Ethiopia anti-corruption arrests

Ethiopia's Federal Police Commission has imposed assets freezes on 413 suspects identified in a five-month-long anti-corruption investigation. These measures and the arrests of high-profile former officials indicate less resistance to reducing the economic influence of state-directed and -owned enterprises. Growing parliamentary opposition to the reforms is unlikely to halt them.

• The asset freezes and several high-profile arrests in Ethiopia during November indicate Prime Minister Abiy Ahmed's administration is facing less resistance from rival factions within the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) to his reduction of the economic influence of state-owned and -directed enterprises.
• Under-performing contracts relating to municipal transport and flagship development projects are likely to be cancelled and re-tendered via competitive bidding, with a view to obtaining the expertise of foreign companies.
• The Tigrayan People's Liberation Front (TPLF), one of the four ethno-linguistic member parties comprising the EPRDF, previously dominated these business enterprises and the security services, so is now likely to oppose the economic reforms in parliament. However, this is unlikely to prove successful because the prime minister's key legislative alliance between his Oromo Democratic Party (ODP) and the Amhara Democratic Party (ADP) - both EPRDF members - will remain strong ahead of the 2020 legislative elections, with the pair having a 58% share of total seats versus the TPLF's 7% share.
• Aggrieved TPLF elements are likely to organize violent protests in the Tigray region, featuring limited mob violence against non-Tigrayans and arson and vandalism against their property, with road blockades posing minor disruption to cross-border trade with Eritrea, but with little direct threat being posed to commercial assets.

The Federal Police Commission in Ethiopia on 20 November imposed asset freezes on the bank accounts and land holdings of 413 suspects named in a five-month-long anti-corruption investigation, who are yet to face trial. The investigation focused on alleged corrupt practices involving USD2 billion worth of procurements for which the tendering processes had not utilized competitive bidding.

These measures followed Attorney-General Berhanu Tsegaye announcing on 12 November the arrests of 63 officials from the state-owned Metals and Engineering Corporation (Metec) for alleged corruption-related offences. As we previously forecasted, Metec's highest-value contract was cancelled on 28 August due to underperformance and delays in the fitting of 16 turbines subcontracted from US and European companies, and the enterprise has since been restructured into separate arms responsible for commercial and military business.

In addition, Tsegaye said that several former National Intelligence and Security Services (NISS) officials had also been detained and would be charged with directing the 23 June grenade attack on a rally in support of Prime Minister Abiy Ahmed. The attack did not harm Ahmed, and was probably not intended to. Rather, the investigation concluded it was conducted to undermine the loyalty of his ethnic-Oromo support base. High-profile arrests included Metec's former chairman, Major-General Kinfe Dagnew, and the NISS's former deputy director Yared Zerihun. No officials have yet been prosecuted. Evidence-gathering is ongoing.

Outlook and implications

The arrests indicate that Prime Minister Ahmed's administration is facing less resistance from rival factions within the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) to reducing the economic influence of state-owned and -directed enterprises. These conglomerates were affiliated with the formerly dominant Tigrayan People's Liberation Front (TPLF), one of the four ethno-linguistic member parties comprising the EPRDF, and have benefited from preferential treatment in tenders; more lenient credit provision from the two largest capitalized Ethiopian banks, Commercial Bank of Ethiopia and the Development Bank of Ethiopia; and priority access to foreign currency, especially in export-focused sectors.

Any resulting prosecutions will indicate that under-performing contracts will be terminated and re-tendered via competitive bidding with a view to obtaining the technical expertise of foreign investors. In such cases, the preferred foreign participation would probably be facilitated by the new Public-Private Partnerships Unit established in the prime minister's office. The affected contracts would probably include, but would not be limited to, construction and mechanical works of the delayed USD4.8-billion Grand Ethiopian Renaissance Dam (GERD); maintenance of the Addis Ababa Rail Transit network; and the construction and operation of several fertilizer plants. Prime Minister Ahmed noted during a discussion with a group of academics on 24 July that the previous government had "masked" problems with these projects.

The TPLF's chairperson, Debretsion Gebremichael, on 19 November said that the investigations discriminated against the Tigray region. His response was probably intended to placate grassroots, sectarian opposition. Even though Gebremichael supports Ahmed's administration, we assess he is increasingly unable to influence the voting intentions of TPLF members who oppose the economic reforms and are likely to challenge them in the House of Peoples' Representatives (lower chamber of parliament). A likely trigger galvanizing this opposition would be the arrest of former NISS director-general and continuing TPLF central committee member Getachew Assefa. Assefa was nominated by a majority as the TPLF's chairperson at the party's annual congress in September, but he turned down the position. The attorney-general implied the authorities are still pursuing his arrest.

Another indicator of parliamentary opposition would be Ahmed's continued failure to appoint chairpersons to the revenues, budget, and finance, and the foreign relations and peace standing committees. The committees are important for formulating and implementing polices across the EPRDF members. However, both of Ahmed's nominations were rejected on 9 November by a 157- and 152-seat majority against, respectively. This included the rejection of Ahmed's defense minister and fellow ODP member, Motuma Mekassa, to the foreign relations committee. However, the TPLF controls only a 7% share of seats in parliament, and we assess that the ODP's alliance with the Amhara Democratic Party, which has a combined 58% share of seats, is unlikely to fracture ahead of the 2020 legislative election.

In the absence of effective opposition in parliament or through the EPRDF's executive councils, aggrieved elements of the TPLF will likely organize protests against these arrests and any subsequent prosecutions in court, alleging that Tigrayans are being targeted unfairly. Such protests are most likely in Mekelle and near the Eritrean border, entailing blockades of nearby roads and limited mob violence against ethnic non-Tigrayans and their property. The deployment of federal forces into Tigray to carry out arrests would increase the risk of stand-offs and (less probably) exchanges of small-arms fire with regional security forces. As indicated by a short-lived mutiny in October, ethnic-Tigrayan affiliated military and police units would be likely to demonstrate weak observance of the chain of command and would probably be slower to intervene.