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Month: May 2019
HUMAN FACE OF FDI
Netsanet Birhanu, like the thousands of other employees at Hawassa Industrial Park, is the lowest paid textile worker in the world, according to a new report from the STERN Centre of New York University. Renting a house for 800 Br with a friend, she gets paid a gross basic salary of 750 Br working for a garment factory, a matter that has cast negative shadows on the working conditions of the nation’s flagship industrial zone.
Following strikes by protesting employees, the Ethiopian Investment Commission and employers at the park implemented an incentive program to increase worker compensation. The quoted salary scale in the report does not factor in the incentives undertaken to address low wages, according to federal authorities. Employees earn more than basic salary when food and transportation allowances are added, as well as have the potential to earn more when attendance incentives and performance-based bonuses are included. Netsanet claims that she was able to earn 2,500 Br last month, more than three times the salary quoted in the report.
Employees and the authorities agree though that this is not enough in a country where the cost of living is escalating. The government admits that there needs to be a balance between the ambitions of attracting foreign direct investment through cheap labour and the living conditions of workers.
In the labour proclamation currently under amendment at the Ministry of Labor & Social Affairs, a national minimum wage may be included, according to sources close to the case. Abebe Abebayehu, the commissioner of the Ethiopian Investment Commission, also indicates that it is time the government settles on a minimum wage to protect the interests of workers.
Employers are skeptical about a blanket raise of the basic salary scale. Considering lower educational levels, a relatively cheaper cost of living, higher logistics costs and weak infrastructure, they find higher wages hard to justify.
Ministry Overhauls Privatisation Laws
The government is amending the privatisation proclamation to specify which government body will oversee the asset valuation of public enterprises, bring them to public auctions, managing transactions and transfer the enterprises to buyers.
All these processes have been solely performed by the current Public Enterprises Holding & Administration Agency, formerly known as the Privatisation & Public Enterprises Supervising Agency.
The proclamation, which is under review by the Ministry of Finance and the Public Enterprises Holding & Administration Agency, with the technical support of the World Bank Group and the Tony Blair Foundation, aims at bringing transparency to the ongoing privatisation process of public enterprises, according to Brook Taye (PhD), senior adviser to the Minister of Finance.
“Since most of the state-owned enterprises have high values, the valuation and the transfer process needs to be transparent,” Brook told Fortune.
Ethio telecom, Ethiopian Airlines, Ethiopian Shipping & Logistics Services Enterprise and Ethiopian Electric Power (EEP) are among the companies that the Executive Committee of the EPRDF decided to partially privatise last June. The Executive Committee has also ruled for the full privatisation of railways, sugar factories, industrial parks, hotels, energy and manufacturing plants.
The amendment process also attempts to balance a conflict of interest that may arise among government offices involved in the privatisation process.
While drafting the bill, the team involved in the process reviewed the experiences of counties that started privatisation decades ago, including some neighbouring nations, according to Brook.
Different countries applied diverse mechanisms while proceeding with the privatisation process. Some had formed commissions, agencies or departments under finance ministries, which oversaw the privatisation process.
A legal framework review co-authored by Mekdes Mezgebu and Mesfin Tafesse of the law office Mesfin Tafesse & Associates, encourages the initiative of the government to classify mandates.
“Clarity in relation to the articulation of the privatisation mandate as it applies to Ethiopian Airlines, Ethio-Telecom and EEP will ground the process on a strong legal basis,” reads the review.
Before reaching the legislation stage, the bill will pass through different layers of reviews and approvals by technical committees, a steering committee and the macro committee chaired by Prime Minister Abiy Ahmed (PhD) to give it policy direction before it reaches the Council of Ministers and parliament.
The Prime Minister has also set up a 21-member advisory council to advise the government on the process of privatising state-owned enterprises.
Along with the privatisation proclamation, the team is amending another proclamation, the establishment proclamation of public enterprises, which is expected to smooth the way for any ongoing privatisation process.
The amendment of this proclamation has two major targets, according to Beyene G. Mesqel, director general of the Public Enterprises Holding & Administration Agency.
“Taking the private sector on board toward ownership of the existing state-owned entities and enabling them to be involved in the formation of new enterprises are the main targets,” Beyene told Fortune.
In addressing the formation of new state-owned enterprises, the 35-page bill mandates the incorporation of a clear business case along with the social objective. The new amendment to the proclamation also calls for trigger mechanisms in the creation of new entities that can be used as a tool for supervising authority over the enterprise and reviewing its financial reports and examining its debt levels.
“This amendment will address the issues of state-owned enterprises that carry high debt loads and operate in an atmosphere of financial mismanagement,” said Brook. “With the trigger mechanism, the management and the board will know the level of debt and timeliness of any needed debt restructuring before it reaches critical levels.”
Selection of corporate governance board members, the composition of the board of directors and their qualifications are areas included in this bill.
The draft bill has been finalised, and it is on its way to being submitted to the macroeconomic committee, according to Eyob Tekalign (PhD), state minister for Finance.
“We expect to submit the bill to the Council of Ministers soon,” Eyob said last month in a meeting held at the Office of the Prime Minister while briefing members of the advisory council about the status of the privatisation process.
Among the enterprises slated for privatisation, Ethio telecom’s process has progressed well. The bill for the formation of a telecom regulatory agency has reached parliament and is waiting for legislation. The process to hire a consultancy firm for Ethio telecom’s asset valuation, a process that is expected to take half a year, has also progressed well, according to the state minister.
To achieve the desired results of the privatisation, Mesfin and Mekdes recommend strong external support including financial, management and legal expertise for the entity in charge of the privatisation process.
Energy Sector, too Much Focus on Hydro
If there is any Western country eager to help Ethiopia in the power sector, none match the enthusiasm and drive of the Danish government. Denmark, a country with an impressive record of 70pc reduction in its per kWh carbon emissions by switching to clean and renewable energy, is keen to explore alternative energy sources in this country.
A year ago, Denmark agreed to finance the construction of a new wind farm in Assela, 165Km south of the capital, to generate 100MW of power. Last week, a delegation of the Danish Energy Agency was here in Addis Abeba, and this week, Denmark sent a delegation to identify additional areas of cooperation in developing alternative sources of energy, as well as to promote management and skill sets in the field.
The Danish could not have arrived at a more auspicious time for the country. Just two weeks ago, Sileshi Bekele (PhD), minister of Water, Irrigation & Electricity, aroused the displeasure of the nation by announcing electricity rationing that took effect on May 9, 2019. Sileshi’s press statement to ration power to businesses and households is the final coup de gras for to a population that has been long suffering from steady power outages.
Initially, Sileshi announced that electricity would get cut off for five to six hours a day. Had there been a tradition of strong electoral accountability in the country, Sileshi would have been held accountable and subject to public fury and outrage. Here, where customers are accustomed to lacklustre services, citizens appear to have shrugged off the announcement.
Ethiopian Electric Utility, the state utility giant, changed the rationing schedule altogether last week, and power cuts are now scheduled in eight and nine-hour shifts. Some households actually reported outages that lasted 24 and 36 hours.
This, too, did not bring about the indignation of the public, for citizens have become too desensitised to the mismanagement and chaos of these state enterprises, who operate without accountability and transparency.
The almost-regular distribution failures of the transmission lines, ill-maintained equipment and inadequate maintenance regimes and constant power outages that customers are subject to are way beyond what Minister Sileshi is willing to admit. In an environment where undependable electric power supply persists, regular household chores become nearly impossible, business operations are negatively impacted and the manufacturing sector suffers.
The last time electricity was rationed was three years ago, following the El Nino-induced drought that hit much of East Africa. Although such a climatic condition did not affect the nation in the last rainy season – which has been described by the National Meteorology Agency as normal – reports are now emerging that water elevation levels and water flows into the nations’ dams have declined leading to the current power cuts.
In Ethiopia, energy generation has now fallen prey to weather conditions, exasperating the perennial technical glitches and distribution failures that have marked the power sector in the country. Diversification of energy sources marches at a snail’s pace, and the absence of private players in the energy sector has hampered energy development.
It has meant a country with a potential of generating 45,000Mw of electricity from hydropower is only using about five percent of it.
Geothermal power, of which there is a potential of producing 10,000 MW, solar and wind energy sources have been even less utilised in Ethiopia. Much like the Danish effort to develop wind power in the country, the government of Japan and Iceland are helping Ethiopia realise its potential of geothermal power.
So far, Ethiopia has failed to meet the growing demand for electricity both from the consumer side, and the unrealized ambition to make the nation a manufacturing hub – an industry that consumes and requires a steady supply of electrical power.
Nevermind that those entrusted in pitching Ethiopia as an ideal destination for foreign capital investment are using cheap electricity as an enticement. A recurrent complaint, among many others, of those that have already come and made the investment is the inadequacy of electric supply and its constant interruptions.
This is a condition that cannot be altered unless structural reforms are introduced in the energy sector.
Electricity export to Sudan and Djibouti last year may have earned the country 82 million dollars, but the current shortage of electricity was so severe that for a nation strapped for foreign currency, the state was forced to interrupt the exports until water levels in the hydroelectric dams improve.
Given that electricity usage per capita is directly correlated to gross domestic product (GDP), it is a major shortcoming competing with the breakdown of the rule of law and the forex crunch.
To their credit, this is a problem policymakers have discerned. The state power monopoly, the Ethiopian Electric Power Corporation was broken up into two parts: Ethiopian Electric Power, the investment arm; and the operator, the Ethiopian Electric Utility. It was instrumental as a horizontal monopoly offsets the natural checks and balances that exist along a supply chain, even if both remained state-owned enterprises.
There is also an effort to diversify sources of energy. There are several private-public partnerships across the country on wind and solar projects. The importance of these should be felt in expanding access to electricity, if not in improving the quality of the distributions.
Unfortunately, these efforts are not large enough to contribute much in addressing a fundamental issue – lowering the burden on the national grid. A growing urban population, expanding manufacturing sector, and ambitious plans to export electricity mean that it is necessary for private players to enter and thrive in the sector.
Over half of electricity users consume very low energy, less than 50KwH. It is a group that can benefit from the engagement of small-scale power producers and the utilisation of microgrids, which are instrumental in reducing energy losses that occur along long-distance transmission lines. Just as importantly, public-private projects on renewable sources of energy would provide a space for the diversification of sources of energy, addressing dependency.
But despite the seeming enthusiasm for a change of gear in how electricity is generated, interested private players have to pass through a power purchasing process that neither has a negotiating timetable or a set of rules on electric tariffs. It leads to delays, higher costs and deters investors from joining the field.
More damningly, a lack of a clear plan on the national grid implementation plans makes profits and market prospects unclear to investors.
These factors debilitate the government’s effort to provide affordable, reliable and sustainable electricity. They are obstacles on top of the usual investment hurdles in Ethiopia, including slow bureaucracy, foreign currency shortages and issues with profit expatriation for foreign investors. It also means that the nation would be unable to engage in micropower production – which now produces a quarter of the world’s energy – compared to 10pc at the turn of the millennium.
What haunts the energy sector more than the shortage of rain are structural problems, lack of diversification of energy sources and creating a competitive energy sector.
Sileshi and his team of experts could have come forth addressing the public with a comprehensive agenda for the power sector that can rekindle hope rather than being a beacon of disappointment.
The big dinner, which cost more than 200 wealthy people a fortune…
The big dinner, which cost more than 200 wealthy people a fortune, has come to pass, leaving behind a memory in as much as it did with raising eyebrows on a couple of fronts, gossip observed.
The energy and focus Prime Minister Abiy Ahmed (PhD) accorded to a three-year project to rehabilitate and restore 56Km of riverside amenities in Addis Abeba makes several dumbfounded about the priority he has in governing this country. Despite the project floating around during reigns of successive regimes, none of his predecessors felt the urge to busy themselves in beautifying the capital. They were swarmed by pressing issues of fundamental matters existential to the nation.
Abiy appears to feel differently, judging by how much emphasis he gives to clean up the physical neglect, if not mess, around his immediate environment. Over the year since he took up residence in Arat Kilo, he transformed the first two ground floors of the Prime Minister’s Office, whitening them to radiate and also beautify the compound. It is as if Abiy wants to see the symbolism in renewal vibrate from a core to as far away as it can get.
To help him do that, the nouveau riche wrote cheques worth 173,000 dollars for a seat around a rose-adorned banquet table at the Grand Palace last week. Some of them felt the pressure from the authorities to attend, such as in the case with the financial sector and the construction industry, claims gossip. Others could have feared a political fallout from their absence, while few of them may foresee an opportunity in supporting the passion of the current political order, says gossip.
In his welcoming address, Abiy used a metaphor of “noise and legacy,” trying hard to hit his message home that the investments they have made today are not in vain. Lifting the image of the capital will not only be a wise investment in generating revenue to many businesses, but it is also a decision that will bring them a moment of pride in their later years, walking by the parks and bicycles paths with their names affixed to plaques alongside the walkways.
The bill for that will reach a staggering one billion dollars, although the Chinese, the Europeans, the African Development Bank and the United Nations agencies have pledged to chip in. Their representatives were among the tuxedo-clad diners entertained with a five million Birr plate inside the dining hall of Emperor Menelik II, which many mistakenly credited Abiy’s administration for its impressive restoration, gossip claims.
Absent from the grand dinner and denied acknowledgement, as well as recognition, were individuals and companies who were behind the restoration work such as Varnero and ZIAS, the construction and architectural firms highly involved in the building of a residence for the Prime Minister’s family as well as restoration work on the Grand Palace, aka Menelik II Palace, gossip disclosed.
The restoration of palace sites has been carried out since 2012 under the watchful eyes of Gebretensae Gebremichael, director general of the National Palace Administration for a decade before he left last year. Known to be a decisive but lone operator, he oversaw the restoration work completed in five of the 13 palaces scattered across the country, including Yohannes IV in Meqelle as well as Qoqa, Melkasa and the Jubilee Palace in the capital.
It took the federal government close to 200 million Br, of which close to 76 million Br was budgeted to the building of guest rooms and restoration of the dining hall where Abiy’s guests were seen marveling last week, gossip revealed.
Low Wages Cast Shadow on Industrial Parks
In her mid-20s, Tizita Eyamo is one of 25,172 workers at the nation’s flagship industrial park in Hawassa, capital of the Southern Nations, Nationalities, & Peoples’ Region.
Originally from Wendo Genet, a town in Sidama Zone, she was hired nine months ago by IndoChine Apparel, one of 21 operational companies in the park engaged in manufacturing pairs of jeans for global brands like Wrangler and Levi’s.
She spent a month and a half training before proceeding to work on a machine that attaches belt loops to pants.
Tizita, who rents a house with her four younger brothers, has a basic salary of 750 Br a month, a salary that has triggered much debate over the lack of a minimum wage in Ethiopia, especially in industrial parks.
But she has been managing to make a little extra each month. She gets a transportation allowance of 200 Br, food allowance of 260 Br and a 200 Br bonus if she shows up each working day of the month.
Additionally, she receives performance-based incentive pay when her team meets 40pc of the target set by the company, which incrementally increases. Last April, her gross salary was 1,700 Br, which does not include her bonus that was lowered by her absence from work for four days.
Her colleague, Netsanet Birhanu, who operates a stitching machine and rents a house for 800 Br with a friend, was able to earn 2,500 Br in the same month. Neither of them though would claim that what they are earning is enough.
“The amount I earn has been growing, but it is still not enough to cover my monthly expenses for food, rent and to support my family,” says Tizita. “I am forced to ask for help from my father.”
A report by the STERN Centre of New York University, quoting the worker’s basic salary scale, released a report this month saying that workers at the industrial park were the lowest paid in the world.
The basic salary in Ethiopia is less than that of the next lowest countries, Bangladesh and Myanmar, by a factor of 3.6.
“The government’s eagerness to attract foreign investment led it to promote the lowest base wage in any garment-producing country – now set at the equivalent of 26 dollars a month,” reads the report.
This has cast a negative shadow over Hawassa Industrial Park, one of six operational industrial parks built with the purpose of realising the nation’s ambition of becoming a manufacturing hub.
Opened in October 2015, all of its 52 sheds have now been occupied by garment exporters. In April, six million dollars worth of goods were exported by these companies, while 29 million dollars was earned overall in the first seven months of this fiscal year.
Many of the park’s workforces come from the Sidama Zone, thought to be endowed with a large working-age group of Ethiopians.
More than five million of this young workforce is found within a 100Km radius of Hawassa, according to Belay Hailemichael, Ethiopian Investment Commission manager at Hawassa Industrial Park.
The Commission, together with local government bodies found within the specified radius, recruits young men and women who have at least an eighth-grade education and are looking for jobs.
Dawit Duressa, a labourer in his late 20s, is among the young men and women who have applied to the Commission to get employment in one of the factories in the park.
“I am looking for a job here, because I want to have a stable income to support my education,” he says.
Dawit knows that the wage the workers receive is low but prefers it to working as a construction labourer where he can earn 70 or 80 Br a day. Construction work is unstable, however, and he has no guarantee of getting work week to week and month to month.
“But if I can get a job at one of the factories inside, I will know I have a stable income, no matter how small, and that will enable me to continue my education,” he says.
Despite a workforce that is still willing to take jobs for low pay, there is agreement that it is an issue that needs to be addressed.
Andualem Alebachew, labour unit senior manager at the park, agrees that the low wages are cause for a lot of grievances, because the cost of living is constantly rising in the city.
“The complaints the workers express are legitimate, so we are working with the companies to come up with solutions,” said Andualem.
In response to strikes for better pay that all the companies in the park agreed to implement a performance-based incentive system, providing transportation and food in cash or in-kind and giving attendance bonuses for those who are not absent during working days.
Every employee at the park thus gets 460 Br in allowances and a 200 Br bonus if they manage to work every working day of the month. A performance-based bonus is also given to a team of workers who work together in a single line.
They work in a sequence to produce a single type of product, and their performance is measured based on their output compared to the target set by the company. A team that performs at least 40pc or more is given bonuses starting at 20 Br a day.
“As their performance grows, so does the additional money they earn, which happens through time as they gain experience,” says Madusha Fernando, HR & administration manager at Indochine Apparel Plc.
Company managers like Madusha argue that the efficiency of workers in Ethiopia is below that of other countries mentioned in the STERN Centre report.
Countries such as China, Sri Lanka and Bangladesh have been in the industry for more than three decades and boast some of the highest manufacturing efficiencies in the world, according to these managers.
Lower education levels, relatively cheaper cost of living in the country, higher logistics costs and weak infrastructure are also used to justify the low wages.
“The percentage of workers who are absent is now around 15pc compared to one percent at our factory in Sri Lanka,” says Madusha. “How are we expected to pay comparable wages when their productivity is not comparable?”
Lacking a skilled workforce, adequate infrastructure and foreign currency for the import of manufacturing raw materials, countries such as Ethiopia have been trying to attract investors through incentives such as abundant cheap labour.
“Historically, the garment industry has been constantly moving to countries with lower costs,” said Abebe Abebayehu, head of the Ethiopian Investment Commission. “In the past decades, South East Asian countries dominated the industry, because they had cheap and abundant labour forces. But as the labour costs in these countries grew, investors are now looking for new investment destinations.”
But the Commissioner admits that Ethiopia has to find a balance between attracting investors and protecting its citizens from unfair working conditions and by setting a minimum wage. On Africa News, a news wire, countered that the report does not take into account the other benefits offered by the companies.
The Ethiopian government has admitted that the worker’s pay is low and needs to be improved. The Ministry of Labor & Social Affairs is currently amending the labour proclamation, and sources close to the case say that it will include setting a national minimum wage.
“The government has been working on finding ways to strike that balance by doing research on the working conditions of the workers and holding discussions with both employees and employers,” said Ergoge Tesfaye (PhD), minister of Labour & Social Affairs.
The government needs to train these workers from the rural parts of the country to participate in mechanised factories, suggests Atlaw Alemu (PhD), a lecturer at Addis Abeba University’s Faculty of Business & Economics.
“The fact that we are bringing farm workers directly into factory settings without briefing them on how to conduct themselves in a work environment or without giving them any technical training will no doubt reduce productivity,” says Atlaw. “That way, the country can ensure better productivity and wages.”
Meanwhile, Tizita hopes for a better salary scale, while unemployed youth like Dawit hope they can get past the gates of the Park to get hired for jobs that, as government authorities readily admit, pay very low.
Enterprise Postpones Abattoir Project
The commencement of construction for the city’s newest abattoir, which is expected to cost two billion Birr, has been rescheduled for three years from now, as residents and farmers living on the designated development land in Nifas Silk Laphto District have refused to be relocated.
The 20ha of land was secured from the City’s Land Management Office in 2016 by the Addis Abeba Abattoirs Enterprise. The new state-of-the-art abattoir, originally scheduled to begin construction by the end of this fiscal year near Hana Mariam Church, is part of a plan to replace the existing abattoir in Qera.
Two years ago the city’s land management office allocated 100ha of land in Nifas Silk District for redevelopment purpose, of which 20ha was granted for the Enterprise as a slaughterhouse with a capacity of processing 14,000 animals a day.
The city identified 177 households and 52 farmsteads living on the designated redevelopment land who were offered compensation and replacement land, according to the City’s land management office. All 52 farmsteads are located on the 20ha allocated for the Enterprise.
The Enterprise, which secured financing for the project from the French Development Agency, has already hired a consortium of consultants and was in the process of hiring a construction contractor. Meanwhile, the residents and 52 farmers on the redevelopment land refused to be relocated, claiming that the compensation they were offered was too low.
“We sent a letter to the city land management office repeatedly asking them to handle the relocation issues,” said Nibret Beka, managing director of the Enterprise.
Atomessa Gemechu, a father of three, is one of the farmers who refused to relocate from the area.
In June 2016, the officials of the city land management office informed the farmers to relocate and offered compensation of 82 Br a square meter, according to Atomessa.
“The compensation is too low, and we will be relocating to a remote area that does not have adequate infrastructure,” he said.
Yirga Workneh, director of compensation and rehabilitation at the city’s land management office, begs to differ, saying that the compensation the city administration offered the farmers was fair.
“We offered them a different area to relocate to, since they refused the first choice, but they still refused to accept the alternative,” he said.
Last year, the land management office tried to demolish the homes, but the process was halted after discussions with the city administration led to negotiations, according to Yirga.
Apart from the farmers, there are residents who have illegally built homes on the land without obtaining permits from the city administration, according to Yirga.
The city’s manager and the Office of the Mayor, along with the security forces, have formed a committee to work on relocating the residents and the farmers.
In the meantime, the Enterprise has decided to postpone the construction period for three years until after the relocation issue is fully settled, according to Nibret.
“If they relocate everyone before that date, we will start construction,” Nibret said.
Girma Seifu, a politician and former parliament member, says that the issues related to land are becoming a crisis on a national level.
To solve the problem, he recommends that the government revise the land policy and the compensation rates that are set for redevelopment purposes.
“On top of that, the government should work to uphold the rule of law,” he said. “All should abide by the law.”
At the end of last week, Deputy Mayor Takele Uma said that the City Administration will be demolishing “illegally” built homes and structures across five districts including Nifas Silk Laphto, Aqaqi Qality, Bole, Kolfe and Yeka.
“We will start taking actions in the next two to three weeks,” said Takele.
Second Audit to Follow Private Colleges
The Higher Education Relevance & Quality Agency will conduct a nationwide audit of private colleges to assess whether or not the institutions meet human, material, financial and curricular requirements of the law.
The Agency will begin the audit beginning June 8, 2019, and it is expected to be finalised before the beginning of the next academic year. This comes months after the Agency audited 167 private college and university campuses located in Addis Abeba and its surrounding areas.
The Agency, which is mandated to regulate higher education institutions, will examine whether the institutions comply with the requirements for libraries, ICT, laboratories, classrooms and teachers and staff as set by the regulatory body.
In addition, the audit will also examine if there are any students enrolled who have not completed the necessary qualifying courses at the schools and will look into students’ scores on their national matriculation exams.
“We will not only be assessing the documents of currently enrolled students but all documents of students that have ever graduated from private higher institutions,” says Andualem Admassie (PhD), director general of the Agency.
The audit will be carried out across all 174 private higher education institutions found throughout the country where around 94,692 students are enrolled. There are 50 public universities and 462 technical and vocational training institutions that are not affected by the audit.
A few months ago, the Agency conducted random inspections on private colleges and universities in Addis Abeba and its surrounding areas with a much narrower scope than the current plan.
“In the previous inspection, we only asked for the institutions to submit their legal documents,” says Andualem.
The initial inspection of 167 entities found major problems in 46 of the institutions, including 27 institutions that were operating without accreditation.
Other violations included expired accreditation certificates, establishing new locations without notifying the Agency and misusing higher education titles without merit. The Agency proceeded to take corrective measures on 24 institutions, issuing warnings, closing others and suing three of them in court.
With the hope of creating a clean slate for next year, the Agency has entered into a contract with nine media companies to publicise the findings of the audit. The acquired data will also be entered into an open-access database created by the Agency and Ministry of Innovation & Technology. The database will contain the registry of all legitimate graduates and students of private institutions in Ethiopia.
“What the Agency is doing will shed light on the part of the education sector that is losing public trust,” says Tirusew Tefera (Prof), a lecturer at Addis Abeba University’s College of Education & Behavioural Studies for four decades. “The audit should be carried out transparently by experts in the field so that disputes may not arise.”
But Tirusew suggests that it should discriminate when it comes to the students.
“All the students should not be shovelled into a single category,” said Tirusew. “There are students who were fooled by the private institutions.”
The Agency agrees with Tirusew.
“There are students who knowingly enrolled in these institutions without meeting the qualifying minimum points, and the Agency is prepared to strip them of their credentials,” said Andualem. “But we will approach the situation differently involving graduates of unaccredited institutions who otherwise fulfilled the minimum criteria.”
The Agency is in discussion with the Ministry of Science & Higher Education on how to treat these graduates.
“We are currently considering the experience of other countries, and these graduates could end up taking additional courses or may have to sit for exams to earn their credentials,” said Andualem.
Two Universities Vie to Evaluate Mass Procurement
Two public universities are vying to evaluate the efficiency of the government’s procurement process for large volume buying.
The Addis Abeba Civil Service University and Bahir Dar University are the two educational institutions that reached the financial evaluation level for the restrictive bid. The bid was announced by the Federal Procurement & Property Administration Agency to evaluate the efficiency of the nine-year-old framework procurement.
The Public Procurement & Property Disposal Service facilitates annual framework procurements that are valued at two billion Birr on average, involving 321 different commonly used items supplied by 49 vendors.
Printer toner, stationery materials, sanitary products, uniform, and tires are among the items procured by the Service to be distributed to all governmental institutions and branch offices. The procurement is made for three years at a time.
Roughly 70pc of the government’s annual budget is devoted to the procurement of different items.
Three universities and two consulting firms were invited to submit bids in March to study and evaluate the framework agreement, to report any gaps discovered and to make recommendations for improvements. Addis Abeba University, the Ethiopian Management Institute and the Industrial Projects Service were the three other participants alongside the two universities.
However, only the two universities submitted proposals that fulfilled the Agency’s technical requirement for assessment methods to be applied to accomplish the work, developing profile of the human power needed, the content of the report and finally the financial offer they proposed.
The winner of the bid will be selected on the basis of how closely it meets the requirements of the tender to the satisfaction of the client; addresses the communication gaps between the user, supplier and the Service; and the overall achievement of the framework procurement, according to Martha Luwiji, director of the Agency.
“The task of the project is expected to show the gaps and come up with solutions and recommendations within the last quarter of the budget year,” said Martha.
The proposal preparation committee for Ethiopian Civil Service University is led by the team leader, Tadiwos Menta (PhD), who said the framework procurement has a good side in terms of efficiency, as it reduces the interventions and transactions of people in the process, thus reducing opportunities for corruption.
But he points out some of the limitations of such procurements in terms of fulfilling the satisfaction of users.
It creates gaps in the delivery of goods from suppliers – delays communications between the buyer, suppliers and end-user organisations during the process of procurement.
There are around 176 budgetary organisations, 15 universities and other institutions that use the framework procurement, but the committee plans to survey about 80 of the institutions, according to Tadiwos.
“Some of the methodologies the research team has to use during the assessment consist of questionnaires, interviews with users and focal group discussions,” he said.
The result of the bid was not immediately announced, and the Director of the Agency told Fortunethat there was no report from the committee that had arrived at her desk by the time this paper went to print.
The dean of the college of business and economics at Haramaya University, Henock Semaw, agrees on the need to assess the impact of the framework procurement.
Henock points out that the framework has some drawbacks in terms of delaying delivery, the provision of quality goods as per the requirement and sometimes inflating prices far above the market price.
“The main dissatisfaction with the procurement arises from its inconveniences for planning and proper budget utilisation,” Henock said. “Most of the time budgets are poorly utilised due to an undefined procurement schedule.”
ZemZem Bank Rises from the Ashes
ZemZem Bank, whose formation was aborted seven years ago following issues with the central bank, has been resurrected and has restarted its formation process.
The founders of the Bank, who lobbied for the establishment of a full-fledged interest-free bank in Ethiopia, have submitted a letter to the National Bank of Ethiopia to reinstate the formation process.
A letter was addressed to Yinager Dessie (PhD), governor of the central bank and dated May 20, 2019, requesting the governing bank provide cooperation in resuming the halted process to establish ZemZem Bank.
Signed by Nasir Dino (PhD), chairperson of the promoters’ board, the letter says that the promoters have considered resuming the process after being inspired by recent reforms that the country is currently undergoing.
“We started discussions with the Prime Minister to restart the formation process last June,” said Nasir, who is also the director general and co-founder of HiLCoE School of Computer Science & Technology.
Prime Minister Abiy Ahmed (PhD) also expressed his administration’s commitment to allow the formation of Islamic banking last Wednesday, May 22, 2019, during the Iftarprogram his office hosted at Millennium Hall.
“I promise we’ll work hard to bring Islamic banking to reality very fast,” said Prime Minister Abiy.
Nine years ago, the organisers of ZemZem filed a request with the central bank to form a bank dedicated to Islamic banking. They started the formation process following the Banking Business Proclamation law that authorised the establishment of interest-free banking in 2008.
In April 2011 the founders of the bank held a general assembly and elected board members. Then they applied to the National Bank of Ethiopia to obtain an establishment license. However, the central bank’s executives informed the founders to withdraw their application until a directive to implement the proclamation was issued and to wait until June or July of the same year before they proceeded with the process.
When the organisers first applied for the formation of the Bank, they had raised 137 million Br in paid-up capital from the subscribed amount of 337 million Br from 6,800 shareholders.
In October 2011, the central bank issued a directive allowing the implementation of interest-free banking operations as a window service along with conventional banking.
A year after the promoters started to establish ZemZem Bank, they sat down with the executives of the central bank in a meeting chaired by Teklewold Atnafu, the former and long-serving governor of the Bank. The promoters were told that they could only proceed if they engaged with conventional banking operations and made interest-free banking a window service.
Calling for an extraordinary meeting in May 2012, the promoters informed the shareholders that the Bank could not get off the ground and the process to form the bank had ended.
Over the past couple of months, the promoters held meetings with the Prime Minister and exchanged correspondence with executives of the central bank, according to Nasir.
However, Nasir, who is an IT professional, refrains from giving further details on how the promoters plan to proceed with the reinstating process and how they will raise the necessary capital for the formation.
Even though ZemZem halted the process of the formation, Oromia Bank and Commercial Bank of Ethiopia were the first to begin providing the service after the issuance of the directive that authorised interest-free banking.
Currently, 10 out of the 17 commercial banks operating in the country offer interest-free banking products and services. Most of the services provided by the banks currently fall under three deposit categories: Wadi’a, Qardand Mudarabah.
On May 18, 2019, another group held a promoters meeting for the formation of another interest-free banking, Hijira Bank S.C.
An expert with a broad experience in the sector believes that this is not the right time for the county to have full-fledged interest-free banking.
“The country doesn’t need a bank that it can’t regulate well,” said the expert, who wished to remain anonymous, adding that the regulatory bank has a gap in having a well informed and equipped staff to deal with interest-free banking.
“Even after their formation, these full-fledged banks will be challenged in getting professionals with broad knowledge of the specialised service required,” he added.
Currently, the country has 17 commercial banks, of which 16 are privately owned. The total capital of the banking industry was 85.8 billion Br in capital by the end of June 2018. Recently, Gadaa Bank S.C started a formation process after receiving approval from the central bank to offer shares for public subscription.
State Creativity Hub to Come Online
The government, with the support of development partners, is setting up a state-owned creativity hub for entrepreneurs and innovators with a seven million Birr investment.
The hub will be located inside the premises of the Federal Small & Medium Manufacturing Industry Development Agency located at Mexico in front of Wabi Shebelle Hotel.
Lying on 172Sqm of land, the creativity centre will provide a place where entrepreneurs, innovators, business people, investors and academics can easily meet, work together and transform their ideas into reality. The centre will also have a co-working area, incubation offices, auditorium, library, showroom, laboratory, a multimedia room and a café.
Expected to be completed in a half year, the hub is designed to accommodate 200 people at a time and create jobs for 20 people. The innovators will also be able to use the workshops inside the Agency.
Financed by the Italian Agency for Cooperation & Development and implemented through the United Nations Industrial Development Organization, the construction of the hub was started two weeks ago. The new facility does not involve major construction work as it will be built between two adjacent buildings with a connecting facility at the Agency.
The construction involves the renovation and the connection of the library and emporium of the Agency, according to Wubshet Tibebu, director of infrastructure development and cluster centres development at the Agency. The Agency was established with the aim of regulating small and medium-manufacturing enterprises and has existing facilities for textile, woodwork, leather and metal workshops.
The five-year-old firm, Benmcon Construction, is hired as a contractor for the hub development with on-site supervision to be conducted by Mulugeta Consulting Architects.
The funding came from the Upgrading of the Ethiopian Leather Products Industry Project. The major focus of the Project is to support micro and small-enterprises engaged in the manufacturing of leather footwear and leather goods operating in Addis Abeba.
“While being open to every innovation, we give priority for ideas in the leather industry,” said Asfaw Abebe, director general of the Agency. “We want to focus on leather because of the abundant resources.”
The hub will have a membership requirement with a minimal registration fee.
“We intend to make a registration fee, because we only want determined people to come to the hub,” said Asfaw. “We don’t want it to be just a place to hang out.”
Though this will be a state-owned creativity hub, there are five private incubation centres including Ice Addis, X-hub Addis and Bluemoon. The incubation centres provide working space, training and coaching, as well as seed funding for start-ups.
Another hub established by the Ministry of Innovation & Technology with a six-million-Birr investment has been established at the Tracon Building along Churchill Avenue, which aims to encourage innovators in the technology sector.
In a country where 70pc of the population is below the age of 35, private incubation centres cannot cover it all, according to Biruk Yosef, an incubation coordinator at BlueMoon.
“The ventures of the government into the area is great,” said Biruk.
Biruk also has a fear that such institutions might end up being like the many youth centres that were built a few years ago and cautions the state to work on its capacity.
Biruk also suggests that the government focus on improving policies, institutional frameworks and supporting existing centres. He also thinks that the state should outsource its creativity hubs and incubation centres to private institutions.
Currently, there are around 15,000 small and medium manufacturing industrial companies engaged in the production of chemicals, construction materials and textile industry. Small industrial companies employ six to 30 employees and have a capital of 1.5 million Br or less, while medium manufacturing industrial companies employ 31-100 people with a capital that does not exceed 20 million Br.
Cleanse the Mind to Clean the Country
At the Association of Women in Business May 2019 annual forum, we held enlightening discussions on the political and economic challenges of Ethiopia. It included the failed economic policies or their implementation, the unresolved issues – rolled down through generations – regarding ethnic nationalism and identity, and how we, as individuals, contribute to the problems and possible solutions.
While attending the forum, I received a text message from the Prime Minister’s Office.
“Let us clean our neighborhoods from rubbish and our minds from resentment and hatred,” it read.
A few years ago, I was at the UNESCO office in Addis Abeba for an interview when a quote captured my attention.
“Since wars begin in the minds of men, it is in the minds of men that the defenses of peace must be constructed,” it stated.
All the armaments we produce, the army personnel we train, the law enforcement systems we design and the Ministry of Peace we establish may well contribute to keeping us safe and secure. However, it requires deep introspection in the human mind to remove the infection of hostility, resentment and enmity toward others. This is why we need to start working on building peace within ourselves.
The legacy of war is casualties and trauma. The economic impact of violence to the global economy was 13.6 trillion dollars in 2015, 11 times the size of global foreign direct investment, according to the Global Peace Index Report.
If the world affords to spend this much money on war, it does not take much imagination to understand the kind of good it can do if such resources were focused on addressing one of the root causes of conflict.
As a nation, we all feel wounded and traumatised by authoritarian leaders who tried to solve problems with guns. Our fear, paranoia, illogical arguments and defensive as well as offensive discourses are rooted in what we have experienced in the past. We are in survival mode and protective of our identity.
We all need healing. This requires individual responsibility to work on the self and co-create the nation we desire to have. Dealing with our past, by letting go of the wrongs done to us, is the initial process of cleansing.
Just as cleaning the physical environment is only the initial work, so is addressing how we feel about the past. The former requires planting trees, watering them and nurturing nature to sustain the cleansed ecosystem. Similarly, the removal of “resentment and hatred” needs to be complemented with an active and creative peace building process, which requires effort, determination, commitment, perseverance, attentiveness and respect for self as well as for others.
Again, to solidify this abstract concept of peace building in the mind, we need to develop a culture of listening and understanding to hold crucial conversations.
After moving on from the past, the mind needs to be filled with ideals we can all agree are constructive. If we all talk but do not listen to each other, we continue to foster hatred and resentment. We may disagree on a number of matters, but it should not be beyond our mental capacity to understand why they think the way they do and respond politely. Shoving our opinion down other people’s throat is counterproductive.
Sociopolitical and economic issues of the past century have not been addressed through a process that involved all the representatives of the different groups in the country. As a result, they keep resurfacing either in the form of violence or aggressive provocations.
This does not bring peace of mind. We need to be respectful as we voice our concerns. By humiliating others, we do not elevate our argument or cause. It requires maturity, self-confidence and good mannerisms to learn to express our ideas without stepping on others’ toes or forcing our ideas on them.
By holding crucial conversations, we need to create new norms and cultures that help us to live in harmony. Since our problems are deeply rooted in historical events and interpretations, we cannot dismiss them as if they are trivial. Deeply wounded people need deep healing, but this requires effort to let go of the past and create new realities.
Prime Minister Abiy Ahmed’s (PhD) appeal to clean our psyche requires that we address one another with respect by listening and understanding each other. In other words, to build peace in our mind, we need to develop character as well as proper communication skills.
Indeed, clean thoughts are not good enough to sustain peace. Our thoughts, attitudes and skills are preliminary tasks that are necessary conditions to collaborate for action in building our nation. We cannot be bystanders, for we are part of the problem and we all need to be part of the solution to heal the nation.
We need to have a positive attitude, engaging in solution-oriented actions, creating space to hold crucial conversations and addressing each other with respect by listening to others.
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