- Dr Minas Hiruy, President of Hope Enterprises

Dr. Minas Hiruy, heads the Hope Enterprises, a local charity. He pursued his higher education in Kansas, US, where he obtained his first degree in business administration in 1973, and his Ph.D in Public Administration and Policy Studies from Kent State University in 1987.

Dr. Minas says that as a result of the spiraling inflation with no end in sight, people could starve to a point where there might be social unrest unless the government and the society do something about it.

Dr. Minas spoke to Bruck Shewareged on questions pertaining to  the inflation and the negative impact it may bring. Excerpts:  

So many theories have been forwarded as to the cause of the spiraling inflation. Yet, is there no consensus on the cause?

Yes, a lot has been said. All I can say is that it is an effect of a multiple of factors, the most important of which is population growth, for one. Population growth is very rapid in this country so much so that in 2005 we actually bypassed Egypt in having the second largest population in Africa, next to only Nigeria.

By UN's account, our population as of 2007 stands at 82 million. What that means is that every year we have new mouths to feed, requiring a lot of food. That is one factor.

The other factor is the global factor, particularly the cost-inducing inflation factors, one of which being the increasing rise of fuel cost and increasing rise in other costs, primarily caused by fuel cost i.e., the costs of transportation, communication, the costs of commodities, labor itself, etc. This had a cost adding effect on the products that we import.

And then the issue of success in our economic development by itself has also an impact on the inflation, specially success is terms of exports. When our locally demanded products are exported, that has an impact of raising prices at the local level. We see that affecting domestic products like teff and wheat. Their prices are sky-rocketing even as we are talking.

But our staple food teff is not that much in demand in the global market. Why is it that its price is soaring?

Actually, it is in demand in the global market. For instance, one fact that I know is that teff has been used  as a substitute for people that do not consume wheat that has gluten. So countries like Holland are using teff. Teff is also used as medicine for its higher iron content. They are producing it in forms of tablets.   

The Ethiopian diaspora is also a big population consuming teff products very, very much. That has an impact on increasing prices. And the diaspora is all over the world.

But is the demand so high in the global market to cause price hikes?

It is. You have to see also the internal demand. With the economy performing so well, one of the things it did was that it induced demand. People that did'nt consume as much before are consuming a lot now. More people are coming to the picture, demanding teff, injera, meat, vegetables, fruits etc.

A vegetable like potato that was dirt cheap, 50 cents per kilo, and nobody buying it is now selling for 5 birr per kilo. Why? It is because of the internal demand for vegetables and fruits. I remember the price of orange. They used to have difficulties selling oranges in the local market here in Addis, with a kilo of orange selling for a birr. Now, you cannot get it for eight birr because of the rising local demand. Production has increased. But with demand prevailing over supply, obviously price rises because people sell to the highest bidder in situations where there is a supply constraint.

Some argue that even though there is enough production, producers demand high price due to the high cost of production inputs like fertilizers. . .?

It adds up. You know, for a long time Ethiopia was out of the global markets. We were like cocooned by our own ways unaffected by crisis the world over. And products like teff, nobody wanted them. They didn't require as much fertilizers or mechanization. So price fluctuations worldwide didn't affect us. And we continued on. But now, that is not so.  Teff uses fertilizers. Teff uses transportations. You need to transport it from farms to storage areas to markets. And transportation is linked to oil coming from abroad. It is linked to spare parts still coming from abroad, and so on.

The people involved in the transaction transfer that cost to the farmer, and the farmer is going to shift it to us, the consumers. Whether you like it or not, everyone is affected by the global situation. So we couldn't go on like we used to with our own ways, isolated from the world market. So now you have a situation where even if you have a big production, like the bumper crop last year, the price wouldn't come down because of these vitiating price factors from abroad. There are other factors i.e., cost of living like the cost for schooling. Schools cost more now. Teachers cost more now. Government increased the salaries of teachers. So producers want to cover their production cost as well as other costs of living. Of course, people with lower income will have a hard time. That's when the social issue comes.  

It is often argued that the actual income of salaried people decreased despite salary increase. How can these people cope?

Purchasing power has actually decreased. If you were getting, let's say five hundred birr last year, at the rate of 39 percent inflation rate, you simply decrease it by that much. So your five hundred birr last year may have the purchasing power of three hundred and fifty birr this year. And ten years down the road, the five hundred birr would be no more that ten birr in purchasing value.

I think that is a critical problem for low income earners, say 500-1000 per month. They cannot make it. I did some figures. This is based on actual data. For instance, at current prices, for a family of five (husband, wife and three children) just to feed themselves three times a day, it will cost some 1,050 birr (see figure). This is just for feeding. Forget cost of transport, medical care, housing and clothing. So if a person cannot get more than that, that family would have hard time surviving i.e., for a family of five who earn five hundred birr -  it seems to be quite prevalent among guards, cooks, clerks, secretaries and the like - they literally have to skip one or two meals a day.

So in effect they are being malnutritioned?

Malnutrition is very rampant. And this is not my knowing. The Ministry of Health knows it. Malnutrition is running into something like 49 percent among our youngsters. What I know right now, we have a soup kitchen (at Hope Enterprises), and everyday I see new people. Often in the past, people used to come here from war situation, drought or a situation of some crisis. But now, normal people are coming. People that have jobs tell you, "Well, I skipped my meal to save money to feed my kids. And knowing that you provide meals I've come here to eat." Simply, people on that kind of income have to skip meal. The malnutrition goes on among children, women, lactating mothers, factory workers etc. We know cases where factory workers are collapsing because they don't eat enough food.

Can the much-talked-about economic progress sustain such a weak and maluitritioned work force? If the work force is weak and ineffective, can the country sustain this economic growth?

Well, you can if you close your eyes to the multitude of the population that is having a hard time. I mean, inflation is not affecting the rich. In fact, they are thriving over it. They are getting richer. We see it in towns and others. Luxury items, liquors and the like show a sharp rise in price. You see expensive weddings at Hilton and Sheraton hotels. The price of renting cars for a wedding parade are astronomical. But the rich people are having it to the hilt, enjoying it.       

But the guy making under a thousand birr is having a genuine hard time right now. When the monthly earning goes less and less, it is a kind of situation where people are so weak and hungry and couldn't even stand up to speak about their needs.

Isn't it scary that at some point there might be a social explosion?

There could be social unrest. I would like to mention, however, that we are a people that do not gravitate towards those kinds of things. We are a people who do not easily yield to pangs of hunger. That is part of our history. If you are hungry, you hold it. Some of it came from our religious background. You mortify the body, as the body is "full of sin" And to be clean, you make it suffer. That is why we fast two hundred and fifty days a year. That is sort of a boot camp for us to exercise suffering.

But how long can one sustain this? That's the issue. In normal circumstances inflation comes and goes. If it comes, it is a temporary pain. You suffer it. Next year, it will get better. That is the normal circumstance. But this time, that hasn't been so. The rate of inflation in this country started four or five or years ago, and from year to year it is increasing.

I remember at one time that the rate of inflation was negative. This was back in 2002 or thereabouts. That was the time when corn was selling for fifty birr per quintal. Inflation was dead, even negative. I remember that the statistics authority was making this public. And uncertain about that statistics, I went and checked with the World Bank, and it was negative. Then the economy started to kick forward. The investors started to come from abroad. The diaspora started to invest. Demand was surging ahead of supply. Oil prices began to increase. Then there was bio-fuels factor i.e., using food crops to produce fuels. These added to the inflationary spiral to a point where last year inflation rate reached 39 percent. And I don't know what it will be by the time this year, 2008, ends. All I know is that almost by the day prices are increasing.

And in this kind of trap, what you can read from the writing on the wall is a situation where inflation is going to be a continuing reality. And if this is so, people are not going to bear it, and the malnutrition not only will continue but will gobble up more children, going from the 49 percent to, may be, 70 percent. Then people are going to be mad. Street violence and crime will increase. And soon you'll have social unrest which will be the raw material, may be, for a revolution. This is the experience of other countries. In the last four or five months, we've seen it. In Haiti people rebelled and actually brought down the government. In Egypt, the moment people went to the streets, the government deployed the army to distribute bread, sugar and other basic commodities. They were saying, "Hold on, hold on. We'll do whatever is necessary to fill your stomachs."

Here, in this country, as I said, we are a people that can handle pain. But the issue is, how long can we sustain it. And the issue is also, those of us that have been able to feed our children three meals a day should do something about it.

You are talking about what the society can do, not the government?

This is not only a government problem. This is a social problem too. We need to talk to government to develop what we can do together so that these unfortunate folks that couldn't feed themselves could be helped in a number of ways. If the going gets touch, if those that have closed their eyes said, "I don't care, I've got myself covered," then you know what will happen? Those that are facing the brunt of it are going to rise up and make you care.

I remember when I was living in the United States, there was this kind of situation, where the blacks on one end of, let's say city, would have no jobs, no adequate earning and there was inflation and they were having a hard time making a living. This was in the 1970s. There was discrimination and a number of other problems. And then across the railroad track were the whites that have everything, jobs and good life. And they used to say, "That is your problem."

You know what happened? The blacks started to throw rocks. It got to a point where the whites couldn't go to work because they had to cross the black neighborhood where the latter wouldn't allow them. So, they started to talk. Company executives and government started to talk. Then they said, "The sooner we learn to be sensitive and address their problem as our problem, the better."

So the businesses started to come up with this new concept called "corporate citizenship." Businesses actually set up charities to help people in those kind of situations. And the government came up with a lot of packages, one of which is food subsidies. I remember, the government used to finance the distribution of milk for children. Down the road, they had things like tax credits for people below certain income, not only on the level of income they earn but also on the number of children. They gave them tax breaks so that they had enough cash to augment their purchasing power.

But what can the government do, at least in the immediate future to mitigate the circumstances? Is government's decision to import 1.5 million quintals of wheat sustainable? Can this move stabilize the price of cereals?  

First of all, the government has taken the initiative to respond to this problem before anyone else raised it as an issue, and we are grateful for that. And the steps taken has sort of slowed down the momentum for, let's say, crisis. But at the same time, I'm not sure if the government is looking at a long-term solution. Importing food is a short-term solution.

So what is the long-term solution. I think, in terms of food, they need to identify the food items that we Ethiopians eat, and they need to set a policy and implementation arrangement to produce those food items en masse. Right now, whether we like it or not, the food producers are households. Well, those households are successful. If you go to their homes, they have stocks of wheat and teff and meat and so forth to take care of themselves. But to take care of the city folks, that is not going to be enough. And unfortunately, the trend that we see right now is that farmers are very productive in terms of population. They have a lot of children. When they succeed, they tend to take on additional wives. So more children to feed. The food that they produce is going to stay there.

So how do you deal with cities' demand of food? Mass production i.e, commercial farming, encouraged and propelled by government through a special policy. And this country can do wonders if that policy is introduced because we have so many basins that are not exploited in terms of irrigation and so many alluvial plans that are not being used. Commercial farming must be encouraged for domestic consumption, not for export. That condition has to be there. Then, I think, we can deal with this problem.

India did it. You don't hear of India having food problems. When I was growing up, Ethiopia didn't have food problems. We used to cringe at the problems of India. Then, the Green Revolution propelled by Neru and then the Ghandi family after that, changed the picture, and food just became abundant.

One of the things the government needs to do is to really be serious about food production en masse on those foods that are demanded locally like teff, wheat, beans, spices, dairy products etc.

 I used to live in Kansas, USA, as a young man during the green revolution. They were producing tons and tons of wheat. How they did it was, it was like a joint project. The government builds the infrastructure i.e., roads, and the electric lines. In addition, there was something that the government did that made the difference. They put in place the irrigation, the facilities and the networks. What are they? They are simply aqueducts, water storage facilities, dams etc. Then the government connects each farm through the irrigation network for a user fee. Each farmer taps into that water during the dry season, pays for it, and there is the production.

 The government here can build the network and train lower officials at woreda level to manage the system. Our agricultural institutions need to be more than paper tigers. The students need to learn actual farming.

But the government doesn't seem to be focusing on commercial farming?

But people are going to starve. We, as a society, are between the devil and the deep blue sea. We can be indifferent about it. We can, of course, cling to the old days. Population is going to keep rising. Cost is going to keep rising. The old ways are not going to be accommodative to these factors. Then what happens? A lot of people are going to starve. And then we will have pockets starvation because of climate change like what's happening in Shashemene, Dire Dawa, the Moyale area etc.

The solution to deal with this problem is massive production. If the government can do it, well and good. Mexico is doing it. India is doing it also. But our experience of the recent past has been, that it has been disappointing with all those state farms.

So what do you do? You think of other options. One option is having various inducements for the private sector to enter into this, to produce for local consumption, not export.

The other option is to encourage food exports to be processed and add value. I was in Metema. Food goes out raw; cows go out raw; fish goes out raw from Lake Tana. I was in Galabat (Sudan) and I saw everyone was eating fish. I thought the fish came from River Nile in Sudan. But I found out that the fish they eat was being exported from Lake Tana.

To me, that's counter-productive. The best thing to do is to export the finished product, i.e., canned meat, canned fish and so on. Why? That adds value and it involves and engages a lot of jobless people and the low income earners in production so that they wouldn't be a pressure point on government to feed them. Why not export our sugar in the form of cookies and candies with added value? There is already an example on hides and skins. The government discourages the export of raw hides and skins by levying heavier taxes. It is beneficial to export the finished products.