The need to enhance performance, ensure fiscal accountability, and drive productivity across Ethiopia’s State-Owned Enterprises (SOEs) is beyond dispute. Ill-structured incentive systems can reward longevity over merit, obscure operational accountability, or create unwarranted pay disparities among peers. However, performance-driven frameworks contribute to workplace stability and enterprise productivity only when they are transparent, evidence-based, and equitably administered. Performance management is far more than a mechanical exercise in numbers and formulas. Employees require complete clarity on how their performance is measured, who establishes evaluation criteria, how outcomes are verified, and how incentives are calculated. Furthermore, key performance indicators must account for real-world variables within the worker’s sphere of control. An individual worker cannot control machinery breakdowns, power outages, raw material shortages, market shocks, or supply chain bottlenecks. When these external factors are overlooked in performance metrics, evaluation systems fail to boost productivity—instead, they become punitive and demotivating.
These operational realities are precisely the issues meant to be negotiated through legal collective bargaining. While enterprise management brings financial constraints and strategic goals to the table, workers and their trade union representatives offer frontline expertise regarding production processes, occupational safety, and workplace dynamics. Consequently, collective bargaining does not impede corporate restructuring; rather, it ensures that reform measures are grounded in operational reality, institutionally supported, and sustainable over the long term.
The ongoing enforcement of this directive and the complete lack of a resolution make this an increasingly urgent matter. What began as a temporary administrative measure has evolved into a lingering standoff that threatens workplace peace across the nation’s largest state enterprises. Re-examining this dispute is not merely an academic exercise; it is an immediate policy necessity because reform cannot mean suspending dialogue, nor can administrative efficiency justify overriding constitutional and statutory rights.
Recently, the order issued by Ethiopian Investment Holdings (EIH) directing a temporary suspension of the signing, renewal, and amendment of Collective Bargaining Agreements (CBAs) across major SOEs has raised widespread concern and debate. This decision brings a fundamental question to the fore of the country’s enterprise reform agenda: Does a reform aimed at boosting productivity justify suspending constitutionally, statutorily, and internationally protected rights to organize and bargain collectively through an administrative directive?
This directive is reportedly linked to ongoing evaluations of employee performance, benefits, and incentive systems. The underlying objectives—enhancing accountability, strengthening financial management, and aligning incentives with organizational output—are vital for state enterprises expected to operate efficiently and sustainably. However, the manner in which such reforms are pursued, particularly when directly impacting industrial relations, demands equal attention.
In an official petition submitted to the Ministry of Justice (Ref: ኢሠማኮ/50/181/2019), the Confederation of Ethiopian Trade Unions (CETU) opposed EIH’s directive, arguing that the holding company cannot unilaterally freeze collective bargaining frameworks. CETU cited constitutional protections, national labor legislation, and international commitments regarding freedom of association and collective bargaining. This intervention casts doubt on the directive’s legality and scope, while signaling deeper anxieties regarding the status of labor rights within corporate restructuring processes.
Legitimate Reform Objectives, Contentious Execution
Ethiopian Investment Holdings (EIH) holds substantial administrative oversight over its portfolio enterprises. Council of Ministers Regulation No. 487/2014 governs the governance, supervision, and management of subsidiary enterprises, empowering EIH to set compensation and incentive structures aligned with commercial principles and international best practices. Article 9 covers corporate governance frameworks, performance reporting, and subsidiary management. These provisions position EIH to shape how these enterprises are managed and how resources are allocated.
However, authority over compensation policies does not automatically answer whether EIH possesses the statutory power to suspend collective bargaining within subsidiary companies. The provisions of Regulation No. 487/2014 do not explicitly confer blanket authority to freeze collective bargaining. A proper legal assessment therefore requires examining the complete content and statutory foundation of the directive, as well as the balance between EIH’s corporate mandate and fundamental workers’ rights.
Furthermore, Regulation No. 487/2014 (Art. 3(3)), which treats EIH and its subsidiaries as private commercial entities regardless of the state’s shareholding percentage, must be interpreted cautiously. This provision is designed to foster commercial competitiveness and operational efficiency; it is not a legal shield to place enterprises above national labor law or strip workers of baseline protections. Similarly, Article 20, which addresses conflicting laws, cannot be interpreted in violation of the Hierarchy of Laws principle to override the FDRE Constitution, the Labor Proclamation, or ratified International Labour Organization (ILO) Conventions.
Collective Bargaining as a Fundamental Labor Right
The core of the dispute lies in the fact that the rights to organize and bargain collectively are fundamental labor rights that cannot be set aside by corporate administrative orders.
The primary purpose of freedom of association and collective bargaining is to enable workers and employers to organize, express their interests, and jointly determine working conditions through lawful and peaceful means. Workers have the right to form unions without unlawful interference and to bargain freely with employers on wages, working hours, occupational safety, benefits, and grievance procedures.
These rights are recognized as Core Conventions by the ILO because they protect foundational workplace standards essential for Decent Work. Ratified ILO instruments—specifically Conventions No. 87 (Freedom of Association) and No. 98 (Right to Organize and Collective Bargaining)—occupy a central role. Convention No. 87 protects the right of workers and employers to establish independent organizations without state interference, while Convention No. 98 shields workers against anti-union discrimination and obligates states to promote voluntary collective bargaining. In the absence of bargaining rights, workers lose their institutional leverage to negotiate fair wages, safe conditions, and equitable treatment.
When a state ratifies ILO conventions, it incurs binding international and domestic legal obligations to implement those standards and report on compliance. Ratification establishes enforceable domestic commitments. Countries adhere to these standards to safeguard labor rights, maintain clear legal frameworks, ensure industrial peace, and demonstrate credibility in global governance. As an early African member state of the ILO, Ethiopia has formally ratified Conventions No. 87 and No. 98, embedding these principles within its legal order. Moreover, under the ILO framework, fundamental labor principles remain binding by virtue of membership. Collective bargaining is not a discretionary administrative privilege that institutions may freeze at will; it is a constitutional right and the primary mechanism through which workers participate in decisions shaping their livelihoods.
Constitutional and Statutory Framework
Article 42(1)(a) of the FDRE Constitution explicitly guarantees workers the right to form associations to improve their conditions and protect their interests, as well as the right to bargain collectively with employers and relevant organizations. Additionally, under Article 9(4), ratified international agreements form an integral part of the law of the land.
To operationalize these constitutional guarantees, Labor Proclamation No. 1156/2011 (Art. 130) provides that matters concerning wages, working hours, occupational safety and health, promotions, transfers, discipline, and grievance procedures fall within the scope of collective bargaining. Article 131 sets out the mandatory procedure for initiating and conducting negotiations. Collective bargaining is far more than a routine meeting between management and union representatives; it is a structured process of dialogue, information exchange, and accountability. Its value lies not only in the final executed agreement, but in fostering mutual understanding of financial, operational, and human resource realities.
Practical Implications of the Freeze
For enterprises and workers falling under the directive’s reach, the practical impact remains a pressing concern. Indefinitely suspending new negotiations, renewals, and amendments leaves unresolved questions surrounding wages, benefits, safety standards, and employment terms hanging in the balance, creating institutional uncertainty and friction.
While the severity of this impact may vary depending on the nature of each enterprise and the expiration status of its agreements, labeling the measure as “temporary” does not lessen its risks. Imposing a sweeping freeze during a period of economic adjustment—when clarity and legal certainty are paramount—risks introducing unnecessary strain into industrial relations.
It is equally important to distinguish between freezing ongoing negotiations and attempting to invalidate existing agreements. While the directive focuses on suspending new signatures, renewals, and amendments, Ethiopian law stipulates that no entity can unilaterally suspend or nullify an active CBA outside of mutual agreement or a court order. Thus, without further legal grounds, existing agreements remain binding, and accrued benefits cannot be assumed to be invalidated. Nevertheless, EIH and subsidiary managements have a duty to explicitly clarify how active agreements and accrued rights will be respected during the review period. Accrued rights—such as earned salary adjustments, overtime pay, annual leave, and contractual allowances—must not fall victim to corporate restructuring. Prior executed CBAs remain legally binding until modified in accordance with statutory procedures by the contracting parties.
Performance Reforms Require Fair Rules
Reviewing enterprise performance frameworks and incentive structures may well be necessary. Misaligned incentive schemes that reward tenure over output can obscure accountability and create unjustified wage gaps. However, performance systems enhance productivity only when they are transparent, objective, and fair.
Performance management is not merely an algorithmic calculation. Employees must understand how metrics are set, who defines evaluation criteria, how results are audited, and how rewards are distributed. Crucially, evaluation metrics must reflect conditions within the employee’s control. Operational bottlenecks, machinery failures, power outages, and supply chain disruptions cannot be blamed on frontline workers. Unfair metrics undermine morale rather than driving efficiency.
These issues are precisely what collective bargaining is designed to resolve. Management can present financial constraints and operational requirements, while trade union representatives bring practical insight regarding production line realities, workplace safety, and implementation challenges. Collective bargaining does not block corporate reform; it makes reform realistic, accepted, and durable.
Can EIH Freeze Dialogue?
While EIH exercises broad governance oversight over public enterprises, its authority is legally bounded. Administrative orders cannot exceed statutory limits. The fundamental legal question is not whether EIH has the mandate to undertake enterprise reforms, but whether it possesses the statutory authority to unilaterally suspend collective bargaining rights guaranteed by the Constitution, national labor statutes, and ratified international treaties.
A temporary administrative measure may be permissible if strictly bounded by clear statutory authority and structured to preserve existing contractual rights. However, where an administrative order lacks explicit statutory backing and acts to halt CBA renewals or restrict union representation, it becomes legally vulnerable.
As CETU noted in its petition (Ref: አሠማኮ/50/181/2019), EIH Directive Ref: EIH/EN-L/76/19 exceeds the statutory authority granted under Proclamation No. 1263/2014 (Art. 54) and Regulation No. 487/2014. In evaluating this petition, if the Ministry of Justice determines that the directive operates ultra vires, violates constitutional protections, or breaches statutory labor provisions, it carries the responsibility to direct the revocation of the order or require formal legal justification. Ultimately, the legality of the directive remains subject to judicial review under the rule of law.
Strategic Imperatives for CETU
While petitioning the Ministry of Justice is a necessary step, relying solely on formal correspondence is insufficient. CETU should pursue a multi-pronged strategy combining legal clarity, enterprise-level engagement, and public accountability:
- Requesting Formal Disclosure: CETU should request formal clarification from EIH regarding the exact scope, legal grounds, and temporal limit of the directive, as well as a complete list of affected enterprises and agreements.
- Categorizing CBA Status: CETU must differentiate legally between active CBAs, ongoing negotiations, expiring agreements, and uninitiated bargaining processes to tailor its legal remedies.
- Defending Accrued Rights: CETU must firmly maintain that accrued rights and existing benefits remain legally enforceable unless modified in full compliance with statutory procedures.
- Institutionalizing Social Dialogue: CETU should advocate for a structured Social Dialogue platform involving EIH, enterprise executives, and the Ministry of Labor and Skills. The objective is not to oppose enterprise performance reviews, but to ensure they proceed transparently and in accordance with statutory protections.
Obligations Facing EIH
Conversely, EIH bears an institutional responsibility to publicly clarify its administrative actions. At a minimum, EIH should provide public clarity regarding:
- The precise list of state enterprises covered by the directive;
- The exact duration and expiration date of the suspension;
- Formal confirmation that active CBAs and accrued rights remain fully binding;
- Clear mechanisms for trade union participation in the review of performance and incentive structures; and
- The specific statutory provisions authorizing the administrative order.
Providing formal answers to these questions is essential for an objective evaluation of the directive’s legality and policy justification.
Reform and Dialogue Must Coexist
Ethiopia’s State-Owned Enterprises require effective governance, fiscal discipline, and robust performance systems built for long-term viability. Equally, workers require transparent employment terms, meaningful representation, and confidence that decisions affecting their livelihoods adhere to lawful processes.
These two objectives are mutually reinforcing. Enterprises that respect labor rights build workforce trust, reduce industrial friction, and secure employee commitment during complex structural transitions. Informed, consulted, and fairly treated workers are far more likely to support productivity reforms and organizational change.
The fundamental issue is not whether performance and incentive frameworks should be evaluated—their review is necessary. The core issue is how that review is conducted, what statutory authority supports suspending collective bargaining, and how the legal rights of both employers and workers are protected under the rule of law. Any reform program aimed at building stronger state institutions must simultaneously strengthen the legal mechanisms that resolve workplace concerns. Sustainable industrial peace rests on clear rules, predictable governance, and genuine dialogue between social partners. Collective bargaining should never be viewed as an obstacle to enterprise reform; when conducted transparently and in accordance with the law, it is the cornerstone of sustainable, accountable, and effective reform.
