The Concept and Characteristics of Public Enterprises in Ethiopia: An Overview
| Author | T Meheret |
| Position | LL.B, LL.M, Lecturer and Attorney-At-Law, Addis Ababa University, School of Law. The author can be reached at tmeheret@yahoo.com |
| Pages | 333-370 |
333
The Concept and Characteristics of
Public Enterprises in Ethiopia:
An Overview
Tewodros Meheret
♣
Abstract
The role of public enterprises in Ethiopia is manifested in the
quantum of capital they command and the magnitude of the
economy’s dependence on such enterprises. Essential services such
as electricity, telecommunication, shipping and logistics, transport
and the like are mainly, if not solely, provided by public enterprises.
Owing to the dearth of research on the subject, there is the need for
conceptual clarity on the notion and the legal forms (or designations)
of such enterprises. Leafing through the relevant laws, one
encounters many definitions. Moreover, the form or designation of
public enterprises and the diversity of the legislation applicable
thereof necessitate inquiry into the concept and their characteristics.
Key words
Public economic enterprise, Public enterprise, Company,
Corporation, Ethiopia
DOI http://dx.doi.org/10.4314/mlr.v8i2.3
______________
Introduction
The state has a public purpose in the exercise of its sovereign power. Such
power is inherent in statehood and justifies the existence of a government.
That is primarily manifested in the specific function of governments in
discharging their traditional role of ensuring peace and security. But any
modern state assumes responsibility beyond its traditional function of
maintaining peace and order and protecting the country from external
aggression, and it engages in economic activities. To accomplish this, one of
the options is setting up an entity that undertakes commercial activities.
♣ LL.B, LL.M, Lecturer and Attorney-At-Law, Addis Ababa University, School of
Law. The author can be reached at tmeheret@yahoo.com
334 MIZAN LAW REVIEW, Vol. 8, No.2 December 2014
Such enterprises have become a universal phenomenon in all contemporary
societies.1
However, the reason why and the extent to which such a role is assumed
varies depending on the political economy or ideology of a state. It is
common to find enterprises owned by the state in different countries despite
variation in their ideologies.2 Yet, this does not render ideology irrelevant as
the utility they will have in a country is a function of the political, economic
and philosophical underpinning of the legal system. Therefore, the question
concerns the allowable limit of direct government activity in the market.3
This article discusses ‘public enterprise’ as a concept from the standpoint
of Ethiopian law. Because of ambiguities in the various laws and due to the
diversity of forms (or designations) utilized, it has become difficult to
clearly identify what exactly the term ‘public enterprise’ refers to. Some
prefer to use the term ‘public economic enterprises’ so that the scope
becomes broad enough to include other forms through which the state is
engaged in economic activities. The first section of this article introduces the
concept and highlights the ambiguities in the use of the term. The second
section briefly deals with the salient features of a public enterprise so that
the multiplicity of definitions can be handled with due caution. The third
section explores the different forms of economic enterprises (that are set up
to carry out commercial activities) with a view to bringing to light the
diversity of form and its implications. The fourth section spells out the
raison d’être of such enterprises, followed by the last section which briefly
continues discussing the theme in the Ethiopian context.
1. Defining the term ‘public enterprise’
Nomenclature is part of the discourse on public sector enterprises which has
been the source of ambiguity.4 In Ethiopia, one of the major proclamations
1 Law and Public Enterprises in Asia (1976), International Legal Center, (Praeger
Publishers), p. v.
2 For instance, we can mention the Tennessee Valley Authority of the USA and you
may call to mind state owned corporations of China.
3 Owen E. Hughes (1998), Public Management and Administration, (Palgrave
Macmillan), p. 1.
4 Kauzya John-Mary(2005), The Question of the Public Enterprise and Africa’s
Development Challenge: a Governance and Leadership Perspective, p. 4, Paper
presented during the Ad hoc Expert Group Meeting on “Re-inventing Public
Enterprises” held in New York from 27 to 28 October 2005, available at
The Concept and Characteristics of Public Enterprises in Ethiopia: An Overview 335
on public enterprises defines the word ‘enterprise’ while other laws use the
term ‘public enterprise’. It may be inquired whether the law uses the term
“enterprise” differently from the word “public enterprise”. But, the body of
the definition clarifies the potential confusion by describing it as a public
enterprise. Despite the multiplicity of terminologies in the proclamation,
they conceptually refer to the same thing as can be gathered from other laws
as well.
The need for a definition is not only academic for it has far reaching
practical ramifications. Apart from ensuring conceptual clarity and delimiting
the boundaries of the notion, the need to define public enterprise is felt
practically in circumstances when the Auditor General’s exercise of power
requires recognition of entities as public enterprises. Where the law
empowers a body to audit them, or when Parliament exercises its power to
review performance or a regulatory organ, it is essential to distinguish the
entities that come under such a law.
Moreover, the enjoyment of rights and the assumption of responsibilities
(such as investment incentives, privileges, rights and criminal liability of
their officers) that are specifically applicable to public enterprises require
marking out the entity. For instance, the definition of the term in criminal
law has the purpose of creating liability on the officials of such enterprises
under certain circumstances. Identifying such enterprises is also essential for
economic decision making and statistical data on the size of the public sector
with a view to analyzing economic implications and other issues. The same
applies to the pursuits of developing policy, strategy and planning, and
undertaking comparative research studies.5
Unlike other similar enterprises such as business organizations, the
attempt to distinguish an entity that can be regarded as a “public enterprise”
may present challenges analogous to abstract concepts.6 Several reasons
explain why it is difficult to define the term. Some of the reasons include the
highly elastic nature of the concept, its contingency on local environments,
the convergence of both public and enterprise aspects in a single entity7 and
< http://unpan1.un.org/intradoc/groups/public/documents/un/unpan021612.pdf>,
(accessed on 07/08/2014).
5 See V.V. Ramanadham (1984), The Nature of Public Enterprise (St. Martin’s
Press) p. 61-63.
6 Ibid, p. 63.
7 Praxy Femandes and Pavle Sicherl (1981), Seeking Personality of Public
Enterprises, (International Center for Public Enterprises in Developing Countries)
P. 16-17.
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