Ethiopia Policy Brief

 1. Economic growth and investment in Ethiopia and its impact on human rights 

Background

In recent years, following the promotion of its free market regime, Ethiopia has been implementing various
economic measures aimed at strengthening the private sector, boosting competition and increasing
investment including by adopting investment proclamation No. 1180/2020 in April 2020.
Government has opened up various sectors of the economy previously reserved for unilateral state
investment resulting in some Multi-National Enterprises investing in sectors such as petroleum refining,
mining, real estate, large-scale commercial farming, manufacturing, and renewable energy.
These measures combined with increases in production costs in other parts of the world has led to a rise
in the flow of foreign direct investment in recent years. For example, Ethiopia has recently emerged as a
major destination for the apparel sector, with industrial parks created as special economic zones to drive
manufacturing-related job creation.
Impact
Private sector investment has an indispensable place in economic growth and development by
bringing capital and technology, generating much needed foreign currency, and creating employment
opportunities.
Whilst prevailing low wages have made Ethiopia one of the preferred investment destinations for
companies, this has come at a cost, most notably to workers. For example, since 2020, the International
Trade Union Confederation (ITUC) has rated Ethiopia at category 4, indicating that workers’ rights are
systematically violated, a factor corroborated by several recent studies.

Although women make up nearly 80% of employees in the garment industry, most of them are employed on the factory floor, with little opportunity for growth and development. In addition, many experience harassment and abuse, unsafe workplaces, forced overtime as well as draconian wage deductions as punishment for minor disciplinary infractions. Discrimination against pregnant workers is also common.

In 2019 the New York University Stern Center for Business and Human Rights and the Worker Rights Consortium conducted research on the labour rights environment in Ethiopia’s growing textile and apparel export sector. Highlighting the impact of the low wages in particular and its negative impact on the overall living conditions of workers, the report stated: The government’s eagerness to attract foreign investment led it to promote the lowest base wage in any garment-producing country—now set at the equivalent of $26 a month. On that amount, workers, most of them young women from poor farming families, cannot afford decent housing, food, and transportation.

A further study by the Workers’ Rights Consortium revealed that workers in Ethiopia producing garments
for fashion giant PVH (which owns Tommy Hilfiger and Calvin Klein), are regularly subjected to abuse and exploitation. Investigation into the working conditions of four textile factories, found that managers routinely subjected workers to verbal abuse calling them “stupid”, “worthless” or “trash” and threatening to fire them. In one of the factories, it was found that managers sexually exploited workers in exchange for promotions. In addition, in all the factories investigated, workers performed significant unpaid labour – either in the form of uncompensated overtime hours or off-the-clock work during breaks or before shifts. These findings are upheld by research commissioned by ActionAid Ethiopia in 2022, in which employees at a major industrial park reported the prevalence of under-payment and abuse. One key informant noted that her salary of 1200 ETB (US$22) wouldn’t even cover basic needs, adding that she frequently found herself on the receiving end of verbal abuse and insults by the manager. A second key informant stated: 

“The owner gives no time even for toilet. The time you spent in toilet is fixed or monitored. More than anything, verbal abuse is so immense. The company manager often says - I do not care about your degree unless you produce.”

Another industrial park employee highlighted the case of a co-worker who lost her leg due to an
accident with one of the machines, noting that although she was treated by the company she was not
compensated for the loss of her leg. Whilst Ethiopian law forbids child labour, evidence indicates that it occurs in several sectors including in the production of hand-woven textiles where children, mostly boys as young as seven years old and some of them victims of trafficking, are working under conditions of forced labour. Research by ActionAid has shown that trafficked children are often sold to recruiters, and the parents and children are deceived with false promises about wages and opportunities for education. Corporate abuse extends to environmental abuses in the form of harmful emissions and toxic discharges into the air and waterways commonly perpetrated in sectors such as tanneries and the extractive sector. Overall what these studies reveal is that if the rights of workers are not protected, and if businesses are not regulated and held to account, they will continue to routinely place profits over people by engaging in exploitative practices (including forms of modern slavery) and compelling employees (many of whom are women and children) to work in situations where they are routinely subject to violence, harassment, and abuse.

2. Towards a UN Binding Treaty on Business & Human Rights

The operations of businesses can have a profound impact on human rights, including those of employees
but also consumers, and communities where they operate. Whilst some of these impacts may be positive,
such as increasing access to employment, others, as highlighted in the examples above, as well as countless more across the world, may be negative and include underpaying workers, using forced labour
or child labour, polluting the environment or forcibly evicting or re-locating communities. This situation has created a pressing need to establish international norms regulating business operations in relation to human rights. After many years of debate, in 2011, the UN Human Rights Council unanimously endorsed the UN Guiding Principles on Business and Human Rights, that operationalized the United Nations ‘Protect, Respect and Remedy’ framework for business & human rights, and further define the key duties and responsibilities of States and business enterprises regarding business-related human rights abuses.

The Guiding Principles affirm that:

• Under existing international human rights law, States have the duty to protect against human rights abuses by all actors in society, including businesses.
• States must prevent, investigate, punish and redress human rights abuses that take place in domestic business operations.
• States are to set clear expectations that companies domiciled in their territory/jurisdiction respect human rights in every country and context in which they operate.

The UN Guiding Principles, which currently enjoy quasi-universal recognition impose commitments on both States and businesses and put special emphasis on remedies for human rights abuses committed by corporations. However, although much progress has been achieved since 2011, human rights abuses by corporations persist. A legally binding international treaty could provide the necessary remedy for this. In 2014, the Open-ended Intergovernmental Working Group on transnational corporations and other business enterprises with respect to human rights was established in response to Human Rights Council resolution 26/9. It has a mandate to elaborate an international legally binding instrument to regulate the activities of transnational corporations and other business enterprises. According to the UN Office of the High Commissioner for Human Rights (OHCHR), the Binding Treaty and the Guiding Principles on Business & Human Rights can and should be mutually reinforcing and complementary. The Guiding Principles call
for action at the international, regional, and national levels that can effectively protect against business related human rights abuses. However, unlike the Guiding Principles, the Treaty would be legally binding in nature and, as such, engagement in the negotiation process represents an opportunity to increase businesses respect for human rights, paving the way for more principled, responsible and accountable business operations. In addition, acknowledging that women the world over are most likely to be employed in the most precarious working environments with least labour protection, earn the lowest wages and shoulder the vast majority of the world’s unpaid care work, engaging in the treaty negotiation process presents a critical opportunity for States to demonstrate political will to put gender justice above corporate interests.