Ethiopia Corruption Report

Corruption within Ethiopia’s police is perceived to be rampant. Impunity within the police force is a serious problem (HRR 2016). Businesses do not have full confidence in the police services to protect them from crime (GCR 2016-2017). Almost half of respondents believe the police is corrupt (GCB 2013). Over half of companies indicate they pay for their own security (ES 2015). The solicitation of bribes by police officers remains a widespread problem (HRR 2016).

In January 2015, the Dire Dawa Bench of the Federal High Court convicted four law enforcement officers for corruption. The officers received jail time and fines for misappropriation of 246 cartons of Shisha in the discharge of their duties (Federal Ethics and Anti-corruption Commission, Feb. 2014).

Companies face high risks of corruption in Ethiopia’s public services provision. Petty corruption and the solicitation of bribes in return for the processing of documents are particularly common forms of corruption in the public services sector (HRR 2016, FitW 2017). About one in five companies indicates expecting to give gifts to obtain an electrical or water connection (ES 2015). Less than one in ten businesses report they expect to give gifts to public officials in order ‘to get things done’ (ES 2015). A third of Ethiopians indicate that they perceive public officials to be corrupt (GCB 2013). Recruitment to and promotion within the civil service is often dependent upon affiliation to the ruling party (GI 2017). A survey of foreign companies concluded that the national electricity provider EEPCo was among the most corrupt service providers in the country (Federal Ethics and Anti-corruption Commission 2014).

Starting a business in Ethiopia takes almost twice as many procedures as the regional average and takes a significantly longer period of time (DB 2017). Obtaining a construction permit in Ethiopia takes two fewer steps than the regional average and the time required is also slightly lower (DB 2017).

There is a high risk of corruption in Ethiopia’s land administration. Businesses report that property rights are insufficiently protected in Ethiopia (GCR 2016-2017). Half of all companies expect to give gifts when applying for a construction permit (ES 2015). A third of Ethiopians report having paid a bribe to a land administration official (GCB 2013). Petty corruption and land-grabbing is common in the land administration sector (TI 2014). This is caused by the absence of strong institutions, transparency, clear policies, and a lack of resources (TI 2014). Officials have also engaged in forgery practices, thereby assigning themselves an estimated 15,000 titles illegally; only a few have been held accountable (TI 2014). There is no right to private ownership of land; all land is owned by the state and leased out for up to 99 years (ICS 2017). Expropriation may only happen when required by the public interest and with payment of adequate compensation (ICS 2017). The government revoked the leases of 3000 investors for “failing to develop the land” because they had not started production within the agreed-upon time frames (BTI 2016). Conflicts between international investors and local communities over land rights have occurred in the past; the government has been accused of performing land-grabs in favor of international investors (BTI 2016). Investors are advised to perform thorough due diligence on the attitude of local communities before making an investment (ICS 2017).

Registering property in Ethiopia is slightly faster than the regional average, while the number of steps required is in line with regional averages (DB 2017).

There is a high risk of corruption in the Ethiopian tax administration. Business report bribes and irregular payments to be common practice when making tax payments and around one in six companies reports expecting to give gifts to tax officials (GCR 2015-2016, ES 2015). Likewise, two out of five Ethiopians report having paid a bribe to the tax services (GCB 2013). Companies rank tax regulation as a problematic factor for doing business (GCR 2016-2017); which, in turn, has impaired investment and economic growth in Ethiopia (BTI 2016). Companies face thirty tax payments each year, which is in line with the regional average (DB 2017).

There is a high risk of corruption when dealing with Ethiopia’s customs administration. The Ethiopian Revenues & Customs Authority was overwhelmingly cited as the most corrupt public institution in a survey among foreign businesses (FEAC 2014). Nearly a quarter of businesses expect to give gifts when obtaining an import license (ES 2015). Companies indicate that corruption at the border, burdensome import procedures, and tariffs are among the biggest obstacles to doing business (GETR 2016). The efficiency of customs procedures is perceived as low and time predictability is relatively poor (GETR 2016). Enterprises that are state-owned or that have close relations to top-level government officials have considerable advantages over private firms, including access to faster customs clearances, leading to an uneven playing field for local and foreign investors (ICS 2017). Companies spend almost twice as much time on border import compliance in Ethiopia compared to neighboring countries, costs, however, are in line with the regional average (DB 2017).

There is a high risk of corruption in Ethiopia’s public procurement sector. One in five companies indicate expecting to give gifts in order to obtain government contracts (ES 2015). Likewise, irregular payments and bribes are common in the process of awarding public contracts and licenses (GCR 2015-2016). Companies complain of unlawful contract termination and non-transparent tender award processes, and report favoritism towards vendors who provide concessional financing (ICS 2017). State-owned enterprises (SOEs) and companies owned by Ethiopia’s ruling party dominate major sectors of the economy (ICS 2017). SOEs have advantages over private companies, including easier access to credit and easier customs clearance (ICS 2017). Foreign investors complain of the lack of level playing field; there are indications that SOEs receive preference in government tenders (ICS 2017).

While many tenders are publicly advertised, there are major instances of contracts being awarded without a tender (GI 2017). Metal & Engineering Corp, the biggest employer in the country, has frequently received contracts without a bidding process (GI 2017). Documents relating to procurement processes are difficult to obtain due to a burdensome bureaucracy and a lack of transparency (GI 2017). The FDRE Public Procurement & Property Administration Agency publishes a list of companies barred from future bidding due to past violations on its website (GI 2017).

There is a high risk of corruption in Ethiopia’s natural resources sector. Financial records relating to natural resource exploitation are not publicly available (GI 2017). There have been concerns that the Grand Ethiopian Renaissance Dam was developed without competitive bidding and the quality of the environmental assessment was lacking (TI 2015). Ethiopia’s extractive industries, especially the mining sector, are a hotbed for corruption; state-owned drilling companies benefit from political favoritism, whereas private companies face high market-entry barriers (World Bank, 2012). Following its application in 2014, Ethiopia is currently working towards implementing the EITI standard to improve accountability and transparency in the mining sector (EITI 2017). Ethiopia’s compliance with the standard will be measured starting in 2018 (EITI 2017).