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DE RUEHDS #2072/01 2380722
ZNR UUUUU ZZH
P 260722Z AUG 09
FM AMEMBASSY ADDIS ABABA
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RUEPADJ/CJTF HOA PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
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UNCLAS SECTION 01 OF 03 ADDIS ABABA 002072 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON SOCI PHUM ELAB PGOV ET
SUBJECT: ETHIOPIA'S ECONOMY FROM THE VIEWPOINT OF THE URBAN 
POOR 
 
SUMMARY 
------- 
 
¶1. (SBU) The rising cost of fuel and imported goods, as well 
as the power shortages that have plagued Addis Ababa for 
several months, are having a sharply negative impact on 
families and livelihoods of the urban poor.  Over a two-week 
period, EconOff visited several of Addis Ababa's poorest 
neighborhoods to examine economic issues from the perspective 
of city residents with whom the Embassy does not frequently 
engage.  During this period, EconOff toured the city's 
largest market, visited three soup kitchens, and met with NGO 
workers who provide services to the city's poorest residents. 
 Residents, NGO workers, and police reported a rising trend 
in urban migration, and thus homelessness and crime, as a 
result of worsening economic conditions in rural areas. 
Reported economic growth is not reaching the city's poorest 
residents, and all eyes look to the government to fashion a 
response -- an expectation that that is not likely to be met 
in the near future.  End summary. 
 
LOCAL MERCHANTS FEEL IMPACT OF ECONOMIC POLICIES 
--------------------------------------------- --- 
 
¶2. (SBU) Addis Ababa's Mercato, reported to be the largest 
open-air market in Africa, continues to do steady business, 
but many local merchants complain of a drop in sales and 
difficulty in securing inventory.  In the past year, the 
Government of Ethiopia (GoE) devalued the Ethiopian birr by 
nearly 30 percent against the U.S. dollar, resulting in 
higher prices for all imports not subsidized by the 
government.  All vendors questioned criticized the 
devaluation of the local currency and its impact on import 
prices, singling out the rising cost of fuel as a particular 
hardship.  Other comments varied by market sector.  Vendors 
of hardware and household goods, for example, stated that 
they have had to increase prices on the vast majority of 
their goods, which are imported from China, resulting in a 
significant drop in sales.  EconOff queried whether customers 
had begun to purchase locally made goods in place of more 
expensive imports, but vendors uniformly responded that their 
customers were reluctant to purchase low-quality domestic 
products, even if it meant they had to do without while they 
saved to purchase foreign goods.  Several hardware vendors 
added they had heard their wholesalers were having difficulty 
importing the products they sold as a result of Ethiopia's 
foreign exchange shortage, and expressed concerns that their 
sales would decline even further as a result. 
 
¶3. (SBU) The Mercato's vendors of building materials had a 
more positive outlook, thanks to the current construction 
boom in Addis.  However, vendors noted the price of both 
imported and locally-produced goods had increased, the latter 
as a result of power cuts, increased fuel costs, and 
unreliable transportation.  Vendors surveyed stated that the 
cost of lumber and plywood had risen by 50 percent in the 
past year, and the cost of locally-produced corrugated metal 
had risen by 15 to 30 percent.  Sales of imported metal were 
down significantly.  Iron rebar, for which vendors reported 
historical price volatility, has been difficult to obtain 
because of domestic power cuts and GoE rationing.  Vendors 
stated that builders were still buying rebar, but prices had 
spiked over 200 percent from the previous year.  When locally 
made rebar was available, prices dropped accordingly.  All 
vendors of construction materials indicated they were selling 
a higher percentage of their goods to contractors, rather 
than to individual home or business owners. 
 
¶4. (SBU) In the grain market, traders reported that prices of 
wheat, barley, and sorghum were stable, and sales remained 
strong.  In response to last year's dramatic spike in food 
prices, the Ethiopian Grain Trade Enterprise (EGTE) has 
imported large quantities of these grains and dumped them on 
the Addis Ababa market.  As a result, while prices in rural 
areas continue to fluctuate, prices in the capital have 
remained flat.  However, merchants were less confident about 
the price of teff, the staple grain produced primarily in 
Ethiopia and used to make the country's national dish, 
injera.  (Note:  Teff is grown in such small quantities 
outside Ethiopia that it cannot be imported, so prices are 
unaffected by the EGTE's dumping.  End note.)  The price of 
mixed teff, which averaged 450 birr per 100 kg between 2004 
and 2008, rose to over 1000 birr per 100 kg between April and 
 
ADDIS ABAB 00002072  002 OF 003 
 
 
June of 2008, and has still not receded.  Merchants reported 
the price of the highest quality teff, which had dropped from 
a high of 1600 birr per 100 kg in August 2008, is rising 
again (currently around 1300 birr per kg), and that they 
expected prices of all qualities of the grain to rise 
further.  Several traders told EconOff that they anticipated 
prices would spike as a result of poor meher (long) rains in 
the country, and the resulting poor crop. 
 
RURAL CONDITIONS SPUR URBAN MIGRATION, ASSOCIATED ILLS 
--------------------------------------------- --------- 
 
¶5. (SBU) During a visit to Addis Ababa's largest soup 
kitchen, Dr. Alemu Gebre Wold, General Secretary of HOPE 
Enterprises (the charity that operates the kitchen), told 
EconOff that homelessness and begging in the city are growing 
at rates he has not witnessed in forty years of working with 
the poor.  For many years, HOPE fed between 300 and 500 
people each day in Addis Ababa, but eight months ago the 
organization increased that number to 1,000 as a result of 
increasing demand.  Despite the increase in resources, 
kitchen workers now frequently must turn away the hungry once 
the day's food has run out.  Dr. Alemu attributed this 
increase to deteriorating economic conditions and food 
security in rural areas, and subsequent growth in urban 
migration. 
 
¶6. (SBU) Dr. Alemu explained that it was traditionally common 
for residents of rural areas to seek shelter and assistance 
from family members already living in the city upon arrival. 
In recent months, however, more and more people HOPE serves 
had told him that family members were unable to take them in, 
given their strained resources in the current economic 
climate.  Dr. Alemu relayed a story he commonly hears from 
beggars (who visit the soup kitchen as a result of HOPE meal 
tickets many Addis residents distribute to them instead of 
cash):  In the countryside, where work and food are become 
increasingly scarce, the prospect of starvation is all too 
real.  Word has traveled from the capital that in an average 
day, a beggar can earn 10-15 birr (in the area of one U.S. 
dollar), which is sufficient to obtain food and rudimentary 
shelter, depending on the size of one's family.  Thus begging 
in Addis, which is less taboo than in smaller communities, 
has become a reasonable job prospect for new migrants.  At a 
second soup kitchen open only to women and children, EconOff 
and FSN Political Assistant identified the overwhelming 
majority of clients as newly-arrived migrants.  Dr. Alemu 
also noted, and EconOff witnessed, that large numbers of 
healthy adults and children are now frequenting soup 
kitchens, compared to the elderly, disabled, and infirm who 
comprised the majority in previous years. 
 
¶7. (SBU) Addis Ababa has also experienced an increase in 
crime in the past six months, according to RSO police 
contacts.  While the police do not enforce vagrancy laws, 
there has been an increase in incidents of petty theft, 
principally comprised of non-violent crimes of opportunity. 
Police attribute this increase to worsening economic 
conditions and to growth in the city's homeless and transient 
population.  Police specifically note an increase in the 
number of street children who appear to be committing petty 
thefts with the intention of being arrested, so that they 
will have shelter for the night.  Because minors who commit 
non-violent crimes are generally jailed for one to two nights 
and then released, police report that this crime pattern 
occurs every rainy season.  However, they attribute the 
increase over previous years to a greater number of street 
children in the capital.  Some of these children are recent 
migrants, but others are children of local families who have 
taken to living in the streets in an effort to support their 
families or feed themselves when their families are unable to 
do so.  Dr. Alemu and Rahel Bisetegne, Coordinator of Our 
Father's Kitchen, a local charity that provides daily meals 
to orphan children, also reported an increase in the number 
of street children in Addis. 
 
COMMENT 
------- 
 
¶8. (SBU) A common theme presented by merchants, NGO workers, 
and the city residents they serve was the hardship created by 
the increased cost of living in Addis Ababa.  Both merchants 
who had witnessed a decline in sales and those who had not 
 
ADDIS ABAB 00002072  003 OF 003 
 
 
noted that their profits were not keeping up with their 
increased family and business expenses.  HOPE Enterprises and 
Our Father's Kitchen both reported higher operational costs 
due to rising food prices and worker salaries, and reiterated 
that these same factors were creating a greater demand for 
the services they provide to the needy.  Residents surveyed 
uniformly condemned the devaluation of the local currency and 
resulting increase in the price of imports, as well as the 
negative impact of power cuts and increased fuel prices.  The 
city's poorest residents are most definitely not seeing the 
benefits of economic growth claimed by the government.  And 
while few of the residents surveyed blame the government for 
the financial strain they currently feel, the vast majority 
expect the government to take action to improve economic 
conditions.  Faced with a poor forecast for this year's 
harvest and myriad economic challenges -- as well as 
elections within the year -- it is unclear whether the 
government will be able to meet these expectations.  End 
comment. 
MEECE