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Month: February 2019
Whiteboard Sales by Street Vendors Dismay Stationary Stores
For Almaz Nigusse, a grandmother in her 60s, the education of her grandchildren is her prime responsibility.
Recently, she found herself haggling for a price with Alemayehu Yeshiwond, a seller of whiteboards around Jacros Street near Salite Mehret Church in the capital.
Almaz has taken it upon herself to see to the schooling of her grandchildren and her teenage child. She buys all the school supplies that they need, and today she settled on 150 Br to buy a small white board from Alemayehu.
Almaz, who lives in Aqaqi Qality district close to Hana Mariam Church, has travelled to the CMC area to observe one of the religious festivals of the Ethiopian Orthodox Church, Tir Mariyam.
It is by chance that she found Alemayehu’s shop and his whiteboards for she has been searching for the item for at least a month. The marker board is a glossy-surfaced writing implement that accepts nonpermanent markers and is easily erased for reuse.
Whiteboards, analogous to blackboards, gained popularity in the mid-1990s, and they have become a fixture of many offices, meeting rooms, classrooms and are even used in the restaurant business.
“I need it for my children so that they can practice and develop their writing skills,” she said.
Almaz’s grandson is one of nearly 170,000 children aged four to six enrolled in kindergartens throughout Addis Abeba. There are 34,867 primary schools in Ethiopia.
Recently many street vendors have started to sell the product in the capital. Genanaw Arega, in his late 20s, is one of them.
He hawks his wares all over the city for about six hours a day, but when Fortunetalked to him, he was in Gerji in front of Anbessa Bus Garage. Genanaw travels to Megenagna, Mexico, Sarbet, Arat Kilo and Bole covering all the important market centres of the city.
Hailing from Addis Qidame in Gojjam, Genanaw has been in the capital for the last five years working as a street vendor.
At first, he sold toys, film and music CD but claims the CD business truncated following the opening of entertainment television channels that reduced the sale of locally-produced films.
Once, working in Bole district, code enforcement officers confiscated CDs that cost him 5,000 Br, which he never recovered. These enforcement officers make random raids against street vendors, often striking with clubs and seizing merchandise with impunity and without any accounting.
Now, Genanaw has found a new opportunity, selling whiteboards, and he devotes his business hours to this single product. He claims that business has improved in the two months that he has been working.
In the beginning, he bought about 20 finished whiteboards at a time from a manufacturer around Gurd Shola, who supplied him with different size boards.
The sizes range between 80cm by 80cm to 40cm by 60cm, having a wholesale price that ranges from 300 Br to 70 Br. He retails them for 350 Br to 150 Br.
Recently, Genanaw started manufacturing the whiteboards himself, assembling at least 10 pieces each day from where he lives in Goro, Agow Sefer. He purchases the material he needs, including nails, laminated chip boards, polyester coverings, moldings and other items locally.
Genanaw is an entrepreneur ready to tackle any business idea and determined to survive in the competitive atmosphere of the city. He is motivated to help his family in Gojam where he sends money regularly.
Genanaw sells more of the smaller sized boards since they take up less space and are preferred by most customers.
Mohamed Seid, a manufacturer and wholesaler of whiteboards around Gurd Shola, is another beneficiary of the new popularity of whiteboards in the city.
Mohamed is in the furniture manufacturing business, producing sofa seat, chair, and beds, but added the boards to his line up about a year ago.
He started by selling his product in the price range of 70 Br to 120 Br, supplying more than 20 retailers, with nearly 15 pieces each day.
“Sometimes we receive direct orders from customers who specify the sizes,” Mohamed, whose customers come from Goro, Megenanga, CMC and Merkato, told Fortune.
Even though the new trend has opened a business opportunity to the street vendors like Alemayehu, it has created business challenges to store owners who stock the product in their shops.
Eyerusalem Zewdu, who has a retail outlet in the Bole area, near Medhanialem Church, is one of those whose business was affected by the mushrooming whiteboard business on the streets
She opened the store about a year ago and carried the medium-sized boards that she retails for 650 Br.
With the advent of street vendors and small market makers offering the product everywhere, no one is buying it from her, except some churches, governmental and non-governmental institutions, according to Eyerusalem.
“I used to sell at least one or two a day previously. Now I am lucky to sell two boards in a week,” Eyerusalem told Fortune.
To balance the difference between formal and the informal traders, street vendors should get proper workplaces, according to Jemal Abagissa (PhD), a lecturer at Addis Abeba University for the past two decades and with an expertise in small and medium businesses.
This is a good business idea that benefits the family from unnecessary paper costs and has to be introduced to other cities in the country, according to Jemal.
The material is more popular in Addis Abeba, where 73pc of primary schools are private.
“The city, federal and regional small and medium enterprise agencies should create market linkages to other cites,” said Jemal.
In the capital, it is estimated that a total of 40,000 people are operating in the parallel market, trading various consumable products including the whiteboards.
Since last year, the city administration has launched a new scheme to formalize these businesses by registering and granting them a working space.
So far, Addis Abeba Trade Bureau has designated 129 marketplaces and provided vendors stalls via a raffle system.
OF DEEDS & DEMOLITIONS
Some residents in Legetafo Legedadi were given a week’s notice to pack up and leave before their homes were demolished by the municipal authorities.
Apparently, the town council had approved a new master plan, and its implementation meant that their property stood in the way of development projects. Just in the past week, 3,685 houses were slated to be demolished, and eventually around 12,000 houses will be cleared.
Since they do not have title deeds, owners of the properties cannot receive compensation. But the town provided them with utilities, which they paid for, and land taxes were levied.
The town maintains it is within its rights to clear houses without title deeds and had held discussions with the residents. This is despite legal experts’ view that the town’s administration, in collecting taxes and providing services, encouraged the settlements and now lacks the moral argument to take such a measure.
Some things hardly change, despite the change of times
Some things hardly change, despite the change of times. The French maxim, “the more things change, the more they stay the same” resonates today to the thousands of people whose settlements in the outskirts of Addis Abeba were brought to an abrupt end after nearly two decades.
The same old claims of a state power justifying its actions as an act of determination to uphold the rule of law becomes a bitter pill to swallow for those who are being displaced. Those on their defence challenge the powers that be of its credibility, not only over its inactions over the years, but also of its subtle recognition of their legitimacy with the provision of utilities by the state enterprises.
Those in the gossip corridors across the city were no less preoccupied with the controversy, thereby revealing where they stand in their stance about the incumbent. The dispute also exposes the once near unanimous support granted to Prime Minister Abiy Ahmed (PhD) is in the process of erosion, although he still enjoys considerable popularity unusual to his predecessors, gossip observed.
It is common for him to receive displays of adoration from members of the public whenever he goes around, as the case was on Friday evening when he entered into the newly opened Hyatt Regency Hotel. Abiy responded with his trademark smile, nodding in recognition of the clapping and whistling of those gathered out by the cafe’s porch.
Alongside his staunch political ally, Lemma Megerssa, chief of the Oromia Regional State, he was there to grace a gathering of the Nouveau riche, mobilised by political peddlers in support of a cause. For some of these people, the event ought to have been deja vu of the EPRDF 1.0, when political clientelism dictates the launching of public projects off the government budget and political masters dispatch their army of cadres to lobby those visible in the private sector to step up to the plate, gossip observed.
Last week was no different in this respect, claims gossip. Takele Umma, deputy mayor of Addis Abeba under EPRDF 2.0, was busy in the previous weeks, offering an audience to many of these businessmen and women called to his office. It was to persuade them to chip in on financing the construction of a stadium in his native town, Ambo, a spa town established in 1889. Close to 120Km west of Addis Abeba, it is rather known for its role as an epicentre of resistance to the government of EPRDF 1.0.
Takele tried to sell the project as indispensable to the stability of the area where a restive youth has hardly any places to spend its idle time, gossip disclosed. Leaders in the area are desperate to keep the youth away from the streets and engage it in constructive activities. Building a brand new stadium for a projected cost of half a billion Birr is one of the ideas the town’s leaders have in mind, but with a limited purse they can only cover 35pc of the town’s recurrent budget from municipal taxes.
The Deputy Mayor of Addis Abeba has reached out to close to 500 business people prior to the fundraising event on Friday, hoping to get one million Birr from each of them, gossip disclosed.
The event, held in the absence Mohammed Hussien Ali Al-Amoudi’s customary largesse of such initiatives, was not a total disappointment either to Takele, the Prime Minister or President of the regional state, gossip observed. Those who attended the event have pledged to contribute two thirds of the project cost, 350 million Br, a considerable commitment from a private sector now suffering from a broader slowdown in the economy, a depressing trend the governor of the central bank, Yinager Dessie (PhD), has conceded to during his one of a kind press briefing last week.
However, among the notable donors were Worku Aytenew, a buoyant businessman who is erecting an edible oil refinery in the town of Debre Markos, who chipped in with 15 million Br; Tedros Yeshiways, the CEO of Gomeju Oil, pledged 12 million Br; and Awash International Bank, 10 million Br. Gemshu Beyene, a construction mogul who owns Elilly Hotel, not only pledged five million Birr, he also acquired a hand watch Abiy donated for five million Birr, a present he claimed to receive during one of his overseas trips.
The Tax Regime Can Use a Broader Perspective
Last week saw yet another institutional initiative taken by Prime Minister Abiy Ahmed’s (PhD) administration designed to review legal constraints in the business of governance. This time around it is the formation of a project office at the federal level dubbed Tax Equity & Cooperation Office. The administration hopes the new office will identify loopholes and address impediments to efficiency and broadness of the tax regime.
Like every administration that has come before it, Prime Minister Abiy faces an uphill battle in domestic revenue mobilization. Ironically, the cause of the problem should have been straight forward to understand.
Total revenues of the nation in the past fiscal year stood at 270 billion Br, 87pc of which was from taxes. It grew by 12pc compared to the previous fiscal year. But its ratio to the gross domestic product (GDP), at 11pc, remained a far cry from the OECD countries’ average of 34pc, or even Kenya’s 18pc. It has been clear for a while that without addressing the matter of tax collection, domestic revenue mobilisation will remain a recurrent nightmare to the government, pushing it to chase foreign loans and grants.
Past administrations have been well aware of the matter but have mostly looked to strengthen tax administration and enforcement as a panacea. Prime Minister Abiy is not just following suit but doubling down as a bill at the Finance Ministry to introduce property taxes shows.
Without any significant tax reform plan on the table, the administration is looking to old tactics meant to change the uncomfortable fact that the private sector is hiding wealth and citizens have no appetite for paying taxes. It is unfortunately a misguided perception to say the least.
There is no arguing that some businesses hide portions of their wealth from the government. It is a problem to varying degrees even in countries with the most sophisticated tax enforcement mechanisms such as the United States.
“That makes me smart,” President Donald Trump said during his campaign trail about using a tax code loophole to dodge federal income taxes.
Citizens’ habits of tax avoidance is not a matter that should be condoned by the government. Neither can it be divorced from human nature. Productive citizens want to retain as much of the capital they have gained to themselves, a matter that should never be blamed on lack of patriotism or greed.
Indeed, this issue does not exacerbate only when the tax regime is unfair or punitive, but the laxer enforcement is as well. But as long as there is no follow up by meaningful reforms to address flaws, gains made as a result of stricter controls are likely to be temporary.
Similarly, publicity events such as the five-kilometre awareness creation race last Sunday, tax ambassadors or even stricter enforcement will not allow the authorities to tackle the problem more than temporarily. Poor domestic revenuesmobilization requires a change of mentality, one that includes a compromise, on how it should be approached.
Under an excessively taxed and poorly administered tax regime, the nation is harmed in two ways. Citizens, as well as business, are more likely to be pushed to the informal sector, or plain hoarding, a nuisance even the most severe police states would be hard-pressed to do away with entirely. Worse, this would be money that will likely not be put in circulation, at least in terms of large transactions, which harms the economy.
The compromise would be to follow the equity principle and allow citizens and businesses to keep more of their capital, which would thus either be used to transact or invest, both of which are beneficial to the economy. This can be done by introducing tax deductions on personal income taxes for expenses such as medical bills. It would be a smart means of leaving citizens, who are the ultimate bearers of consumption taxes, with additional income at their disposal.
At the very least, it would keep them from looking for employment opportunities in the informal sector, and get them spending in the formal one. At most, it would help citizens save more and invest.
A similar outcome can be achieved when it comes to businesses by making corporate taxes progressive, with a view to making business entry smoother. A long overdue matter, it will help incentivise new start-ups and small as well as medium enterprises – the bedrock of wide employment – while fairly taxing the rich.
However smooth the bureaucratic process or reliable the provision of services becomes, businesses can barely survive the first few years if there is not enough capital to begin with. Allowing them to pay lower tax rates than the 30pc flat rate that is currently deducted from the profit of every business organization will make life for owners of start-ups easier.
A further improvement that could be made in how businesses are taxed would be allowing districts to collect property taxes that are under consideration by the Finance Ministry. It can encourage them to go the extra mile to attract property and reinvest the taxes in facilities and services within their own communities. The consequence would be competition between districts to make doing businesses smoother, which would be highly consequential to the economy.
The authorities also may want to look beyond the current tax base, especially in employment tax, which includes 1.6 million civil servants and 2.6 million people employed in private companies and non-profit organisations. It should address the fact that income from agricultural activities, collected and administered by regional governments, is not taxed appropriately.
It is baffiling to see agriculture, the mainstay for 83pc of the population contributing 35pc to the GDP and generating 73pc in foreign exchange, is the least contributing to taxes.
The discrepancy arises from the uneven methodology in tax valuation, which in some cases is carried out based on the sizes of lands. It is a combination of the poor tax administration regime to correctly account income derived from the sale of produces as well as the incumbents’ view, whose political base mostly constitutes the rural community, that farmers should not be taxed.
It may be a politically unwise decision to make, but the authorities can barely broaden the tax base if they are unable to compel farmers to pay what is due to them for reinvestments in their own regions. The public good that is provided is used by farmers in no less manner than the urban poor whose wage, however small, is taxed by the state.
Unplanned Demolitions Displace Legetafo Residents in Ruins
Serkalem Baylegn, a 35-year-old single mother of three, lives in Legetafo Legedadi, Oromia Regional State, 11Km northeast of the capital.
Born and raised in Addis Abeba, she bought the property where she now lives fifteen years ago, after the house she had lived in was expropriated by the city government for development purposes.
“The cost of living in Addis Abeba was too high,” Serkalem recalls, explaining why she moved to Legatafo.
The 300Sqm property stood behind a church that she and her ex-husband bought for 38,000 Br, where they gradually built 12 new rooms that they rented out.
After separating from her husband about a decade ago, Serkalem became the sole provider of her family and supplemented her income by selling vegetables.
Her life was disrupted when bulldozers sent by city authorities arrived at her doors on the morning of February 20, 2019. As she and her neighbours clamoured to move their personal property out of their homes, the machines demolished her home where her children were born and raised.
Serkalem was not the only one who lost their home that week as the city moved to dismantle 3,685 homes deemed illegally built by the authorities.
While Serkalem claimed that she had never received any prior notice of the impending action, others noted that they were given notices about a week ago.
Anewar Mohammed, a resident of Burqa, 03 kebele, was issued a notice to vacate on February 8, 2019, and his home was demolished on February 19. The city administration claims that it had been in discussion with residents over the last six months, but people affected by the municipal action claim that they were unaware of any discussions.
The notices were sent by the Legetafo Legedadi City Administration’s Land Development & Management Agency that stated the land was needed for green space development, advised the residents to clear the properties themselves by a specific date and warned that the costs of clearing homes will be charged to the owners in cases of non-compliance.
The City Administration kept its word and arrived with bulldozers on February 19, 2019, clearing and demolishing nearly 40 houses over a 15,000Smq area, according to witnesses that live in the area.
The area was settled by people who bought the plots from farmers without titles or deeds of ownership. In the ensuing years, the authorities provided them with electricity, water and registered the homes and collected utility bills.
“We have even paid property taxes,” says Anwar.
A small clinic, Tafo Family Clinic, that operated in Legetafo for over a decade also fell to the demolition order.
“We didn’t have a title deed for the land, but we had everything else, including a license for the clinic from the Oromia Health Bureau,” says Yeshiarge Abraham (MD), owner of the clinic.
“We were told that the land was needed for the expansion of a nearby school.”
In recent months, the Legetafo Legedadi area has seen the influx of displaced people that resettled in the aftermath of conflicts in Oromia and Somali regional states. In contrast to the demolition orders carried out against the residents, the authorities have promised to build 100-unit condominiums to house the refugees, an irony not lost by those who saw their properties demolished.
The residents claim that they have even made contributions in support of the refugees and that the Mayor had also thanked them for their efforts.
This measure by the City Administration was taken following the city council’s decision to implement a master plan, according to Habiba Siraj, mayor of Legetafo.
“The houses are illegal and built inside a designated green area, buffer zones and areas reserved for social and investment purposes,” Habiba told Fortune.
The master plan is a new one and follows the one that had served the city ever since the Special Zone Surrounding Addis Abeba of the Oromia Regional State was established in 2008.
“The demolition of houses built in violation of federal and regional laws are part of a larger operation,” says Melkesa Midega (PhD), head of the Oromia Regional Government Rural Land Administration & Use Bureau, pointing out to the 12,000 settlements in Legetafo Legedadi without title deeds that are slated for demolition.
Since last month, the administration of the Oromia Regional State has been demolishing houses deemed illegal in Shashemene, Burayu and Sebeta, a measure that is allowed under Ethiopian law.
According to Adissu Arega, head of the Political and Rural Mobilisation Bureau in the Oromia Regional State, 36,117 illegal settlements in 25 cities have been cleared so far
Urban property may be cleared by the government if deemed necessary for development purposes with the appropriate compensation awarded. When it comes to settlers who cannot provide title deed documentation though, they may be evicted from their residencies without any reimbursement.
The newly displaced residents are considered illegal settlers by the city administration because of the way they acquired the land. They bought the land from farmers before the area was incorporated into an urban zone. The initial purchases of the land from farmers, without following the proper land title and deed transfer requirements, is considered illegal.
But residents, as well as activists, claim that the city’s measure to evict residents that have lived in the area for 15 years and paid property taxes is a politically motivated move more than anything else. They cite as evidence the selective bulldozing of houses in neighbourhoods, while the administration claims that such areas are needed for developments, is a telltale sign.
The reason some of the houses were left standing is that the houses belong to farmers, which would require compensation before eviction, according to a statement by the Legetafo Legedadi Government Communication Affairs Office. Since the city has not accommodated a replacement for them, it has delayed their demolition, the Office’s statement said.
From a legal perspective, the residents can lodge grievances according to experts.
“Though the residents don’t have a legal claim, they have a rightful claim arising out of de facto use of the land,” says Yonas Tesfaye, legal expert and lecturer of law and development at Addis Abeba University.
He bases his argument on the fact that the City Administration condoned their existence by giving them government services and by collecting taxes from them for land use.
“This is not a normal case, and we shouldn’t follow normal procedures, but rather principles of justice and equity should prevail,” said Yonas.
“The government’s actions and omissions have contributed to claims of lack of moral and legal ground to evict these people.”
Human Rights Council, an independent human rights group in Ethiopia, has condemned the City’s actions and has asked that compensation and resettlement of displaced people should be made. It stated that such measures will result in social and human rights problems.
But the media attention that the measure has received and the outrage in public opinion is no solace to residents of the city who have received notices of evictions but have so far been spared dislocation.
For those whose houses have been demolished, such as Serkalem, the future is uncertain.
After placing her belongings and children in a neighbour’s house, Serkalem managed to put up a makeshift plastic shed and stayed the first night in the rubble of her house.
“I have nowhere to go,” she says.
Ethiopia Moves to Liberalise Aviation Industry
A regulation that will liberalise the aviation industry is in the making and has reached the Office of the Attorney General for legal review.
Drafted by the Ethiopian Civil Aviation Authority, the draft regulation is expected to relax investment bottlenecks in the air transport sector, including lifting the 50-seat limit on private aircraft.
If approved by the Council of Ministers, the bill will enable citizens to participate in domestic and international flight operations, maintenance and aircraft repair, consultancy service, aircraft design and manufacturing, education and training, import, distribution and leasing of aircraft parts.
Non-national investors will also be allowed to engage in the aviation sector through full ownership, except in the case of domestic and international flights. In the latter case, they will be required to enter into partnerships with either Ethiopians or members of the Ethiopian diaspora with a maximum equity limit of 49pc.
The minimum capital requirement for non-national investors will be 200,000 dollars and 150,000 dollars for joint venture with domestic investors. The Authority has three main directorates: Aviation Regulation, Air Navigation Service and Support Service.
The new regulation provides broad opportunity for nationals and members of the Ethiopian diaspora to invest and play a significant role in the economy of the country, according to Endeshaw Yigezu, air transport director at the Authority, who has been with the agency for the last 15 years.
“With more than seven decades of history of air service, we still have only one globally competent airlines and everything is controlled by the government,” he told Fortune. “The government could not survive by intervening in capital intensive markets where every resource requires foreign currency.”
Ethiopia, which has been a member of the International Civil Aviation Organisation (ICAO) since 1952, has 16 private investors operating in the air transport sector. The companies engage in consultancy, aviation training, domestic flight operation, flight facilitation and cargo handling.
Dawit Gebreigziabher, a well-known investor and aircraft business pioneer who is running National Airlines, said that the investment proclamation that limited investment in aircraft with less than 50 seats has been in contradiction to free market principles.
“We have been able to discuss the issue with the Authority, and we are hopeful it would be one of the roadblocks that are addressed,” he said.
The major player in the industry is the state-owned Ethiopian Airlines that operates with a fleet of more than 100 aircraft, serves six million passengers a year and reported 2.6 billion dollars in revenue in 2017.
Ahmed Kellow (PhD), the former CEO of Ethiopian Airlines and general manager of First Consult, agrees that it is a good idea to expand access to local and foreign investors.
But most of the areas opened for investment require large-scale capital and state of the art technology that makes them more suitable for well-established and recognized airlines, according to Ahmed.
“For local investors to venture to companies that offer consulting, education and training; as well as invest in domestic flights, presents good opportunities to enter the industry and grow,” Ahmed told Fortune.
The nation has an adequate skilled workforce to fill the demand in aviation management and maintenance, he added.
12500000
… Birr spent by the Mayor’s Office of Addis Abeba for reception and hospitality events in the first six months of this fiscal year. The figure represents half the budget of the 2018/19 fiscal year. The Office placed a request for an additional one million Birr in a supplementary budget for hospitality.
MOENCO Invests 700m Br in Service Center
Motor & Engineering Company of Ethiopia (MOENCO), the sole importer of Toyota vehicles, is constructing a Toyota Service Centre for 700 million Br.
The new facility will have 80 service bays and can maintain up to 25,000 vehicles a year. The centre will be located in Aqaqi-Qality district on a 20,000Sqm plot. Construction of the project started in December 2018 and is expected to be completed by the end of 2020 when it will provide job opportunities for 300 people.
GERETTA Consulting Architects & Engineering, which has overseen the construction of the Oromia Cultural Centre and Century Mall, is consulting on the project. The construction will be carried out by the 17-year-old Bamacon Engineering Plc, which was contracted to build the Embassy of Rwanda and Kanoria Africa Textile.
Once completed, the service centre will have a central lab system, a showroom, onboard diagnostic systems, wheel alignment and automatic exhaust gas extraction. It will provide services such as vehicle and part sales, periodic maintenance, general and collision repair.
MOENCO, which has nine branches across Ethiopia and employs 1,500 people, is also investing 110 million Br to modernise its service delivery. CDK, a London-based company, was contracted to install Autoline-DMS, a dealer management system for all of its branches.
“It will create the ultimate customer experience,” said Seife Getahun, finance director of MOENCO.
With an annual turnover of four billion Birr, MOENCO has been operating in Ethiopia since 1968 as a subsidiary of Inchcape, a London-based company engaged in global distribution and retail in the automotive sector in over 30 countries across five continents.
MOENCO is one of the largest automotive companies in Ethiopia, which already has 19 vehicle assemblers and over 800,000 vehicles, though 90pc of demand is met by imports. It is also an agent to brands such as Komatsu, New Holland Agriculture, Hino Motors, Cummins Generators and Suzuki Motorcycles.
During the last fiscal year, Ethiopia spent 544.3 million dollars to import vehicles.
Over the past two decades, MOENCO has invested more than one billion Birr in branch expansions, service outlets and parts distribution centres.
MOENCO’s new service centre project is an investment that experts have applauded.
Such service centres will contribute to the growth of the industry by bringing new technology, besides reducing the problem of maintenance in the country, according to Eshetie Berhan (PhD), associate professor at Addis Abeba University’s School of Mechanical & Industrial Engineering.
“MOENCO should move toward the manufacturing of spare parts,” said Eshetie.
“Our society deserves … empowered and competent judges.”
Meaza Ashenafi, president of the Supreme Court, said on her Twitter page. She added that judicial competence and integrity is crucial in judicial reform.
Central Bank Allows Forex Transactions Inside Ind. Parks
Companies operating in industrial parks can transact in foreign currency while selling and buying raw materials with each other beginning this month, according to a new directive issued by the National Bank of Ethiopia (NBE).
The new directive was issued two weeks ago to enable investors to buy or sell raw materials or inputs in foreign currency when they are manufactured by companies that operate in any of the industrial parks. The purchaser will settle the payments from its foreign currency retention account.
Signed by Governor Yinager Dessie (PhD), the directive went into effect on February 4, 2019.
“It is found necessary to support the strategy of the government by creating smooth operation in industrial parks by addressing the emerging needs of investors, particularly that of foreign investors in industrial parks,” reads the directive.
The new directive also enables employers at the industrial parks to pay their non-national employees in foreign currency. The non-national employees are as well allowed to open foreign currency account at banks operating within the industrial parks.
The directive further privileged the non-national employees to transfer forex from their accounts to accounts abroad. But the national bank has set a limit on the foreign currency account of a non-national employee to be credited to the maximum of the employees’ net monthly salary.
To facilitate the process, commercial banks operating in the industrial parks are allowed to issue an interim export permit to an investor upon the summations of all export documents to sell or buy products as raw material.
Before the issuance of the directive, companies operating in the industrial parks were facing challenges in making transactions.
Abebe Abebayehu, a commissioner at the Ethiopian Investment Commission, states that the new detective is one of the reforms to solve problems encountered by companies in industrial parks.
“These kinds of innovative approaches could help industrial parks to become successful,” Abebe told Fortune.
Chargeurs Fashion Technologies Plc, a French-based company that invested two million dollars and became operational in 2017, is one of the beneficiaries.
Producing and supplying interlining, a material used as an extra lining between the ordinary lining and the fabric of a garment, Chargeurs Fashion supplies the product to companies operating in the parks.
“We import the raw materials in foreign exchange and could not sell them in local currency as we are indirect exporter companies,” said Hibret Lemma, managing director of the Chargeurs Fashion, whose company hires 25 employees and manufactures 24,000 linear meters of interlining a day.
For the first eight to nine months, the company was selling its products in a credit arrangement as it could not accept payments in foreign currency, according to Hibret.
Last year in June, Chargeurs Fashion and JP Textile, a Chinese company, were given a waiver from the Bank by a letter to sell their products in forex but only for those operating inside the Hawassa Industrial Park.
“Now it is a relief for us and for other foreign companies planning to invest in the country,” Hibret told Fortune.
Along with Chargeurs Fashion, four other companies operating in Hawassa Industrial Park trade raw materials with each other. JP Textile, JAS Holdings, which produces packaging materials and another United Kingdom-based company that produces labels are among the beneficiaries.
Located in Hawassa, the seat of Southern Nations, Nationalities & People’s Regional State, the Park encompasses an area of 1.3 million square metres, of which 300,000Sqm is occupied by sheds. It hosts 52 sheds designated for textile and apparel manufacturing and is considered the flagship park of the country.
Currently, there are six state-owned operational industrial parks, while five are in the pipeline. To build the 11 industrial parks, the government has invested 1.3 billion dollars.
In addition to the government-built parks, there are six privately-owned industrial parks that are operational, with one more under construction.
In the first seven months of the current fiscal year, operating industrial parks have generated 81.4 million dollars from exports. Companies in Hawassa, Eastern and Bole Lemi industrial parks were the largest exporters.
Zereyaqob Belete, the managing partner of Nexus Investment Solution, a decade-old investment consultancy, applauds the government’s move in issuing the new directive.
“It will motivate other foreign companies to invest in the country,” said Zereyaqob.
In previous years, companies were investing in Ethiopia attracted by the economic growth of the country, which was in the double digits, according to Zereyaqob. This is no longer the case, as the economic growth has dropped to seven percent, he added.
“New companies will invest in the country looking at the success of the already operational companies,” Zereyaqob said.
He further recommended that local companies and investors have to be active in investing in industrial parks with the assistance of the government.
City Inaugurates Ambitious Park Project
The Addis Abeba City Administration inaugurated a greenery park project that will devour around six percent of the city’s budget and almost seven percent of the tax revenue it plans to collect this year.
With a 2.5 billion Br budget, the park stretches over 18ha of land from Basha Wolde Chilot to Orma Garage near Sheraton Addis Hotel. The park is part of a 29-billion-Br project to revitalise two rivers that cross the city from Entoto to Qality. The whole project is planned to be completed in three years.
Deputy Mayor Takele Uma launched the project even though it was planned to be launched by Prime Minister Abiy Ahmed (PhD), who canceled due to a busy schedule.
The construction of the park will include roads, playgrounds, sports fields, shops, bicycle paths and walkways, as well as entertainment facilities, and is slated for completion next year. Its objective is to rehabilitate rivers and riverbanks, mitigate river flooding and erosion and promote a green economy, according to the Deputy Mayor.
The construction and design of the park will be carried out by Geom Luigi Varnero, which won the project after bidding with five foreign construction companies. Varnero, an Italian firm, is known for constructing the eight-story twin buildings of the former Ethiopian Shipping Lines.
The Rivers Basins, Green Areas Development & Agency will hire a supervisor consultant for the pilot project next week. Ten selected local and international companies have been invited to bid, according to Sileshi Degefa (PhD), CEO of the River Basins Agency, which oversees six offices including the River & Riverside Development Project Office and Entoto Tourist Destination Development Project Office.
The two project offices were merged under the agency and will be accountable to the Office of the City Manager. The measure aims at utilising resources without redundancy, according to the Deputy Mayor’s announcement.
Initially, the total cost of the revitalising the Riverside Development and Tourist Attraction projects that stretched from Entoto to Sheraton Hotel was estimated to cost 5.6 billion Br, out of which the Riverside project cost was set at 605 million Br.
The Agency was in the process of hiring a company to develop Banteyiketu River, which stretches from Urma Garage to Afincho Ber. But the merger of the two agencies led to the cancellation of the bidding process.
Blue Matrix Consultancy, in association with Image Consultancy, was the initial firm that signed a deal with the Agency in November 2017, to supervise the River Revitalisation Project at a cost of 10.2 million Br.
“The new project uses the previous studies developed as inputs for the preliminary design, but the contractor will develop its own detail design,” Sileshi said.
Aziza Abdulfetah, lecturer and chairperson of Landscape Architecture at the Ethiopian Institute of Architecture, Building Construction & City Development commends the effort to create public space that requires major commitments.
She suggests open discussion and comments to be held with professionals in the field of architecture and landscaping to enrich the final design.
“The contractor should focus on ways that revive the flow of the rivers by utilising methods that percolate water to the ground and water refills in any open space to preserve the ecology,” Aziza said. “For a sustainable operation of the park, a maintenance plan should be considered from the outset of the project.”
Two months ago, the city administration launched another large scale project – the 50-billion-Br La Gare Eagle Hills Project – to be built in a joint effort by Abu Dhabi-based private real estate company, Eagle Hills, and the City Administration. The project encompasses 36ha of land, three hotels, 4,000 apartments, a mall and entertainment centres.
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