Challenges in Access to Urban Land for Business Activities under Ethiopian Law: Between Oligarchy and Broad-based Private Sector

Author:Elias N. Stebek
Position:Elias N. Stebek (LL.B, LL.M, PhD), Associate Professor, St. Mary's University, School of Graduate Studies. An earlier version of this article was part of an unpublished research paper titled 'Access to Urban Land for Private Sector Development in Ethiopia' (Dated June 9, 2015) which was submitted to Private Sector Development Hub, Ethiopian ...
Pages:37-82
SUMMARY

Various restrictions in Ethiopia’s urban land law have adversely affected the availability, transferability and tenure security of land-use rights for business premises. These legal and administrative challenges have led to urban land lease tender price hikes that are not affordable to the majority of economic actors in the private sector. The gaps in land information and land governance... (see full summary)

 
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Challenges in Access to Urban Land for
Business Activities under Ethiopian Law:
Between Oligarchy and Broad-based Private Sector
Elias N. Stebek
Abstract
Various restrictions in Ethiopia’s urban land law have adversely affected the
availability, transferability and tenure security of land-use rights for business
premises. These legal and administrative challenges have led to urban land
lease tender price hikes that are not affordable to the majority of economic
actors in the private sector. The gaps in land information and land governance
exacerbate the challenges in the realms of availability, transferability and
tenure security. Such land-use right market imperfections are susceptible to
economic rent seeking, resource capture and land speculation. Unearned
windfall income for persons involved in resource capture, the difficulties
encountered by many businesspersons in loan repayments for land lease and
construction, urban land lease tender rates and rising business premise rental
rates corrode rather than nurture broad-based value adding economic activities.
This article examines the Ethiopian legal regime and urban land governance in
light of the challenges they create in the availability, transferability and
affordability of access to urban land for business activities. There is thus the
need to address these challenges and enhance tenure security in order to
facilitate the emergence and coalescence of a strong middle class and broad-
based private sector in lieu of a nascent oligarchy of the nouveau riche (the new
rich) which is in the course of ascending onto its dreamland, inter alia, through
resource capture attributable to various restrictions against wider access to
urban land.
Key terms
Access to urban land, land-use rights, land lease, urban land law, Ethiopia
DOI http://dx.doi.org/10.4314/mlr.v9i1.2
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Introduction
African Union Agenda 2063 has espoused a visionary transformational
framework. It aspires that by 2063 “African countries will be amongst the best
Elias N. Stebek (LL.B, LL.M, PhD), Associate Professor, St. Mary’s University, School of
Graduate Studies. An earlier version of this article was part of an unpublished research
paper titled “Access to Urban Land for Private Sector Development in Ethiopia” (Dated
June 9, 2015) which was submitted to Private Sector Development Hub, Ethiopian
Chamber of Commerce and Sectoral Associations.
38 MIZAN LAW REVIEW, Vol. 9, No.1 September 2015
performers in global quality of life measures.” This envisages “strategies for
inclusive growth, job creation, increasing agricultural production; investments in
science, technology, research and innova tion; gender equality, youth
empowerment and the provision of basic services including health, nutrition,
education, shelter, water and sanitation.”1 Ethiopia shares these aspirations.
Ethiopia aspires to join the category of middle income countries as of the
year 2025. This envisages business environment which is conducive to value
adding economic pursuits, sav ing, investment, enhanced job c reation and
sustainable development. These pursuits not only aim at ‘growth’, but also its
sustainability which, in the avenue of sustainable economic benefits, envisages
significant job creation with decent levels of real income, fixed capital
formation (which varies from foot-loose ‘investments’) and steadily improving
social well-being through inclusive growth and poverty alleviation.
Ethiopia’s developmental aspirations and pursuits for the years and decade s
ahead envisage agents of such transformation. As good practices throughout the
world have proven, innovation, creativity, motivation, c ompetence, sustained
efforts and integrity are among the cornerstones of structural transformation
which can be nurtured and honed at the grassroots thereby rendering the private
sector a major change agent. It is under such a setting that economically
empowered citizens can pursue rational (i.e., informed and morally responsible)
self-interest within a framework of public interest and the common good. This
requires the alleviation of various constraints including inadequate access to
urban land and the restrictions in its transferability. The private sector can
hardly play its role in value creation, competitiveness, and economic
development in the absence of such grassroots empowerment.
There are various challenges in access to urban land in Ethiopia which
adversely affect the business environment. They, inter alia, include (a) land
market imperfections due to the mono-route features of urban land provision
mainly by municipalities, (b) challenges in lease tender and allotment processes,
(c) the breadth and security of lease rights, (d) the transferability of lease rights,
(e) the right to use land rights as collaterals for bank financing, and (f) gaps in
land information to the public including information about relatively predictable
lease price ranges. Other issues of concern relate to institutional fragmentation
in land management, incoherent practi ces of municipal branches of city
administrations such as Addis Ababa and the challenges of the legal regime’s
susceptibility to opportunity grabs by speculators and corrupt office holders.
1 African Union, Agenda 2063: The Africa We Want, 2nd Ed, Popular Version, page 3.
Available at
<http://agenda2063.au.int/en/sites/default/files/agenda2063_popular_version_05092014_E
N.pdf>, Last visited 22 January 2015.
Challenges in Access to Urban Land for Business Activities under Ethiopian Law 39
This article examines various laws, regulations and directives on land lease
in light of the opportunities and challenges with regard to access to urban land
for business activities. It addresses the major policy, legal and administrative
challenges encountered by the business community in the process of accessing,
utilizing and transferring urban land-use rights. This, inter alia, includes: the
challenges with regard to (a) inadequate diversity in modalities of accessing
urban land and restrictions in tenure security; (b) unaffordable lease tenders for
urban land lease holding, and (c) the level of land information and governance.
Particular attention is given to the Unba n Land Lease Proclamation No.
721/2011, Urban Landholding Registration Proclamation No. 818/2014, Draft
Urban Land Lease Model Regulations (2004 EC), Urban Land Lease
Regulations No. 49/2004 EC issued by Addis A baba City Administration, and
other relevant regulations and directives.
The first three sections of the article focus on the legal regime on access to
urban land including its elements of tenure security, use and consistent
treatment. The fourth and fifth sections deal with challenges in access to urban
land and the transferability of rental business premises. Challenges related with
access to urban land are further discussed in the sixth and seventh sections
which briefly address the issues of rising lease tender prices, challenges in
affordability and corruption. The eighth section briefly states observations on
various clusters of interest in the private sector, followed by concluding
reflections on the way forward.
1. The Legal Framework on Accessing Urban Land for
Business Activities in Ethiopia
Four key factors are suggested by Muir & Shen,2 that determine access to land
for business activities, namely: access, security, use and consistency of
treatment. With some taxonomic adjustments, these indicators are used in this
article to examine Ethiopia’s urban land laws. These key factors are not
however, considered as a rigid framework in this article but merely serve as an
indicative roadmap (with some adjustments) in the first three sections. The first
indicator (access) is discussed in this section while the second indicator
(security) is discussed in Section 2 under a broader title: ‘Scope of tenure and its
security in urban land’. The third and fourth indicators of access to land (i.e. use
and consistency in treatment) are high lighted in Section 3.
One of the four indicators of ‘access to land’ stated in Muir & Shen is
access’ which involves the questions: “Is the land I need available? If so, from
2 Russell Muir and Xiaofang Shen (2005), “Land Markets: Improving Access to Land and
Buildings by Investors”, FIAS World Bank Group, October 2005.

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