"Rehabilitation cast aside as Endowment Fund squabble swallows Tigray" By Ashenafi Endale November 16, 2024 REPORTER.
https://www.thereporterethiopia.com/42642/
"Rehabilitation cast aside as Endowment Fund squabble swallows Tigray"
“Last week, political turmoil in Tigray Regional State threatened to boil over as the head of the Interim Administration (TIA) accused the Tigray People’s Liberation Front (TPLF) and its Chairman, Debretsion Gebremichael, of plotting a coup.”
November 16, 2024
“The development comes as the region marks the second anniversary of the peace deal that ended a brutal two-year war against the federal government and its former allies. Tigray is still reeling from the conflict; essential infrastructure has yet to be repaired and over a million people remain unable to return to their homes.
Rebuilding post-conflict Tigray, however, appears to have taken a backseat as the split between the region’s political leaders gains traction and diverts the agenda. Many are left wondering why the TPLF, which had acted in unison during the conflict, has succumbed to infighting in the years following the war.
Despite its strong centralization and its characteristic iron-like discipline, TPLF is not a stranger to factionism. This time, the split appears to be drawn along the lines of a conflict of interest over control of the region’s resources rather than political differences.
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An investigation conducted by The Reporter indicates the political feud in Tigray is centered around the Endowment Fund for the Rehabilitation of Tigray (EFFORT) and its subsidiaries. Documents and a series of interviews with federal and regional officials reveal that Tigray’s political elite are caught in a race to assert control over the Fund and its vast resources, and through it, political dominance.
What is EFFORT?
EFFORT is a conglomerate of dozens of companies initially formed as a PLC in 1992 with a reported capital of USD 100 million. It was converted into an endowment fund three years later.
Among the companies under its wing are Trans Ethiopia, Guna Trading House, Ezana Mining Development, Sur Construction, Saba Dimensional Stones, Hiwot Agricultural Mechanization, Maichew Particle Board, Addis Pharmaceutical Factory SC, Bruh Tesfa Water and Irrigation Technologies, Abergele Int. Livestock Development, Dejena Chemical Engineering, Messebo Cement Factory, Mesfin Industrial Engineering, and Almeda Textile Factory.
Although by definition endowment funds are set up through donations and meant to be used to fund charitable causes (in this case public services and infrastructure in Tigray), EFFORT has remained firmly under the control of TPLF central committee since its inception, never directly accountable to the public.
The Fund and its overall management have always been opaque, making it difficult for analysts and regulators to keep track of it even before war broke out in 2020. Some classify EFFORT’s lifespan into three categories: pre-war, war, and under TIA management.
“EFFORT is an enormous conglomerate. [It is] probably the third largest in Ethiopia next to Ethiopian Investment Holdings and MIDROC,” said one financial and economic analyst, who requested anonymity.
In a 2017 paper titled ‘Inside the controversial EFFORT’, Techanie Befekadu stated the Fund’s paid-up capital was three billion birr, with no less than 66 companies under its wing. The paper indicated EFFORT also held majority stakes in several other businesses.
In a 2019 research paper dubbed ‘The Party That Consumes the State: The Rise of Oligarchy in Post-1991 Ethiopia’, Tefera Negash Gebregziabher offered extensive insights on EFFORT’s shadowy trajectory in relation with the Ethiopian People’s Revolutionary Democratic Front (EPRDF), TPLF, and other heavyweight political entities.
Tefera contended that EFFORT built its wealth through the transfer of former federal state-owned enterprises (SOEs) with small or negligible monetary value; unserviced loans from state banks Commercial Bank of Ethiopia (CBE) and Development Bank of Ethiopia (DBE); channeling foreign aid to its coffers and then to TPLF coffers; fraud and semi-legal activity; tax evasion; collusion and insider networking; and direct government procurement contracts, among other items.
“The loans that were turned into uncollectible accounts include the 1.7 Billion birr given out for the expansion of EFFORT’s investments, and the 1.2 Billion birr lent to establish three companies of EFFORT (Messebo Cement, Almeda Textile, Addis Pharmaceuticals),” reads the paper.
It indicates that five billion birr of the eight billion loaned out by DBE over the span of nearly three decades went directly to the Tigray region and EFFORT.
Among the SOEs transferred to EFFORT are Kuraz, a renowned publishing house during the Derg era, and the Ethiopian Domestic Distribution Corporation (EDDC).
Kuraz eventually became Mega and EDDC transformed into Guna Trading House. Analysts such as Tefera observe that the first companies that belonged to TPLF were born out of the privatization process, later expanding and granting politicians, particularly members of the TPLF central committee, ever greater shareholding power.
The paper alleged that former Prime Minister Meles Zenawi was a leader of the nucleus that planned and executed the EFFORT-led policy.
Others, such as a paper titled ‘Vanguard Capitalism’ by Toni Weis, who currently serves in the World Bank, also noted EFFORT’s enormous size in 2013.
Lie and Mesfin (2018) pointed out that “some 80 percent of the larger private business sector is dominated by two interlocking conglomerates [MIDROC and EFFORT], which enjoy preferential government treatment and have access to foreign currency.”
Their paper highlighted deep-seated frustration and resentment from independent private entrepreneurs who had to close down “because they could not compete for government support.”
In his paper, ‘Prosperity to the Periphery? The Politics of Resource Extraction in Ethiopia, Post-2018’ Jonah Wedekind explained how EFFORT retreated into Tigray when the EPRDF lost power six years ago.
“In the run-up to the war between the central government and the TPLF in November 2020, EFFORT—Tigray’s regional conglomerate—and its subsidiaries had their accounts frozen, contracts canceled and assets stripped, allowing their businesses to be redistributed to prospective bidders across Ethiopia,” reads the paper.
It notes shifts in the salt, gold, and sugar industries and a scramble for control from private firms and other regional administrations.
“For example, when the EPRDF’s reign came to an end, four companies dominated Afdera’s salt business, the largest among them Ezana Development Mining Plc, a subsidiary of EFFORT, lost their concessions as salt lands were redistributed by the new regional government with support from Abiy,” reads the paper.
Wedenking hinted that the currency denomination in the weeks leading up to the start of the war in 2020 also had a serious impact on EFFORT’s financial activities.
“Having made Tigray dependent on federal revenues, the central government withheld the 2020 budget grant to Tigray region—a fiscal move that provoked confrontations between the two sides. The situation was compounded by the central government’s introduction of new Birr currency banknotes in September 2020, to ‘curb financing of illegal activities, corruption and contraband’, as Abiy Ahmed tweeted. This likely further choked the hoarded cash reserves held by the TPLF and its affiliated businesses,” reads his paper.
“With the Tigray region and affiliated business elites largely marginalized, exiled or confined to the war-torn and besieged Tigray region, the central government was now ‘free’ to reconfigure the national economy’s federal and regional hierarchies, primarily through fiscal policy reforms and redistributing strategic assets, resources and businesses.”
However, during the two-year, EFFORT and its subsidiaries suffered significant damages. Almeda Textile’s plant in Axum was heavily damaged by explosions, for example. Other EFFORT businesses were subject to extensive looting, and sources indicate the Tigray Defense Force (TDF) also used Fund’s resources during the conflict.
EFFORT and the rift within TPLF
The terms of the Pretoria peace agreement and the ensuing establishment of the Tigray Interim Administration transferred control of EFFORT from the TPLF central committee to the head of the TIA. In essence, Debretsion and his faction lost the reins to the Fund as part of the deal that ended the war, while President Getachew Reda and his supporters were placed in charge.
The shift is the primary reason behind the political infighting that has plagued Tigray over the last two years, according to inside sources.
Both sides see control over EFFORT as key towards political dominance in the region and beyond. The Fund’s vast finances are central to the equation as any aspiring political force in Tigray would need to keep the region’s influential military wing on its side, and the military needs resources.
The cutoff of federal budget subsidies has only amplified reliance on EFFORT. Even holding TPLF’s official license of registration as a political party, which has been another source of disagreement between the two factions, means little without control of EFFORT, according to inside sources.
“EFFORT also has finances in accounts abroad, but TPLF officials have been unable to access them since the war,” said one source, who spoke to The Reporter anonymously.
The source indicated that Debretsion and key supporters such as Fetlework Gebregziabher (Monjorino) have been shut out.
“They tried to shift the accountability for EFFORT from TIA to TPLF but that failed. So, by hook or crook, they moved to get rid of Getachew in order for Debretsion’s people to take over TIA and thereby gain access to EFFORT,” said the source.
He told The Reporter the rift between Getachew and Debretsion began to brew during the war.
“Debretsion’s group says Getachew is a product of EPRDF, not a son of TPLF. The old vanguard, led by Debretsion and Monjorino, believes Getachew is not entitled to command EFFORT’s resources,” said the source. “Debretsion also accuses Getachew saying ‘he gave out TPLF’s interest during the Pretoria negotiations.’”
There are other factors at play, too.
Chief among them is the loyalty of Tigray’s security forces.
“Among the generals, there are those who support Getachew and others ready to counter if the TIA takes action against Debretsion’s faction. The military is balanced on both sides. But it’s basically waiting until one of the two wins. The military, and the Tigray public, see no political differences between the two sides,” said another source, who spoke to The Reporter under condition of anonymity.
Another factor is the federal government, which has reportedly stated its position regarding EFFORT to Tigray’s officials. Addis Ababa wants EFFORT to undergo an audit and subsequently be reshaped into a transparent organizational structure.
The Fund and its subsidiary companies were placed under the care of the state-owned Commercial Nominees and a caretaker board under the Ministry of Finance shortly following the outbreak of war in 2020. The TIA assumed control following the peace agreement two years later.
“The audit was launched after EFFORT was transferred from the caretaker to the TIA but there are two problems with it. First, it was very difficult to find documents pertaining to EFFORT and the companies under it,” an official at the Finance Ministry told The Reporter.
Regional officials in Tigray claimed the paperwork was damaged or destroyed during the fighting, according to the official.
“But even after the audit was finalized using the documents available, regional officials were unwilling to disclose its findings. The audit was finalized recently but both Getachew’s group and Debretsion’s faction were instructed by the military not to disclose the findings,” the official told The Reporter.
The third and final factor is the unpredictability of the Fund’s managers, particularly Beyene Mikru, who plays a pivotal role in running EFFORT.
“The managers are weighing their own interests [in choosing] between Getachew’s and Debretsion’s groups. Sometimes they side with Getachew, others with Debretsion,” said a source close to the issue.
The source told The Reporter that Beyene has sided with Getachew as the feud intensifies.
Beyene’s name was on the recently published list of a dozen TIA officials that TPLF has ordered to relinquish power.
The source disclosed that Beyene had attended a meeting organized a few weeks ago to review EFFORT’s 2023/24 performance and chart plans for this fiscal year. The TPLF central committee and Debretsion called the meeting, but it featured no detailed discussions about the Fund’s performance or plans for the future, according to the source.
“The minutes of such meetings and every meeting involving senior TPLF officials are filled with fierce arguments regarding EFFORT,” the source told The Reporter. “Recently, they are also arguing about where Tigray’s gold is going.”
TPLF has ordered that no gold be allowed to leave Tigray as tensions surrounding EFFORT reach a fever pitch, according to the source.
“They stated that a substantial amount of gold is leaving Tigray every day. But there are no clear reports as to who is benefiting from the gold. During the most recent meeting, they decided that no gold will leave Tigray until the two parties reach an agreement over EFFORT,” said the source.
Ezana Mining Development, which runs several gold projects in the region, is also in hot water as it tries to cut ties with a tangled web of joint ventures it had previously entered into with foreign mining companies.
Reports indicate that although foreign investors are preparing to return to Tigray after the force majeure of the northern war, Tigray’s officials are not willing to grant external companies access as many of the gold mining sites are already under the control of locals, ex-combatants, and the military.
“Beyene is with Getachew. Debretsion wants EFFORT back badly. EFFORT is under Getachew but practically it is the military handling EFFORT’s resources as of now. Beyene fears the military. If the two groups do not come to an agreement and it escalates into a clash, the military might move to take over the administration,” said the source.
Reports indicate that Debretsion and his faction argue that EFFORT is TPLF property, while the opposing side wants to see the Fund audited and brought under public accountability.
“If EFFORT is restructured as Getachew and the federal government say, then Debretsion’s group will get nothing. It will also mark the end of the old vanguard’s political dominance. Regarding EFFORT, Getachew is on the federal government’s side,” the source told The Reporter.
The big argument now is whether to disclose the findings of the audit report, according to the source, who alleges that figures such as Monjorino have a vested interest in keeping the report in the dark.
The source claims that Dawit Gebregziabher, a business tycoon residing abroad and brother to Monjorino, is heavily involved in smuggling and contraband trade in the region and elsewhere in the Horn of Africa.
“He is the one arranging the smuggling of gold out of Tigray,” said the source. “Monjorino always says her brother was exiled because of Meles. She keeps a strong position regarding regaining access to EFFORT’s resources by getting rid of Getachew. If Debretsion’s group gets a hold on EFFORT, Dawit is ready to inject capital to help it recover from the impacts of the war.”
The path forward
A financial analyst who has kept a close eye on EFFORT argues that nothing less than strong action can draw the line between the Fund and TPLF.
“The audit conducted so far must be made public. This is essential as per Ethiopia’s laws regulating endowments as well as the commercial code. There is the public interest of Tigray’s people. The findings of the audit must be disclosed,” he said.
However, the analyst notes the audit was conducted by auditors handpicked by TPLF and urges that another must be conducted by auditors selected through an international bidding process.
The analyst observes that such an audit would still fall short of uncovering any deep-seated corruption, embezzlement, and fraud that may lie hidden in the Fund’s balance sheets.
“This kind of party involvement and grand corruption in the conglomerate can only be uncovered through investigation. EFFORT must be audited and also investigated,” said the analyst. “Afterwards, it must be returned to the people of Tigray. It’s an endowment so it belongs to the public. It must be free of any politics, and free of TPLF.”
The analyst urges both political factions to reach a consensus and normalize relations with the federal government in order to roll out a resource mobilization strategy to rebuild Tigray. He observes that EFFORT still commands vast assets, domestic and abroad.
“Despite certain value drops owing to the war-time damages and losses, EFFORT still has assets that can help to splinter to fast growth with proper restructuring and management. It is still an enormous conglomerate,” says the analyst.
Getachew’s accusations of a coup attempt last week, however, indicate that a consensus and any hopes at rehabilitation for millions of people in Tigray, most of whom live in poverty, are far off.”
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