Risk is inherent in public sector especially in poor developing countries.

Pfeffer & Klock (1974)

defines risk as the perils to which the individual is objectively exposed at any time. The world

development report said that Risk management can be a powerful tool for development and has

the potential to bring about security and future prosperity to people in the developing world.

Ethiopia has not only faced risk in its culture but uncertainty and insecurity that may hinder

development if not addressed adequately. Ethiopia is a country located in Sub Saharan African,

with a population of approximately 112 million people. The worldbank stated that Ethiopia,

although the second most populous country after Nigeria in Sub-Saharan Africa, is also one of

the world’s poorest countries. Ethiopia suffers from significant developmental concerns that pose

significant risks and uncertainty for the region. Although the economy has been performing well

in recent years, there are challenges related to sustainable economic growth and the advent and

effects of climate change whilst still grappling with issues of poverty among its population.

Hence, it still cannot attain developmental status because of the risks associated with it. This

article seeks to examine these risks while devising methods in how it can be alleviated or

reduced and what these developmental concerns imply for the governance structure.

Climate change

Climate change is the rise in earth temperatures as a result of too much greenhouse gases

being released in the air. Although Ethiopia greenhouse emissions are low, the effects still pose a

huge challenge to Ethiopia and its people. Climate change has resulted in Ethiopia becoming one

of the world’s most drought-prone countries, with the complete failure of seasonal rains. Irish aid

(2018) argued that climate variability has increased in Ethiopia, associated with the ElNiño

Southern Oscillation (ENSO), with warm phases associated with reduced rainfall in the main wet

seasons further exacerbating the drought and famine. To add numbers to the issue, the mean
annual temperature has increased by 1.3°C between 1960 and 2006 and is projected to increase

by 1.1 to 3.1°C by the 2060s, and 1.5 to 5.1°C by the 2090s. Comfort (1988) said that although

disaster is viewed as a problem, it can be managed more effectively by informed action and

appropriate investment of attention and resources in risk-prone communities. Governments are

regarded as the primary actors in mobilizing communities to engage in the mitigation of risk and

preparedness for possible disaster. These activities, in turn, would increase the capacity of

communities to respond effectively when extreme events did occur and to recover more quickly

from the damage. According to the Index for Risk Management, Ethiopia is ranked as high risk,

with exposure to hazards including increase in floods, earthquakes and droughts respectively,

which will increase conflict risk and human exposure. Climate change and resultant disasters will

definitely hinder and even reverse the development trends. The climate change impacts are

projected to slow down economic growth and make poverty reduction even more difficult. The

challenge is to manage recurring disasters, and government agencies to be responsible for

designing appropriate policies and enabling citizens to take informed action to reduce risk.

However, it is estimated that adapting to climate change in the areas of agriculture, energy

provision and road infrastructure may cost an annual average of $0.8-2.8 billion USD but If

further irrigation development is not undertaken, the country will lose between US$28 billion

and US$32 billion by the year 2050. This is about 40% of the GDP.

Solutions and implications for government

Designing public policy to manage disaster risk requires different allocations of attention,

resources, organizational structure, methods, and measurement of performance. Disaster

represents the interdependent cascade of failure triggered by an extreme event that is exacerbated

by inadequate planning and ill-informed individual or organizational actions. The new 2013
policy provides for a comprehensive framework of disaster risk management (DRN) measures

and is an amendment of the 1993 National policy on disaster prevention and management. It

includes general directions and major implementation strategies early warning and risk

assessment, information management, and on integration of disaster risk reduction into

development plans. The main objective of the Policy is to reduce disaster risks and potential

damage caused by a disaster through establishing a comprehensive and coordinated disaster risk

management system in the context of sustainable development. In addition, the government he

government in 2011 finalized its “Climate-Resilient Green Economy” (CRGE), strategy. The

following are the key recommendations to strengthen climate integration into development

planning.

Governance is directly affected by the risk of climate change effects. To Wildavsky, risk

is ever present in a complex social world, and it would be impossible for any government to

eliminate risk altogether. Ethiopia has definitely felt the heat as agriculture which contributes

40% of GDP has fallen, which means that there is less revenue for the government and the poor

diversification of the sector means that it will cause a strain on the government. The governance

has incorporated Ireland in their processes who have supported climate change through its

bilateral aid and civil society programmes. In 2016, Ireland provided a total of € 14,178,725 to

Ethiopia in climate finance through the bilateral programme and € 1,886,257 through civil

society programme.

Because of the severity of the issue, the federal level structural and institutional capacity

needs to be replicated at regional level to effectively discharge the national climate policy

implementation at all levels. This issue of climate change has indeed received a lot of

international consensus in helping the government as the Irish Aid Country Strategy for Ethiopia
for 2014-2018 supports climate-smart public works, social transfer systems and enhanced

livelihoods for a sustained reduction in vulnerability and to provide the platform from which

poor people can benefit and participate in economic growth. The governance structure must

overall develop a strong climate governance and institutional capacity to foster adaptation and

resilience to climate impacts

Economic stability

Ethiopia is the fastest growing economy in the region. However, it is also one of the poorest,

with a per capita income of $790. Ethiopia aims to reach lower-middle-income status by 2025.

The worldbank stated that Ethiopia’s economy experienced strong, broad-based growth

averaging 9.9% a year from 2007/08 to 2017/18, compared to a regional average of 5.4%.

Ethiopia’s real gross domestic product (GDP) growth decelerated to 7.7% in 2017/18. Industry,

mainly construction, and services accounted for most of the growth. Agriculture and

manufacturing made lower contribution to growth in 207/18 compared to the previous

year. Private consumption and public investment explain demand-side growth, the latter

assuming an increasingly important role. Although agriculture role has declined, it still is a very

important factor in the economic growth, contributes 40.5% of GDP in 2015 having over 85% of

the population working the sector. This means that the sector is easily threatened by climate

change and world prices. This continued growth was due to the rapid production and exportation

of coffee.

Solutions

Solutions proposed to sustain the economy includes the Country Partnership Framework (CPF)

approved in June 2017, designed to support the Ethiopian government’s Growth and
Transformation Plan (GTP) II while aiming for the World Bank Group’s (WBG) twin goals of

eliminating extreme poverty and boosting shared prosperity, as well as achievement of the

Sustainable Development Goals (SDGs). The assistance from International Development

Association in the form of credits and grants has allowed the Government of Ethiopia has made

strides in areas such as The Growth and Competitiveness Program, Competitiveness and Jobs

Creation Project and the Women Entrepreneurship Development Project. Which are all

important in diversifying Ethiopia’s economy. The International Development Association is

Ethiopia’s largest provider of official development assistance and has committed over $20 billion

to more than 70 projects in Ethiopia since 1991.

Implications for governance

With this high economic growth, the challenge is for the government to sustain it. The prime

minister encourages greater private-sector involvement to support the government’s plan to

transform Ethiopia from an agriculture-based economy into a manufacturing hub, a plan that

hinges on improved transport and energy infrastructure and greater agricultural-sector

productivity. Achieving consistent relative economic growth will reflect positive trends in

poverty reduction. As at 2016, the share of the population living below the national poverty line

decreased from 30% in 2011 to 24% in 2016. The government adopts the Growth and

Transformation Plan (GTP II) which will run to 2019/20 aimed at expanding physical

infrastructure through public investments and to transform the country into a manufacturing hub.

GTP II targets an average of 11% GDP growth annually, and in line with the manufacturing

strategy, the industrial sector is set to expand by 20% on average, creating more jobs.

To achieve these goals, reforms are needed to improve the burdensome and opaque

business and investment regime. The poor quality and efficiency of government services are
made worse by weak rule of law and pervasive corruption. State distortions in prices and interest

rates undermine monetary stability. The government in achieving development wishes to instill

the neoliberal policy of privatizing state enterprises and rationalization of government regulation.

While the process is still ongoing, the reforms have attracted much-needed foreign direct

investment.

Poverty

The worldbank stated that Ethiopia is one of the world’s poorest countries, with about 44 percent

of its population living in poverty, although it has one the fastest-growing economies in the

world. The causes of poverty in Ethiopia include a myriad of variety of actions stemming from

climate change as well as man-made actions. However, the main causes of poverty in Ethiopia

are brought on by the effects of its economy revolving around agriculture. About 80 percent of

Ethiopia’s people work in agriculture. Because agriculture is the primary source for Ethiopia’s

economy, most of its population takes up much of its rural areas than its urban. Most of Ethiopia

working population are farmers which constitute the largest percentage of poor people. They are

also responsible for contributing 40.5% towards GDP but their state is found lacking. Most

farmers, if not all, depend on their agriculture for most of their living essentials. Because so

many of these farmers live in poverty, they also lack the ability to update their tools to grow

better crops. Apart from the challenges in reaping enough revenue from the crops, they must also

contend with effects of climate change. These effects contribute to large droughts, infrequent

rain pattern, frequent natural disasters, which have all degraded agricultural lands and made the

sector volatile. As if difficulty making a living were not enough, Ethiopia’s poverty is further

worsened by the recent war. The consequences of the war with Ethiopia’s neighboring country,
Eritrea, have been compared to those of World War I, leaving a legacy of economic burden in

the country, with millions of dollars spent by an already poor economy.

Solutions

Ethiopia, in 2005 introduced new agricultural practices which resulted in increased production.

As the World Bank states, this agricultural growth has allowed for a 4 percent reduction in

poverty each year. The use of fertilizer, along with high food prices and good weather, has given

poor farmers with access to markets a higher income. Ethiopia also instituted the Productive

Safety Net Program (PSNP). The World Food Program writes that there are 7.4 million people

participating in the PSNP. The program works to end chronic food insecurity through transfers of

food or cash (or a combination of both). The PSNP has helped 1.5 million people who were in

poverty to be lifted out of poverty. From 2000 to 2011, poverty in Ethiopia declined from 44

percent to 30 percent. As the World Bank says, this “translates to a 33 percent reduction in the

share of people living in poverty”.

Implications on governance

The government has recognized that an economy predominantly focused on agriculture will lead

to poverty since they do not bring much to the bargaining table. Since 2008/2009, the service

sector has overtaken the lead from agriculture in terms of output contributing 39.3 % GDP vs

agriculture 36.3 %. Thus, there have been structural transformations to eradicate poverty. The

worldbank (2019) reported that Ethiopia’s economic performance in the 2016-17 financial year

was robust, and it is set to continue along positive path leading to further poverty reduction.

Ethiopia’s reform agenda is expected to support growth that is projected to be slightly below or

above 8% in the near term. Economic reform incorporating private sector is expected to help the
economy grow faster. Ethiopia’s new prime minister has promised to jumpstart serious economic

reforms. The pursuit of sound, private sector-led and export-oriented economic policies is critical

to achieving Ethiopia’s economic and social ambition. Although the private sector is still

undeveloped, they have played a role in absorbing some of these poor people in their

organizations to remain competitive, while the government has been formulating and

implementing ambitious and robust midterm plans since the mid-2000s, Plan for Accelerated and

Sustained Development to End Poverty (PASDEP) has been implemented during 2005/06 to

2009/10 followed by the First Growth and Transformation Plan (GTP I) that was implemented

from 2010/11 to 2014/15. Currently, the Second Growth and transformation Plan (GTP II) is in

its third year of implementation whose major objectives include maintaining the strong growth

averaged 11 percent achieved in the past, deepening economic transformation, and aiming to

become a lower middle income and carbon neutral status by 2025. The overarching objectives of

the midterm plan is eradicating poverty and accelerating structural transformation with the vision

of becoming middle income and carbon neural status by 2025.