As Germany and Ethiopia celebrate 120 years of diplomatic ties, Capital sat down with Jens Hanefeld, the German Ambassador to Ethiopia and Permanent Observer to the African Union, to discuss the rich history, current collaborations, and future potential of this important relationship. Ambassador Hanefeld shares his insights on economic reforms, investment prospects, and the evolving role of Africa on the global stage. Excerpts;
Capital: Can you describe the current state of diplomatic relations between Germany and Ethiopia?
Jens Hanefeld: Our countries enjoy a very good and longstanding relationship. We are celebrating the 120th anniversary of the establishment of diplomatic relations between Germany and Ethiopia, which dates back to the time of the German Empire and the Ethiopian Empire.
However, our relationship extends much further back in history, with engagements through philologists, scientists, and exchanges occurring prior to formal diplomatic ties. Our relationship is not only long-standing and well-established, but it is also vibrant, alive, and forward-looking. We are committed to further developing its potential in the future.
Capital: What are the key areas of cooperation between the two nations?
Jens Hanefeld: Germany is a close partner in various fields, supporting Ethiopia’s development and helping the country reach its full potential. We are strong supporters of the macroeconomic reforms that Ethiopia has undertaken, agreed upon with the IMF and the World Bank and supported by the donor community. We applaud the courageous decisions taken during this economic reform process. It is remarkable that the Ethiopian government demonstrates such strong ownership of these reforms, clearly indicating through the term “homegrown economic reforms” that this is an Ethiopian-led initiative, not something imposed from abroad. We see ourselves, along with other donors and agencies, in a supportive role.
Capital: How do the reforms help the public in general?
Jens Hanefeld: The impact of the reforms should be analyzed from an Ethiopian perspective. It is not for me to define their effects. What we believe is crucial, as Chancellor Scholz has also emphasized recently, is that all forms of foreign support will ultimately help create the necessary preconditions for domestic growth by leveraging private capital, from domestic or foreign sources.
The success of these reforms will be evident in how much both foreign and domestic capital is mobilized to invest in Ethiopia, thus fostering economic growth. The necessary preconditions for this are not only the macroeconomic reforms themselves but also the creation of a conducive framework.
There are crucial factors to consider, such as stability, national reconciliation, and the rule of law, which are vital for attracting investors. Additionally, issues like human rights and transitional justice must be taken into account. It is important to view these elements as interconnected, as they all play a significant role in the overall success of the reforms we hope for.
Capital: Security, stability, and the rule of law present significant challenges. What if these efforts fail?
Jens Hanefeld: Ethiopia possesses immense potential, evidenced by its rapidly growing population of between 121 and 130 million people. The country has a young and striving populace and a large diaspora that can contribute positively. Rather than focusing on potential failures, we concentrate on ways to ensure success. Our policy approach regarding Ethiopia involves engaging with the government and civil society, as a vibrant civil society is essential for creating the necessary space for economic reform and progress.
Capital: There are currently few significant German investments in Ethiopia. What accounts for this lack of interest?
Jens Hanefeld: German investors are indeed monitoring developments in Ethiopia at this time. With my background in economics and experience at a large German company before coming to Ethiopia, I can confidently say there is considerable interest among German companies in the region and across the continent.
To be frank, there is a growing interest in Africa. The German African Business Summit held in Nairobi at the end of last year attracted a record number of participants, reflecting this interest. However, I also recognize that there is still significant potential for growth.
We are actively exploring ways to increase the interest of German and European businesses. An important factor in this effort is the initiative for an African free trade area, which was intensively discussed at the recent African Union Summit here in Addis. This initiative could significantly enhance trade relationships among African countries and potentially pave the way for a closer economic relationship with the European Union.
We are living in a time when the rules-based system is clearly under challenge. From a European perspective, there is significant potential to develop stronger relationships between multilateral structures and organizations in Africa and those in Europe, particularly within the European Union. However, German companies tend to currently invest more in other East African countries rather than Ethiopia.
Capital: Is this due to security issues or other reasons? Why do they choose to invest in other East African countries?
Jens Hanefeld: I made that statement intentionally, highlighting the bold economic reforms that Ethiopia is currently undertaking. These reforms have the potential to fundamentally shift the business environment and enhance the overall landscape for the business community. The relaxation of the foreign exchange regime, banking reforms, the establishment of a stock exchange, and other measures are clear signs of progress, which we hope will attract international banks.
Recent regulations have come into effect, and discussions with our companies, both German and Ethiopian, indicate considerable movement on the regulatory front. I believe this will positively impact the business environment in Ethiopia. However, it is important to recognize that the need for reform arose from the challenges faced in the past, which were not as favorable as the current situation. The reforms themselves highlight the necessity for action. While these actions are being implemented, it is crucial that the significant and courageous economic reforms are integrated within a broader framework of general reform. This includes upholding the rule of law, respecting human rights, ensuring national reconciliation, and maintaining peace in the country. Such an environment is essential for attracting and supporting businesses. Ethiopia, with its vast domestic market, presents a key opportunity that should be leveraged.
Capital: What is the status of developmental cooperation between the two countries?
Jens Hanefeld: On the one hand, KfW – the German state-owned investment and development bank – is very active in Ethiopia. Most visible, on the other hand, is GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit) . The GIZ is the development arm of the German government, although it operates as a private company. It was restructured a few years ago and is very active not only in Ethiopia but also in many other countries, helping to implement projects across various fields. The reason we see KfW and GIZ here – rather than significant private investment – is, quite frankly, related to the earlier point I mentioned. As governments and the donor community, we can provide funding and focus on areas where we identify a need, such as here in Ethiopia.
We aim to support the Ethiopian government in creating an environment that attracts businesses. Currently, our focus is on establishing the groundwork for foreign investment in Ethiopia, with the ultimate goal of attracting foreign capital and companies. The Ethiopian government plays a crucial role in making the country appealing to investors, and it is important to communicate this effectively. While we are happy to support these efforts, the investment agency and other government bodies are responsible for leading this initiative.
And just to add- a rather hidden cooperation: The EU, thus including Germany, is granting a very preferable tax regime to Ethiopia: no tariffs no tax on everything but arms. We are talking about a market of approx. 450 Mio. consumers. Great competitive advantage for products made in Ethiopia.
Capital: How do you achieve this?
Jens Hanefeld: We facilitate this through contacts and advice. When we receive inquiries, we relay them, and we actively explore various projects in Ethiopia. The country has many promising initiatives, particularly its reliance on green energy, which sets it apart from others. In fact, Ethiopia’s green energy quota exceeds that of Germany, and we commend this achievement. It presents an interesting opportunity for collaboration. Green energy can also be an interesting factor for business to open up factories, given the taxation, e.g. in Europe, on carbon emitting production.
Capital: What are your thoughts on the involvement of German companies in Ethiopia’s hydro energy development and electric vehicle policies?
Jens Hanefeld: German companies are indeed involved in Ethiopia’s hydro energy sector, particularly in developing the necessary networks. It’s essential not only to generate energy but also to ensure infrastructure is in place. We’re also examining Ethiopia’s policies regarding electric vehicles and their ambitious strategy in this area. This strategy is significant, especially since it can save foreign exchange by relying on electricity generated from sustainable sources.
It is crucial that this strategy is implemented realistically to achieve its goals. We have experience in Germany that highlights the importance of carefully exploring these options.
These areas represent promising business opportunities, and we look forward to collaborating with our Ethiopian counterparts.
Capital: How do the recent cuts in US government aid affect operations in countries like Ethiopia, and what is your perspective on the future of Germany’s political landscape and its impact on international partnerships?
Jens Hanefeld: I cannot comment on the policies of other governments. However, I can say that predicting the future, especially in politics, is always challenging. I believe that the budget will be a crucial issue in the formation of the new government in Germany, having had elections only two weeks ago. At the same time, I remain optimistic that we will continue to be a reliable partner, as Ethiopia and many others have known us to be in the past. This also applies to the UN agencies. I hope we can sustain most of our support, even as we prioritize defense spending in Europe in response to Russia’s aggression against Ukraine.
Capital: Are there any upcoming initiatives or agreements you can share with us?
Jens Hanefeld: As mentioned, our relations rely on many different actors who all have their respective initiatives with Ethiopian partners. The German Embassy School for example will celebrate its 70th anniversary next weekend – having been building bridges between young people for decencies. However, with a new government coming in, I hesitate to announce any new initiatives at this time. It would be premature to do so. We should wait for the formation of the new government following the elections and then proceed from there to see what we will be able to announce.
Capital: What has been your experience and perspective since arriving in Ethiopia, and how do you view the role of Africa in the international context?
Jens Hanefeld: I arrived in the country five months ago, marking my and my wife’s first experience serving in Africa. Previously, my diplomatic career has focused mainly on transatlantic relations and policy issues at headquarters. I find it fascinating to be here, especially considering Ethiopia’s unique history of never having been colonized by foreign invaders.
This aspect is noticeable and quite intriguing. We are also grateful for the warm welcome we have received.
In my daily work, I particularly enjoy the privilege of serving as a double-hatted ambassador—representing Germany in Ethiopia and as the Permanent Observer to the African Union. This role allows me to follow not only the situation in Ethiopia and the Horn of Africa but also how the entire continent comes together in Addis Ababa to address future challenges. Initiatives like the creation of a common African free trade area are vital when looking towards the future.
We are currently facing numerous challenges, particularly with the significant crises in Sudan and the DRC. However, it is essential to recognize that Africa is a continent of the future, not merely one of crisis. I see it as my role to convey this message back to Germany and Europe during my engagements with partners.
Capital: How do you view the future of cooperation between the European Union and the African Union?
Jens Hanefeld: This cooperation is very important to us. We look forward to working together with the new Commission and engaging with them as quickly as possible once their members are in office. We are eager to advance institutional cooperation between the EU and the AU. We hope to see both ministerial meetings and a summit of African and European leaders in the near future.
These events would send a strong signal. With a new commission in the EU and a new commission at the African Union, it is vital to ensure that they meet as soon as possible, despite the many challenges we all face in our regions.
Capital: Any final comments?
Jens Hanefeld: I believe it was significant that Chancellor Scholz and Foreign Minister Baerbock bothcame to Ethiopia during their tenure. These visits represent important milestones in our bilateral relationship. Moving forward with such high-level contacts would be a crucial step, but it is ultimately up to the leaders to decide.
