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Month: February 2019

The Toxicity of Yelugnta

Posted on by Web Master

Society plays a significant role in the personality of an individual. It molds the way we respond to situations, carry ourselves, speak, walk, act and even think.

Each society has a culture that is authentic, and Ethiopia has several norms that are only found in this country. This can sometimes be defined by the very vocabulary of languages, which are profoundly affected by cultures and norms. Depending on the occurrence or non-existence of the experience, vocabularies are shaped.

Depression, for instance, does not have an equivalent term in Amharic, for the experience is often attached to the word for boredom. On the contrary, certain qualities are explained well in the Amharic language but lack an English term. The word Yelugntais a famous example. A feeling found abundantly in social circles in Ethiopia, it proves itself challenging to translate.

This quality of an Ethiopian psyche, which can be translated to “what would people say?”, is described in a book entitled “Ethiopia in Transit: Millennial Quest for Stability and Continuity,”

Yelugntarefers to deference to public moral accountability. The book goes on to describe this authentic word as the definer of the ethical limits of the acceptable, a moral sanction against conduct deemed unethical.

Manifested throughout one’s life and affecting the outcomes of several situations, Yelugntais a powerful social tool in Ethiopia. It serves as a rather acceptable façade, a mask to abide with the rules that have been handed down from one generation to another.

Every thought, idea or feeling has to pay fealty to Yelugntaand can only be expressed if it passes the query, “What would people think?” or “What would people say?”

Because of this fear, people often shy away from opportunities, dreams and passions. We want to take a bite, to stay and converse more or point out that we are uncomfortable, but instead we remain silent or even allow others to speak on our behalf. We want to be, but we are not, and ultimately we want to live, but feel tired with the thought of someone driving the car we call our life.

The psychology behind “What would people say” can be understood in the positive sense of abiding with socially constructed rules that do not allow people to surpass the rights of individuals. But it can also be understood in the sense of depriving oneself of the value and metrics of one’s life.

What society says cannot be a frame of reference to what is right or wrong. Society should not decide which action is acceptable or undesirable, as long as no one else will get hurt mentally or physically. Even objects, let alone subjects, that seem to have a clear cut purpose act as different tools in different situations.

And if objects cannot be boxed into a pre-determined corner, how can situations, beliefs and ideas?

This is a glitch in the system. It is a fundamental error to explain that any outcome of culture or norm is a permanent trait that cannot be improved upon or changed based on circumstances and context.

It is for that reason Yelugntais a flawed means of social relations. It allows society to control the actions the individual desires to make. This creates an emotional prison and shackles the brain.

Even though Ethiopians are bearers of a quality that exists far less intensely elsewhere, it is a culture that should be discarded. It is holding back the potential of the youth that dare to think differently and ultimately contributes to the nation’s lack of progress.

 

National Bank Alters Forex Rules for Retention Accounts

Posted on by Web Master

The central bank has enabled foreign currency retention account holders to sell forex to commercial banks through negotiation.

Previously, the banks have been buying foreign currency from retention account holders with a buying rate set by the National Bank of Ethiopia’s daily foreign exchange indicative rate.

The amendment aims at encouraging exporters to bring foreign currency, according to Yinager Dessie (PhD), governor of the National Bank of Ethiopia.

“It will also enable banks to gain more foreign exchange from the account holders, who will be encouraged by the new rate,” Yinager told Fortune.

The directive, which repealed the prior law issued four years ago, becomes effective on February 15, 2019.

Even though the new procedure allows transactions through negotiation, the directive sets limits on premiums of what banks can add, and that figure may not exceed the selling rate. The selling and buying rates maintain two percent differentials.

There is a need to amend the directive to create a clear computation among banks, according to the directive signed by Yinager.

It was a decade ago when the National Bank issued a new directive for the regular recipients of foreign exchange remittance and exports of goods and services to open retention accounts at any of the commercial banks. The account holders are only able to use the money to finance direct business and current payments such as the import of goods, promotion and subscription fees, and the settlement of external loans.

Prior to the issuance of the directive, the recipients of foreign currencies can open two types of retention accounts. In one they can keep up to 10pc of their earnings for an indefinite period. A separate account holds the remaining 90pc, and account holders have 28 days to use the hard currency, at which time it is converted to Birr.

The new directive amended the restriction by raising the indefinite holding retention figure to 30pc and reducing the other account to 70pc.

Addisu Habba, president of Debub Global Bank and head of Ethiopian Bankers Association, believes that the new setup will undermine the income of banks from foreign exchange dealings and increase export revenue at the expense of banks’ income.

Abdulmenan Mohamed, a banking expert, expects the new directive will have a positive effect on the Banks.

“It will enable banks to retain customers as they will be able to supply them with forex,” said Abdulmenan.

Constitutional Rights, Meaningless without Independent Judiciary

Posted on by Web Master

Following political transformation in Ethiopia over the last 10 months, the administration of Prime Minister Abiy Ahmed (PhD) took a courageous and unprecedented step to ensure gender parity in key leadership positions. The appointment of women as head of state and president of the Federal Supreme Court is indeed unprecedented.

Likewise, gender parity, where women hold half of the ministerial cabinet positions, has become an inspiration not only in Africa but on the global stage as well. The careful selection and appointment of key female leaders demonstrate the administration’s desire to respond to the aspiration of the public. Citizens demand independent and strong development, democratic, justice and security institutions that have been lacking in our country.

Indeed, since last year, reforms in Ethiopia have started in earnest. On the justice front, amnesty has been granted to thousands of prisoners; draconian laws imposed on civil society organisations have been amended, and revisions in electoral and media laws are underway.

The crucial, overarching mission at this time is restoring public confidence in the judiciary, a matter I stressed when elected as Chief Justice last November.

Since then, we have embarked on engaging stakeholders in our judicial system, an uncommon practice in our country. We have held town hall meetings with 350 Federal Court judges, 3,500 professional and support staff of the Federal Court, 400 practising lawyers and presidents of regional supreme courts from across the country. Key concerns and issues were addressed during these town hall meetings. We assessed the damage done to the rule of law and expressed our collective aspiration for the supremacy of the law and the independence of the judiciary.

It was an opportunity to communicate to our judges that their mandate is to abide by the rule of law, conduct fair trials, observe due processes, uphold the equality of every citizen before the law, and stand for the impartiality of the administration of justice.

We are already observing the positive impacts of this shared commitment. A high-powered Judicial Reform Advisory Council composed of former judges, senior lawyers and academics has been established.

Our reform agenda includes the revision of our court structures and the redesign of the judicial administration system, including composition and mandate of the Judicial Council and procedures for the appointment and removal of judges. We are also addressing cross-cutting issues that affect judicial independence and service delivery. We are strengthening the existing alternative dispute resolution mechanisms and setting up new ones as we consider these measures to be vital in managing the overflow of cases in our formal court structures.

To implement reforms successfully, we rely on international principles and standards as well as “good fit” practices. To do that, we are forging alliances with international partners such as the UNDP, USAID, the Swedish International Development Cooperation Agency and the Open Society Foundation. More partners have shown interest to support our reform agenda.

The engagement of stakeholders and outreach activities and the creation of more platforms for awareness and understanding is crucial. We need space to invite stakeholders and change-makers from the judiciary, bar associations and governments.

Given the complexity, the multiple inputs required and the diversity of expectations on the judiciary, we need to increase the number of innovators and change makers who are addressing the issues of law and justice.

Citizens must and can initiate change and pressure officials of the judiciary. But change also ought to be a two-way street, and members of the judiciary should be able to meet the public half way. It will mean staffing the judiciary with independent-minded judges, a matter that entails a unique vetting process.

Judicial vetting often applies in the appointment of new judges. However, judicial vetting has also been applied to sitting judges in some countries with a view to restoring public confidence, especially in the context of political transition.

The experience of former communist eastern European countries is noted here. In East Africa, Kenya is well known for vetting sitting judges – first after the adoption of a new constitution in 2010 and later in 2013, when a new Chief Justice implemented the “Radical Surgery”. The procedure though has been questioned for its impartiality and the disruption caused on judicial functions.

In the case of Ethiopia, we have opted to take a less radical approach. Some judges left on their own accord, but most remain in office and continue normal functions. Our approach involves finding the right balance to avoid legal complications, disruption of the much needed judicial services and screening of judges who are corrupt and grossly incompetent.

In view of these, we are collecting informal feedback from judicial leaders, peer coordinators and lawyers about the competence and integrity of individual judges.

Questionnaires are also being administered to collect the views of litigants, and we are also reviewing existing disciplinary complaints against judges. While systematic inspection of files is underway, the collection of data on unjustified assets will be launched soon. Such evidence will be analysed objectively and qualitatively based on a transparent process.

New approaches are being utilised in order to prevent future vetting of sitting judges. We need to make concrete efforts to attract good judges based on competence and integrity and make a clean break from recruiting judges based on political loyalty that defeats the purpose of judicial independence.

This means having to address the issue of salaries and benefits. Justice is not cheap, and Ethiopia, as one of the lowest paying countries, needs to address this challenge progressively and incrementally.

The judiciary should also be a learning organisation, and training opportunities should be available. Just as critical is to revise our appeal procedures and to implement alternative dispute resolution mechanisms. This way, we can reduce the workload on judges and recruit and retain a reasonable number that can provide quality judicial service.

Subsequently, it is important to reinforce existing soft laws such as the “Basic Principles on the Independence of the Judiciary” and the “Bangalore Principle of Judicial Conduct.”

Such principles require further elaboration and affirmation. There is a need to pluralise and adopt the principles in our day to day work. Indicators related to the rule of law and judicial independence should feature as a critical area of accountability for national, regional and international monitory and peer review mechanisms.

This is all with the view that the rule of law and trust are crucial to enable people who do not know each other personally to live together in harmony.

A society that is unstable and has low levels of trust is caused by the lack of faith in a fair and swift judicial system. If citizens have no faith in the judiciary, they will have no trust in government in general.

“All the rights secured to citizens under the constitution are a mere bubble, except guaranteed to them by an independent judiciary,” as Andrew Jackson, seventh president of the United States, said.

Edible Oil Processing Plant Springs Up in Gonder

Posted on by Web Master

Tsehay Farmers’ Cooperative Union has invested 70 million Br to set up an edible oil processing plant in central Gonder, Amhara Regional State.

With a production capacity of refining 10,000lt of oil a day, the plant is expected to be inaugurated at the beginning of this week. The plant, which took two years to complete, rests on 8,734Sqm of land and is expected to create jobs for 75 employees.

The processing plant, which will use sesame seeds, niger seed, sunflower and peanuts to produce the oil, started trial production on February 12, 2019, processing 7,000lt of oil a day.

The steel structure of the new plant was constructed by a Saudi Arabian company, Zamil Steel Industries, a company founded in 1998 and headquartered in Dammam. Zamil employs over 10,000 people in 55 countries.

The machinery was installed by an Indian company, Kumar Metal Industries, a company established eight decades ago supplying machinery for oil mills, solvent extraction and edible oil refining plants. The company has a presence in 25 countries and serves over 500 customers.

The two-decade-old Tsehay Farmers’ Cooperative Union has been engaged in trading cereals, processing animal feed, distributing consumer products and exporting sesame.

Oil made of sesame will be exported, while the rest will be retailed in the local market, according to Endalkachew Abi, CEO of the Union, which is one of the 388 cooperative unions in Ethiopia.

The plant will play a significant role in import substitution, according to Sintayehu Demissie, a lecturer at Addis Abeba University.

“A large portion of Ethiopia’s edible oil is still imported,” said Sintayehu.

The latest data from the Food, Beverage & Pharmaceutical Industry Development Institute shows that 96pc of the nation’s demand for edible oil was being fulfilled by imports from Indonesia, Malaysia and Singapore.

The country imports 350 million tons of subsidised palm oil a year due to a shortage of oil in the country, which has an annual potential of producing more than 785,000tn of oilseeds.

In 2011 the government banned private companies from importing edible oil. As the shortage in the market grew, however, the Ministry of Trade & Industry allowed selected public and private companies such as Hamaressa Edible Oil S.C, Alle Bejimla and Belayneh Kinde Import & Export to ship and distribute edible oil to the local market.

Sintayehu also applauds the geographical location of the plant, which is close to the area where the company can source the raw material.

Cooperative unions should receive support to fill the gap in the supply of edible oil, according to Sintayehu.

“Giving tax holidays and incentives can potentially help the existing companies and attract new investments in the area,” he said.

In the country, there are over 1,000 small and micro oil processing companies accompanied by 27 large and medium-sized oil processors.

When fully operational, Tsehay will collect more than  80,000tn of various types of oilseeds a year from five cooperative unions.

In the coming three years, the Union, which has 120,450 farmer members, is planning to invest in the expansion of the processing plant to produce oil from soybeans, according to Endalkachew.

“Soybean seeds are highly cultivated in the area,” Endalkachew told Fortune.

The Union is also planning to invest in expanding the animal feed processing plant and opening a nail and corrugated sheet manufacturing company.

Market-led Economic Policy Advocacy Needs Platform

Posted on by Web Master

The political situation of the past four decades has succeeded in driving skilled human power out of Ethiopia, including economists that could have contributed to policymaking.

This largely entailed the generation that came of age during the student movements in the late 1960s and early 70s. While a section of it, those that subscribe to developmentalism, stayed active in politics, the intelligentsia that could have provided the other side of the argument remained silent. There was never a platform to advocate for market-led economics on the scale that was set aside for developmentalism.

Prime Minister Abiy Ahmed (PhD) has changed this and offered liberal economic policy pundits a voice. However, after almost three decades of an antagonistic relationship with the government, the business class and liberal intellectuals are not yet willing to engage on the level they should be.

This will be counterproductive to efforts to address the weaknesses of the private sector. Without the active participation of economists, academics and the business class in arguing for market-led development, the current bureaucracy and government institutions, biased towards revolutionary democracy, will continue to dictate matters.

The few active in calling for a new economic road map, rather than the one advocated by the Growth & Transformation Plans (GTPs), are not advocating neoliberalism, for the drawbacks of that economic prescription have been evident over the years. But they want to see bigger private sector engagement in the economy to bring about competition and better delivery of goods and services.

This can hit obstacles the more policy changes are delayed. It can also be contorted into a hollow argument that market-led policies can be implemented under a developmental umbrella, which is merely impractical.

Developmentalism has been forwarded as a tool for advancing the interests of citizens. And while it has had benefits in helping stimulate the economy, the lack of inclusive political institutions led to the economic model being abused. Worse, the growth of monopolies weakened competition and created an economy that failed to be dynamic. As a result, the nation’s economic fate has been tied down to a few commodities.

The current model has taken the nation’s economy to double-digit growth and poverty reduction. But it is unraveling before our eyes as can be witnessed on the macroeconomic front. There needs to be a transformation in policy making. And to realise it fully, more space needs to be given to debates and discussions.

On such a platform, the value of comprising and allowing the private sector to play its part will be made clear, which should drive public opinion. Popular support can give the government the stimulus to drive forward reforms, especially in fiscal and monetary policies as well as liberalisation of the service sector.

The current mindset of the public and, more worryingly, government institutions is that the status quo still has some fruits to bear. From the National Bank of Ethiopia to the Ministry of Trade & Industry, ministries are operating with the mindset that businesses pose a threat to the economy.

After months of major reforms in the political reform, the economic front remains painfully distressed. This has more to do with the fact that economic institutions largely continue to be staffed and led by the same people that have been around for decades than the view that the political situation is sucking all the attention.

Different management with different perspectives needs to be brought to the fore, and associations that represent the private sector need to be strengthened so they can lobby for the changes they desire. The combination of these can lead to a smoother transition and realise liberalisation and World Trade Organisation membership sooner.

But this can only be achieved if economic institutions can be detached from undue influence by politics. Indeed, political and economic ideologies cannot be divorced, but this does not mean that institutions such as the central bank should be swayed by politics.

The argument of those that advocate market-led economics should be anchored on the model’s superiority in improving the quality and quantity of services and goods. A liberal economic environment encourages competition, which leads to the most efficient allocation of labour and capital. It is on this end that we can find competitiveness, which the developmental state has curtailed for too long.

 

Foreign Policy when Push Comes to Shove

Posted on by Web Master

Western countries, led by the United States, have been uncontested in their exercise of global power, playing the chief role in geopolitics. The rest of us, including Asians, were living in America’s world.

But no empire is bound to last forever. With the ascendancy of China and the insistence of Russia on playing a global role no matter the consequence to its domestic economy, the West is no longer the sole source of political, social and economic influence in the world. It is not just the matter of Russia and China asserting themselves in the international scene, it is also the fact that both the United States and the European Union seem to be unraveling from the inside.

And as global power dynamics reshape itself, countries across the world are trying to reorient their foreign policies accordingly. Ethiopia is also trying to adapt to the new reality, with the current foreign policy strategy, which had been introduced in 2002, under review.

The recommendation from analysts and veteran diplomats such as Takeda Alemu (PhD), former envoy to the United Nations, is that the nation has to maintain its neutrality and retain positive diplomatic relationships between the superpowers.

If Ethiopia can remain neutral at a time when global rivalries can potentially turn into conflict, and then after, it would be the most ideal of scenarios. It should also be the first path of recourse the nation should consider when global powers come knocking for alliances.

But the current discussion on the need for neutrality bases itself on the assumption that the major powers will ask nicely, or that the chief means of baiting countries such as Ethiopia is through foreign direct investment (FDI) and trade.

If one goes by how previous rivalries have culminated, most poor nations were never given a chance of choosing neutrality. For Ethiopia, the 1930s led to an invasion by one of the Axis powers, and the 70s and 80s saw a government propped up by the Soviet Union and rebel armies financed by Western nations. Non-alignment is impossible under such circumstances.

But, some would wonder, if the Swiss can maintain their neutrality through two World Wars, why can Ethiopia not manage the same in a state of intense global rivalry?

What is not mentioned about Switzerland’s neutrality was the fact that it was a heavily armed nation, perhaps unable to defeat a German Nazi army, but substantially wear it down. It was also a factor that, while the country was always on Hitler’s chopping list, the war ended in six years with his defeat.

Ethiopia will not be as lucky. It is not a country that will be able to assert any serious resistance if, say, the US holds back aid. And neither is it a country that will be given lesser attention than its neighbours, as was the case with Switzerland, but finds itself at the centre of one of the most strategic regions in the world.

Pragmatism should be the way forward in foreign policy. Pundits have stressed that Ethiopia should not punch above its weight when it comes to international affairs, and this may be a suggestion that rules out neutrality.

Largely dependent on how intense the rivalry between global powers becomes, non-alignment could be an ideal aspiration in non-ideal circumstances. It has already become dangerous to maintain neutral positions on the China-Taiwan, US-Iran and Israel-Palestine relations, and it is likely to only get worse.

There needs to be a plan to fall back on for nations such as Ethiopia. Choices may have to be made, and sides may have to be taken. Under such circumstances, a nation should choose to side with those that are democracies with a record of upholding political and human rights.

There is a certain uniformity in how alliances are made across the world, and they are usually between countries that subscribe to similar principles and ideologies, helping to further fortify these views.

A country like Ethiopia, an aspiring democracy, should thus look to republics if push comes to shove and a choice needs to be made. Republics, not always, but mostly, consider the well being of an ally’s citizens as an important factor for diplomatic and economic relations.

Autocracies are less likely to be concerned about how citizens are treated in an allied country. This would feed all the wrong impulses of governments in countries without established democracies. Alliances with non-republics should be avoided whatever the economic opportunities that may be gotten.

 

Law Firm Readies for New Proclamation

Posted on by Web Master

Located on the 8th Floor of Dembel City Centre, one of Addis Abeba’s posh properties and prime locations on Africa Avenue (Bole Road), MLA’s office evokes images of a modern investment bank rather than a law firm.

According to people knowledgeable with MLA’s evolution, the firm spent a little over 1.5 million Br on renovating its office, which earns an estimated one million dollars in revenue from corporate clients that include Japanese Tobacco and Eagle Hills. The latter is new to the Ethiopian market with its flagship real estate development project, La Gare Eagles Hills. MLA declined to confirm its income or what it spent on the renovation of its offices.

The principal of MLA, Mihereteab Leul, is an experienced attorney well recognized in corporate law and has gained recognition in corporate litigation, taking over the mantle from the late Teshome G. Mariam, another well-known expert in corporate law. Despite its new appearance, MLA is essentially a law firm.

The office is divided between a client receiving area and the main operation space, where young lawyers are busy at work in their stations.

Under Ethiopian there was no clear rule regulating law  firms. This is to change soon as part of the many legal reform efforts that are underway by the administration of Prime Minister Abiy Ahmed (PhD). The change in the law will allow lawyers like Mihereteab to reposition themselves and emerge as corporations.

Mihereteab is shy when discussing money matters, including how much he spent in renovating his offices and the size of the revenue he earns from his corporate clients. But he is bullish about meeting the goals he has set out for his firm in the coming few years.

Naturally sheepish, he is determined in his resolve to establish his firm as a corporate entity on par with other firms in Africa and elsewhere.

He has come a long way from his days as a young lawyer, canvassing courthouses and spending his time litigating on behalf of his clients in court chambers. Although he misses those days, he no longer does litigation but focuses on providing legal and business advice to corporate clients, a service several other firms in the industry are increasingly drawn to.

The office renovation work that took half a year was completed by an Italian firm, Fabio Construction, which has experience working on projects for OCP, a Moroccan company, and start-up incubator Bluemoon. MLA held an inauguration ceremony for its renovated offices on Thursday, February 21, 2019.

According to Mehrteab, the renovation will help create a business-friendly atmosphere for his clients.

“Most of our clients are international corporate entities, and we are determined to meet the standards of international law firms.”

MLA works with international law firms like DLA Piper, Baker Mckenzie and Slaughter and May. It represents 68 international clients including Coca-cola, General Electric, Motor & Engineering Company of Ethiopia (MOENCO), ABB Group and Mahindra & Mahindra Limited among others.

“We also aspire to be a proper law firm,” said Mehrteab, who employees 33 workers including lawyers, paralegals and administrators.

MLA is a member of the International Bar Association, the Ethiopian Lawyers’ Association, and the International Trademark Association.

The office works in areas like investment and corporate law, taxes, energy, mining, intellectual property, hospitality and real estate. It is also involved in dispute resolution and arbitration, conducts legal due diligence, as well as advising clients on company formation, mergers and acquisitions.

Currently, the Office of the Attorney General is preparing amendments on advocacy laws to activate the legal registration of law firms. An advisory committee, of which Mehrteab is a member, has conducted a pre-amendment study and has delivered a report to the Attorney General, who will draft the bill.

The Attorney General is amending the 18-year-old Federal Court’s Advocacy Licensing Proclamation with the main aim of establishing competent law firms.

The existing legal framework does not permit the establishment of individual law firms as unique entities, established to practice law under their own licenses.

The new law will formalise the current customary trend of law offices in the country, according to Kahsay Gidey, dean of Meqelle University’s School of Law.

“As there are no laws regulating the establishment and operations of law firms, many law offices have been operating as de facto law firms. We hope the new law will regulate this,” Kahsay said.

Kahsay also believes that the new law will help clients to access specialised lawyers in one place and make a company liable rather than individuals during disputes.

But it could also have some disadvantages if the Attorney General does not include stringent articles in the proclamation, according to the expert.

“The lawyers could abuse the business model as the company would be liable, not them individually,” Kahsay said. “The proclamation should have provisions that regulate this.”

Co-op Bank Keeps Rebounding, Posts Decent Performance

Posted on by Web Master

The Cooperative Bank of Oromia has recovered from its dismal performance of two years ago by posting a decent record last financial year.

The Bank registered 55pc profit growth at 523.4 million Br, boosting the earnings per share to 42 Br, a six Birr increase from the previous year, outperforming most other banks.

“This is a remarkable performance,” said Abdulmenan Mohammed, an experienced financial statement analyst, “and the management of the Bank should take credit.”

Abera Hailu, board chairperson of the Bank, also gave credit for the good performance to the management and employees of the Bank.

“I would like to thank the management and employees in successfully discharging your respective responsibilities,” wrote Abera in the annual performance report.

The management has gone through a restructuring designed on a customer-based model, switching from a product-based approach, according to President Deribie Asfaw.

“We have introduced three new segments in the organisational structure run by vice presidents to satisfy clients,” said Deribie.

Several factors contributed to the improved performance of the Bank.

Income from interest, fees and commissions, and foreign exchange dealing soared by 62pc, 18pc and 172pc, totaling 1.9 billion Br, 354.1 million Br and 204.8 million Br, respectively.

Abdulmenan applauds Cooperative’s positive performance and gains in foreign exchanges.

“It is very impressive that Cooperative Bank did very well, while several banks struggled to maintain their market share,” said Abdulmenan.

Increasing the customer base has helped the Bank to increase income from foreign exchange dealings, according to Deribie.

“We have increased the exporter base of our customers,” Deribie said, “which helped us to get more forex.”

Even though the Bank managed to increase its income, expenses have climbed.

Interest expenses soared by 84pc to 620.4 million Br; salaries and benefits increased by 45pc to 700.4 million Br; and other operating expenses went up by 56pc to 559.5 million Br.

The increase in expenses is a bit concerning, according to the expert.

“The management should keep an eye on these expenses,” Abdulemenan toldFortune.

The management’s decision to follow a growth strategy – hiring more staff and focusing on branch expansion – is the reason for the jump in expenses, according to Deribie.

In the last fiscal year, the Bank opened 42 new branches and hired 719 new employees.

Reversal of provisions for loan impairment by transferring it to income was another strong achievement of the Bank, renaming 42.1 million Br as income.

In the previous year, the Bank reversed 105.2 million Br.

“The Bank followed a prudent approach when calculating provisions for loan impairments,” commented Abdulmenan.

The Bank reported a surge in total assets, which increased to 29.9 billion Br, a 68pc increase.

Loans and advances of Cooperative Bank similarly went up by 59pc to 15.1 billion Br, while mobilising 25.8 billion Br in deposits, an increase of 81pc. This is a considerable upsurge compared to the private banking industry growth of 38pc.

“The growth of total assets, loans and deposits at Cooperative Bank is very impressive,” commented Abdulmenan.

However, the loan-to-deposit ratio of the Bank has dropped to 59pc from 67pc. Two years ago, the loan-to-deposit ratio of the Bank was 70pc.

“The decline in a loan-to-deposit ratio of the Bank is disappointing,” said Abdulmenan. “The management should rectify this.”

The decline is caused by the nature of the Bank’s borrowers, according to Deribie.

“Our borrowers [farmers and cooperative unions] come in delicate seasons before harvesting season,” said Deribie, “and they pay back the loans within a year of taking the loan.”

Cooperative Bank increased its investment in National Bank of Ethiopia bonds by 62pc to 5.4 billion Br. This investment represents 18.1pc of total assets and 21pc of total deposits of the Bank.

Liquidity analysis shows that the liquidity level of Cooperative Bank had improved in value and relative terms.

Cash and bank balances increased by 117pc to 7.7 billion Br. Cash and bank balance to total assets went up to 25.7pc from 20pc, while cash and bank balances to total liabilities rose to 27.7pc from 21.6pc.

The liquidity level of Cooperative Bank is much higher than required, and it needs to channel its excess liquid resources to income generating activities, according to Abdulmenan.

The financial statement of the Bank shows that last year the Bank settled half a billion Birr borrowed from the central bank a few years ago.

Cooperative Bank increased its paid-up capital by 60pc to 1.6 billion Br.

The capital adequacy ratio (CAR), the ratio of a bank’s capital to its risk, dropped to 14.3pc from 14.6pc.

Even though the CAR value of the Bank is higher than the regulatory requirement, which is eight percent, it is far lower than the industry average of more than 21pc.

“CBO needs to beef up its capital for precautionary reasons,” recommended Abdulmenan.

Deribie agrees with this.

Two years ago the shareholders agreed to boost the paid-up capital of the Bank to three billion Birr, according to Deribie, but the Bank faced a challenge in collecting the equity from the shareholders.

“As the shareholders are scattered,” said Deribie, “we could not collect the capital with the planned schedule.”

Opposition Parties Poised to Stumble Again

Posted on by Web Master

In Arada, St George Square, just to the south of the old Addis Abeba Fire Station building is a little obscure street, the strangely named Eon Street, that runs to Ras Mekonnen Square in Piassa. Alongside this relic of a road flourishes the typical urban scene of our enigmatic capital that pulses and thumps in an endless rhythm of life that defies its ever-present blight.

There, among the corrugated metal sheds and plastic-covered stands of small market traders, booksellers, street vendors, tailor stalls and road-side cafès, is an old rambling building that still houses the offices of what remains of Qinijit, one of the opposition parties of that infamous election of 2005.

In one of the rundown rooms, two women operate a paralegal business that churns-out dozens of legal documents that are otherwise prepared by lawyers. Their clients are as varied as the documents that they whip out of a small printer and a busy photocopier that continually shakes and rumbles from overuse and age.

Coalition for Unity & Democracy, or Qinijit, is one of the opposition coalition parties that faced the incumbent, EPRDF, it too a coalition creature of its own. On the walls of the building are hung old crumpled posters with pictures of bygone party events. Some placards are etched in ink with stories of the chaos that followed the controversial election – narratives of winning the election, imprisonment, pleas for pardons, exiles and congresses held to resurrect the party after its demise by faith, internal squabbles, incompetence and autocratic rule.

During those heady days, political parties had mushroomed into a mad collection of fraught alliances and groupings, much as they have today.

What they all had in common then was that they were all desperately cobbled up assemblages with dumfounding names and acronyms that beguile ordinary folks – UED, ESDFP, ONC, SEPDC, CAFPDE, CUD, AEUP and EDUP-(M).

Fourteen years on there are nearly 80 different political parties and coalitions, with as many names and acronyms, gearing up to compete in the upcoming 2020 elections. For the most part, they all resemble their predecessors and have names that begin with their geographic origins, with “Ethiopia” sometimes inserted for variation.

These parochial names are typically embellished by the adjective “Democratic,” that is routinely followed by nouns such as “Movement”, “Front”, “Party”, “Congress” and “Organisation.” Their existence and legitimacy, it seems, is purely confined and branded by their alliance to a particular group and region and nothing more.

Most have no membership lists that they can bring to the public forum; nor any legitimate constituency that has bestowed upon them the power of representation; or much else in the way of party mechanism or program that they can point to.

Today, Qinijithas splintered into many factions that are still led by some opposition leaders who sprang to prominence during the infamous 2005 elections.

For the most part, party lineups for the upcoming elections have  not posted any political programs or established viable web presences. Among the very few that have managed to post anything at all, the material is essentially devoid of any real substance and content.

The rhetoric of values, struggles and principles without economic agenda; without contributions to policy and legislation; absent of concrete proposals for the way forward; and without a road map on how to win the next election is as useless as onion leaves.

The worrying question for all of us today is how these desperate and disorganised groups will manage to function as viable political entities and avoid the squabbles and incompetence that consumed them in the past. The plain and direct answer is that they must start preparations now and start putting their houses in order.

What is required is that they create competent party organisations; provide policy proposals to effectively engage their competition; recruit and consult with the electorate to gain the trust of the citizens; bring forward an impeachable leadership team that is acceptable and worthy of the public interest; and establish a transparent, accountable and effective funding mechanism as some experts suggest.

The current fashion of cavorting in the limelight, while neglecting the core duties of organising and building a constituent base is not sustainable. There is no need for excessive intellectual expositions in speeches and presentations that leave the voting public bewildered and disinterested.

A recent discourse during a televised discussion among political parties laid bare the monumental chasm that lies between the political elite and the electorate.

During this gathering of opposition party members, an opposition party leader delivered an intricate lecture more suited to post-graduate doctoral students at Addis Abeba University than a nation mired in poverty, political uncertainty and economic malaise. It is doubtful if the speech enlightened even the ordinary people in attendance about his party’s program, agenda or its road plan for the upcoming election.

Further afield from the august hall of the meeting; far away from that erudite gathering of supplicants and flatterers; out in the far-flung regions of the nation; in the remote corners of Wello, Gonder, Wellega or Illubabor – his message could barely register.

The need in Bale, Harar and Gomugofa is for food, healthcare, education, employment and prosperity, not political demagoguery. There is no stampede in the provinces to hear a convoluted thesis on political economy and macroeconomic theories; nor for any sermons that bore the pants off even the most jaded politician who may be in the know.

Agency Builds Mechanisation centers for 130m Br

Posted on by Web Master

The Agricultural Transformation Agency (ATA) is preparing to build mechanisation centres in different parts of Ethiopia for an estimated cost of 130 million Br.

The mechanisation centres will rent, based on a fee determined by the size of farmlands, machinery such as tractors and equipment used for planting and harvesting of crops. It will also provide operators.

Though there has been a need for technology on farms in Ethiopia, most of the farmland is fragmented, making the use of mechanisation unpractical for individual farmers, according to Gebre G. Tsadik, mechanisation centre pilot project head at the Agency.

The Agency plans to overcome this hurdle by providing the services on cluster farmlands and allowing neighbouring farmers that grow the same crop to rent out the machines together.

Ten service centres will be built in four regions namely Oromia, Amhara, Tigray and the SNNPR, which were selected based on the kind of commodity and amount of productivity. “They have a record of surplus production,” said Gebre.

The mechanisation project is geared to support areas that produce wheat, barley, corn and sesame. “Teff was excluded since it was covered in other projects,” said Gebre.

The Agency began work on the project five months ago and has conducted research on which type of machine can be used for which type of land and crop. Agriculture contributes 34pc to the gross domestic product (GDP) in Ethiopia, employing over two-thirds of the workforce, and 72pc of the sector is made up of crop production.

Currently, the Agency is in the process of hiring an architectural firm to design the centres, each of which is estimated to cost 13 million Br. The centres will have a machine operation training centre, maintenance facility and shop for tractor spare parts.

“We want the centres to provide services to other machinery owners too,” said Gebre, who added that the management of the service centres would be outsourced to farmer unions and private organisations, and the Agency will play a regulatory role. “Outsourcing it to profit-making institutions can make it more effective.”

The non-governmental organisation to which the service centre is outsourced, which will be chosen through a bidding process, will finance 30pc of the cost of the construction, while the rest will be provided as a loan by ATA.

For the procurement of the machines, the seven-year-old Agency, established to facilitate agricultural transformation under the Ministry of Agriculture, has agreed with the Development Bank of Ethiopia. The Bank, which has pledged 30 million Br as loans, will cover 80pc of the cost of the machines through a loan, and the non-governmental organisation will provide the rest.

Experts in the area state the move by the Agency is to be applauded but note that such plans need careful implementation where checks and balances are employed.

“The outsourcing is beneficial but, in the future, more should be done to completely decentralise the centre and open a path to farmers or groups of farmers for direct ownership of the machines,” said Solomon Addisu (PhD), college dean for Bahir Dar University’s College of Agriculture & Environmental Sciences.

 

We have made a correction to the total cost of the project after finding a mistake.

 

East African Real Estate Discovers the Working Class

Posted on by Web Master

The last two decades of the real estate boom in East Africa has changed our building landscape and inventory, as it quite rightly should have done.

Our starting point was a region that was short of every kind of building, from housing to shops, offices, warehouses, hotels and even student hostels. In all, we faced a real estate landscape that was cripplingly underinvested. And we invested.

Choosing which type of investment barely mattered. Every kind of property sold fast. Developments got snatched up even before the building bricks were laid, simply because the market had little to offer.

We are no longer in that situation. But confusing our sector’s move to maturity with the end of real estate investment opportunities is a mistake.

In our first years of heavy real estate investment, we concentrated primarily in high-end assets, because we all believed they delivered higher margins and higher returns. In fact, that is no longer the case and may never have been the case. But when we were short of everything, we began with expensive buildings.

We built estates of detached houses and townhouses, high-end rental apartments, shopping malls, often huge ones, and towering office blocks. And in some areas, we began to reach market saturation. As a result, an investor putting up a million dollars worth of penthouses now, unless they are building for a specific unmet need, would be lucky to fill it in four years.

Yet only a tiny proportion of citizens in East Africa live in high-end neighbourhoods. When we look at the needs of the country’s working classes, market researchers have reported demand for two million units. Of this, over two-thirds are for earners who can afford rent of 180 dollars to half a thousand dollars a month.

Today, it is hard to pinpoint any stock that is coming to the market for this segment, certainly not to the scale that responds to this opportunity. Instead, investment in this type of property has been left to unsophisticated investors in what is largely a landlord market delivering developments, as is the case in the more densely populated Nairobi.

The buildings are unplanned and non-compliant with construction standards, as developers seek to lower construction costs and complete projects more quickly to increase returns.

However, a huge opportunity exists for a better quality of real estate in this segment. Moreover, while the perception that rental yields in high-end areas are higher has driven investors and developers to such areas in Kenya, research has shown that yields are higher in the mid-market areas.

For instance, the average rental yields in 2016 in the mid-market were 6.5pc, compared with 6.3pc for high-end apartments. That premium in the mid-market has continued. In 2018, mid-market rental yields ran at 5.4pc, compared to high-end yields at 5.3pc.

Moreover, demand is abundant.

Thus, if the National Social Security Fund (NSSF) were to put up an organised estate in a largely middle-class area, it would not struggle with tenancy, as tenants look for a quality stock that is currently close to nonexistent.

Such estates offer almost the same amenities as homes in high-end markets, including modern, 24-hour security systems with professional security personnel, ample parking space, borehole water to cover for water shortages and maintenance services, though at far lower rents.

Similarly, for developers building commercial properties such as stalls or retail centres, as opposed to large malls, occupancy will never be their biggest challenge as they attract small and medium-sized enterprises (SMEs) and private businesses dealing with the routine needs of East African consumers.

The investment opportunities in real estate remain enormous. But now it is the turn of the working classes, and the returns are just as high for investors.

It is a challenge we welcome, with the region’s annual investor conference, the East Africa Property Investment summit to be held in April in Nairobi, set to be the largest yet and a key platform for developing real estate policy and white papers for the government.

In this, our compass should be clearly set. We do not face a depressed real estate industry. We face the next opportunity, and it is far larger than the last one.

Myths the Medical Profession Stands Against

Posted on by Web Master

In Addis Abeba, where there is relatively better healthcare provision, though not cheap, traditional medicine and witch doctors lend themselves to quips.

But in deeply rural areas, where health care like all other basic services is severely lacking, superstitions and medical myths rule. With far fewer medical professionals, most people have nowhere but to turn to the locals who practice the “art of healing” based on practices acquired from religion, culture and experience.

This has given way to a mix of Western biomedicine and indigenous practices in health care. Countries such as Brazil and China have managed to develop traditional medicine in their health care systems. It is as well recognized by the Ministry of Health as an important alternative health resource that is currently readily available to both rural and urban communities. But it is not uncommon for these treatments to drift into medical myths under an environment of lax regulation and awareness.

Medical myths are common in different parts of the world, even the developed ones. The scientifically unsubstantiated belief that vaccines cause mental problems is one of the most popular. There are no witch doctors in this case but they are medical myths that do not have basis in science.

Such views persist even in the United States, where the populace is exposed to information, democratic institutions exist and healthcare is better provided. Underdeveloped nations such as Ethiopia, which lack all these above attributes of the North American nation, fare far worse. It is not only a matter of views, which could be seen as pull factors, but also push factors – mostly lack of access to health care – that is leading to the problem.

Many researchers have documented and published stories about traditional medicine and medical myths at different points in time. Health extension workers, as well as radio and TV advertisements, have helped create awareness about the matter. But the problem persists.

The problem may be exacerbated by the Ministry of Health’s new directives to relax working conditions for health professionals. Making the sector more flexible can have its benefits. Issues related to multiple licensing and extension of the scheme that allows years of medical service to be reduced based on the remoteness of places are in fact commendable.

But the directive also makes it smoother for medical doctors to terminate contracts for service by making the process easier. Worse, health professionals such as nurses, midwives and health officers have been relieved of mandatory medical service.

On the surface, such flexibility can improve the provision of quality service, since health centres now have to attract professionals. But in the short to medium term, it can reduce access to health care, exacerbating an issue that is already worrying.

This will create a gap in health care delivery, leading to loss of human capital, and the medical myths and superstitions that have dominated traditional medicine will fill in the hole. This is a dangerous pathway that needs to be avoided.

Ethiopia is among the highest spenders in health care in Africa, and the efforts in the sector have helped reduce child mortality and diseases like polio and malaria. The government should be commended for its persistent awareness creation programs to contain HIV/AIDS in the 2000s. But using Africa for comparison is setting the bar too low, and global experience shows that the medical industry in Ethiopia is highly lacking.

When faced with an incurable disease, it is easy to understand why citizens of a developing country such as Ethiopia, where there is just one health professional for every 1,000 people, may want to try any treatment. But to find this unquestioning acceptance of dubious remedies for common illnesses is disconcerting.

Unfortunately, doctoral training seldom includes instruction on how to challenge patients deeply held beliefs, with sensitivity, and without being confrontational.

Physicians have a duty to practice rationally, using the best scientific evidence whenever possible. At times, they do not have the evidence to guide treatment. In this situation, unfortunately far too common, they should be humble enough to acknowledge this to the patient and explain the reason why they advocate a particular course of treatment as the best possible one in light of existing knowledge.

But this also entails that there are medical professionals in areas where such beliefs are prevalent. The Health Ministry should thus reinstate mandatory service for necessary professions such as nursing and midwifery since access to medical service is not an issue that should be gambled on at the moment.