Ethiopia – honest to a fault

Recently, we have spent a great deal of time studying Ethiopia. Arguably, a country that was once a symbol of the failure of African governance has now become a beacon of the continent’s hopes for the future. Its economy has sustained high growth rates for over a decade. Its people are more prosperous than ever. And AddisAbaba is quickly overtaking Nairobi as East Africa’s business hub.

Earlier this month, Ethiopia issued a $1 billion Eurobond, making it the poorest country ever to have done so. This is remarkable in itself – but what is even more remarkable is the way in Ethiopia they went about communicating with its potential investors.

As with any financial instrument of this kind, Ethiopia had to issue a prospectus to potential investors, which must include the sorts of risks that might prevent the country from paying back its creditors on time and in whole. As the FT says, this is typically a “boilerplate section … that is largely ignored.”

The Ethiopian government, however, had a different idea. Rather than vague platitudes, Ethiopia’s bond prospectus laid out very specific risks, most of which would seem quite exotic to the typical bond investor. What would normally be a pro-forma section seems to have become a frank exploration of everything that could conceivably go wrong in Ethiopia.

If anything, Ethiopia’s prospectus may have gone too far. Seasoned Ethiopia-watchers know that the African nation is very unlikely to sink back into conflict with its rival Eritrea, or to experience another famine on the scale that made the country notorious in the 1980s. Djibouti is not about to cut off Ethiopia’s links to the sea. Yet the Ethiopian prospectus visited all these possibilities, and more.

In any event, investors clearly seem to have been impressed by their forthrightness: the bond was 240% oversubscribed.

We have done a great deal of work in Africa, both with British clients operating in Africa, and African clients seeking to improve their reputation abroad. Over the decades, one of the greatest challenges we have faced has been to encourage our African clients to be more frank when communicating with western audiences.

Many western journalists, governments, NGOs and businesses are guilty of creating an inaccurate caricature of Africa. Countries across the continent have far more opportunities and fewer challenges than many in the west realise.

But instead of addressing the west’s uninformed criticisms and concerns, we find that many African governments opt instead to ignore them. When communicating with western audiences, they often exaggerate their successes and opportunities, while downplaying (or almost totally ignoring) the challenges their nations face.

This tendency to paint a rosy picture has not just been ineffective – it has actively harmed African countries’ ability to tell their own stories. Too many western audiences have now taken to treating every pronouncement by an African government – no matter how factually correct – as dishonest and self-serving.

That is why we were so surprised – and pleased – by Ethiopia’s message to investors. It is a welcome change from much of the PR material put out by many African governments. There are clearly people within Ethiopia who understand the power of frankness. This is a very positive sign for Ethiopia’s future, and we hope that it is a sign of things to come in the rest of Africa.

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