The Government of Ethiopia has banned the import of all non-essential luxury goods in a bid to stabilize the economy, so it says. No more jam, no more chocolate, whisky or vodka, not even calendars… (or is it caviars?)
Why such measures?
Consider Ethiopia’s trade deficit, it has been on an upward trajectory for many years owing to the liberalization of the import regime, while exports continue to remain stagnant. In 2021 Ethiopia imported USD18 billion in goods and exported around USD 3.95 billion in commodities and agricultural products. With the ban, the Central Bank of Ethiopia assumes that there will be saving close to 100 million dollar per year. Compare this to the country’s official import bill, the 100 million dollar saving is peanut.
In any case, how effective is banning consumer goods like hairdryers and cornflakes, while ignoring the elephant in the room? Indeed, consumer goods, excluding automobiles, comprise a fraction of the total imports, and aren’t even in the top 10 list of imports. By far the biggest imports of Ethiopia are fossil fuels, industrial goods, and in the past 3 or 4 years defense related imports. Yet there is not a peep about reducing any of these.
Surprisingly, the ban excludes electric vehicles. I ask why, when the cheapest Tesla Model 3 starts now at $46,990 in the U.S., whereas in Europe, it can cost as much as 54,990 euros ($59,000). Keeping with the U.S. statistic, the average electric vehicle price was $51,532 in April 2021 (Kelley Blue Book). This was before recent price hikes, inflation, and raw materials scarcity came into play, so it may be at least 10% higher now. Obviously, this will be done by spending more money, not less.
Anyway the jury is still out on how clean or dirty or cheap or expensive electric vehicles are. Different studies reveal different findings. Assuming electric vehicles are allowed in, is this going to help the country’s balance of payment? Is this going to increase workers access to transport? Sadly, this is a policy that naively ignores the lives and needs of real Ethiopians.
Insofar as the ban on electronic devices is concerned, it is unclear if this includes laptops and PCs. This will be a big setback for the local tech industry. It’s also not clever to ban smartphones which increasingly enable access to training and information. Instead of adding even more hurdles, this sector should have been assisted, which not only has the potential of exponentially increasing exports, but will simultaneously reduce fuel imports, and make better use of our human capital.
Anyway, the great majority of Ethiopians will not be concerned by the ban. Only the rich and the elites would feel personally ruined. These groups don’t realize the most important component of our economy (or any economy for that matter) – energy – has become scarce and costly, they don’t realize that economies that can only function if energy is cheap break down. That’s why we need to reflect on a new economic model that reduces dependence on goods and services (luxury or not) sourced from thousands of miles to markets near us. We need to ponder over an economic model that favors local producers and consumers, an economic model that encourages less consumption and waste. The fruit juice flown in from thousands of miles away require jet fuel, air or ship cargo containers, refrigerants and spare parts for jet or ship engines. Surely, we (as a community and as individuals) should embrace a new paradigm of self-reliance to reduce our dependence on long supply chains and build an economy tailored to our unique circumstances. This should be one of our major projects of the 21st century.
Can we count on this government to move our precarious economy to self-reliance? The answer for now is no…. just look at the government’s “Homegrown Economic Reform” agenda. An agenda that pushes the country into the discredited liberal democracy process, an agenda that promotes the endearing fantasy of infinite expansion of consumption. An agenda that does not take into account that globalization has not been win-win; but win-lose: the reality is the benefits flowed to the few multi-national and large corporations at the expense of the many. But more importantly it’s an agenda that does not recognize the foundation of the global economy – cheap energy – has reached an inflection point: from now on, energy will become more expensive. The idea that cheap, easy-to-get resources will remain abundant is not realistic. What’s realistic is to start reducing our dependence on long supply chains by relocalizing our production of life’s essentials. In short globalization is no longer a solution; it is the problem.
So you see it’s essential that we navigate intelligently the unprecedented transition from excess consumption to securing essentials by increasing self-reliance. Today we have an opportunity to redraw Ethiopia’s grand strategy from the ground up. Fortunately, our country is well placed to meet these challenges, if for no other reason than the public will demand it and that the great majority is already operating in a localized economy.
Are our leaders ready for tomorrow?