In August, Brook Taye took on the role of chief executive at Ethiopian Investment Holdings (EIH), stepping into one of Ethiopia’s most pivotal positions: reforming the nation’s state-owned enterprises (SOEs).
Launched in 2021 as the strategic investment wing of the Ethiopian government, EIH currently manages a diverse portfolio of 40 companies valued at several billion dollars. This includes key entities such as the national airline, the state-operated telecommunications firm, and the country’s leading bank, alongside enterprises involved in electricity, manufacturing, construction, trading, chemicals, hospitality, and insurance.
“We consider ourselves an entrepreneurial state,” Brook, who also serves on the committee steering Ethiopia’s economic policies, remarks. “We firmly believe that our state-owned enterprises can drive significant developmental growth.”
The creation of EIH aligns with the aspirations of Prime Minister Abiy Ahmed, who chairs the board. His first six years in office were overshadowed by political turmoil, including a devastating conflict in the north and ongoing protests in various regions.
Currently, the government is eager to revitalize its economic strategy following the initiation of an IMF program in July. Recent measures include floating the birr and permitting foreign competition in sectors like banking. However, Brook emphasizes that this does not indicate an imminent pivot towards privatization.
“Market liberalization does not imply the sale of state assets,” he clarifies. “The government is not pursuing a privatization strategy; instead, we have focused on reforming state-owned enterprises.”
Dominance in the Economy
For decades, the Ethiopian government has occupied a dominant position within the nation’s economy. Ethiopian Airlines was established during the reign of Emperor Haile Selassie. Following his overthrow in 1974, the country was governed by a military regime aligned with the Soviet Union, which led to the nationalization of land and businesses.
From 1991 onwards, the Ethiopian People’s Revolutionary Democratic Front (EPRDF) ruled, initially motivated by Marxist ideologies before shifting towards a capitalism model within a “developmental state” framework. During the first two decades of its regime, more than 300 state-owned enterprises were privatized, while the state remained a crucial player in the economy, with its remaining firms shielded from competition and given preferential financing access.
“The government viewed these enterprises solely as policy tools and failed to prioritize their commercial sustainability,” Brook says, drawing on his experience as a regulatory analyst, private equity manager, and ministerial advisor. “This oversight brought significant consequences, culminating in a debt burden we had to address.”
According to him, the guiding philosophy of EIH is that it “must function, think, and communicate as an owner” of its assets, rather than acting merely as a regulator. Brook is focusing on the firms’ commercial performance, such as return on assets. The fund also seeks to co-invest in new ventures alongside private enterprises—like a recent partnership with a Japanese firm for passport production.
Though EIH has not disclosed specific financial figures, it reported $18.5 billion in revenue from its companies for the fiscal year 2022/23. For the first quarter from July to September, it paid dividends of 5.8 billion birr ($46 million) to the government.
While some companies, like Ethiopian Airlines, are highly profitable, others face difficulties. The IMF has identified the debt levels of state-owned enterprises as an “acute” fiscal risk, highlighting loss-making entities in the railway, electricity, and sugar sectors, all managed by EIH.
A portion of debt equivalent to 9% of GDP was transferred from state companies to a newly established corporation in 2021, where it now counts as government debt—though, as noted by the IMF this year, this transfer “was not accompanied by operational improvements.”
“We have only a few companies facing challenges,” Brook states. “Their issues are either historical, like those involving the sugar companies, or stem from cyclical business fluctuations. The rest are flourishing.”
Despite the government’s defaulting on foreign bonds and the IMF urging a more rapid pace of reform, there is pressure to liquidate state assets for quick revenue. Brook, however, believes Ethiopia has gleaned vital lessons from the experiences of other African nations and Eastern European countries, where hurried privatizations resulted in disastrous outcomes.
“They sold when companies were in a weak position,” he asserts. “No prudent owner would choose to do that. You wouldn’t sell your house in a down market; instead, you would enhance its value to achieve a better price.”
Telecommunications Issues
When EIH looks to part-privatize companies, securing buyers is sometimes challenging. The initiative to sell a 45% stake in Ethio Telecom, the country’s leading telecommunications provider, has yet to yield success. Brook attributes this struggle to a “multitude” of challenges, including the global economic situation, the impact of the COVID-19 pandemic, and the conflict in northern Ethiopia.
“The 45% offer remains open,” he confirms. Following unsuccessful attempts to attract a telecom operator, the government may pursue investments from firms in the financial sector.
In the meantime, the government is in the process of selling a 10% stake in Ethio Telecom to domestic investors, which Brook reports is progressing “very well.” He adds that this sale will not interfere with the 45% offer, as the government “plans to divest from a majority [stake]” in the long run.
The Ethio Telecom share sale is part of the preparations for the launch of the Ethiopian Securities Exchange (ESX) in January. As the largest country without a stock exchange, Brook—who previously held the position of director-general of the Capital Markets Authority—believes it is high time for such a venture.
“The market has the potential to mobilize significant financial resources for development,” he states. “It would generate a proper yield curve for treasury bonds and notes, attracting local financing while also benefiting foreign institutional investors.”
Brook indicated that EIH also intends to list companies involved in shipping, printing, insurance, and duty-free operations.
Aspiring for Growth
Realizing Ethiopia’s economic goals presents significant challenges amidst ongoing political, social, and security crises. Investors may be cautious in a country where travel outside the capital carries the risk of kidnapping.
Nonetheless, Brook remains optimistic about the long-term potential of Africa’s second most populous nation. When asked about which models he looks up to, he cites “Ethiopia—specifically Ethiopian Airlines.” The national carrier has survived 79 years of tumultuous regime shifts. “What has ensured its resilience? A consistent factor: it was managed commercially without interference.”
Critics argue that the Ethiopian government has been excessively slow to withdraw from its economic dominance. Others warn that it risks prematurely divesting essential assets like Ethio Telecom before fully harnessing its economic potential.
Brook appears to advocate for a balanced strategy, where the government maintains control over key enterprises while enabling them to compete more vigorously against foreign rivals—much like Ethiopian Airlines competes with other airlines across Africa.
“We need to liberalize because Ethiopia doesn’t win gold medals for 10,000 meters in Addis Ababa,” he insists. “We compete on the world stage and claim gold because of the competition.”
