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Month: June 2020

ONION TEARS

Posted on by Web Master

They may be few in number, but consumers are venturing to the vegetable market in Qera to buy basic food items at prices that are becoming more and more prohibitory. One of the main culprits is the red onion, an important ingredient in traditional Ethiopian cooking but which consumers are finding hard to justify as its price soars.

Beginning in mid-May, the price of red onions has doubled and is currently selling for between 30 Br and 40 Br a kilogram. Some consumers have, as a result, been forced to stretch each purchase of red onions as long as possible before venturing back to the vegetable market.

The reason for this is a combination of seasonal supply shortages and certain unique disruptions to the market chain. The case of the former is related to the rainy season, which complicates the logistics of bringing red onions to market.

Adding to these seasonal problems is the government’s halt of supplying productive hybrid red onion seeds, which farmers are now buying from private suppliers. But the Ministry of Trade & Industry, which has assembled a national task force to conduct an assessment into the price hikes, believes that this may have more to do with both the legal and illegal export of onions. In May alone, 10,000ql of red onions were legally exported to Djibouti, Somalia and Kenya.

The Ministry has also found that intermediaries are a negative influence on the market by dictating prices to the disadvantage of farmers, which are in turn disincentivised to grow the vegetables. The response from the government has been to establish a strategy to weed out the intermediaries and make the connection between consumers and producers more direct.

This is a good start, according to experts, but the government should also focus on long-term considerations, including boosting agricultural productivity by creating incentives and introducing more mechanised farming technology.

Onion Price Rises as Supply from Farmers, Sudan Falls

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On the sunny Wednesday afternoon of May 17, 2020, the newly opened vegetable market in Jan Meda, which recently replaced the Atkilit Terra vegetable market, received few customers and fewer transactions.

Vegetable retailers met only a handful of buyers. Abebech Yilma, 38, was among them. She bought a kilogram of red onions and a kilogram of tomatoes for 30 and 22 Br, respectively.

Abebech, a resident of the capital, has found the cost of living unbearable since most of the food prices such as red onions have increased. Abebech is raising her two children on her 3,500 Br monthly income.

She used to consume a kilogram of red onions every week. Now, she is stretching each kilogram further.

“With the current price,” said Abebech. “I can’t consume a kilogram of red onions every week.”

The price of red onions usually rises during the rainy season, but the current price is unprecedented. In mid-May, the cost of red onions increased from an average of 15 Br to 37 Br a kilogram. Depending on the place and type, a kilogram of red onions is being sold for 30 to 40 Br, a more than two-fold increase over the price a month ago.

This unexpected price hike is not only affecting the pockets of consumers but also retailers, who have witnessed the demand for the vegetable fall sharply.

Ibrahim Kedir, a red onion retailer in the Jan Meda open market, has observed this trend. He used to sell 10 quintals of red onions a day, but now he is retailing just five.

“Demand for my commodity has declined by half for the past three weeks,” he said. “Customers aren’t coming like before.”

Ibrahim is buying the vegetable for 28 Br a kilogram from wholesalers who are located there and retailing for 30 Br a kilogram.

The price hike has led to less consumption and is also affecting the wholesalers. Ahmed Siraj is a wholesaler in Jan Meda. He used to sell 15 to 20ql of red onions a day, but now he is selling eight to 12 quintals for 2,800 Br each.

Ahmed’s stock was minimal up until two weeks ago. At this moment, his stock is full of the commodity. Too full.

“The price crisis has been followed by very little demand for the commodity, and the onions are decaying,” said Ahmed.

Both the city’s trade bureau and the Ministry of Trade & Industry have recognised the latest supply shortage and the drastic price increase for the vegetable.

The price crisis is mainly attributed to market chain disruptions, according to Solomon Bekele, transaction director at the Addis Abeba Trade & Industry Development Bureau.

Every year during this season there is a supply shortage of red onions and other agricultural products in the capital, because heavy rainfall interrupts the flow of these products to Addis Abeba, according to Solomon.

“There is also a significant amount of wasted red onion production in the rainy season that contributes to the supply shortage in the market,” Solomon said.

The Ministry of Agriculture also disclosed that the rainy season is not known for the production of onions.

During the transition from the spring to the summer season, the production of red onions usually declines, because farmers plough and prepare the land for cereal crops, according to Desnet Belay, market research and promotion director at the Ministry of Agriculture.

“But this is typical; there are always seasonal fluctuations in red onion production,” said Desnet.

The area of land that is used for onion cultivation has declined in the past fiscal year from the preceding year. During the last fiscal year, 67,624 farmers cultivated 28,185ha of land with onions, an 11pc decline from the previous year. Productivity has also fallen by 10.7pc to 2.6 million quintals.

The main reason many farmers have stopped cultivating red onions is the high price of the hybrid red onion seed, according to Werake Redi, manager of Bereka Vegetables & Fruits Cooperative Union and an administrator of Ajira Kebelle in Silte Zone.

Previously, the government used to supply the farmers with hybrid red onion seeds from Europe. But now it has ceased to supply the seeds, leaving the farmers to buy them from private enterprises.

The farmers have been buying the hybrid seeds from Europe and Israel for 6,000 Br a kilogram, which is very productive, equating to 500ql to 600ql a hectare.

“We can buy it since the seed price is expensive,” Werake said.

“Before, NGOs from Israel and Holland were giving us hybrid seeds. We used to buy a kilogram of local red onion seed for 1,000 Br, but the productivity of the local seeds have decreased from 380ql to 160ql a hectare,” he said.

Demand fluctuations also compelled the farmers to switch to other crops. When the price of red onions was higher in the previous year, most of the farmers tended to plant red onions the following year. This brings excess supply, less demand, low prices and low return to the farmers.

“Many farmers have stopped planting red onions, because they are discouraged by these supply and demand fluctuations,” said Habtamu Abera, executive manager of Zengena Irrigation Development Cooperative Union, in Awi Zone, Amhara Regional State.

In this fiscal year, 36,373ha of land is estimated to be covered with onions, which are expected to yield 2.7 million quintals of the vegetable.

“However, seasonal production fluctuation isn’t the main factor for the price hikes since supply shortages usually occur during this season,” said Eshete Asefa, state minister for Trade & Industry.

Due to the latest price escalation, the Ministry of Trade & Industry has assembled the National Task Force for Market Stabilisation to conduct an assessment on the causes of the red onion and tomato price increases. The Task Force identified that there is a shortage of red onion supply in the market.

On top of the seasonal production fluctuations, supply chain disruptions and illegal trading activities have contributed to the latest price hike, according to Eshete.

The assessment indicated that one of the reasons for the price increase was the interference of traders who are exporting onions abroad in legal and illegal ways, explained Eshete.

“We’re taking measures against traders and brokers who aggravate the problem,” said Eshete.

In May alone, 10,000ql of red onions were legally exported to Djibouti, Somalia and Kenya, according to Eshete, who added that 11 trucks transporting onions to Djibouti were caught in Dire Dawa last Friday.

The Ministry of Trade & Industry this week sanctioned the export of red onions to neighbouring countries because of the supply shortage in the domestic market. The Ministry ordered all customs stations to ensure that vegetables such as red onions and tomatoes are not exported abroad during times of high local demand.

“We then sent a letter to the Ministry of Revenues to stop the export of red onions and tomatoes,” Eshete said.

Another contributor to the shortfall in supply was the interruption of the import of red onions from Sudan due to the Novel Coronavirus (COVID-19) pandemic.

“The import of red onions will be resumed soon,” said Eshete. “We’re working to ensure the continuation of the supply of red onions from Sudan.”

The ministries of Agriculture and Trade & Industry are currently conducting assessments on red onion production in Oromia, Southern Nations, Nationalities, & People’s, and Amhara regional states.

The Ministry of Agriculture identified that low return on investment has made red onion a less popular crop with small-share farmers.

But these farmers are still getting the same value they were getting years ago, according to Desnet.

“The Ministry discovered that the middlemen get more value from the red onions than the farmers,” says Desnet. “The brokers are highly networked and dictate the buying price for red onions from the small-scale and household farmers where the prices are low. This discourages the farmers from boosting red onion production.”

To encourage the small-scale farmers, the Ministry of Agriculture, after assessing the situation, came up with a new strategy for the farmers to increase the value of their products. It initiated the establishment of more producer unions and local organisational entities through which the producers of red onions and other agricultural products can lobby the prices for their commodities.

“These entities are initiated to make the farmers the price makers, not the price takers,” said Desnet.

To shorten the transaction chains and reduce the wasting of agricultural commodities, particularly red onions and tomatoes, the Federal Cooperative Agency has started providing logistical assistance to the producers and consumer unions, according to Usman Surur, director general at the Agency.

“We employed the connection between the farmer and consumer cooperative unions to stabilise the price and the market by decreasing transportation cost burdens on the producers,” said Usman.

The exclusion of intermediaries from the transaction will benefit the producers and consumers as the values that were going to the brokers will now go to the farmers and buyers, according to Mohammed Aman, an assistant professor of agricultural economics and agribusiness at Haramaya University.

“It can work for the time being but can’t be a sustainable solution to the fundamental problems of the sector,” Mohammed said.

Mohammed argues that the principal factor for the problem is a supply shortage. There is steady growth in the agricultural sector, but there is also fast growth in demand for agricultural products.

The COVID-19 pandemic might bring about supply chain interruptions, according to Mohammed.

“The pandemic can easily disrupt the flow of products like red onions since it is a perishable good and producers can’t stock it,” said Mohammed.

To reduce waste, the government should provide the farmers and their cooperative unions with storage and transportation facilities to supply their products to the market in the shortest possible time, according to the expert.

“There needs to be an authoritative institution in place of transparent information service about the market,” said Mohammed. “Producers and consumers should be provided with information regarding the market to bring about smooth transactions.”

The government should take action to stabilise the prices, because red onions are a basic commodity not a luxury, according to Mohammed.

“The government should also focus on the long-term solution – boosting agricultural productivity by giving incentives and introducing efficient and mechanised farming technologies,” Mohammed recommended.

Getachew Reda . . .

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Getachew Reda, the increasingly combative spin doctor of the Tigray People’s Liberation Front (TPLF), says he is no longer optimistic about his previously held “level of optimism” that something “will pull some magic that could avert crises.” In his recent interview, he seems to have taken the rhetoric to a whole different level of asserting the constitutional rights of the Tigray Regional State to break away from the federation if it wishes so.

It is such inflammatory rhetorical exchanges between those in Addis Abeba and Meqelle that worried a group of elders and prominent individuals, hence prompting it to start mediation. Its goals were, however, modest, clams gossip. The group wanted to urge both parties to desist from making public statements that fuel the growing confrontations and discipline the media under their respective control to behave rather than amplifying drums for violence, according to gossip.

Jointly led by Mesfin Araya, a psychiatrist, and Tsadiku Abdi, a pastor, the 40-plus individuals began their journey-in-persuasion from Meqelle. A day earlier, the TPLF leaders invited figures from other parties and organisations following a formal request placed by the forum for political parties and civil societies in Tigray, gossip disclosed.  Although the forum brought together 25 representatives from political parties and civil society groups in the region, including Bayton, Salsay Woyane Tigray, Seb Hidri Civil Society and Tigray Chamber of Commerce, none were able to speak during the meeting held at Planet Hotel, claims gossip.

Three members of the political bureau of the TPLF – Debretsion Gebremichael (PhD), Fetleworq Gebre-egziyabher (Monjorino), and Asmelash Weldesellasie (Abay Nefso) – addressed the group, complaining about actions and inactions by the federal government that they feel have “alienated the people of Tigray”. To an opposition leader active in the Regional State, the group was more like a spiritual mission than practical or with a clear purpose, according to gossip.

Nonetheless, the group won a passive concession to bring the leaders in Tigray to be on board for an all-inclusive national dialogue on how to overcome an inevitable political impasse, claims gossip. But its members did not make it in time to meet the same day with leaders of the Prosperity Party (PP), for the aircraft had to be grounded due to technical difficulties, gossip disclosed. They had to wait for a night flight for their return back to Addis Abeba.

The group members met the following day with five leaders of the Prosperity Party at the Prime Minister`s Office: Benalf Andualem, head of the PP; Meles Alemu, deputy head; Alemu Sime (PhD), political and civic affairs head; Negussu Tilahun, press secretary for the Prime Minister; and Abebe, the latter who remained quiet during the whole session, gossip disclosed.

The Prosperitians tried to clarify and contextualise the many public statements their leader has made that aggravated the feelings of the TPLF leaders and their constituencies over the past two years, claims gossip. Only if prominent members of the group, such as Patriarch Abune Mathias, Cardinal Berhaneyesus, Grand Mufti Hajji Omar Idris, and Haile Gebresellasie, were to relent, claims gossip. Many were displeased for failed expectations of meeting the Prime Minister, claims gossip.

While some of them said they would have no desire to speak before an inclusive congregation of all contending parties was convened, some like Haile reiterated commitments from earlier efforts baulked at by federal authorities, gossip revealed. Some members of the group admonished leaders like Alemu for the mishandling of conflicts in Wellega Zone of the Oromia Regional State, gossip disclosed.

The meeting nonetheless was concluded ambiguously than the clear commitment for all-inclusive national dialogue the group of elders had wanted from the Prosperitians, gossip revealed. The latter said they would get back to the group after consulting their leader, Abiy Ahmed (PhD), a pledge remains open up until press time, claims gossip.

Egypt Changes Water Security Strategy, the Answer to Nile Dispute

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The messages from Washington, DC are unambiguous. They urge Ethiopia to relent to Egypt’s demand for a deal before it starts filling the Grand Ethiopian Renaissance Dam (GERD) next month. Glossed over in these messages are threats implying that Ethiopia could face an uncertain future in its relations with the United States and the multilateral financial institutions where it holds significant power.

Ethiopia, Egypt and, to a degree, Sudan are in a diplomatic impasse over disagreements about the filling and operation of the Dam. It is often the case that contradictory statements come from the parties involved in the talks. It was no different following their latest talks last week, during a video conference held on June 17, 2020.

It was part of an ongoing negotiation to set rules and guidelines on the first filling, scheduled to begin in July of this year, and the annual operation of the Dam and the impact this could have in the downstream countries. Negotiators from Ethiopia, and Sudan too, claim that many of the technical issues have been hammered out. Still, a legally-binding deal, which would include a mechanism for the settling of disputes between the three countries, is yet to be made.

Ethiopia’s Ministery of Water, Irrigation & Energy, believes that “negotiation requires prudence to safeguard the permanent right of Ethiopia over the Blue Nile.” This is while the Sudanese delegates said they needed “guidance” from their Prime Minister on the resolution of the legal issues.

For Egypt, these statements show nothing but “Ethiopia’s intransigence.”

In the meantime, the clock is ticking. And so is the desperation of Egypt’s leaders in the face of Ethiopia’s determination to begin filling the Dam in a few weeks. It is a decision that makes not only Cairo and Khartoum displeased. Washington, DC keeps weighing in to the constant irritation of Addis Abeba.

An unusual statement was issued over Twitter by the United States’ National Security Council demanding Ethiopia make a deal before it begins to catch water for the GERD. Just as ominous was the subtle remarks from the World Bank’s chief, David Malpass, who also served as the undersecretary of the US Treasury for international affairs under President Donald Trump. It is no secret that the World Bank has always been under the weighty influence of its most significant contributor and most powerful voter, the United States; but rarely does it coordinate messaging on such a regional issue.

It was only shocking to Addis Abeba to see the World Bank’s President take the trouble to emphasise during his call with Prime Minister Abiy Ahmed that “Ethiopia and its neighbours sustain constructive dialogue [and] cooperation on water sharing.”

It is hard not to read this as a thinly veiled threat.

The response was symbolic of a growing polarisation over the GERD between Ethiopia and Egypt. For the former, even its high officials minced no words. Abebe Abebayehu, head of the Ethiopian Investment Commission (EIC), responded to the Security Council’s comment saying, “It isn’t anyone’s damn business.”

The level of agreement across the political aisles when it comes to the GERD is similarly unprecedented compared to almost every other national issue. Even some of the Prime Minister’s determined detractors seem to be on the same page. If there is an issue Jawar Mohammed and Eskinder Nega could see eye to eye on, it is in their respective responses to the remarks from Washington, DC.

There has always been an overriding consensus in Ethiopia that no country has a right to dictate terms for a project that lies safely within its sovereign borders and the right to make use of its national resources.

On this, Ethiopia’s conviction is backed up by international rules that guide relationships between countries. For all of its remonstrations, Egypt has not invoked an international treaty that would prevent the completion of the hydroelectric dam. All it has to go on are colonial-era treaties that give it historical (read: hegemonic) rights over a river it neither is the source of nor consulted the country from which about four-fifths of the waters originate.

For decades, Egypt’s superior negotiating tactics have left Ethiopia on the defensive and framed the argument in such a way that the latter was the victim. Despite the absence of credible evidence, it has successfully painted Ethiopia as an aggressor attempting to severely curtail the supply of water to around 100 million of its inhabitants with an over-ambitious rapid filling schedule.

Its success has come in with its ability to play on the connection the international community has made between the Nile and the Egyptian culture and civilisation. It is a “fabled river at the heart of Egypt’s very identity,” as The New York Timesput it in a piece about the dispute over the Dam.

It is a view held in Egypt as much as outside of it. And it is a misrepresentation of facts that has helped Egypt stick with its outdated water security strategy, unwisely anchored on the Nile River. Hence, the answer to the disputes lies in its revision for broader cooperation with the 11 countries in the Nile Basin, having a combined population of over half a billion people.

Egypt may see the Nile as central to its history. It is a nation that prides itself in developing one of the oldest civilisations, tracing its roots to the farmers that settled around the floodplains of Egypt several millennia ago. It is an understandable self-image and appreciated too.

There is also another side to it. It is a country that experiences the highest level of inefficiency in water usage. Ironically, one of the most water-scarce countries in the world happens to be a net exporter of what experts call “virtual water.” No less than 10pc of water it receives from the Nile is sent out virtually through its exports of corn, a crop known to have taken double the volume of water in Egypt than in Europe. Yet Egypt could choose to conserve this water on other crucial needs and import maize from where it can be found cheaper.

Nonetheless, this is also about its leaders’ choices in anchoring their water security strategy over a source with fluctuating volume year to year, instead of tapping into the groundwater in the Nubian desert, which reservoir researchers estimate can represent a 500-year equivalent of waters from the Nile.

Egyptian leaders’ unwillingness to revise their water security strategy has put its negotiators in a position superbly described by Foreign Minister Gedu Andargachew, as people who “want to take but not give.” This could be because they are participating in the talks not due to a rational desire to compromise. They appear to be participating in the negotiations with the primary intention of arm-twisting Ethiopia into at least delaying the filling of the Dam.

The same goes for Ethiopia’s negotiators, who have no intention of conceding on the central part of the contention – when it is to be filled. Under overwhelming public pressure not to give in, they seem to be participating to show goodwill and placate a regional power with far more resources and influences on the international stage.

But while it is evident that no significant compromises are to be made by either country, it is Egypt that seems to have adequately understood this. It is expending its efforts to make its point on the international stage, despite the fact that the curve of history bends against its claims. Its go-to has been the United States, a country with an administration in the White House bent on buying Egypt’s silence, if not support, in its Israeli-centered Middle Eastern re-engineering. Egypt knows it cannot convince Ethiopia, but it is trying to persuade everyone else. It knows it cannot win the legal argument so it is thus attempting to superimpose a narrative that fits its perspective.

It is a tactic missing on Ethiopia’s side. Its diplomats need to win not just the diplomatic war but the narrative as well.

The history behind Egypt’s hegemony over the use of the Nile waters and its privileged position in shaping the global agenda can be successfully thwarted if Ethiopia takes the debate to Egypt’s water security strategy. It is indeed unfair, unsustainable and promotes unjust water-sharing arrangements within the Nile Basin. Egypt and, partly, Sudan are beneficiaries of a past they both should have rejected. It is the hypocrisy of the highest rank to have thrown out the yoke of colonialism only to keep remnants of it that continue to be beneficial.

It is seen, rightly, as an injustice faced by all the other countries of the Nile Basin. It is in solidarity with them, not unilaterally, that Ethiopia has the chance to make its cause heard over the Nile dispute.

Bill Outlines Formation of Secondary Market Regulatory Agency

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Ethiopia will soon have its own Capital Market Authority that will supervise and regulate a new financial market, where equities, bonds and financial derivatives will be transacted, according to a bill drafted by the National Bank of Ethiopia (NBE).

The bill is expected to be legislated before the end of 2020 and also proposes the launch of a secondary market in Ethiopia for the first time. A technical committee comprised of members from the central bank, the Ministry of Finance, the Office of the Attorney General and external advisors, has been working on the bill for the past year.

Having seven board directors, including the Minister of Finance, the Governor of the central bank, the Attorney General, three members representing the private sector and non-governmental institutions and a CEO, the Authority will report to the parliament. The parliament will appoint board directors from the private sector upon the recommendation of the Prime Minister. The directors have a three-year term with the possibility of a term extension.

The CEO and deputy CEO of the Authority, which each must have at least 10 years experience at a senior management level in law, finance, economics or management and have expertise in areas relating to money or capital markets or finance, will be appointed by the parliament on the recommendation of the Prime Minister.

The capital market will be established to support the development of the national economy by mobilising capital, promoting financial innovation, and sharing investment risks, according to the 63-page draft proclamation.

The Authority will regulate the listing and delisting of financial products including bonds and stocks on the trading platform, grant licenses for operation to securities brokers, securities dealers, investment advisers, fund managers, investment banks and collective investment schemes. It will also engage with the approval of operation as a securities exchange and derivatives exchange, among other duties.

The Authority will accord an exchange license to the establishment of the Ethiopian Securities Exchange, which provides the trading platform for financial products and will be established as a share company. The capital of the Ethiopian Securities Exchange is to be determined by the board members of the Authority.

The establishment of the Ethiopian Securities Exchange will have a share composition of no less than five percent and a maximum of 25pc to be allocated to the government. No less than 25pc and not more than 55pc will be allocated for corporations, capital market intermediaries, and international securities exchange operators. A minimum of 20pc and not more than 40pc of the shares will be offered to individuals with a maximum limit of five percent.

While the total shareholdings of international securities exchange operators and other foreign investors are not to exceed 25pc of the Exchange’s capital.

“The idea is to make the market predominantly owned by the private sector,” said a source close to the case, “and the government to be a strategic partner and market maker in the process.”

However, in the scenario where there might be insufficient demand from citizens, then the maximum limit on shareholding by corporations, capital market intermediaries, and international securities exchange operators can be increased up to 75pc.

In another scenario where there is no interest from citizens, corporations, capital market intermediaries, and international securities exchange operators, the maximum limit on government shareholding can be increased to 100pc.

The Ethiopian Securities Exchange Company will provide the trading platform for capital market products such as equities, debt securities, derivative instruments, units in a collective investment scheme, real estate investment trusts, currency exchange contracts and other products to be declared by the Authority’s directive.

“It’s likely that the market will kick off with stocks and bonds,” said the same source, an individual close to the case. “The other financial market products are listed in order to give breathing space for a legal framework to be in place to be used at a later time.”

The bill also grants capital market activities like buying, selling and dealing in financial market products, investment advice, underwriting, fund management, real estate investment trust management, and corporate finance advice relating to acquisitions and mergers.

To handle any kind of dispute in the securities market, the bill also outlined the formation of the Capital Market Tribunal to appeal against the decision of the Authority. Under the appointment of the Prime Minister, the Tribunal will have five members with a chairperson and a vice-chairperson.

The chair and the vice-chair should comply with the requirements the High Court judges should fulfill, while the rest of the members must have experience in law, commerce or accounting. The members will have three-year terms of office and will be eligible for re-appointment for a further three years.

“The idea is commendable; the country might see an increase in the formation of companies, leaving behind the traditional way of raising money,” said a macroeconomist who wanted to remain anonymous. “Regardless, on the ground, there are so many bottlenecks that need to be worked on first.”

For instance, the government needs to update the current accounting, auditing and disclosure standards to ensure transparency, which is a key in securities exchanges and cannot be built up overnight, according to the expert.

The financial sector needs major reform, including the central bank, in terms of capacity building, and the government should question the supply and demand of where the money will come from since the banks are in the throes of a liquidity crunch. The country does not have that many appealing companies to avail shares of publicly, according to the expert.

“It will take 10 years minimum to have a vibrant market, and the next three years will be a trial period,” added the expert.

The expert argues that the expectation of finding international security exchange operators to partake in the Ethiopian Stock Exchange to be unlikely.

“The country doesn’t have any oil or gold at its disposal. To think that investors will be interested is a far-reaching hope,” he added.

The source close to the case begs to differ on this.

Owning natural resources is not a necessary precondition for the development of the financial market; the growth of the country is an indication of the attention of investors, according to this source.

“We have banks, insurance firms and other huge companies that are interested in joining the market,” he said.

EY Draws Nearer to Advising Ethio Telecom Privatisation

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Ernst & Young (EY), an advisory, tax and transaction services provider, has moved closer to securing a deal to advise the partial privatisation process of the state-owned Ethio telecom. EY has been in a neck and neck race with Deloitte, another accounting and financial advisory firm, for the contract.

EY offered the lowest price of 3.72 million dollars to advise on the partial privatisation process of the over-a-century-old telecom giant. The second-lowest bidder, Deloitte made an offer that was 58,000 dollars higher than EY’s offer. The technical evaluation put Deloitte in the top spot with a score of 77.3pc, which was higher by a percentage point than its close competitor EY.

The aggregate weighting result placed EY on top, scraping ahead of Deloitte with a 0.1pc point difference. The winning company is expected to be announced in a week.

A total of four global consulting firms vied for the project, including EY, Deloitte, PricewaterhouseCoopers (PwC) and Ronald Berger. During the financial opening that was held on June 16, 2020, PWC, which came in third place on the technical evaluation, offered 11.17 million dollars, while Ronald Berger placed a bid of 4.65 million euros.

The Ministry of Finance, which has been handling the pre-privatisation process of the state-owned enterprise including Ethio telecom, floated an expression of interest for the project at the end of September, inviting international companies to supervise the privatisation process of the state-owned giant. The World Bank allocated the budget to hire the consultant under the Ethiopia Digital Foundations Project.

The bid had initially drawn the attention of KPMG, which was disqualified due to a conflict of interest that could arise following its ongoing contract with Ethio telecom in conducting the asset valuation. The state telecom giant hired KMPG last August to handle the asset valuation for one million dollars.

The winning consultant, which will be hired for an estimated 14 months, will undertake due diligence and recommend a feasible mode of privatisation of the company. The consultant will also be involved in the preparation of bid documents for the partial privatisation, review the initial asset valuation, identify bidder selection criteria, and undertake legal due diligence including taxes, contracts and liabilities.

The government has decided to divest 45pc of the company for privatisation, keeping 55pc under state ownership. Five percent will be availed for public subscription.

As one of the highest-earning state-owned enterprises, Ethio telecom generated over 22 billion Br in revenues, of which 73 million dollars was in foreign currency, in the first half of this fiscal year. It paid 3.9 billion Br and two billion Birr to the government in the form of taxes and dividends, respectively, in the reporting period.

The company was also able to push the number of telecom service users to 45.6 million, a 10.9pc increase from the same period the previous year. It raised the telecom penetration rate to 45.4pc. Out of its total customer base, 44 million use mobile devices, 22.7 million use data and one million are fixed-line users.

Once the Ministry of Finance hires the transaction advisor, it will hand over the privatisation process to the Public Enterprises Holding & Administration Agency and will commence implementation of the transaction alongside the consultant, according to the recently legislated Public Enterprises Privatisation Proclamation. The proclamation split the process into pre-privatisation, privatisation and post-privatisation.

In the pre-privatisation process, the Finance Ministry determined the modality of the company’s privatisation, the number of shares to be availed for sale, and ensure that the company is prepared for privatisation.

The proclamation, which was legislated two weeks ago, also gave the Ministry and the Agency the right to decide if a portion of a public enterprise will be reserved for the employees of the enterprise in question. The government shall also retain a golden share, which gives it veto power over board resolutions of the public enterprises on which it does not retain a majority stake.

Agency Drafts Directive to Activate Online Learning

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The Higher Education Relevance & Quality Agency (HERQA) has drafted a directive that will enable higher education institutions to teach undergraduate and postgraduate students online.

It is the first ever online learning directive and was sent to the Ministry of Science & Higher Education for approval last week. Once approved it will enable the Agency to regulate both private and public higher education institutions that provide online education. The Agency has been drafting the directive for the past year and a half in collaboration with experts in education, information communications and the law.

Mid-last week, the draft was tabled for consultation in the attendance of HERQA’s board members, which include representatives from Addis Abeba University, the Civil Service Commission, Kotebe Metropolitan University, the Private Higher Education Institution Association and the Ethiopian Chamber of Commerce & Sectoral Association.

The directive comes onto the scene at a time when all educational institutions from the elementary to university level are closed as a result of the Novel Coronavirus (COVID-19). Since closing, higher education institutions have been trying to deliver classes online.

The directive is expected to be approved and become effective in the coming two weeks, according to Andualem Admassie (PhD), director-general of the Agency, which will give accreditation to the institutions and renew their licenses. The Agency will also follow up with the institutions, set out criteria and support and control the institutions.

The directive aims at increasing access to higher education at various levels and meeting the needs of citizens who have not had access to online higher education, according to Andualem.

“It’s also important to outline a system to enable the Agency to license higher education institutions for online teaching, renew their licenses and regulate them,” said Andualem.

The directive will govern the 50 state universities and 250 other colleges across the country. So far, the Agency has registered a total of 1.4 million students that graduated from higher education institutions in the last two decades. For the current fiscal year, the government allocated 50.6 billion Br, 13pc of its total budget, for education.

The directive states that online education programmes shall be provided in the English language, except for language courses. Higher education institutions can admit students only after getting approval from the Agency, which was first established in 2003 and tasked with accrediting and re-accrediting programmes in higher education institutions.

To get approval from the Agency, the institutions are required to prepare a curriculum, outline a digital instruction design, arrange teacher and student support services and assessments, and set up a student registration system.

Education credentials obtained from online learning through the accreditation of the Agency will be equitably accepted, according to the directive.

The directive will enable institutions that are already well-equipped for the service but blocked from launching the service due to the lack of a legal framework, according to Wondwosen Tamrat, president of St. Mary’s University and vice president of the Private Higher Education Institutions Association.

“It’ll give an opportunity to the educational institutions to build up their technological capacity,” said Wondwosen.

So far, the Higher Education Relevance & Quality Agency has issued guidelines for regular, distance, and cross-border certification and renewal. It also accredits institutions and ensures that basic quality standards are met.

At least one education expert believes that the directive serves as an option to make education accessible to the community, but it remains an open question whether or not it takes social justice into account.

It makes a huge difference between students with access to the internet and without access, according to Belay Hagos (PhD), an associate professor at Addis Abeba University’s Institute of Education Research.

“It is obvious that online learning can be used only by a student who is supported by digital technologies and that it requires financial capabilities,” he said. “It seems that the directive is designed for just a few students.”

Nevertheless, it will have a significant impact on people with disabilities and those who do not have the opportunity to go to school, according to Belay.

Hyatt Regency Gets Back on Track with Paperless Services

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The Hyatt Regency, which stopped service for almost two months, has reopened its doors to patrons under a new style of operation. The hotel is now offering guests a paper-free experience that is in compliance with health and safety protocols.

The Hyatt Regency closed its doors in early April following the onset of the Novel Coronavirus (COVID-19) in the country and now has a new Standard Operating Procedure (SOP) aimed at functioning digitally. The hotel, which gave paid leave to its employees during the closure, has started implementing a Quick Response (QR) code that avails menus, hotel information and guest bills.

The QR codes are now functional at the restaurant where patrons use it to select from different menu options. The code is also used to open and close hotel room doors for guests. Guests are notified of all in-room messages and bills through the television in their room.

The hotel, which has almost 500 employees, launched these services alongside the use of mandatory protective masks, stationing hand sanitiser and other equipment for the hotel’s staff.

Hyatt Regency, which started operations in December 2018, has also undergone a new health and safety certification process aimed at protecting its staff and customers from COVID-19 known as the Pandemics Due Diligence Assessment certification by DQS Holding GmbH, an accredited auditing firm.

The hotel, which is Hazard Analysis and Critical Control Point (HACCP) certified, added an in-house certification and training focused on hygiene and cleanliness, according to Heddo Siebs, general manager of the hotel. This includes increasing its cleaning frequency along with using hospital-grade disinfectants on all high-touch surfaces, guestrooms and shared spaces.

A COVID-19 hotel and traveller’s protocol is being drafted by the Ministry of Culture & Tourism under its national tourism recovery strategy set for a second consultation on Friday, June 26, 2020. The hotel protocol is one part of the sector’s preparations to receive tourists.

The strategy considers the need to become operational while taking the necessary precautions, according to Tewodros Derbew, director of international tourism facilitation at the Ministry.

“Hotels aren’t the only sub-sector that should be engaged in this,” said Tewodros. “Every link and value chain in the process from when a tourist first steps in the country until that tourist leaves should be fully integrated.”

The aim is to protect the health of tourists and service providers alike while paving a path for the tourism sector to recover. However, the standards and guidelines have their own cost implications.

For this, the government is working on providing multidimensional support, according to Tewodros.

“There are plans underway in making certain machines or devices that hotels will have to use duty-free,” said Tewodros.

The Addis Abeba Hotel Owners Trade Sectoral Association, with 152 hotels under its wing, is one of many members working with the Ministry on the draft protocol for the hotels. The Association, which has 18,000 employees working at its hotels, is in the process of preparing for eventually re-opening.

However, this is not feasible at the moment, according to Biniyam Bisrat, chairman of the Association, which has just 22 of its 152 members currently operating and serving as quarantine centres.

“Hotels can’t hold meetings, tourists are not coming to the country and bars are also not allowed so to what end would hotels open up at the moment?” Biniyam commented. “However, the Hyatt has set the bar high and we consider it a best practice example.”

While the costs related to re-structuring modes of operation and training staff will be an additional burden for a sector that is currently retaining its employees out of pocket, Biniyam agrees that it is still a necessary step.

“It is mandatory to maintain the safety of employees and customers,” he said. “If we aren’t able to do this, it’ll be impossible to stay operational as an industry and a country.”

One factor to keep in mind is how hotels can promise international tourists that they have clean and sanitised facilities as per international standards, according to Yonas Moges, a managing partner at Calibra Hospitality Consultancy & Business Group.

“Providing a cleaning manual and a well-prepared staff ahead of time is another important element,” he said. “The industry also needs to work on its offers for the local community which will be its first clients upon re-opening.”

Yonas also recommends sourcing sanitising materials in advance and reconsidering hotel amenities as another focal point for the sector.

Ethiopia Permits Self-Isolation to New Entrants

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The government has loosened the chains around the state of emergency decree, allowing funerals to take place with the presence of families and cutting the mandatory quarantine period by half for those arriving in the country. The adjustments were made even while Novel Coronavirus (COVID-19) infections continue to proliferate.

The Ministry of Health sent a letter to the Office of the Attorney-General with a list of articles to be revised in order to reduce the pressure on medical centres that are critical to containing the outbreak.

The revised directive has kept intact the number of people allowed to attend a funeral to 50; but after the death of a person, family members are required to notify Ederor weredahealth centres and hand over a sample. Then family members can go ahead and hold a funeral ceremony without waiting for the results of the sample. But the government will continue to hold burial ceremonies for the death of those without family members.

“However, family members are required to take all the necessary prevention methods through the process of burial,” said Seharela Abdullahi, state minister for Heath.

Previously, family members of the deceased had to wait for the results of the sample, which has resulted in keeping the body at home for more days due to the limited capacity of laboratories. And the burial process was attended by the presence of security forces.

With the increasing number of positive autopsy reports, the government had assigned one laboratory in the Ethiopian Public Health Institute (EPHI) to handle the samples from deceased bodies.

“This has increased the burden on the laboratory, leading to psychological crises among family members who have been forced to hold onto the bodies of their deceased relatives,” she added.

Travellers who can produce a negative test certificate that was secured three days ahead of arriving in Ethiopia will be discharged to their respective homes for self-quarantine for 14 days. However, anyone with a positive test certificate won’t be allowed to enter the country and will be directed to return to their country directly.

In the case of people arriving in Ethiopia without any proof of a medical test, they must provide a sample for testing purposes and receive a response within three days.

If the sample is found to be negative, they must spend seven days in a quarantine centre and once released will be advised to maintain strict self-isolation for seven days and follow the advice of health professionals.

If the sample shows a positive result and the individual is asymptomatic, then the patient will be directed to one of the universities or schools being used as isolation centres and will receive the necessary care, as opposed to the previous arrangement which required that they be sent to treatment centres.

The government will advise on the procedure of self-quarantine upon the discharging of entrants and will sign a document of accountability. The prior procedure used to require that everyone entering the country remain in the allotted quarantine centres for 14 days.

“There will be a close daily follow-up with the discharged entrants,” said Seharela. “People must understand the magnitude of the issue and be held accountable.”

If anyone is found violating the mandatory self-quarantine at their respective homes they will be subjected to a punishment stipulated under the state of emergency decree.

Currently, the country is conducting 5,000 tests every day and has the capacity to run 7,500. There are 26 fully functioning laboratories, and 20 more laboratories are currently in the pipeline and wrapping up preparations. In the capital, there are six quarantine centres, close to seven isolation centres and four treatment centres.

On June 20, 2020, out of 4,848 laboratory tests, 399 cases were confirmed positive, pushing the total confirmed number of cases in the country to 4,469. So far, 1,122 people have recovered.

Tomoca Coffee Branches out to Kenya

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The seven-decade-old Tomoca Coffee company has joined in the deluge of international food and retail chains establishing a presence in Kenya and tapping into the continent’s expanding consumer class.

The oldest coffee chain in the country is testing the waters abroad with a new location that provides in-shop roasting and a packaging facility alongside a coffee drink service area spread over a footprint of 250Sqm, located at Two-Rivers Mall in Nairobi. The new coffee chain, which has taken on 20 Kenyan employees, will source its coffee beans from Ethiopia, Kenya and Rwanda, with a focus on single-origin blends of the house specialty.

Tomoca Coffee has chosen a joint partnership with a local investor for its new venture rather than the franchise model of expansion. The coffee shop, which will officially open its doors July 1st, will showcase Ethiopian products on its shelves such as honey, leather and textile products.

“Currently, we’re just having a soft opening for testing a few employees and handing out a visiting invitation,” said Wondwossen Z. Meshesha, chief global operations officer of Tomoca Coffee.

Spanning 12 months from planning to execution, the new flagship shop was designed by Elnes Design Consultancy & Marketing, the eight-year-old sister company of Tomoca behind the design of all Tomoca locations, and was constructed by a Kenyan firm.

“Kenya has a very young and dynamic population with a wide consumer base that demands high-quality products and services,” said Wondwossen.

The retail industry in Kenya is also supported by low overhead fees, mainly through low rental fees and attractive incentives by property owners, according to the operations officer.

“As part of the Common Market for Eastern and Southern Africa (COMESA) community, it is also a great benefit for us to venture out first within the East African community before elsewhere,” he said.

This is a commendable milestone for the historic coffee chain, according to Aweke Mekonnen, an independent marketing management consultant for close to a decade.

“The coffee chain, however, should have a strong grip over its brand abroad, as it’ hard to maintain quality in expansion plans,” he said. “It should also place Ethiopian managers at the outlets that know the brand inside and out.”

Tomoca is also taking Ethiopian coffee to new frontiers with an additional two Kenyan shops that will provide coffee drink services only. The new coffee shops, which will both have a size of 100Sqm, are currently under construction.

With a new strategy, the coffee chain plans to expand aggressively within the continent in the next 10 years, aiming at a minimum of 250 shops. Standing on its symbolic title as the oldest Ethiopian Coffee chain in Kenya, it aims to take the Ethiopian blend global with a step into North America next year, then Turkey, the United Kingdom, Europe, the Middle East and Asia.

“We had to wait for a couple of months before opening our doors due to the global pandemic after finishing up our investments,” said Wondwossen.

Tomoca Coffee, which took eight years to branch out in Ethiopia, also plans to open 100 coffee shops in the country over the next decade. Currently, the coffee shop is setting up a new state-of-the-art coffee factory with an investment of 10 million dollars to pursue a value-added roasted coffee for the international market.

The new coffee factory, which is awaiting the installation of machinery after taking close to two years for construction, is expected to employ over 100 employees. For its local operations, the coffee giant built a coffee factory that sprawls over 1,500Sqm in Dukem eight years ago.

Tomoca Coffee, which started in 1953, is now supporting more than 300 employees with 11 branches in Addis Abeba and one branch in Bishoftu (Debre Zeit). The chain is currently working on constructing five additional branches in the capital.

Bankers Association Sets Up Committee to Offset COVID-19 Impact

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With growing concern at the spread of Novel Coronavirus (COVID-19), the Ethiopian Bankers Association, a consortium of commercial banks, has formed an ad-hoc committee that will work on lessening the impact of the virus on the industry.

The new committee, which was formed two weeks ago with one member from every bank for a total of 18, is working on preparing guidelines for the banks to use in their daily operations.

Employees of banks working in the finance department, messengers delivering cheques and bank tellers are highly exposed to the virus. So far, employees working at over half of the banks have contracted the virus. Tellers, security guards, branch managers and messengers are among those who have tested positive. Now, the bank executives are taking action.

The committee, which held its first meeting last week, has outlined the working pillars of the plan, which include guidelines for the safety of employees, customer service and corporate social responsibility. After the first meeting, the chair of the committee sent a questionnaire for the commercial banks to reflect on what kinds of measures they have taken so far. Many of the banks have already responded with preventative measures and crafted stimulus packages for various sectors.

Ever since the virus first arrived in the country, banks had been organising a committee that observes the ramifications of the spread of the virus and suggests counter measures. Most of the banks have raised the cash withdrawal limits on ATMs to minimise the necessity of customers arriving at branches. They have also waived fees on ATM transactions.

“We’re supplying sanitiser, soap, gloves, masks and other necessary protective gear to every branch and head office,” said Wondoessen Teshome, president of Enat Bank.

After going through the replies of the banks, the committee will create a draft of its guiding principles and table it to the board of the Association for approval, according to an official statement from the Association.

Part of the ad-hoc committee’s job is to devise a plan that allows bank management to work remotely at their homes without affecting operations in order to prevent the deaths of top executives, according to the same statement from the Association.

“The committee will also look for a real-time solution to handle cheques,” he said.

Following the directive that changed the daily cash withdrawal limit, cheque transactions have increased at banks. Last month, the central bank limited the daily and monthly cash withdrawal to 300,000 and one million Birr, respectively. It also restricted the amount businesses can withdraw each day to 300,000 Br and 2.5 million Br a month.

Recently, the National Bank of Ethiopia sent out a circular to all commercial banks requiring them to temporarily shut down any branch location that was exposed to the virus. The banks should ensure service is provided at a nearby branch until all staff members get tested, and the necessary disinfection is carried out at the specific branch.

The banks are also required to report to the central bank at the time of the incident and the subsequent reopening of the branch as well.

The most effective and easy way is for customers as well as the public to wash their hands after handling money at any time, according to Tadele Bogale (MD), a public health expert at Family Health International 360.

“There is no warning about using banknotes or cheques as long as people wash their hands immediately afterward,” said Tadele.

The banks, as major economic institutions in the country, need executive succession plans during the COVID-19 pandemic, according to Abdulmenan Mohammed, a financial expert with close to two decades of experience.

The plan should include the list of the executives who will replace the existing senior managers of the banks if the pandemic affects bankers, according to Abdulmenan.

“The plan should also include scenarios for the foreseeable future,” he said. “The governing bank should demand the banks prepare succession plans as the Central Bank of Kenya recently did.”

Setit Water Joins Thriving Bottling Business

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Adas Trading Plc, a local livestock export company, has started bottling Setit Purified Spring Water in the Western Zone of Tigray Regional State after investing 60 million Br.

Built on 10,000Sqm of land, the plant is located at Rawian town, eight kilometres from Humera. It distributes the water in half-litre, one-litre, two-litre and 20-litre bottles. Setit, which operates with 59 permanent and 11 contract employees, produces 18,000lt of water an hour and plans to increase its production capacity in the coming months.

The company is the 15th water bottler in Tigray Regional State, 10 of which are operational. It also joins the 97 other bottlers operating at the national level. After being certified by the Ethiopian Conformity Assessment Enterprise last April, the bottler started supplying its products to the market.

The company has chosen Rawian due to the existence of natural spring water, an abundance of water resources, and the availability of an important geological resource to the industry, sandstone, according to Kibrom Mulugeta, CEO of the company, which was established in 2015 and exports livestock to the Middle East.

The construction of the factory began in 2014 and was completed late last year. The construction was delayed due to a foreign currency crunch, power supply shortage, and delays in electricity infrastructure development, according to the managers.

The company imported the bottling machinery from China for 33 million Br. It invested 27 million Br in the civil work of the construction. The Development Bank of Ethiopia (DBE) covered 70pc of the investment through lease financing.

The factory operates for nine to 10 hours a day because of the hot weather conditions in the area that make it difficult for employees to work the whole day, according to Kibrom.

The marketing strategy of the bottler is granting franchises to organised youth. It is working with municipal governments to organise unemployed youth to receive loans in exchange for distributing its products, according to Kibrom.

It has already co-organised 57 youth in Meqelle and 20 in Humera to retail its products. It began distributing its products in Western and Northwestern Tigray three months ago and started sales in Meqelle two weeks ago.

“We’ve so far given the franchises to organised youth in Humera, Shire, Sheraro and Meqelle,” Kibrom said.

Hailemariam Kebede (PhD), an assistant professor of marketing management at Addis Abeba University’s School of Commerce, appreciates the marketing strategy of the company.

“It’s a viable strategy since the youth are familiar and have close contacts with the public,” he said.

The bottler will be benefiting from the local market, according to Hailemariam.

“Most of the bottlers in the country are located around Addis Abeba, and thus Setit can take advantage of the lower transport cost to penetrate the market,” Hailemariam said.

Being the pioneer in western Tigray, the bottled water manufacturer is benefiting from the large demand for its products, according to the CEO.

“We found the market very encouraging since there is a demand for our product,” Kibrom told Fortune.

The huge demand and high returns are encouraging businesses to join the water bottling business in the Regional State, according to Daniel Mekonen, deputy commissioner of the Tigray Investment & Export Commission. He adds that many bottlers located in Addis Abeba and the surrounding area are still supplying their products to the Regional State, indicating that there is huge market potential for the sector.

“Most of the bottlers in the Regional State are expanding their businesses,” said Daniel.

The bottler should compete in terms of quality and packaging by introducing new techniques and modern technologies, Hailemariam recommended.