STUBBORNLY YIELDING

Prime Minister Abiy Ahmed (PhD), President Isaias Afeworki (middle) and Shimelis Abdissa (right), deputy president of Oromia Regional State, visited the Adama Industrial Park on December 26, 2019.

Eritrea’s strong man, Isaias Afeworqi, is legendary for his statement, “When I’m challenged, I become stubborn.” It could be this steadfast belief that brought him to Addis Abeba for the third time since the premiership of Abiy, who was a ranking radio operator during the bloody war between Ethiopia and Eritrea in the late 1990s.

Provoked by Isaias’s decision to make an incursion into Ethiopia, hoping to put political pressure on Ethiopia’s leader, the two-year standoff led to the regrettable death of nearly 100,000 people on both sides. The Claims Commission formed after the ceasefire reached in Algiers, Algeria, found Eritrea as the instigator of the war. However, the Boundary Commission awarded it the town of Bademe, the flashpoint of the conflict. True to his words, Isaias remained stubborn and proved to be a survivor through layers of time.

There was no sign of that tension as the two leaders drove to Adama in a very relaxed atmosphere. They seem to be in a jovial mood as Abiy himself drove Isaias around showing him the Kuriftu Resort & Water Park in Bishoftu, casually mixing and taking selfies with the surprised holidaymakers there. They also made a brief stop at the Dukem Industrial Park before heading back to Addis Abeba where Isaias laid the cornerstone for the soon to be built Eritrean Embassy building.

Central Bank Avails 5.5b Br Loan to Cash-Strapped Banks

Amidst the tight liquidity conditions in the banking industry, the National Bank of Ethiopia (NBE) offered 5.5 billion Br in loans to commercial banks at a competitive bidding interest rate.

Following the central bank’s letter dispatched to the 17 banks on December 25, 2019, all of them have applied for a total of 8.7 billion Br in loans, oversubscribing the offer by 3.2 billion Br. Unlike previous times, where the banks were borrowing money from the central bank at their maximum lending rate, NBE made them bid on the interest rate.

The loan from the central bank arrived on the scene at a time when banks pay out dividends to shareholders and taxes on profits to the tax authority, which places their operations in a tight liquidity environment.

In their loan applications, which were submitted a day later, the highest interest rate offered was 15.29pc, while the lowest was nine percent. The winning weighted-average interest rate was 10.6pc. The banks were notified of the result and told to sign the agreement.

While availing the loans, the central bank set the lowest interest rate at nine percent, which is 4.5 percentage points lower than the average lending rate of the commercial banks. The loan has a maturity period of two months. The central bank also limited the maximum value a particular bank can apply for at 15pc of the 5.5 billion Br, which is 825 million Br.

To ease the cash-strapped industry, the central bank usually offers loans to banks with an interest rate that is equivalent to their maximum lending interest rate. The banks were requesting whatever amount of value they need to stabilise their liquidity conditions.

Unusually, the current liquidity crunch in the banking industry is very severe this year, according to a senior bank president at one of the larger commercial banks.

“Due to the existing foreign currency crunch coupled with the higher inflation rate and depreciation of the Birr,” said the bank executive, “depositors aren’t coming to us, while the remaining are withdrawing money to put the cash on collateral.”

Last month the headline inflation rate reached 20.8pc, while the Birr against the dollar weakened by 0.2pc every working day.

Thus, operators in the banking industry are currently facing challenges to clear checks among them, according to sources close to the case.

In fact at a single branch, Commercial Bank of Ethiopia’s Finfine Branch, over one billion Br worth of checks is waiting to be cleared, according to a source knowledgable on the matter.

The liquidity crunch at the banks is expected, since most of the private banks were operating in tight liquidity conditions last year, according to Abdulmenan Mohammed, a financial statement analyst who closely follows the financial reports of banks.

“Last year, the loan-to-deposit ratio [a measure to assess a bank’s liquidity] of most of the banks has increased,” he said, adding that the banks were disbursing a considerable amount of loans. “There were some private banks, whose loan-to-deposit ratio exceeded 70pc.”

The average loan-to-deposit ratio of both private and state banks was 58.7pc last fiscal year, which was higher by over three percentage points from the previous year.

The banks’ liquidity ratio (a financial metric used to determine the ability to pay off debt without raising external capital) stood at 17.2pc, growing 16.2pc from the preceding year. The central bank requires banks to maintain liquid assets of no less than 15pc of their net current liabilities.

Abdulmenan recommends the governing bank raise this figure higher.

“Considering the size of the banks, which are growing,” said Abdulmenan, “the central bank should increase the rate to minimise risk.”

He also says the oversubscription of the banks shows the current liquidity crisis has reached a concerning level.

“This happens at a time when the central bank has lifted the NBE bill purchase requirement on banks,” he said, “which helps the banks improve their liquidity level.”

For the past eight years, the private banks had been purchasing a 27pc bond from the central bank whenever they approved loans and advances. Over this period, the banks bought a total of 116 billion Br of the NBE bills, of which 30 billion Br has matured and was repaid.

Appreciating the central bank’s initiative to improve the liquidity crunch, some bank executives are not happy with the interest rate.

“It’s not fair to pay interest to the national bank, while we have a huge amount of money with the bank in the form of NBE bills,” said a senior bank president. “The Bank should have given us the money, and we can return it later.”

Int’l Union Prods PM to Intervene in ET Labour Dispute

The heated dispute between a newly formed labour union and the management of Ethiopian Airlines Group escalated this month with the intervention of continental and international trade unions.

The International Transport Workers’ Federation, which represents 18.5 million workers in the transport industry in 147 countries, wrote a letter to the Office of the Prime Minister calling  on Prime Minister Abiy Ahmed (PhD) to join the fray and resolve the issue. In the letter, the Federation expressed its concerns over the alleged interference of the management of the Airlines in the internal affairs of the newly formed Basic Trade Union.

The Federation intervened in the case following a call from its affiliate, the Ethiopian Transport & Communication Workers Unions Federation, of which the new trade union of Ethiopian Airlines workers is a member.

In its letter, the Federation described the alleged ongoing acts of interference by the management of the Airlines as a “stark violation of ILO Conventions,” as well as a serious breach of the principles of association enshrined in the UnitedNation’s Charter and other international and regional human rights treaties.

“We understand that instead of engaging in a constructive social dialogue with Union,” reads the letter from Stephen Cotton, general secretary of the Federation, “the management of the company concentrated its efforts on weakening it right from the start.”

The Federation also called the Prime Minister to encourage the management of the Airlines to engage in a constructive social dialogue with the Union.

The International Trade Union Confederation-Africa also wrote an open letter to the Prime Minister calling for action to protect and safeguard the rights of the airline’s workers to freedom of association and representation.

Signed by Kwasi Adu-Amankwah, general secretary of the Confederation, the letter alleged the management of Ethiopian Airlines prohibited the Union from recruiting members, dismissing two pilots due to participation in union activities, and suspending the chairperson of the Union as well as intimidating staff to prevent them from joining the Union.

However, the Airlines denied this, saying that no attempt was done to suspend the chairperson.

“There is no lay-off decision or attempt of that against the Chairman,” reads an email from Ethiopian Airlines. “Rather he has put himself out of duty by refusing the flight assignment given by the Company long before the establishment of the New Union.”

The Airlines also stated that it cannot respond to the alleged dismissal of the pilots and others, stating that some of the cases are non-existent, include false allegations and are factually incorrect.

However, Addisu Weldemichael (Cap.), one of the alleged terminated pilots, confirmed his termination to Fortune.

He said that his termination follows a comment he made on a Telegram app group, which has 8,603 members, created among the employees of the Airlines.

“My comment was considered a verbal assault on a member of the management team,” the 33-year-old pilot, who worked for the company for 12 years, told Fortune.

Markos Yesuwork, a maintenance technician and the vice-president of the new Union, also faced a more than month-long suspension for being accused of using company email to attack the management of the company.

Last month the Confederation of Ethiopian Trade Unions (CETU) also appealed to the Prime Minister and the Ministry of Labour & Social Affairs to address the issue.

CETU has tried to resolve the issue by facilitating the elections of council representatives of the Basic Trade Union twice in June and September 2019, according to Kassahun Follo, president of the Union. It also brought the management of the Airlines, the Ministry of Labour and the local Transport Industry Employers Federation together to discuss on the issue.

“However, the differences between the management and the new Basic Trade Union is getting worse,” Kassahun told Fortune.

The Union also wrote a letter to Abadula Gemeda, chairperson of the board of the Airlines Group, but did not receive feedback yet. It also wrote a letter to the Office of the Prime Minister calling for an intervention in November.

The management of the Airlines denies any intervention in the labour union matter.

“We unequivocally and categorically deny an allegation of management intervention on Union matters,” reads the email the Airlines sent to Fortune.

Yeshiwas Fentahun, the chairperson of the new Basic Trade Union, declined to comment on the issue, stating that he already took the case to court.

Earlier last week, the 50-year-old Primary Trade Union, the older union representing Airlines workers, called a press conference to announce the return of 35 suspended and terminated employees to duty.

Their employment was reinstated after submitting an apology letter to the Airlines, according to the employees, who talked to Fortuneunder the condition of anonymity.

Fortune’sattempts to include the responses from the press secretariat of the Prime Minister’s Office and the Ministry of Labour & Social Affairs did not bear fruit.

Constitutional Inquiry Concludes Six-Year Battle

The Council of Constitutional Inquiry, the nation’s constitutional interpretation advisory body, has resolved a six-year court battle over a piece of land in Oromia Regional State in favour of Getachew Eshete.

The Council ruled in favour of Getachew, who has been in a court battle with Bewketu Tadesse (PhD) and Meseret Bereded who bought Get-Eshet Detergent Manufacturing & Packing Plc from Getachew and his family for 22.5 million Br on November 27, 2012. The detergent plant is located in Bishoftu, Oromia Regional State.

When Bewketu and Meseret bought the plant, they paid two million Br as a down payment and agreed to pay 13.5 million Br to the sellers in four years. They also agreed to pay back a seven-million-Br loan the sellers owed to the Development Bank of Ethiopia (DBE).

However, 10 months after the agreement, Getachew and his family took the case to the High Court claiming the buyers failed to pay the down payment and appealed to the court to void the contractual agreement. They also claimed that the defendants unlawfully took possession of 3,015Sqm of land, which was not part of the contractual agreement.

In their defence, the defendants argued that they had already paid the two million Br down payment, 2.9 million Br to the DBE and 0.8 million Br in accumulated taxes. They also claimed that the plaintiff took the case to court while they were about to make the first year’s payment that amounted to 3.75 million Br.

The defendants also argued that they did not illegally possess the disputed land; instead, they argued that it came with the plant, which rests on an 11,305Sqm plot.

The High Court that presided over the case rejected the plaintiffs call to void the agreement and ordered the defendants to pay the outstanding 17.5 million Br and take over the plant. It also ruled that the parcel in dispute belongs to the seller, Getachew, and was not part of the detergent plant.

Displeased with the High Court’s ruling, both parties took the case to the Supreme Court. After reviewing the appeal, the justices sustained both the 17.5 million Br payment and the land issue. While passing a ruling over the land, the judges stated that the disputed parcel is under a title deed given for a juice processing plant owned by the plaintiff.

Bewketu and Messeret took the case to the Cassation Bench, stating that the lower court made a fundamental error of law. The Bench again sustained the lower court’s ruling. The justices of the Cassation Bench also sentenced Bewketu and Messeret, along with four more people, to between one to six months of imprisonment for alleged contempt of court committed after the court session had ended.

They again took the case to the Council of Constitutional Inquiry in May 2018 requesting constitutional interpretation, stating that the Cassation Bench’s ruling contradicted six articles of the Constitution.

The Council, which is chaired by Chief Justice Meaza Ashenafi, closed the case by rejecting the claimant’s claim, stating that the case does not need any constitutional interpretation.

Even though the case has exhausted all the judicial hierarchies, the claimants are planning to appeal to the House of Federation as a last resort, according to Assefa Adane (PhD), special consultant to Get-Eshet.

“The Council has told us that we can appeal to the House of Federation,” he told Fortune.

Semere Ejigu, a lawyer with nine years of experience, does not agree with the ruling of the Inquiry and argues the case requires constitutional interpretation.

“All the claims raised by the claimant require constitutional interpretation,” said Semere. “The Council’s rejection is not right.”

He is also against the justices’ ruling that sentenced the claimants for contempt of court.

“There must be a judicial notice given by the court for imprisonment if someone insulted or harassed the judges,” he said. “Witnesses should have been heard at least.”

Getachew and his wife, Haregnesh Mekonnen, declined to comment on the issue.

 

Edible Oil, Agro-Processing Plants Take Root in Assosa

Edible oil and agro-processing plants are set to break ground in Benishangul-Gumuz Regional State with a combined investment of 230 million Br from two farmers unions.

For the two plants, the Federal Cooperative Agency (FCA) conducted a feasibility study with the Assosa Farmers Multipurpose Cooperative Union and the Assosa Farmers Cooperative Union last year.

The oil refinery plant, which has a capacity of refining three million litres of oil a year from niger, soybean and groundnut seeds, will be set up by the Assosa Farmers Multipurpose Cooperative Union. The fruit and vegetable processing plant, which produce 16,181tn of tomato and mango products a year, will be established by the Assosa Farmers Cooperative Union.

The oil refinery plant can process 45,000ql, 85,500ql and 19,500ql of niger, soybean and groundnut seeds to produce 1.3 million, one million and 741,000lt of edible oil, respectively, a year. Expected to cost 51.2 million Br, the Development Bank of Ethiopia will be covering 80pc of the investment through a loan. The remaining balance will be in cash equity contribution from the Union.

The country has an annual production capacity of 784,809tn of edible oil with an average per capita consumption of 8.9lt of oil a year. Two years ago, there was a shortfall of 15,532tn of edible oil in the country.

The Agency aims to meet the oil demand and improve the market share of the unions, according to Ayalsew Workneh, public relations director of FCA.

Occupying 2,000Sqm of land, the oil plant is expected to create direct job opportunities for 81 people from the member cooperatives and the local community.

Since the Regional State is known for the production of oil seeds like sesame, niger seed, groundnut and soybeans, the plant will source the seeds from the local area, according to Eshetu Chekole, general manager of Assosa Farmers Multipurpose Cooperative Union.

Established by eight primary cooperatives with 2,674 member farmers who contributed 87,000 Br in capital, the Union is involved in marketing oilseeds, niger oil processing and input distribution. Currently, the number of primary cooperatives affiliated with the union has reached 58 with more than 15,000 member farmers.

The second plant, a mango and tomato processing plant, will have a capacity of processing 18,000tn of mangoes and 10,800tn of tomatoes a year to produce 954tn of mango jam, 13,305tn of mango juice and 1,922tn of tomato paste.

Having a total investment cost of 179.4 million Br, the agro-processing plant will use 130.2 million Br for capital expenditures with the remaining set aside for initial working capital. The processing plant will be erected in Assosa town within the compound of the Union.

The main objective of the plant is to minimise the post-harvest wastage of the fruits by adding value, addressing the market problem and increasing the productivity of the farmers and their income, according to Weldedawit Teka, general manager of the Assosa Farmers Cooperative Union, which was established by 16 multipurpose primary cooperatives with 1,848 individual members.

Thirty percent of agricultural products are wasted due to the traditional way of harvesting and an improper market chain. Mangoes and tomatoes are also known to be highly perishable.

The Regional State, which has a total of 22 cooperative unions, 17 of which are agricultural cooperative unions with 67,162 individual farmer members, is known for a higher harvest of mangoes and vegetables.

Last year 105,000tn of mangoes were harvested at the national level, and 28pc of it was cultivated from Benishangul-Gumuz Regional State.

During peak harvest seasons, fruit and vegetables are sold at throwaway prices because of a lack of means to preserve and store the products, according to Weldedawit.

“The plant will make the fruits and the vegetables accessible during off-production seasons and also increases their value,” he said.

It will also save foreign exchange by substituting imports, according to Ayalesew.

Mulubrihan Bayissa, lecturer and head of the Department of Agricultural Economics & Agribusiness Management at Jimma University, said the plants will benefit the farmers by cutting out the middlemen in the value chain who make more money than the farmers.

He also suggests the Agency train the farmers to practice a modern harvesting system to increase productivity and profitability.

The Ethiopian Army at a Conceptual Crossroads

A one-of-a-kind, if not curious, seminar was held at the Hyatt Regency Hotel late last week. Organised by the Institute for Strategic Affairs (ISA), a federal agency run by Hallelujah Lulie, its focus was on the security sector’s conduct during times of transition. Enlisting panelists such as Gebretsadkan Gebretensae, a retired army general who once served as chief-of-staff of the Ethiopian army, the seminar tried to examine the “effectiveness, efficiency, legitimacy and accountability” of the security community, which comprises no less than eight institutions.

The Ethiopian army is one of these and is undergoing a reform process comprising six programmes, which its strategists hope will achieve 11 goals. In the eyes of the architects of the defence reforms, the objectives are to strengthen civilian oversight, enhance social control, make it transparent and accountable, as well as modernise it to become professional, modern and competent enough to respond to predictable and unpredictable threats.

Here is where tough questions should be raised: What are these threats? Who defines the nature of them? Whoever is tasked to do the definition, where do they get the mandate from? Where does the army’s capability to use its resources stop? What is the mandate of the military in society?

These may be issues that are hard to build consensus around. But with the ongoing reform effort, they have begun anew with different people within the army and the political establishment holding various and, understandably, conflicting views.

Granted, Ethiopia’s Constitution incorporates no less than five provisions concerning the role and mission of the army in the republic. It commands the army to safeguard the country’s sovereignty and orders it to discharge its responsibilities under a state of emergency. But it bans the defence institution from any involvement in partisan political organisations.

Nonetheless, what does safeguarding sovereignty involve? What does compliance with the Constitution really mean? Does it require the army to intervene if and when constitutional provisions are violated and trampled by the political class? Or any other group for that matter?

The army and its leaders are at a crossroads, grappling with these vexing issues.

Some believe the primary role of the Defence Forces is to guard the national borders against foreign threats and aggression; and, it stops there. They would not want to see the army meddle in any domestic political squabbling as some of the armies in places like Egypt, Turkey and Pakistan do. For them, it is neither a guardian nor a custodian of a democratic order.

Others have a broadened understanding of the concept of sovereignty. It is also about ensuring human security within a defined state, whether the threat comes from within or outside. The army should not be a bystander in the face of blatant violations of the Constitution and massive atrocities committed against humanity. They would argue that the protection of the Constitution is the primary security issue and the only way to guarantee the viability of a country.

People in this category worry that scrupulous politicians, even if they get to power through legitimate means, can subvert the constitutional order gradually, and the army may be the only independent and powerful institution that can stop them. And they contend that for it to be a bystander in such an extreme situation is foolhardy.

The latter view champions the army as the last guarantor of the constitutional and democratic order. It tends to view the military as having a democracy-safeguarding role during a transition to a stable democratic order.

But it is a view no different from a doctrine the late Prime Minister Meles Zenawi had authored in what is known in the army as “the red-book”. It sees the army as the last bastion for Revolutionary Democracy, a partisan political agenda that politicised the military.

The supra-nature of an army in society is not without precedent in the world or history. Armies have intervened to topple authoritarian regimes and played a democracy-promoting role in Turkey and Portugal, for instance. But asking the army to play watchdog over what should be handled by other civic and democratic institutions, in an area that it has neither the expertise nor the training, is a slippery slope that would drag it into partisan politics. It is something that needs to be avoided by all means.

Asking the generals to make a judgment over whether actions by civilian leaders are constitutional is compelling them to make political decisions that parliament and the courts should make. Even if all these fail, citizens still retain the power of civil disobedience. Portraying the intervention of the army as the only option is not within the bounds of wisdom.

For the very few examples of the army’s constructive involvement in promoting or safeguarding democracy, there are abundant instances of history where armies – initially intervening in the guise of restoring law and order – have swiftly moved to establish military dictatorships. Though this is usually done with a promise of a quick return to civilian rule, those promises are often broken, and armies stay in power for a long time. Once invited into the political arena, it is hard to dislodge them from the corridors of power.

Asking the military to involve itself with any political process, even with the good intentions of protecting the Constitution, is demanding from people of uniform something they are not equipped or qualified to do. It detracts from their core mission. It poses the risk of the misuse or abuse of power. It creates a dangerous militarisation of law enforcement.

If armies’ intervention into the political order is unavoidable, it only shows that there is a total breakdown of constitutional order. At that point, there is no democracy or Constitution to guard; instead, there is a complete failure of a political system.

The Ethiopian political landscape today is, unfortunately, a highly polarised one. Most institutions have been tainted with political interference and co-optation. There are not many institutions or leaders that garner instant respect as autonomous figures.

The army is an exception. It is one of the few – if not the only institution – that enjoys a certain level of acceptance and respect as a national institution with a mostly non-partisan stance. That in itself is a credit to the army, especially in recent days when its leaders have been pushed continuously to play a law enforcement role in different parts of the country.

In today’s polarised and fragmented political environment, it puts the country at risk of losing one of the few national institutions that have, for the most part, remained above the fray.

Military leaders should avoid the trap of, and temptation for, political ambition in as much as politicians should stay clear of tempting the men and women of uniform to demonstrate political partisanship in their favour. Political leaders should exercise the most restraint to avoid the bent to call the army to interfere in political disputes or interpret disagreements over constitutional matters. Those are best left to the courts and other democratic institutions.

The army should remain professional, at all times obeying and carrying out its function free of any partisanship to any political organisation as the Ethiopian Constitution stipulates under Article 87.

The cornerstone of constitutionalism is limited government; the concept is that all parts of the state structure have an area of focus delineated and the power entrusted to them limited to the task assigned. No part of the state is called to be and do all things for the republic.

Leaving the army alone to fulfill its assigned tasks is the wise and constitutional path to take. Leaders of the Ethiopian Defence Forces would do historical justice in not only safeguarding the constitutional order but also in their determination to not submit to unconstitutional demands that come from the political establishment.

That the army has had such leaders in its history as Gebretsadkan (Lt. Gen) remains a living example of such courage of conviction.

Farmers Union Plants Coffee Complex in Gelan

The Oromia Coffee Farmers Cooperative Union invested 50 million Br to build its first coffee roasting and packaging complex at Gelan town in Oromia Regional State.

Expected to start production in two months, the plant will aid the Union by adding value to coffee products and is the first of its kind for the Union that has been exporting green coffee beans for two decades. The plant will roast, grind and package the coffee for local use. It has a capacity of roasting, grinding and packaging 120Kg of coffee an hour.

Sprawling on 2,307Sqm of land, the plant was set up within 18 months of the groundbreaking in July 2018. Walabu Construction, a young local firm that is currently involved in the construction of the Bulbula Integrated Agro-industrial Park & Rural Transformation Center at Shashemenne, West Arsi, completed the project. Yonagu Engineering Plc, another young local firm, supervised the project.

“From now on, we are funneling our investments toward adding value to our coffee,” said Oumer Wabe, general manager of the Union, which was established in June 1999 by 34 cooperatives with 22,691 farmers with capital of 835,000 Br.

The bid for the construction of the plant was first floated in April 2018, and it was initially awarded to Nasew Construction the next month after the company offered the lowest price of 15.1 million Br. However, the contract was terminated since the contractor could not tie a knot on the construction of the complex after seven months following the contract award.

“We had to cut ties with the construction company due to its poor performance and slow development,” said Oumer.

However, the construction company argues that the consultant did not deliver the designs on time, which hindered the pace of the construction.

“There was a communication problem with the management and the consultants,” said Temsegn Shambel, an office engineer at Nasew Construction.

Later the Union floated a new tender after discussing it with Oromia Regional Cooperative Agency and awarded Walabu Construction a new contract.

“Currently, the construction of the plant is in its final stage with the installation of a sewage system,” said Oumer.

Topper Roaster, a Turkish manufacturer that exports its products to 146 countries, supplied the coffee roasting machine for 17 million Br. Topper also supplied the automated packaging unit.

When completed, the plant will employ 20 locals to start with, which will further increase when the production ramps up.

The management of the Union is also planning to open a chain of coffee shops in the capital, where it will also sell packed coffee. It has made inquiries to the City Administration for land to open coffee complexes to directly sell its products to users. To cut the expenses of farmers under the union, it plans to construct a storage facility and a laboratory. The farmers had been travelling to other areas for laboratory tests and to store coffee.

It has already started construction of two storage sites and a laboratory in Guji Zone for 38 million Br.

Currently, the Union has 405 cooperatives with over 400,000 farmers and has three coffee processing plants, which are located in Dire Dawa, Gelan and Qality that wash and remove the husks from the green coffee beans.

From small-scale washing to larger scale processing, the country has over 200 coffee processing plants. Other coffee exporters and unions including Mullge Coffee Export, Tracon Trading Plc and Yigreacheffe Union are also en route to open coffee processing complexes.

Yirgacheffe Coffee Union’s roasting plant, which is almost done, sprawls across 10,000Sqm of land and is located in Aqaqi Qality District behind Oromia Water Works Construction Enterprise. It is being built at a cost of 16 million Br and has a capacity of roasting 480Kg an hour.

Tracon Trading Plc already set up a roasting plant two years ago, but they are installing new machines being shipped from Germany, Italy and Turkey. The roasting plant is located in Hawas Wereda and rests on 1,300Sqm of land. Currently, it has the capacity to roast 240Kg in each batch.

The number of processing plants has been increasing over the past five years, according to Menelik Habtu, president of the Ethiopian Coffee Roasters Association.

“It is due to the demand spike for processed coffee from the world market,” said Menelik. “There is also a push from the government to expand the growers’ and exporters’ capacities.”

 

 

 

Abay Industrial Ventures into Garment Industry

Abay Industrial Development S.C., the economic wing of Amhara Regional State, has set up its fourth manufacturing plant in Gonder town for 452 million Br.

Abay Garment Factory, located 500Km north of the capital, rests on four hectares of land with three sheds each covering 4,618Sqm of land. The plant will make polo shirts, T-shirts, trousers, jeans and khaki trousers. Having a production capacity of 26,000 pieces a day, the factory is expected to create job opportunities for 565 employees.

Expected to commence operations at the end of January, the company is currently giving training to its human resources team.

Amhara Building Work Construction Company, the regional construction firm that engages in the construction of roads, bridges and factories, constructed the plant. Amhara Urban Development Bureau supervised the project.

Abay imported the sewing machines from Japan at a cost of 2.1 million dollars. Other finishing and cutting machines were also imported from the United States, Japan, Vietnam and Turkey for 3.4 million dollars.

JUKI Corporation, a Japanese manufacturer of industrial sewing machines since 1938 that recently opened branches in Ethiopia, has installed the sewing machines. Value Technology, an Egyptian company established in 2003, installed the cutting machines and other related work.

“Once the plant becomes operational, we’ve got a plan to export our products to Europe and the United States,” said Telayneh Webneh, project manager of Abay Garment, which has been under construction for the past three years.

The garment plant is the fourth manufacturing set up for Abay Industrial, a public-private partnership formed with four billion Birr in registered capital raised from about 516 investors and state-owned enterprises in the Amhara Regional State. It is also engaged in the construction of a cement factory, a cold steel rolling mill and a sugar factory.

The cement plant is under construction in Eastern Gojam Zone, Dejen Wereda, Amhara Regional State at a cost of the 8.8 billion Br. The construction commenced in March 2019. Abay Industrial is also in the process of hiring contractors for the metal and sugar factories.

Abay Garment will join the 140 companies registered to manufacture textile and garment products in Ethiopia. In the first half of the last fiscal year, the garment industry generated 12.9 million dollars from exports, which accounts for only one percent of the total 1.2 billion dollars the country earned from overall exports during the same period.

“Power interruptions and finding drinking water for workers are the main challenges we’re facing now,” Telayneh said.

Henok Semaw, an assistant professor and dean of business and economics at Harmaya University, applauded the construction of the company in terms of creating job opportunities and generating foreign exchange from exports.

Henok also notes that the government should set a minimum wage, since most of the employees in the garment industry complain about lower salaries.

“Besides developing a hard-working environment,” said Henok, “the company should continue giving training.”

Mulugeta G. Medhn (PhD), a lecturer at Addis Abeba University’s School of Commerce, also recommends the government work on electric power supply to create a suitable investment environment in the country.

“There has to be a policy that prioritises dedicated electric power, especially for massive investments,” Mulugeta said.

Mulugeta also says that to support the infant garment industry in the country, the government has to have an incentive package for local manufacturers.

“To compete in the global market,” he said, “the local manufacturers should create a joint venture with the foreign manufacturers to acquire experience and technology. “

Massive Investment Pays Off Ethio-Re

As a result of a massive increase in investment income, the nation’s first reinsurance firm, Ethiopian Reinsurance S.C., amassed a huge profit last year.

Since the firm first joined the insurance industry in July 2016, Ethio-Re made the highest stride in increasing its net profit by 70.2pc to 133.8 million Br.

The underwriting profit of the company also registered a remarkable increase by 120.5pc reaching 74.6 million Br. In its first year of operation, the company declared a 61 million Br loss and netted 78.6 million Br profit in the second year of operations. Earnings per share also grew by 21.4pc, up from 15pc in the previous year.

Operations, as well as investments made in time deposits, equity shares and bond purchases, positively contributed to the profit growth of the firm, according to Fikru Tsegaye, business development & corporate affairs manager of Ethio-Re, which has 105 shareholders including insurance firms, banks, individuals and labour unions.

The 969.9 million Br investment in time deposits and the 93.9 million Br equity in bonds, generated 102.7 million Br in income. This investment income registered a 53.6pc spike.

Gross underwriting premium also shows a 5.6pc increase to 698.7 million Br. Out of which, 110.7 million Br was transferred as retrocession, which went up by 51.8pc. Increase in retrocession was accompanied by the 1.8pc decline in the level of claims paid and provided for to 329 million Br.

“The management of the company should be applauded for such performance,” said Abdulmenan Mohammed, a financial statement analyst with close to two decades of experience.

Reductions in claims were achieved due to underwriting measures, and appropriate risk assessment and management practices in the insurance companies Ethio-Re has reinsured, according to Fikru.

Ethio-Re ceded 186.9 million Br to reinsurers marking a 17.3pc increase. The commissions it paid also accounted for 37 million Br, a 3.4pc decline.

The growth of cedant acquisition costs of Ethio-Re had been rising for two consecutive years, according to the expert.

“It is concerning,” said Abdulmenan. “The management should seriously look into the growth of these costs.”

However, Fikru does not find the cost increase concerning, attributing it to the rise in the commission paid to the insurance companies that resulted from the growth of the industry.

Fikru also says that the year was productive since the company was allowed to work with COMESA member countries, particularly in the East Africa region, including Kenya. In previous years, it was only allowed to operate in the local market.

“Over the past three years since its establishment, Ethio-Re saved more than 60 million dollars in foreign exchange bleeding,” Fikru asserted. “We also helped develop local capacity for risk shouldering.”

To strengthen Ethio-Re’s business base, the central bank has ordered the 17 insurance firms to transfer five percent of all insurance policies to Ethio-Re, including  25pc of treaty sessions, policy coverage assigned to other reinsurers.

Reinforcing relationships with business partners and shareholders to cultivate and maintain strong relationships was the major focus area of the board of directors in the reporting period, according to Hailemariam Assefa, board chairperson of the company.

The company’s total assets increased by 42.1pc exceeding 1.6 billion Br, and its assets from its long-term insurance business represented 7.3pc.

Liquidity analysis shows that the liquidity level of Ethiopian Re went down. It’s cash, and bank balances decreased by 54pc to 109.1 million Br, while the ratio of cash and bank balances to total assets dropped to 6.7pc from 20.8pc.

“Despite the reduction, the liquidity level of Ethio-Re is at an ideal level,” the expert observed.

Ethio-Re could also manage to raise its paid-up capital by 16.9pc to 607.2 million Br. The capital and non-distributable reserves of the company accounted for close to 39.4pc of its total assets.

“Ethio-Re is a well-capitalised company,” said Abdulmenan, “so it should use this capital efficiently.”

Endalkachew Zelekew, a shareholder of Ethio-Re and executive officer of the underwriting and reinsurance department at Tsehay Insurance, says that even though the performance of the company has improved, it does not match with the initial expectation of the shareholders.

He also says that the firm’s limited investment in time deposits was acceptable since it is a recently established company.

“However, huge capital investments in other areas such as fixed asset acquisitions might not be advisable at such an early stage,” he said.

Addis Registers Modest Profit, Yet Dividend Remains Stable

Though shareholder returns remain lower, Addis International Bank, one of the late entrant banks, had an impressive financial performance last year, raising its profit by 46pc.

The profit growth of Addis, which netted 167.2 million Br, is more than double the industry average, which stands at about 20pc. The earnings per share (EPS) of the company went up by about three Birr to 20.7 Br.

Considering the young age of the Bank, the performance of Addis is satisfactory, according to Abdulmenan Mohammed, a financial statement analyst.

The considerable increase in the total income of the Bank contributed to the growth in profit after tax. Interest on loans and investments in the NBE bond reached close to 407.8 million, showing a 41pc increase. Service charges and commissions went up by 36pc to 216 million Br.

However, income from foreign exchange dealings showed a slight decline by one percentage point to 30.7 million Br.

Even though the forex earnings of the Bank is better than some banks, Hailu Alemu, president of Addis, says it is still less than their expectations.

“The forex crunch in the economy posed a huge challenge to the banking sector as a whole,” Hailu told Fortune.

In tandem with the remarkable growth in total income, the Bank’s expenses also increased markedly at about the same rate as that of income. The total expenses of the Bank increased by 37pc to 463.7 million Br.

Interest paid on deposits showed the highest rate of increase by 54pc, reaching 208.1 million Br.

The higher interest rates the Bank paid on time deposits was the reason for this, according to Hailu.

“We were paying 12pc to 13pc on time deposits, since we did not have a strong base in the current or deposit accounts that required much lower interest rate payments,” Hailu said.

Salaries and benefits also rose to 124.5 million Br, showing a 29pc growth, while general administration expenses spiked by 20pc to reach 119 million Br.

In a bid to attract competent and qualified human resources to be more profitable in the industry, Addis increased salaries of employees, according to the President.

“We also recruited additional staff members for the new branches we opened,” Hailu said.

In the reported period, the Bank opened nine new branches, pushing its total branch network to 68.

As Addis is relatively new to the industry, the expansion of expenses is expected, according to Abdulmenan.

“Still the management needs to keep an eye on expenses,” he added.

Last year was the year where the Bank focused on digital banking services, according to Hailemelekot Teklegiorgis, chairperson of the board of directors of the Bank, in his address to the shareholders in the performance report.

Addis introduced the Kuteba Lehulu savings product that particularly targets those segments of the society without identification cards by using a biometric verification system.

About 11,823 new users started using the service last year, pushing the total number of customers to 24,667.

Addis’s total assets showed a massive increase of 31pc exceeding 5.5 billion Br. It disbursed nearly 2.7 billion Br in loans and advances while mobilising almost 4 billion Br in deposits.

The loan-to-deposit ratio declined by two percentage points to 67pc, which was still not far below the industry average of 70pc.

Addis increased provisions for doubtful loans and advances by 48pc reaching 12.1 million Br.

The Bank’s investment in the NBE bond reached 1.1 billion Br, representing 19.3pc of total assets and 26.9pc of the Bank’s total deposits, both of which remained pretty much the same over the years.

The liquidity level of Addis increased by 28pc in terms of cash and bank balances, which reached 1.3 billion Br. However, the ratio of liquid assets to total assets declined by just a percentage point to 24pc, as the ratio of liquid assets to deposits also fell by one percentage point to 34pc.

“As Addis is a very liquid bank, it should use its liquid resources for more income-generating activities,” the expert observed.

The 17pc increase in its paid-up capital reached 831.3 million Br with a capital adequacy ratio of 37.6pc.

“This shows that Addis is a highly capitalised Bank. Addis should employ its capital to increase shareholders’ returns,” the expert suggested.

Shimeles Gedlegiorgis, a shareholder of Addis and CEO of Ethio Life & General Insurance Company, says he is satisfied with the performance of the Bank despite the challenging external business environment that constrained foreign exchange earnings.

However, he suggests the management of the Bank consider a more cost-effective approach to maximize profitability in the long run.

Bureau Engages Local Firms in Public Projects

The City Administration’s construction bureau hired 51 local architecture and engineering firms at a fixed price to supervise the construction of ongoing public projects in the capital.

Last year Deputy Mayor Takele Uma ordered all of the ongoing public projects to be transferred to the construction bureau, citing the avoidance of delays and better management as the main aim of the move. The projects had been under the management of public institutions that own them.

After taking over about 1,000 ongoing projects, the Bureau has been working on the preparation of bid documents, the announcement tenders and selecting contractors and consultants.

Out of all the projects, the consultancy services for 51 projects, worth six billion Br, were transferred to local companies two weeks ago. The companies that secured the projects are those who participated in the renovation of 488 schools and 10 hospital projects, which were launched by the City Administration last summer.

Out of the projects, six of them will be carried out by level-one consultants, three by level-three consultants, five by level-four consultants and the remaining 37 projects will be supervised by level-five consultants.

Addis Abeba Cinema, Akaki Zonal Stadium and Minilik Eye Centre are among the projects recently awarded to the engineering consulting firms. Noble International Business and Cheetah Consulting Architects & Engineers Plc are among the companies that secured contracts.

Some of the projects are expected to be completed this year, while the rest will be delayed due to a shortage of foreign exchange.

Beginning this month, the Bureau called interested local companies to apply for the projects, and 108 consultants showed interest. Then the Bureau screened the companies after analysing their capacity and the scope of work and held a raffle to select the winning 51 companies.

Before drawing the raffle, the Bureau gave a five-day standstill period for the participant companies to submit their complaints or grievances. And five companies filed grievances.

“Since they raised reasonable issues, they were included in the project,” said Afework Nigussie, deputy head of the Bureau, which is currently managing more than 1,000 projects including shed works with a total cost of over 10 billion Br.

Noble International Business, a company that was previously engaged in the construction of Amhara Mass Media Agency and the Harari Regional State Administration Office projects, was awarded for the supervision of the Addis Abeba Cinema construction project.

“We’re waiting for technical specification from the Bureau to mobilise human resources,” said Abdulwasi Usmail, general manager of Noble.

Cheetah Consulting is also awarded to consult on the construction of Akaki Impaired Centre.

Yonas Sebsibe, the CEO of Cheetah, says that the company does not have detailed or concrete information about the project.

“We still don’t know the related costs and what exactly will be our role,” he said. “The Bureau has to work on this and provide us with more details.”

Mesele Haile (PhD), a consultant and lecturer at Addis Abeba University for over three decades, says that forwarding these projects to the local consultants should be fair and merit-based.

“Previously, the process of awarding such projects had issues with fair distribution,” he said. “This will boost job creation and give chances to young professionals.”

Cherry-Picking Loyalty

Every high-ranking officeholder takes an oath of office which, among other things, requires them to pledge allegiance and loyalty to the Ethiopian Constitution. Not only officeholders but many politicians profess to that same loyalty. Even some whose political programme includes a plan to change the Constitution still affirm their loyalty to it.

In fact, in Ethiopia now we are seeing a new tug of war between parties who all claim to be fighting to preserve the Constitution. Different but opposing groups all claiming themselves to be the last great hope for the Constitution is a bit confusing for the general public. How is the public to decide who is in fact truly loyal to the Constitution?

I guess the starting point would have to be agreeing on the definition of what it means to be loyal to constitutional government. Loyalty denotes faithfulness, commitment and responsibility to a cause or principle. Therefore, when a person or a movement claims loyalty to a constitution, they are saying they will conduct themselves according to the principles of constitutionalism.

Constitutionalism is the idea that government should only have legally limited powers to carry out its duties, and that its authority or legitimacy depends on its observing these limitations. This idea often associated with John Locke and popularized by the American Revolution has many loud fans but few practitioners.

That should not be surprising, since it goes against the natural instincts of human beings. The natural instinct of the human being is an insatiable lust for power. Nobody wants to be limited in their exercise of power if they can get away with it. That is why most framers of constitutions around the world make sure to include articles written as clearly as possible limiting the powers of officeholders. Because without them, there is no doubt there will not be limited government.

The responsibility of citizens then is to see and evaluate the claims of different groups against their record when it comes to observing the limitations to power that are clearly enumerated in the constitution itself.

For example, the Ethiopian Constitution unambiguously states that, “It is prohibited to assume state power in any manner other than that provided under the Constitution.” Therefore, any person, group or political party that employs unconstitutional means like insurrections and riots is only giving lip service to constitutionalism.

Another clear article is the right to life. Every person has the right to life, and no person may be deprived of life except as punishment passed by a court of law. Therefore, a group or political entity that has a history of unlawfully eliminating political opponents in extrajudicial killings can hardly be said to be an adherent of constitutionalism.

The Ethiopian Constitution clearly states that everyone has the right to protection against bodily harm. And yet most movements in the country now or in the past have supporters that are quick to physically beat up anyone they perceive to have an opposing view.

Everyone is supposed to have the right to freedom of thought, conscience and religion. Yet few are that tolerant in this country today. Everyone is supposed to have the right to hold opinions without interference. Not only that but also the right to express them. “This right shall include freedom to seek, receive and impart information and ideas of all kinds, regardless of frontiers, either orally, in writing or in print, in the form of art, or through any media of his choice.”

One would be hard pressed to find anyone that truly believes in these articles let alone practices them on the ground. Most of the fight and competition regarding the Constitution is superficial and limited to form and structure. It is not about content. Almost all political movements in Ethiopia may pay lip service to the Constitution. But hardly any of them actually practice it either in their internal party politics or in their relationships with other political entities. Constitutionalism is a demanding principle. It is all or nothing. One can not cherry-pick loyalty to hand-picked articles.