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Month: November 2018

The Bet on Democracy

Posted on by Web Master

Two former judges, Birtukan Mideksa (left), a prominent activist and politician, and Meaza Ashenafi, president of the Supreme Court, stood before parliament last Thursday, November 22, 2018. Birtukan was nominated by the Prime Minister to chair the Electoral Board before being approved by MPs and then sworn in by Chief Justice Meaza.

The parliament did not approve her appointment unanimously. Out of 330 MPs, three abstained and four voted against her.

Once the parliamentary session ended, the two posed for pictures, and Birtukan answered questions from the gathered media.

“Every election held has inspired doubts in the public’s heart instead of trust,” she said, adding that the Electoral Board will henceforth work to regain the public’s confidence and will oversee elections that all participant parties can trust.

The symbolism of appointing a former member of the opposition Unity for Democracy & Justice (UDJ), jailed following the contested general election of 2005 and sentenced to life in prison before being granted a pardon, has not escaped notice. Both domestic and international observers praised her election as a step forward in the democratisation of Ethiopia.

Not everyone has been enthusiastic, however. It has been pointed out that her appointment to head the Electoral Board should have been done in consultation with opposition parties. Also, there are complaints that her ascendancy to head the Board comes at a time when a working group is still drawing up recommendations to amend the electoral law and the organisation of the Board.

The working group is part of a 13-member Advisory Council for Legal & Justice Affairs, which includes Chief Justice Meaza. The Council was set up under the Attorney General’s Office to recommend amendments to media, anti-terrorism and charity law, as well as to restructure democratic institutions such as the Electoral Board.

Central Bank Eases Filing Requirements

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Dividend payments to shareholders of banks and insurance companies will be settled right after shareholder meetings, according to a new directive issued by the National Bank of Ethiopia (NBE).

The new directive was issued four weeks ago to rescind the former directive that mandates the approval of shareholders regular and extraordinary meeting minutes by the central bank, and registration of the minutes by the Document Authentication & Registration Agency (DARA).

“The process of approval and registration of the minutes of shareholder meetings sometimes proved time consuming,” reads the new directive signed by Yinager Dessie (PhD), governor of NBE. He continued that it “resulted in undue delay in dividend payments to shareholders of banks and insurance companies.”

The process of minutes approval and registration came on to the scene in 2015 following the issuance of a directive that required board chairpersons and secretaries of banks and insurance companies to deliver minutes of the general assembly to the central bank within 15 days of the assembly. Once the central bank approves the minutes, it will be sent to DARA for registration, according to the former directive.

The registration and approval processes took months, overlapping with the general assembly, and the extraordinary meetings of banks and insurance companies, according to Eyesuswork Zafu, a shareholder at United Insurance and board chairperson of United Bank.

“Besides, the minutes were being sent back and forth between the central bank and the financial institutions to correct simple and minor errors,” Eyesuswork told Fortune.

Whether the shareholders decided to reinvest their dividends or be paidout, they were supposed to wait until the process of approval and registration of the minutes was completed and the banks and the insurance firms received the blessing of the NBE.

The process took up to three months and remained a major source of disappointment for shareholders and the institutions.

Before the issuance of the rescinded directive, the financial institutions were paying dividends within seven days of the shareholders assembly.

“We have been calling for the lift,” said Adisu Habba, president of the Ethiopian Bankers Association.

“Since the enactment of the procedure, none of the minutes were rejected, nor any general assemblies annulled, yet the process has been creating inconveniences,” said Adisu.

Applauding the move by the central bank, Abdulmenan Mohammed, a financial expert with a decade and a half experience, states that the latest move by the NBE shows the Bank’s relaxation on some of the areas that have been stiffly regulated.

“It is the right decision by the NBE,” he told Fortune. “It cuts additional procedures that have no apparent benefits.”

“As long as the accounts are audited, and the amount of dividend to be paid out is approved by shareholders, it will be adequate,” he said.

Aggregate profits before taxes of the 16 private banks have soared by 33pc to almost eight billion Birr in the 2016/17 fiscal year. The gross profit also reached 10.25 billion Br during last fiscal year. In the 2016/17 financial year, the 16 private insurers in the country earned a gross profit of 1.3 billion Br. Last year’s shareholder returns increased by 31pc from the previous year.

Officials from the central bank were not immediately available for comments.

MetEC Receives Third Boss

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Prime Minister Abiy Ahmed (PhD) appointed Ahmed Hamza (Brig. Gen) as a new director general of the state-owned military-industrial conglomerate, Metals & Engineering Corporation (MetEC), replacing Bekele Bulado (PhD).

Ahmed, who has been deputy director of the Corporation for the past seven months, was assigned to the post on November 13, 2018, but took over as head of the Corporation last week.

MetEC has been in upheaval recently. In the past few months, it has been terminated from almost all the mega projects it was involved in, and close to three dozen of its administrators and employees have been arrested under allegations of crimes of grand corruption.

Prior to his appointment, Ahmed was deputy director of MetEC in charge of finance and investment. He was one of six deputy directors of the Corporation with responsibilities for project management, logistics, operations and business development.

Before moving to MetEC, Ahmed was the head of the supply management sector at the Information Network Security Agency (INSA). He has also served as a member of the board of directors for the Development Bank of Ethiopia. Ahmed was one of the colonels promoted to Brigadier General by former President Mulatu Teshome (PhD) in 2013.

As the third head of MetEC, Ahmed replaced Bekele who came to office seven months ago following the resignation of Kinfe Dagnew (Maj. Gen) in April. Bekele took over from Kinfe by moving from his post as Minister of Trade, where he worked for two years. Bekele was a vice president for administration and business development and an instructor with the academic rank of Assistant Professor of Strategic Management at Hawassa Universty.

The founding CEO, Kinfe, was head of the Corporation since 2008 when MetEC was first implemented under the direction of the late Prime Minister, Meles Zenawi. The corporation was put forward as one of the major tools for industrialisation in transforming Ethiopia into a middle-income country. Kinfe was recently arrested by Federal Police over allegations of grand corruption and abuse of power.

Police suspected Kinfe for allegedly causing the delay of the Great Ethiopian Renaissance Dam, Yayu Fertiliser and other sugar factories. He is also suspected of being involved in corruption by allegedly engaging in illegal local and international procurements against the laws of the nation.

The issue of two shipping vessels, the procurement of six aircraft, a project involving the establishment of a petroleum refinery and construction of several sugar factories are the areas currently being probed by investigators, according to Police. A couple of days before Kinfe’s arrest, close to three dozen officials and employees of MetEC were arrested by police, suspected of similar crimes as Kinfe.

Hours before MetEC officials first appeared in court, Federal Attorney General Berhanu Tsegaye announced that his office has been conducting a five-month-long investigation into the procurement practices of MetEC and has gathered evidence of alleged crimes.

“For six years the Corporation made international procurements – totalling two billion dollars- without any bidding processes,” Berhanu said. “Local procurements worth 204 billion Br were also made without a proper procurement procedures.”

All of the suspects have appeared before different sessions of the 10th Criminal Bench of the Federal High Court of Lideta. The Court denied bail requests for all the suspects and granted police a 14-day custody right for investigation.

At the end of August, Prime Minister Abiy signaled that his administration had launched an investigation into MetEC. Subsequently, the he ordered the cancellation of contracts of mega projects that were under the purview of the Corporation. The Primer has also decided to split MetEC into two entities by separating its commercial and military activities.

With this new reform, four industries out of 15 that operated under the Corporation were transferred to the Ministry of Defence, while the rest were kept under the Corporation. To finalise the split, the Corporation drafted a regulation that will change its name to the National Industrial Engineering Corporation, restricting its mandates to manufacturing commercial products.

The regulation, which is still pending at the Council of Ministers, also switches its accountability to the newly formed Public Enterprises Holding & Administration Agency the Office of the Prime Minister.

“My major focus area will be to bring the Corporation back on the right track,” Ahmed told Fortune. “Having all the resources, the Corporation failed by being mismanaged.”

In the last few months, MetEC laid off close to one-fourth of its workforce, which once numbered 19,500. This includes both members of the military and civilians working at its 98 subsidiary companies.

An expert shared Ahmed’s view of mismanagement at the Corporation.

“MetEC didn’t have proper financial management, a marketing strategy or an internal audit,” the expert told Fortune five weeks ago, attributing these irregularities as a source of its failure.

 

Renegotiation Brings Back La Gare Eagle Hills Project

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After a two-month delay caused by differences on land lease payments, Prime Minister Abiy Ahmed (PhD) cut the ribbon for the 50-billion-Br La Gare Eagle Hills Project early last week.

Kicked off jointly by Abu Dhabi-based private real estate company Eagle Hills and the city administration, the project encompasses building three hotels, 4,000 apartments, a mall and entertainment centres on a 36ha plot of land. It is expected to provide employment opportunities for 25,000 people.

The agreement between the city and the developer was expected to be signed two months ago. However, it was delayed due to differences on the relocation of the 1,600 households currently residing in the area and occupying over 10ha of the land. The company was expecting the city administration to handle the relocation issues of the residents.

A team of six delegates, including the city’s land management, investment and housing officials led by Deputy Mayor Takele Uma, were in Dubai a few weeks ago to renegotiate the terms of the agreement.

After the re-negotiation, the city administration decided to grant the company the land with a lease free payment, while Eagle Hills agreed to build residential units for the inhabitants of the area.

Both have agreed to deliver the homes to the current residents without displacing them, according to Feven Teshome, press secretary at the city mayor’s office.

“The parties will finalise the construction of the replacement homes prior to demolition,” she told Fortune.

“The new homes will be built on the open areas. Only after the residents have been relocated to the new units will the demolition work be started,” Feven told Fortune.

While granting Eagle Hills the land for free on a 99-year lease, the city retains a 27pc share in the project.

“Having a stake in the project will help us to closely monitor the project,” Prime Minister Abiy told the gathering last Monday during the launching ceremony attended by Eagle Hills Chairperson, Mohammed Alabar.

Alabar, the eldest of 12 siblings, is the developer of Dubai’s Burj Kalifa skyscraper through his company, Emaar. Eagle Hills, established four years ago, has been engaged in major international real estate construction in Africa, Eastern Europe and the Middle East. Eagle Hills is currently working on 12 city construction projects including a waterfront project in Serbia and residential apartments in Jordan.

Following the start of the project, Eagle Hills is working on the outer fencing of La Gare Eagle Hills, which was the principal depot for Anbessa City Bus company. The station was moved to the open space in front of Ghion Hotel to accommodate the project.

“We brought the best of the best to Ethiopia,” Alabar said. “Our projects so far were successful, and we have learned a lot.”

Eagle Hills projects are not without controversies. The Waterfront Project in Serbia was criticised for building high-end apartments for a total cost of four billion dollars in a middle-income country. The residents of Belgrade took to the streets to protest the project, stating that it does not consider the country’s situation.

The 132-year-old Addis Abeba Masterplan set the area aside as a central business district. With this plan, the leading financial sector players are marking and finalizing construction of their headquarters within walking distance of the La Gare Eagle Hills project. The area is anticipated to be established as the most prominent high-end location in the coming decade.

“The project will have an affordable housing component as Eagle Hills has agreed to sell the units at a price compatible with the residents’ income,” said Feven. “Besides, the government will arrange a payment modality for the current residents.”

Urban designers commend the government move, yet suggest professional discourse and public deliberation over the project.

“This is a huge project, yet we have little information,” said Zegeye Cherinet (PhD), an urban design expert. “The government at least needs to consult professionals from all spheres of academics before proceeding with the project.”

The La Gare project is set to be completed in seven years. The place has an emotional attachment to the residents of the city. The oldest and the first train line in the country, Addis Abeba – Djibouti train, was headquartered at La Gare. The train station, completed in 1917, was used as the hub that links the south and east with the central highlands.

The company has already started importing their machinery and equipment, according to Feven.

“The project will commence soon,” she said.

Eagle Hills did not reply to email requests before this paper went to print.

PetroChina Lands Low Bid to Freight Nation’s Petroleum

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PetroChina offered the lowest bidding price of 27 billion Br to freight nearly 2.2 million tonnes of petroleum products in 2019.

Three international companies, Vitol, Trafigura and PetroChina, bid on the tender, while 36 responded to the tender, which was initially floated in late September but was then cancelled and re-floated on October 28.

During the financial opening held on November 21, 2018, at the Ethiopian Petroleum Supply Enterprise, the bids to transport gas oil, regular gasoline and jet fuel through Djibouti or Eritrean ports were made in two credit schemes of 150-day and 360-day payment periods.

PetroChina, a Chinese oil and gas company established in 1999, offered to freight the petroleum products through a Djibouti port for the lowest cost of freight (CFR) at 4.78 dollars a barrel for gas oil, 5.07 dollars a barrel for regular gasoline and 5.15 dollars a barrel for jet fuel for a 150-day payment period.

For the 360-day payment period, the lowest price offered by PetroChina for cost of freight (CFR) was 6.92 dollars a barrel for gas oil, 7.22 dollars for regular gasoline, and 7.30 dollars for jet fuel through a Djibouti port.

“We evaluate financial offers by the lowest cost of the combined price of petroleum products and the cost to use the ports,” said Abayneh Awol, chairperson of the tender committee and manager of the petroleum supply & sales department at the Enterprise. “The results of the financial evaluation will be announced next week.”

Most of the participants have transported fuel to the nation before. Trafigura was the winning company for this year, while PetroChina won the bid for 2017.

After the fuel supplies arrive at depots inside the country, the Enterprise distributes the fuel to 26 oil retailers. The major distributors in Ethiopia are National Oil Company (NOC), Yetebaberut Beherawi Petroleum, Oil Libya and Total, which together operate around 800 fuel stations scattered throughout the country.

Ethiopia’s consumption of fuel products is estimated at around 12.4 million litres a day and has been increasing by an average of 10pc every year since 2013. Last fiscal year, the nation consumed about 4.3 billion litres of fuel, with gas oil, nafta, taking the lion’s share.

Trafigura, a Singaporean firm, procured the 2018 delivery of gas oil with the lowest freight price offer of 3.69 dollars CFR per barrel through Djibouti and 3.97 dollars a barrel CFR for regular gasoline. The company supplied 1.4 million tonnes of petroleum for an estimated cost of 22 billion Br.

“Fluctuation of the international price of oil and variation in the exchange rate and credit period of payment are major determining factors of cost of fuel,” according to Serkalem Gebre Kristos (PhD), former CEO of Dallol Oil with over a decade of experience in the market. “Outside the quantity of the fuel purchase, the rest is out of our control.”

In addition to the procurement conducted through this open bid, equal amounts will be purchased through direct government-to-government transactions from Sudan and Kuwait.

This month the government amended fuel retail prices, a year and half after the last amendment was made. Following the new adjustments, the gasoline price changed to 19.69 Br per litre from 18.77; kerosene was raised to 17.78 Br a litre from 16.35; and jet oil increased from 25.7 Br to 27.08 Br.

Addis Gets Two Bus Depots for 1.3b Br

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Two bus depots are under construction and are expected to be operational in three months time. Located in Shegole to the north and Qality to the south of Addis Abeba, the depots cost 1.3 billion Br.

Managed by the Transport Programs Management Office, the construction of the Shegole and Qality depots has reached 95pc and 85pc completion rates, respectively.

The Shegole depot is estimated to cost 556 million Br. Built on 5.4ha of land and designed to accommodate 212 buses and 19 maintenance bays.

The Qality depot will cost 790 million Br and rests on a 5.2ha plot. It can host 244 buses and includes an underground basement that can park up to 89 buses. There is a plan underway to expand this depot by two hectares and accommodate an additional 200 buses.

With a daily service capacity of 300 buses for each depot, both sites will host fuel stations that enable six buses to fill their tankers at a time. Two dry cleaning machines, two automatic body washing machines, an under-hood washing system and two paint booths have been installed.

The water for washing the buses is pumped from groundwater wells with pumping capacities of eight cubic metres an hour. The used water is recycled in a water recycling plant, while liquid waste from the whole block and the site will be treated in a wastewater treatment plant. Each depot has two reservoirs with the capacity of holding 150 cubic meters of water.

Offices, a café, security and surveillance systems, backup generators and fire alarm and fire suppression systems are other features that have already been completed.

The design and build contracts were awarded to China State Construction Engineering Ethiopia, a firm that has been in business for over 10 years. The company has constructed the headquarters of the African Union and is currently building Commercial Bank of Ethiopia’s new head office.

ETG Designers & Consultants Plc was hired for 3.3 million Br to review the design and provide construction supervision and contract administration.

The contractual period for both projects is 21 months from project start date, which was November 2016 for Shegole and March 2017 for Qality.

“The contractor has requested an extension of three to four months for both projects to complete the finishing work,” Azeze Betru, assistant resident-engineer of ETG, said.

The depots will start operation step-by-step in the coming three months with the commencement of parking, fuel station and washing facilities, according to Nathanael Challa, project office division head.

Fekadu Gurmessa (PhD), a transport geography lecturer at the Addis Abeba University for more than a decade, finds the projects appealing but believes the depots are too spacious.

“It would have been possible to have gotten the same capacity of depots using lesser space by building under the basements as in the case of the Qality one,” he said.

But Nathanael argues that the topography of Shegole is different from Qality, which makes an underground parking space impossible.

“The design is based on the master plan targeting maximum cost effectiveness and operational efficiency,” he said.

Shegole depot used to be managed by the Anbessa City Bus Service Enterprise, the 75-year-old transportation company that operates with 3,500 employees and 366 buses. It transports 270,000 commuters a day on its 106 routes in the city, and another 18 routes outside of Addis Abeba.

Upon completion, both Shegole and Qality depots will be handed over to the city administration and will be used by all of the city bus service providers including Anbessa City Bus.

Addis Abeba has 366 Anbessa city buses, 188 public service buses, 240 Sheger public buses, 86 Sheger student buses and 64 Alliance City Buses, according to the first quarter report of the city’s Transport Authority.

An additional two depots are in the design stage, of which one is expected to accommodate 450 buses at Mekanissa, and 850 buses in Yeka.

Authority Plans to Digitize Transport, Traffic Mang’t Systems

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The Federal Transport Authority will institute a digital system that integrates traffic and transport management systems. By the time it is operational, it will have cost the Authority an estimated 45 million dollars.

The Transport & Traffic Management System will integrate driver training, testing and licensing, vehicle registration and inspection, penalty management and road accident management.

The Authority is in the process of hiring a consultant to design the System and to supervise the installation of all related infrastructure. A tender to hire a consultant was floated on August 25, but was canceled as a result of a lack of interest by qualified firms. After the tender was floated for the third time, which closed two weeks ago, eight local and international companies submitted their technical and financial offers.

The Authority plans to have the system design completed by the end of this fiscal year.

“The current traffic system requires an integrated information system where information about vehicles and penalties is available and accessible,” said Banchialem Luel, IT head at the Authority. “We also hope to improve our service efficiency and reduce economic costs related to transportation.”

Almost a third of driving licenses in Ethiopia are fraudulently obtained, according to a study done by the Authority.

“The number of unqualified drivers on the road is alarming,” said Banchialem. “The new system will provide the traffic police with the necessary infrastructure to easily identify fake drivers’ licenses.”

This Management System is part of a bigger project, Transport Systems Improvement Project (TRANSIP) to be implemented by the Authority and Addis Abeba City Roads Authority.

Financed by the World Bank in 2016, the 300-million-dollar project aims to improve mobility in Addis Abeba and the effectiveness of road safety compliance systems throughout Ethiopia. With almost two-thirds of the budget allocated to the capital, the project is expected to be completed in half a decade.

The project involves expanding the existing traffic signal and control systems in Addis Abeba and improving the conditions on selected streets for pedestrians, modernising the operations of Anbessa City Bus Enterprise, building the operational and managerial capacities and efficiencies of urban transport agencies and establishing a database for driver and vehicle licensing nationwide.

“It’s a huge project that requires a lot of work and that involves a lot of stakeholders,” said Banchialem.

The Authority also digitized its operations and services three months ago and placed over half of its services online.

Around 16,000 people have lost their lives to traffic accidents in the past three years with another 50,000 sustaining injuries.

Experts have reservations about the TRANSIP project, however, including the Transport & Traffic Management System.

Fekadu Gurmessa (PhD), an expert in the area of transport geography for more than two decades, believes that the main problem in transportation is accessibility, not lack of moblity.

“The project does not address the immediate and important transportation challenge of the country,” he says. “The system does not prioritise the problem of public transport inaccessibility.”

AfDB Endows Ethiopia with $123m

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Ethiopia signed a grant agreement for 123 million dollars with the African Development Bank (AfDB) to be used in support of basic services.

The agreement was signed at the Ministry of Finance between Finance Minister Ahmed Shide and Gabriel Negatu, regional director of AfDB, on Friday, November 23, 2018.

The grant will be disbursed in two phases to regional governments and weredas and will be administered under a blocked account.

The areas of focus for the support are health, education, water and sanitation services. The grant is intended to supplement the Basic Services Transformation Program, which has been under implementation in Ethiopia for the past three years.

“The government will continue to work toward enhanced accountability and transparency in public service delivery, thereby strengthening the effectiveness of the program,” said Ahmed.

This support brings the Bank’s total commitment to Ethiopia to 1.74 billion dollars, which has been channelled to energy, transport, water supply and sanitation, agriculture, governance and the private sector.

A great deal of the multilateral development finance institution’s operations across the continent is dedicated to improving the standard of living, increasing accessibility of electricity and industrialisation.

In the same week, a concessional loan agreement amounting to 30 million Euros was also signed with the European Investment Bank, while another grant agreement was signed with the Danish government for 150 million dollars. Ahmed signed the former agreement with Werner Hoyer (PhD), president of the European Investment Bank.

The agreement with the EIB is aimed at supporting the Women Entrepreneurship Development Project by providing access to financial services and loans for micro and small-scale enterprises, while the grant by the Danish government will be utilised for the implementation of the Danish Country Programme that runs for half a decade.

The latter will cover the improvement of value chains in agriculture, food security, nutrition and climate resilience.

Getachew Yirga, an assistant professor at Bahir Dar University’s College of Business & Economics, believes that this financial support is coming at the right time as the country requires a capital injection.

“The recent political reform has played a part in influencing their support and working even more closely with the government,” he says. “The support can make a difference if implemented properly.”

In 2018, the World Bank pledged 3.3 billion dollars to Ethiopia, which is over three times higher than the Bank’s commitment the previous fiscal year, while the government targeted this fiscal year to cover over 19 billion Br of the budget from external assistance and almost 33 billion Br of its budget from loans.

Trade Bureau to Launch Online Registration, Easing Hassles

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The city Trade Bureau is launching a new online application in an effort to ease the process of acquiring certificates of competency, trade registrations and business licensing.

The new system, One Window System, is expected to minimise the number of people required to visit the bureau to obtain official documents, according to Abdulfetah Yesuf, head of Addis Abeba Trade Bureau.

Estimated to cost 3.8 million Br, the new system is currently being developed by local company Custor Computing Plc.

Custor has previously developed the Online Trade Registration & Licensing System for the Ministry of Trade & Industry, an online document registration programme. Additionally, the company completed the Integrated Transport Management System and the Integrated Revenue Management System for the Document Authentications & Registration Agency (DARA).

The Trade Bureau’s new system connects all 116 weredas, 10 districts and eight tax centres across Addis Abeba.

The new initiative is expected to create job opportunities for more than 350 people, with training expected to be delivered to 45 district employees.

As part of the service, the bureau will also add direct short message system (SMS) along with the web-based service.

The development of the application began in mid-2017 and is expected to be finalised at the end of 2018.

“We developed this application to minimise the manual system, customer dissatisfaction and unnecessary back and forth,” Abdulfetah told Fortune.

Before going to the Trade Bureau to obtain a business license, applicants have to get a certificate of competence as a prerequisite to obtaining a business license from different institutions including the Addis Abeba Environmental Protection Authority, the Addis Abeba Culture & Tourism Bureau, and the Addis Abeba Food & Drug Authority.

To obtain these certificates, business owners can apply to these institutions through the new system as it integrates the city offices.

Currently, a person has to wait 15 minutes to get a license from the Trade Bureau if the competency process is completed, according to Dereje Yiberta, ICT department director of the Bureau.

Wubete Nigusse, an expert in computer applications and a lecturer at Kotebe Metropolitan University with a decade of experience, supports the new system.

“The online system reduces cost and time and facilitates operation,” Wubete said. “Not only that, the online system should create accuracy and identify fake trade licenses.”

So far a total of 330,000 business licenses were issued by the Addis Abeba Trade Bureau to 270,000 individuals.

“Some of the offices in weredas do not have full internet access,” Dereje told Fortune. “So to run the system actively the office must be connected with the internet network.”

To overcome possible internet interruptions, the bureau has made an agreement with Ethio telecom to fix the connection problem within a maximum of 48 hours, according to Dereje.

Berhan Posts Slight Profit Increase

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Berhan Bank, one of the late entrants to the private banking industry, posted a slight profit increase during the last fiscal year, recording 327.85 million Br.

The firm’s shareholder return declined by 33pc to 20.36 Br from two years prior.

The profit growth of the firm has slowed down due to a newly introduced reporting system, International Financial Reporting Standards (IFRS), according to Abraham Alaro, president of the Bank.

In preparations to report with IFRS, the bank re-audited its financial statements of the past two years. In the process, the asset, income and expenses of the bank were adjusted.

The increase in the number of shares is also the source of the decline in dividends, according to Abraham.

Last fiscal year, Berhan sold new shares to its 15,000 shareholders to raise 680 million Br in an attempt to meet capital requirements set by the National Bank of Ethiopia (NBE). The central bank has established a minimum paid-up capital threshhold for private banks of two billion Birr.

Berhan Bank’s paid-up capital reached 1.7 billion Br. The Bank also increased its capital by two percent in the reporting period.

“We are investing in the Bank’s future, and this is just a necessary step to take,” Abraham told Fortune.

Shareholders’ acceptance of the slight growth and the decline of the EPS is part of the effort to put the Bank in a strong financial position.

“We would have loved it if we could get more returns,” says Daniel Wondimu, Chairperson of Berhan Insurance, one of the major shareholders of the Bank. “But as we know, the Bank is on the right growth track, and the results are good.”

In terms of income, 2017/2018 was a good year for Berhan, managing to increase its income by 60.5pc. Income from loans, advances and NBE bills reached 1.11 billion Br. Income from service charges & commissions and foreign exchange dealing decreased by 5.6pc and 6.26pc, respectively.

The bank earned 343.31 million Br from service charges and commissions and 62.15 million Br from foreign exchange transactions.

The declines must have been due to stiff competition in the industry coupled with volatile international business, according to Abdulemenan Mohammed, a financial expert with over a decade and a half of experience.

Board chairperson of the Bank, Gumachew Kassie, echoed the expert’s opinion on the annual report.

“Formidable challenges characterise the year,” said Gumachew, “A sluggish export sector, acute shortage of foreign currency and political unrest have undermined the smooth functioning of the bank’s operations.”

Despite the challenges, deposits grew by 41.6pc, reaching 10.8 billion Br. The attainment of the resource mobilisation effort came up with the expansion of the bank’s outlets and an increase in the number of depositors. The number of depositors at the bank reached over half a million. The Bank opened 21 additional branches, reaching a total of 182 branches across the country.

The firm disbursed 7.2 billion Br in loans and advances, a 33pc increase from the preceding year. This makes the loan-to-deposit ratio of the Bank 65.1pc. For the past two years loan disbursement showed a slight decline. During the preceding year, the loan-to-deposit ratio of the bank was 68.8pc.

Berhan’s loan-to-deposit ratio stood one percentage point lower than the industry average.

Abdulmenan attributes the Central Bank’s credit cap as the major reason for the ratio decline.

Last year, the Central Bank set a 16.5pc lending disbursement ceiling for outstanding loans on sectors other than export and manufacturing. This has affected the disbursement effort of banks that have reported so far this year.

Still, the expert believes that Berhan can improve the ratio.

“The Bank has some room to increase its loan-to-deposit ratio,” said Abdulmenan.

Provision of doubtful loans of the bank has also shown a slight growth from last fiscal year, reaching 22pc and amounting to 25.1 million Br.

The problem has got the attention of the Bank too.

“We have done a series of follow-ups on bad loans in the second half of the reporting year,” Abraham told Fortune. “Thus far we have successfully curtailed bad loans within 2.5pc.”

The maximum non-performing loan ratio as set by the Central Bank for commercial banks is five percent.

Berhan also increased its investment in NBE bills. With five percent interest rates, these bills are helpful for reducing high liquidity. Berhan’s five-year bonds increased by 37.4pc to three billion Birr. The bonds amount to one-fifth of the total assets of the Bank.

The total assets of the Bank reached 14 billion Br, a 25pc increase from the preceding reporting period.

“This is a significant achievement of the Bank,” said the president.

The expenses of the Bank soared, which affected the efforts made to increase interest income. The bank’s interest expenses increased by 83.5pc to 417.35 million Br.

The salaries and benefit for the 3,237 employees of the bank increased by 48.4pc to 438.75 million Br, and general administration expenses went up by 57pc to 249.44 million Br.

The main reason for the increase in expenses is the introduction of two new structures in the company, according to Abraham.

The Bank installed two new divitions led by vice presidents and opened five district offices and an additional 21 branches in the past fiscal year.

The expert suggests the enactment of a cost monitoring system to control expenses.

“The bank should put appropriate cost control mechanisms in place,” Abdulmenan told Fortune.

Despite its cost, the bank’s cash balance went up by 32pc, reaching 2.6 billion Br. The liquid assets sit at 19pc of total assets.

“With the aggressive resource mobilisation, we have low liquid assets,” the president said. “Yet this is manageable.”

A Place to Call Home

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Existing in a post-colonial, post-slavery Africa, we must recognise that we have to re-imagine Africa beyond the borders.

In 1948, we can look back at Emperor Haile Selassie’s gesture of offering land in the city of Shashemane for people largely of African descent to make a living. Even though dozens of families took the first plunge, with the many political changes since the fall of the monarchy, much of the population consists of tourists on overstayed visas.

Recently, more and more of them have been given residency cards. The joy shared by this community is truly inspiring. The road has been filled with struggle, but many would not change the fact that they have made Ethiopia their home.

Today, Ghana has declared 2019, “Year of Return”, and extended a global call to Americans of African descent. The nation even naturalises those who would like to become permanent citizens.

A few months ago, I was having lunch with two African-American men who were on their first journey to Ethiopia.

As we shared stories, learning about each other’s culture, one of them said, “There is a lot of fear to being a black person in America,” and later, jokingly staring at the only two Caucasian people in the restaurant, “We aren’t a minority here.”

To them, these comments were a moment of realisation of feeling at home.

The atrocities committed on African-Americans in the United States, especially in the pre-civil war era, are beyond comprehension. They were made not to feel at home, targeted by the law, victimised and villainised, day in and day out.

I have felt the burn of racism when I visit places where I am the only black person. The negative reactions of those who believe I do not belong there is humiliating and scary and leaves one angry.

Yet knowing that I can always come back to a country that may not be perfect but accepts me for who I am makes a difference in how I see the world. For an Ethiopian, such as me, who has lived their entire lives in Ethiopia, the idea of feeling displaced is unsettling.

“It’s just painful to experience each day; it is a matter of colour that makes you an outsider,” one of my closest friends confided in me.

And this sentiment is reiterated by other diaspora and those with African descent that have been forcefully taken from the continent centuries ago from their native lands.

African-Americans leaving their homes and repatriating to Africa is not a solution, but African countries should be able to offer a choice for those who want to become citizens here.

The African Union should be playing a key part in this. Even though it is not a perfect organisation, burdened with the economic and democratic underdevelopment of its member states, it has an important place to play in black history.

In 2016, I remember my disappointment when Haiti was denied associate member status in the African Union. Even though the decision makes geographical sense, we must be able to think beyond that.

A step in recognising our place in this history is important. I have met many who felt a sense of calm being among Africans in Africa. And if nothing else, we should offer black people all over the world a place where, at any time, they can call home.

There, of course, needs to be a structured means of handling such matters, yet maybe we can start with finding inspirations from Ghana, and learn from the challenges by those who have repatriated to Ethiopia.

In the restoration of what was painfully taken away from black communities, African nations can play an influential role in the healing of our brothers and sisters everywhere.

From ‘Voodoo Economics’ to a Well-being Economy, Africa’s Choice

Posted on by Web Master

Neo-classical economics, with its different forms and scope and with market and trade liberalisation at its core, has been the dominant economic theory since the first industrial revolution. Despite all its inherent theoretical and practical limitations, it has been successful in driving economic growth in some parts of the world.

It has also been key in the globalisation of national economies in the second half of the 20th century. In recent decades, however, its dominance was significantly challenged by prominent economists, including some Nobel Laureates in Economics.

The challenge took a new dimension and scope with the growing inequality observed within and between countries as its trickle-down effect failed miserably. This has been mainly caused by the exclusive focus on economic growth as measured by the growth rate of gross domestic product (GDP).

The emergence of global environmental challenges, such as climate change and biodiversity loss, has also been another source of challenges faced by the dominant economic thinking. This was again mainly caused by its principle of externalising all costs related to environmental pollution and degradation.

Since independence from European colonial powers, international development organisations led by the World Bank and the International Monitory Fund have been at the forefront of promoting and stipulating neo-classical economic principles of market and trade liberalisation on African countries.

The infamous structural adjustment programs that were imposed by these institutions in the 1970s and 80s led to extensive socio-economic havoc in many African countries. Despite the enormous effort made by these organisations and the stated commitment of successive African governments to laissez-faire market economies, not a single African country that took a Bretton Woods’ prescription succeeded in becoming a developed or a transitional economy.

As it was eloquently stated by the prominent Pan-Africanist and Kenyan Lawyer P.L.O. Lumumba, what we have in the region is more of a “voodoo economics,” which is an African version of neo-classical economics. Hence, we saw for decades economies that are either in shambles or seemed to be developing but are under state capture, benefiting a small group of people.

Experiences of the last half a century have clearly shown that neither neo-classical economics nor its African version, “voodoo economics,” helped Africans to achieve an economic development that meets the needs of their people.

Today, Africa is faced with multitudes of economic, social and environmental issues which have made the development challenges more complex. These challenges are expected to be further aggravated in the coming decades as a result of the extremely high rates of population growth coupled with an increasing percentage of youth.

In this context, African countries and their development partners need to recognise that existing and emerging socio-economic challenges could not be resolved with the same approaches and prescriptions of the twentieth century. That is why it is important for African countries to channel their effort toward the development of a “well-being economy” that responds to the reality of the region.

A well-being economy is an economy that strives for the continuous fulfillment of basic human needs and aspirations of its people within the limits and possibilities of its resources and available external opportunities. This would require deploying a national development strategy that is home-grown and organic but at the same time adaptive to global dynamics.

It also requires governance mechanisms that are equipped with transformative leadership that is based on adaptive learning and inclusivity. A well-being economy addresses both the distributive and participatory justice of its people through their active involvement in the planning and management of the development process.

Progress toward a well-being economy is measured by actual and perceived improvement in the well-being of its people rather than solely relying on the growth rate of GDP and foreign direct investment. Achieving this would require the development of distributed local economy networks in combination with national backbone industries that are low-carbon and resource efficient.

Its primary operational objectives would be job creation and value addition at the local level, which are extremely crucial for African countries. Such an economy also recognises the critical importance of maintaining the well-being of the natural ecosystem as the foundation for the fulfillment of its developmental objectives on a sustainable basis.

In essence, the Well-being economy provides a fundamentally new vehicle for the effective implementation of Agenda 2030 on sustainable development goals with a qualitatively higher outcome. Hence, it is time for African leaders and policymakers to provide the creative space for the development of a Well-being economy in Africa rather than continuing with the same versions of ‘voodoo economics’ and expect a different outcome.