Viewpoint

State must step up during pandemic to support ailing firms

The labor ministry’s COVID-19 protocol abdicates government responsibility for helping companies retain workers

Since the outbreak of the COVID-19 pandemic, the Ethiopian government has been taking measures to try and contain its effect on citizens’ health and the economy. These efforts were stepped up when the first coronavirus case was reported in Ethiopia on 13 March.

Among the measures are instructions issued by the Ministry of Labour and Social Affairs (MoLSA) in the form of the COVID-19 Workplace Response Protocol (Protocol). As the preamble indicates, the Protocol is sourced from the International Labour Organization’s (ILO) Guideline on how to manage crises.

It underlines the need for participatory legal and administrative measures with proactive consultation. The Protocol has two major elements. The first is preventive measures that should be taken by employers, workers and safety officers to try and stop workplace actors from contracting COVID-19. From the employer’s perspective, the Protocol requires them to ensure the provision of sanitary materials, eliminate congestion in workers’ transportation service, and ensure social distancing. Similarly, workers are required to comply with these measures and take responsibility for reporting symptoms.

The second objective is to mitigate the impact of the pandemic on the national economy, the sustainability of enterprises, and on workers’ socio-economic situation. Ultimately, the Protocol restricts employers from laying off employees as a result of the pandemic. This is done despite employer’s right to suspend workers in cases of force majeure or financial problems under the Labour Proclamation No. 1156/2019. In order to do this, initial suggested measures before laying off workers include the suspension of collective bargaining agreements; freezing of salary increments; suspension of fringe benefits; and revising existing salary scales.

However, the Protocol left out—apparently intentionally—a key part of the ILO guidelines.

Whereas the ILO promotes a tripartite approach between the government, employers, and workers, the Protocol is an order for workers and employers only to comply with—therefore it doesn’t detail what the role of the government should be. It instead imposes all the responsibility of ensuring workers’ social protection on employers. Contrastingly, the ILO guideline suggests this should be done via the combined efforts of workers, employers, and the government.

Rather than this approach, the government should focus not just on short-term workers’ social security, but also long-term businesses continuity. As a result of the recession, government, employers, and workers will inevitably all lose out. An effective response is about balancing these interests and protecting the national economy so that it revives soon after this crisis is over. It is only by getting the balance right that sustainable social protection can be ensured.

Otherwise, with the current bilateral arrangement between employers and workers, the government might ensure short-term social security, but that would be at the cost of the national economy in general, and businesses continuity in particular. By not allowing employers to lay off employees as revenues radically drop, the workers might have their income sustained for two or three months, but after that the company is likely to die and so will not be in a position to cover those expenses.

Considering the current status of the country, the government might not be able to provide all of the needed support by itself. Therefore, this should undoubtedly be one of the areas where it seeks support of its international partners, whether it’s through new funding or repurposing planned assistance. Ultimately, backstopping companies to support workers requires a huge public investment—which is presumably why it was not included in the MoLSA protocol—but it is something that needs to be done to ensure the rapid revival of the economy after the pandemic subsides.

Generally, uniform, large-scale, and coordinated policy measures are needed at times like this. Making employers shoulder the burden of social protection is not a sustainable approach to workers’ social security. In fact, such uncoordinated measures could result in the closure of hundreds of companies, especially Micro, Small and Medium Enterprises (MSMEs) that cannot shoulder this responsibility for long. This will result in a long-term social security crisis and it could take a while for the economy to recover.

 

As per the ILO guideline, in these combined efforts, the government needs to take the lion’s share of the responsibility. As well as ensuring social protection, it is expected to stimulate the economy and labor demand. This can be done by adopting activist fiscal policies, particularly social protection measures such as unemployment benefits, along with public investment and tax relief for low-income earners and MSMEs. Additionally, it could loosen certain regulatory barriers imposed on employers like the challenges in relation to reporting taxes, accessing financing, and licensing procedures.

As it has done to some degree already, the government also needs to adopt accommodative monetary policies like interest rate reductions, reserve rate relaxations and targeted liquidity provisions. Because the crisis hits hard certain sectors like aviation, tourism and hospitality and MSMEs in general, targeted financial support is required.

But it is important that these measures are not left to a single ministry and nor should they be carried out piecemeal. They require the commitment of the government in general to an all-encompassing approach. The issue is not only determining what the relationship between employers and workers should be, it is also about making sure that the country’s economy survives the crisis with minimal damage. That can only be done with carefully calculated policy decisions, which should involve all branches of the government. Limited protocols such as the one MoLSA issued will not be able to address all the issues and could end up doing more harm than good.

Follow us on Twitter @EthiopiaInsight and join our Telegram channel here

COVID-19 Situation Dashboard

This is the author’s viewpoint. However, Ethiopia Insight will correct clear factual errors.

Editor: William Davison

Main photo: Hawassa Industrial Park; 15 August 2017; William Davison

Query or correction? Email us

Published under Creative Commons Attribution-NonCommercial 4.0 International licence. Cite Ethiopia Insight and link to this page if republished. 

Related Insight

17 April 2020 Is Tigray’s COVID-19 state of emergency constitutional, practical?

17 April 202 COVID-19 and federal supremacy in the constitutional system

14 April 2020 የኮሮና በሽታን ለማሸነፍ ኢትዮጲያውያን ከሌሎች ሀገሮች መማር አለባቸው

13 April 2020 COVID-19 state of emergency and the federal balance of power 

8 April 2020 Dealing with COVID-19’s impact under Ethiopian labor law

4 April 2020 Ethiopian inaction will lead to another COVID-19 catastrophe

3 April 2020 Ethiopia needs a State of Emergency to combat COVID-19

1 April 2020 Ethiopia’s COVID-19 quandary

We need your support to deliver news from across Ethiopia

About the author

Tsegamlak Solomon

Tsegamlak is a corporate and tax lawyer. He is a graduate of Addis Ababa University and works as a legal counsel at a private equity firm.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Social media & sharing icons powered by UltimatelySocial