Recurrent conflict smacks SMEs out of business

Ethiopian businesses take major losses due to recurrent conflicts in the last few years, leading to the closure or stagnation of several businesses in many regions of the country.
Policy-oriented research commissioned by the Center for International Private Enterprise (CIPE) and conducted by the Ethiopian Economic Association (EEA) in 2022 found that Small and Mid-sized Enterprises (SMEs) in Amhara, Afar, and Tigray have either reduced their operations significantly or shut their businesses down following the recent hostilities in the regions. Despite businesses’ major losses due to recent conflict, there are still few platforms or institutional mechanisms through which representatives of the private sector can meaningfully contribute to peacebuilding and economic recovery, the research reveals.
Currently, CIPE is supporting the Ethiopian private sector’s efforts to improve conflict mitigation skills and contributes to peacebuilding.
“Considering the crucial role Ethiopia’s private sector plays in creating jobs and investments that are vitally important for the country’s stability, the business community’s engagement in issue-based, inter-regional conversations can contribute to sustainable peace. In this context, CIPE aided in the establishment of an inter-regional private sector coalition consisting of chambers of commerce, business associations, and civil society organizations (CSOs) from four regions: Oromia, Amhara, Somali, and Afar. The interregional coalition aims to foster an environment for collaborative peacebuilding, economic recovery, and regional economic integration and stability. The coalition currently includes 20 organization members (chambers of commerce, business associations, and women and youth organizations) in the four regions. Following the cessation of hostilities in Northern Ethiopia, the business community representative in the Tigray regionhas expressed their willingness to join the inter-regional, accepting CIPE’s invitation,” the International Private Enterprise cited.
The coalition was actively engaged in identifying priority issues and solutions that are captured in the business agenda for peace and economic recovery which was launched in March 2023. The business agenda formed the basis for a dialogue between the government and the inter-regional private-sector coalition that aims to garner support for the key priorities and solutions identified by the business community to rehabilitate businesses and resume inter-regional trade in conflict-affected areas.
The five priorities of this initiative included; immediate reconstruction of infrastructure and business properties in conflict-affected areas, improving access to finance for businesses operating in conflict-affected areas, restoring and strengthening business relations within and between regions, stimulating investment in conflict-affected areas, and promoting inclusive and consistent public-private dialogue (PPD).
As highlighted, under the five priortites, some of the solutions forwarded by the coalition members include; granting debt relief to businesses that lost their properties due to conflict, effectively enforcing the Movable Property Security Right Proclamation No. 1147/2019, establish a loan guarantee fund to support businesses in conflict-affected areas, establish regular joint peace forums between regions, organize joint cross-regional mobile bazaars, including conflict risk on the list of risks covered by insurance policies for businesses operating in conflict-prone areas, and providing special investment incentives to attract investors to invest and contribute to the economic recovery of war-affected regions.
Reflecting on the business agenda, Kebede Mohammed, the Secretary General ofthe Afar Region Chamber of Commerce and Sectoral Association stated that, ‘’Following the November 2022 ceasefire agreement that ended violent clashes in war-affected regions,to sustainably redress the effects of conflict and ensure lasting peace, rebuilding destroyed infrastructure, restoring basic services, upholding the rule of law, and supporting the private sector should be prioritized,’’ adding that, “Several of our members are highly affected by the war; interregional trade relations have been slow; investment has been down; production and productivity have been meager; and illegal trading has been expanding in the region. We are now working to increase the engagement between the government, the private sector, and all stakeholders in building a common framework and solving issues that the private sector is facing. The sector needs the support of all stakeholders especially the government to get out of the current situation.”
Haftay Hagos, the Secretary General of the Tigray Region Chamber of Commerce and Sectorial Association, explained that before the war, private business, investment, and tourist flow to the region was high but the outbreak of the COVID pandemic followed by the deadly war has destroyed everything.
“The war has damaged the trust between the private sector and the community by giving ways for the prevalence of informal trading in the region. After the Pretoria agreement, there are improvements, but there are still issues that need to be addressed such as providing incentives to local businesses, solving issues related to a shortage of hard currency, and instituting appropriate policies to support the private sector resume operation,” said Haftay.
“The private sector can contribute to post-war reconstruction efforts by investing in infrastructure and creating job opportunities, which can help to stabilize the region. Therefore, it is essential to promote inclusive public-private dialogues, good governance, and a system that respects the rights of the private sector in interregional trade relations and provides support to affected businesses for the sustainable growth of the private sector,” he emphasized whilst indicating that his office has organized a bazaar in 9 different cities in the region engaging businesses from different parts of the country with the aim to increase inter-regional trade.
Nibret Bantegegn, the Secretary General of the Amhara Region Chamber of Commerce and Sectoral Association, mentioned that the conflict has disrupted the economic activities of the region, causing a setback to the development of the private sector.
“The government should take measures to support businesses to operate smoothly and contribute to the growth of the economy” Nibret expressed, adding, “The regional and federal governments should support the private sector in war-affected regions by providing needed-supportand creating an enabling environment for reconstruction and economic development to sustainably address the critical challenges it is facing now including instability and lack of finance.’’
For the last 15 years, CIPE has been working on initiatives aimed at improving the business environment and promoting entrepreneurship in Ethiopia including implementing private sector-led policy advocacy,and providing financial and technical support for national and regional business membership organizations to build their capacity.

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