FORTUNE+ VIDEO SPONSORED CONTENTS ADVERTORIALS FORTUNE AUDIO Fortune Careers New TRADE AFRICA New

Fortune Logo

Month: May 2021

BANK ROLL

Posted on by Web Master

Upbeat, Shimelis Abdisa (left), president of the Oromia Regional State, walks out of the main hall of Sheraton Addis with Dima Negewo (PhD), a veteran politician and a member of the national economic advisory council, and Lencho Bati, Ethiopia`s ambassador to Saudi Arabia, for a morning break. The occasion was Oromia Credit & Saving Share Company’s graduation from a microfinance institution (MFI) to a full-fledged commercial bank. It gets a new name, Sinqe, which refers to a stick held by women in the region and a new headquarters – which just began construction – to fit its new stature.

Although there are currently some 20 banks under various stages of formation – a proliferation that has led the central bank to raise the minimum paid-up capital to five billion Birr – Sinqe will likely be one of the major players in the field. The road was opened by a directive last year that allowed microfinance institutions to transition into commercial banks. It is doing as such with seven billion Birr in paid-up capital, only behind that of the state juggernaut the Commercial Bank of Ethiopia’s (CBE) 40 billion Br.

But banking is in such momentum that Sinqe was only one of two banks inaugurated last week.

Three days later, in another lavish event at the Hyatt Regency, Selam Bank’s founders celebrated the green lighting by the central bank of its entry into the unchartered waters of mortgage banking. The only other institution to attempt the same is Goh Mortgage Bank, which is itself under formation after mobilising around half a billion Birr in capital. With two million shares availed to the public, Selam Bank hopes to provide an ambitious 200 billion Br worth of mortgages over half a decade. Zemedeneh Negatu, an Ethiopian American businessman, addresses the founding meeting held last week.

Sun Shines Brightly on Telco Market. Beware Misgoverning It

Posted on by Web Master

Those entrusted with public office may love throwing events; but, no one is doing it as enthusiastically and glamorously as the Ethio telecom.

Its first-ever female Chief Executive Officer (CEO), Frehiwot Tamiru, has spent the past few months hopping from city to city and towns – with Dire Dewa being the latest – to unveil 4G LTE services. She is usually joined by country office managers from Huawei, the Chinese technology firm position to become a leading telecommunications infrastructure provider to Ethiopia. Perhaps, her biggest bet on the company came earlier this month, when Telebirr, a mobile money service app, was launched.

It is not just the events and lavish launching ceremonies, though. Over the past three years, the state telecom monopoly has introduced a range of products and services, including an airtime credit where the recharge data of users is appraised automatically. It also cut its tariff when inflation was biting across the country and engaging with its users far more frequently than it used to.

What suddenly fired up Ethio telecom from a disinterested public monopoly to an ambitious disrupter?

Its rather young and ambitious CEO has turned a page or two from the books of the financial sector. When it opened up for domestic competition in the mid-1990s, executives of the gigantic Commercial Bank of Ethiopia (CBE) were little prepared. They had thought long years under the state`s ownership, size and capital would shield them from the onslaught awaiting them. They were proven wrong.

Frehiwot and her executives face far more unmerciful competition from international competition with the liberalisation of the telecom sector. The threat of liberalisation and the potential digitisation policy aimed at powering the economy pushing her to swim rather than sink with an old vessel. Unless oiled and greased to cruise with speed and agility the ship sailing in the same water, she might have realised it a matter of time before the vessel she is captaining will indeed fall in the deepest surface of the market.

To the credit of Prime Minister Abiy Ahmed`s (PhD) administration, so much has changed over three years to reposition the market. Over the past three years, the Ethiopian Communications Authority (ECA) was reestablished while electronics transactions legislation was put in place, allowing public and private institutions to offer services digitally. The National Bank of Ethiopia (NBE) has allowed local non-financial institutions to offer mobile banking solutions. It has been one open-up and policy reform upon another.

The fruits have been visible. Mobile payment transactions have grown, streaming services have come onto the scene, the commercial industry is beginning to move online, and taxi-hailing and delivery companies are innovating new products and services as they rush to sign on more users and building communities around their hubs.

The biggest boost to the telecom market has come with liberalisation.

It is a move that threatens to rival the unquestioned monopoly of Ethio telecom, which enjoys monopoly over anything and everything telecommunications since 1894. It is not just the over 40 million subscribers that depend on it. Its monopoly on infrastructure is the entire digital ecosystem and everything else that runs on it.

Admittedly, Abiy`s administration has baulked at fully liberalising the telecom sector, having limited digital financial services to domestic firms and restricted investments from independent cell tower companies. The former rule means that the international consortium, Global Partnership for Ethiopia (GPE), which eventually won one of two telecom licenses, will not introduce mobile money services any time soon. The latter restriction forces the company to use Ethio telecoms already installed infrastructure, for a price.

But it is a positive start that should be welcomed. No doubt, the road towards liberalisation has been everything but bumpy. The restrictions that advantage Ethio telecom over potential rivals – which the Prime Minister promises will be lifted soon – has led to offers much lower than initially expected. It has pushed the administration to cancel the only other offer, for 600 million dollars, it had received. It is also unclear to what extent Western economic sanctions and restrictions will affect the country’s ambition for digital takeoff, as the United States has given half a billion dollars to the consortium, which Safaricom Plc leads.

Still, the news is massive. The consortium will buy the license fee for 850 million dollars. More consequential will be its plans for future investments, where it pledges to spend eight billion dollars over the next decade. It will significantly impact access to digital services, creating productivity gains for businesses through better connectivity and hopes to impact a million jobs.

The enthusiasm for the telecom industry parallels that of the brewery industry beginning about a decade ago when foreign players began to flood the market, albeit at a smaller scale. It impacted the lives and livelihoods of 62,000 farmers in the malt-barley production value chain, investments in bars and restaurants, revolutionised product marketing, brought in 1.5 billion dollars in foreign direct investment over half a decade and contributes over five billion Birr annually to state coffers through taxes.

Competition in the telecoms industry could do the same for the economy but on steroids.

Unfortunately, if there is one thing that has been a constant of policymaking and governance in Ethiopia, it is the ability to muck up a good thing. The digital space, at the moment, has new energy. Many of its players are young, and there is a modest but promising ecosystem of digital startups. There is also a global enthusiasm for greater digital coverage and innovations – capital is not as forthcoming, but pieces of training for digital startups are a dime a dozen these days.

Most important is perhaps that the telecoms sector is largely unsullied with the sort of administration that has bogged down growth in other areas of the economy. Hopefully, this will not continue for long, and policymakers today have the responsibility to help the sector avoid bottlenecks that have brought other industries – such as construction – to their knees.

One overarching issue is active and flexible governance, which could be learnt from the construction industry. Take, for instance, the constant disruptions related to cement supply. Half of the time, the authorities does have little insight into what is happening or which hole to attempt to seal. Its responses are contradictory and even worsens hoarding and illicit trading when price ceilings are placed.

The construction industry is also a living lesson on how deeply rooted corruption becomes when transparency and competition disappear. The meddling involvement of the state policing the supply chain beyond regulatory oversight has put prescriptions sending the patient back to the coma. Forget major projects like dams or roads, where millions of Birr could not be accounted for. Owners of small and medium enterprises under job creation programmes can only dream of being awarded contracts for the tiniest of work, such as part of a drainage system of a building, if they have greased the palms of local bureaucrats. This serves as a sobering entry into the construction industry for engineering professionals fresh out of school.

Perhaps the most important lesson federal agencies such as the Ministry of Innovation & Technology and the Communications Authority can take is that private players get crowded out in the face of a monopolising public sector. Take here the overwhelming advantages of Ethio telecom against competitors such as mobile operators that lack the network effects and necessary starting firepower to build on an economy of scale. It may not serve as a deterrent for players that come into the market with massive capital and decades of experiences, such as the Safaricom-led consortium. Still, it certainly complicates life for local players that are trying to break in.

This includes banks attempting to compete in the mobile money sphere, despite boasting a much more modest reach and experience in the field.

Telecom liberalisation also augurs consumer sovereignty, allowing market players to compete for users and support Ethiopia’s digitisation process. This would be hard to do with a policy framework that advantages Ethio telecom over its competitors. The administration needs to make good on its promises and allow the old monopoly to compete with other players. The alternative is that, while state coffers continue to grow, the telecoms sector will suffer.

Petrified Labour Cries  over Burdensome Living Costs

Posted on by Web Master

The day Rabia Ali found a job was unforgettable for her family. She had to walk for two hours from her homeland, Siyomba, a small town in Amhara Regional State, to apply for the job at Kombolcha Industrial Park. It was three and half years ago, but Rabia remembers it as if it was yesterday. Earning a monthly salary of 1,450 Br working as a machine operator at one of the textile plants inside the park, the 25-year old got married last year.

Rabia was excited. She was hopeful the job would enable her to save some to help her family, who can barely cover their monthly food expenses and perhaps start a small business of her own. But, the years rolled by, and her dreams remain unfulfilled. Saving from her marginal income was proven a tough chase. Inflation in the double-digits has been the scourge of many in the fixed income group whose wage remains stagnant in the face of the rising cost of living.

“The increasing cost of living has eaten all of my money, taking away my dreams along with it,” said Rabia.

Undoubtedly, she speaks for many, her experience mirroring the galloping inflationary pressure on household incomes.

When she first joined the industrial park, less than 900 Br was enough to buy a quarter quintal of teff, sufficient for a month for a family such as hers. It now costs five times as much in the area where she lives. Edible oil is now on retail sale for as much as 100 Br a litre, increasing from 60 Br.

Shiro, chickpea or bean powder used to make stew, is a staple diet in Ethiopia. The popular imagination considering it low-income families` meal; the cost to prepare a dish depends on the quality of ingredients used. It could cost a household little, and Rabia`s family consumes it on almost a daily basis. Shiro is priced 70 Br a kilogram, a 30 Br upsurge in three years. An item always on the top of her grocery list, berbere (an Ethiopian spice blend), showed an even more dramatic increase from less than 100 Br to 250 Br.

Rent, which comprises one-third of her recurrent household expenditure, rose to 600 Br from 450 Br.

The compounded build-up of prices in living cost represents a 44pc increase since she started work at the industrial park. Her salary grew by a mere eight percent. Inflation-adjusted, her real wage now stands at 1,090 Br, 25pc lower than her purchasing power a few years ago.

“So annoying, indeed,” says Rabia, in exasperation.

Rabia may not have grasped the economics of wage and labour. But she understands enough to describe her life as a “completely tedious” affair. Her story reflects the living conditions of millions of wage-earners, especially those under the fixed and lower-income ladder, across Ethiopia. These are the families most hit, where the official report reveals year-on-year inflation averaged 20pc in the last 12 months.

The state in Ethiopia remains the largest employer, with an estimated 1.5 million people under the civil service payroll. The private sector, largely the financial and the manufacturing sectors, follows where Rabia and many more salaries can  barely cover their monthly expenditure, of which 60pc comprises cost to food items.

The problem is severe in Addis Abeba, a city highly dependent on supplies from regional states and imports to get its food and non-food items.

A resident of Addis Abeba who requested to remain anonymous works in the administration department at the headquarters of the Federal Police Commission and earns a monthly income of around 7,000 Br, half of which goes to pay rent. He spends roughly 30pc of his salary on food supplies, while school fees for two of his three children top the regular expenditure. For as long as he has been employed, he struggled to save up to 15pc of his income for the rainy days. “Unfortunate circumstances and sickness” is how he describes the winter seasons of life.

“This is no longer possible with each of my expenses rising at a higher rate than ever,” he told Fortune, sipping coffee at a cafe around the Mekanisa area.

The authorities measure movements in prices and cost of living in the economy; through the federal agency for statistics, they release monthly data on headline and core inflation. In headline inflation, they follow prices that are not adjusted to remove highly volatile and seasonal food and energy prices. Known in the economics jargon as top-line inflation, the data covers year-on-year movement in prices.

Headline inflation in Ethiopia has been in the double digits since August 2017.

Precipitated by the devaluation of the Birr against a basket of major currencies (more so the Dollar) in October 2017 and later by further depreciation as deep as 21pc yearly, the economy saw its highest inflation rates in nine years during March last year, reaching 22.6pc. Though this figure dropped to 19.2pc last month, it remains higher than the eight percent target set by macroeconomic policymakers in Prime Minister Abiy Ahmed’s (PhD) administration.

The rise in wage across sectors of the economy remains stagnant or grow marginally compared to the galloping of prices.

Kassahun Follo has served as the president of the Confederation of Ethiopian Trade Unions (CETU) for over a decade. He leads a national labour organisation with no minimum wage, although the civil service has a threshold monthly income of 420 Br, almost 10 dollars at the current exchange rate.

“Wage is significantly low even before it was eroded by an increase in the cost of living,” Kassahun said. “Income earners, especially those in the lower bracket, are now in a difficult position. The inflationary pressure is leaving an indelible mark on the labour side.”

Ayele Gelan is an economist from the Univerity of Strathclyde, UK, and with over 30 years studying the domestic economy. Having a debut as a research economist for the Kuwait Institute for Scientific Research (KISR), he has been a vocal advocate for adopting an income policy, accompanied by and synchronised with supply-side policies for food and other necessities. He would argue that the way out of this “cataclysmic situation” would be revamping the wage structure, raising income from the bottom. This, Ayele believes, “fixes Ethiopia’s economic malaise.”

However, revamping wage to double salaries across the board would add about 3.5 billion dollars (147 billion Br) to the budget, an amount Ayele argues is “nothing” compared to spending on projects such as the safety net programs.

Doubling the monthly wage of income earners may sound wonderful to people like Rabia. But policymakers are reluctant to travel down this road, often downplaying the importance of wage adjustment in taming the inflationary pressure. They fear that doing so would lead to wage-push inflation, which results from a rise in the cost of goods and services as businesses try to offset the increase in the cost of labour by adjusting prices.

A close look into the inflationary pressure, according to Fikadu Digafe, chief economist and vice governor of the National Bank of Ethiopia (NBE), reveals that the upsurge in cost of living is largely driven by the increase in the price of food items, which is attributed to supply-side problems. He blames a lengthy supply chain and the involvement of intermediaries speculating prices.

“This is a country where you buy an item for a price three or four times higher than its farmgate price,” says the Vice Governor. “The involvement of multiple actors in the food supply chain did the job of controlling the inflationary pressure complex.”

He sees the use of fiscal and monetary policy measures futile as more than three-fourth of the inflationary pressure is contributed in the food component.

This has been reflected in successive reports from the Central Statistical Agency (CSA), the federal agency that monitors prices. The latest data puts food inflation at 21.7pc, signalling that the prices of all food items increased by the same percentage compared to the same period last year. The highest increase is seen in the price of edible oil, followed by dairy products (33.6pc), bread and cereals (27.4pc), and coffee (22.8pc).

The speed with which the Birr has lost ground to the Dollar and other major currencies over the last three years; on average 35pc, compared to the past two decades, is perhaps the most powerful driver of prices. The authorities may consider the fast depreciation of the Birr “necessary, no matter how difficult the trade-off” could be. They hoped to improve the economy’s competitiveness, boost export earnings, and reduce imports, though little has been achieved thus far.

For Mesfin Nemera, an economist and policy analyst with four decades of experience, including service to the central bank, it is perplexing to see a government that keeps depreciating Birr at the expense of ordinary lives.

“Without substituting imports and diversifying exports, it won’t bring a change in the competitiveness of the country,” said Mesfin.

Export revenues have remained below three billion dollars annually. Contrary to the wishes of the macroeconomic policymakers, import bills have only been reduced by a mere eight percent, reaching 13.8 billion dollars in the last fiscal year, with the country not able to substitute most of the goods that it brings in. The imbalance in trade and balance of payments causing the loss to the Birr remains alarming.

The Birr has depreciated by 25.8pc, 38pc, and 44pc against the dollar, euro, and pound sterling, respectively, since last year.

“Enough is enough,” Mesfin said. “No one deserves to suffer from such an ill-advised government policy.”

Rabia, too, has had enough. She wants the government to introduce a minimum wage, a promise that has vanished into thin air though incorporated in the labour law, revised recently.

“We can’t survive unless our wage is adjusted, which our employer is not willing to do,” said Rabia. “We need a regulated minimum wage.”

Ethiopian Electric Worth 382 billion Br

Posted on by Web Master

The state-owned power monopoly, the Ethiopian Electric Power (EEP), is worth 382 billion Br (8.7 billion dollars current exchange rate), as an asset valuation result revealed. This is slightly higher than the 302.3 billion Br of debt it owes to the Commercial Bank of Ethiopia (CBE).

The assets in the books of the company include dams, substations, and electric lines, among others.

An asset valuation job carried out by Fairfax Plc, a private consulting firm, has been completed after two and a half years. Contracted in November 2018 for 2.8 million dollars, Fairfax was expected to complete the work in eight months. The firm has rustled against PwC and KPMG, the big names in the international audit and consulting business.

However, the completion of the contract has suffered a two-year delay due to a misunderstanding that occurred while defining the scope of the work before the beginning of the actual valuation process, executives at the EEP conceded.

“The preparation process before the valuation began had been undermined,” said Yirgu Hailu, head of the Assets Valuation and IFRS Reporting Programme Office at EEP. “Our assumption that inventory and revaluing the assets of such a big enterprise would end in just eight months was wrong, considering the size and locations of its assets.”

Zemedeneh Nigatu, founder and global chairman of Fairfax Africa Fund, attributed the project delays to the vastness of EEP’s holdings and the difficulty of bringing in expatriates after the COVID-19 pandemic last year.

It is one of Ethiopia’s biggest-ever asset valuation projects, according to Zemedeneh.

“It shows how local companies are in a position to deliver such a huge task,” he told Fortune. “The time was fair considering these factors.”

The final report concluded that EEP has 24 power generation sites, 129 substations, 36,200 transmission lines, 948 vehicles, 48,000 pieces of furniture, and 3,232 buildings under its possessions. The market value of each asset was taken into consideration during the valuation since it is a prerequisite to comply with the International Financial Reporting Standard (IFRS), a job awarded to PwC Global Financial Services for 2.1 million dollars.

While the firm has already received 40pc of payment for the job, it has delivered inception and assessment reports and used the asset valuation report to convert the current accounting system of EEP, a generally accepted accounting principle (GAAP), and technically assisted the enterprise in making it ready for IFRS implementation.

“We’re now waiting for the external auditor [Audit Service Corporation] to finalise its process since the adoption has been completed,” said Yirgu, who expects the audit firm to deliver EEP’s IFRS audit report within a few months.

Prior to EEP, several state-owned enterprises have been converting their reporting system to IFRS, with the latest being Ethio telecom, consulted by PwC. Its asset value, carried out by KPMG East Africa Ltd, has increased by 42pc following the adoption. The state-owned Commercial Bank of Ethiopia (CBE) was the first financial firm to adopt IFRS, a year before the Accounting & Audit Board of Ethiopia (AABE) set the deadline. It was followed by all private banks and insurance firms, which complied with the reporting system in 2018.

Getahun Abebaw, an asset valuation expert with seven years of experience, sees IFRS as crucial to show the real value of assets companies have in their books.

“It helps state-owned enterprises and any other company to show the market value to the public, contrary to GAAP,” Getahunsaid.

Though the implementation of IFRS was originally scheduled to be completed in 2020, it was extended for three years. Institutions designated as being of public interest are expected to comply with the new reporting standard.

The valuation under the use of the state-owned electric producer excluded two big hydroelectric projects – the Grand Ethiopian Renaissance Dam (GERD), which is projected to cost over five billion dollars, and Genale Dawa, built at the cost of 451 million dollars – as well as the Repi Landfill Project, in which the EEP has invested 119 million dollars. The 335-million-dollar 500kv electricity lines connecting Ethiopia with Kenya were not incorporated in the valuation. It took assets that were in use by 2016, based on the accounting principles of IFRS, a year after Parliament passed legislation compelling companies to adopt IFRS for financial reporting.

The 64-year old state-owned enterprise has gone through major corporate restructuring since its establishment in the mid-1950s. Christened as the Ethiopian Electric Light & Power Authority (EELPA), it was a regulatory body as a sole generator and distributor of electric power for four decades.

Its corporate identity was divorced from its regulatory role in the mid-1990s, rebranded as the Ethiopian Electric Power Corporation (EEPCo). The companies business bundling generations of electric power and retailing to households came to an end in 2013, when Prime Minister Hailemariam Desalegn administration decided to separate EEP from the Ethiopian Electric Utility (EEU).

Recently, the government established the Liablity & Asset Management Corporation to soak up the debts of state-owned enterprises including EEP.

Amhara Region Places Two Billion Br in War Recompense

Posted on by Web Master

The federal government has received a request for reimbursement in billions from the Amhara Regional State, for costs incurred for medical treatment provisions to members of the Ethiopian National Defence Forces (ENDF) injured in the war in Tigray Regional State, among others.

A letter from the regional health bureau requesting reimbursement was sent to the Ministry of Peace, copied to the Ministry of Health, confirmed Alemtsehay Paulos, state minister for Health.

Since November last year, the civil war unabated in Tigray cost the Amhara regional budget billions of Birr, of which two billion Birr is requested as a recompense from the federal government, Fortune verified. Hospitals and health centres in the Amhara region are under pressure to undertake their usual activities, affecting the provision of health services to the population due to a surge in medical expenses.

Gizachew Muluneh, communications affairs director of the Amhara Regional Administration, confirmed that a budget request has already been sent to the federal government. “We’ve incurred high costs for measures that required immediate intervention [from the regional government],” he told Fortune.

Several public hospitals in the region have been put to provide medical treatment for injured military members. A Bahir Dar University referral hospital, Finote Ghion Hospital began receiving injured soldiers immediately after the conflict broke out last year. According to hospital sources, the Hospital sent some of its medics to the war front in the Western Command, deployed to provide treatments on the battlefront.

“Psychiatrists are still serving in these areas,” these sources told Fortune.

The radiology department of the Hospital sees up to four heavily injured patients a week. Still, the number was double during the early days of the conflict, according to a health worker who requested to remain anonymous due to the issue’s sensitivity. In addition to members of the national army, the Hospital has been providing care for members of the Amhara special forces, these sources disclosed.

Although the cost of these unanticipated services has put a toll on the Hospital’s budget, it has yet to ask for a reimbursement.

The Amhara regional state received 37.8 billion Br in budget support, representing close to eight percent of the federal government budget. However, the recompense its health authorities have requested constitutes a little over three percent of the 62 billion Br budget the regional council has approved for the fiscal year.

The budget for health services comes through three channels: treasury account, disbursed for general health purposes; support from bilateral and multilateral partners on project bases; and non-profit organisations.

The demand from the Amhara Regional State for recompense puts additional pressure on the federal budget, which is already stretched to pay for the war and massive humanitarian undertakings that followed. Federal authorities claim that no less than 70pc of spendings to feed the millions of people displaced in Tigray Regional State is paid by the government.

Fiscal risks of different natures can be addressed using various techniques, according to Andualem Tilahun (PhD), a macroeconomist. Recurring and anticipated shocks like drought can be managed through contingency budgeting and midterm shocks can be addressed through reserves insurance. Unanticipated shocks like these, however, cannot be solved through reserves or insurance, explained the expert.

What remains as a possible solution is to cut the budget from other projects or expenditures and finance immediate deficit or borrowing, the expert explained, citing that slashing funding for other areas or projects will likely aggravate economic issues stemming from the COVID-19 pandemic. Similarly, borrowing could cause more inflation.

“Both are unfavourable choices,” said the expert.

Having budget discipline that creates a fiscal space capable of accommodating such shocks would have allowed the government to better manage the situation, according to Andualem, who advised that non-inflationary borrowing to bridge the budget deficit could be the best way to go.

The crisis in Tigray has displaced nearly 1.6 million people since the conflict began, according to assessments conducted in April by the International Organisation for Migration (IOM). More are likely to join.

“Active hostilities have been reported across all of Tigray’s six zones in recent weeks, while volatile security conditions have rendered some previously accessible woredas – or districts – inaccessible,” says a report of USAID released on April 28.

Close to 282 million dollars of support has gone to humanitarian assistance in the regions with contributions from USAID and the US Department of State’s Bureau of Population, Refugees & Migration. Still, the federal government is expected to incur more humanitarian assistance, health services and military operations.

Dozens of Constituencies Excluded from Elections

Posted on by Web Master

The upcoming national polls will not see voters casting ballots in 14pc of the constituencies across the country. A total of 76 constituencies, including the 38 in the Tigray Regional State, where elections are not planned for this year, will not be part of the sixth national elections scheduled for June 21, 2021.

Officials of the National Electoral Board of Ethiopia (NEBE), chaired by Birtukan Mideksa, announced last week their decision not to conduct elections in 38 constituencies struggling with severe security issues, including four constituencies in Benishangul Gumuz, 14 in Somali, seven in Oromia, eight in Amhara, three in the southern regional state, and two in Harari regional states. The decision will mean that more than half of the constituencies in the Somali Regional State, where an estimated 6.5 million people live, will not be represented, while Benishangul Gumuz, home to around 1.5 million people, is also facing a similar fate.

When Parliament convenes in October 2021, there is fear over 15.5 million people will be unrepresented for the first time in 25 years, a major setback for the Board.

Around 36.2 million voters have been registered to cast ballots at more than 46,000 polling stations, but this number might differ if registrations in certain areas are kicked off and upon conclusion of auditing of voters` registrations, which the Board is currently conducting. Over 9,300 candidates have been registered for seats in regional councils and the federal Parliament. The Prosperity Party leads the flock with 2,799 candidates, followed by EZEMA`s 1,540.

With new legislation passed in 2019 and Birtukan’s return from the US to head the Board, the electoral board has undertaken restructuring that was hoped to meet expectations to conduct free, fair, and credible elections in 547 constituencies. The largest, 178, is in Oromia Regional State, followed by Amhara (138) and southern regional state (123). Somali Regional State and Addis Abeba have 23 constituencies each. While the number of constituencies in the peripheral states varies from nine to two, Tigray Regional State has 38 seats in parliament, but voters cannot exercise their constitutional rights due to the civil war raging there since November 2020. The latest assessment conducted in April 2021 by the International Organisation for Migration (IOM) reveals that there are 1.6 million people displaced within Tigray.

But it is not the only part of the country that election officials have deemed unsuitable for polling.

In parts of Benishangul Gumuz, areas where conflicts have been reported since 2019, including Metekel, there will not be elections conducted. The situation has escalated in the past few months, leaving more than 150,000 people displaced, and the area has been under military command beginning January this year. An estimated 500 people have lost their lives there since August last year, the Ethiopian Human Rights Commission (EHRC) report disclosed.

“The government is not adequately doing its job to guarantee security for the people,” Seifesilassie Ayalew (PhD), deputy president of Enat Party, which has fielded the third-largest number of 605 candidates, told Fortune.

Conflicts in the Somali, Afar, and Amhara regional states have been recurring, too.

These conflicts might not be contained within these constituencies, according to Eyasped Tesfaye, a political analyst. He foresees that it may get difficult for the electoral officials to hold the elections in other regional states.

The board announcement concerning 11 constituencies in Somali Regional State, where irregularities in voters` registrations were reported by contesting parties, might have informed Eyasped’s sullen view. The Board has formed a committee composed of its directors, lawyers, and representatives of civil societies to look into these allegations.

There has also been a dispute between the Board and the Harari Regional Government after electoral officials declined to let members of the Harari community residing outside of the regional state vote for the regional assembly, a practice that has been common during the past five elections. Earlier this week, justices at the Federal Cassation Bench upheld a ruling by the Supreme Court, allowing Harari voters to cast ballots to vote for the regional assembly, despite their legal residence elsewhere.

Despite the mishap, however, Seife Selassie believes elections in the rest of the country should go ahead while voting in the missing constituencies can be delayed, citing that the government is unlikely to address the security concerns in time.

“Though it will likely have an impact on voters’ decision making, I don’t believe delays will lead to a constitutional crisis,” he said.

Eyasped disagrees.

“Elections across the country should be concluded before mid-August, which coincides with the postponement made by parliament last year,” said Eyasped. “Failure to do would result in a constitutional crisis.”

Insurance Firms Warned of Bites from Political Violence

Posted on by Web Master

African Reinsurance Corporation (Africa Re.), the premier continental reinsurance firm, has warned its client firms in Ethiopia to apply precautionary measures when selling a political violence and terrorism policy.

This comes as demand for the policy coverage exhibits tremendous growth, with businesses starting to avoid potential losses due to conflicts. Alarmed by the ongoing political instability and recurrent conflicts across Ethiopia, Chaucer Group, an international speciality insurance and reinsurance company, has increased the risk rating for civil unrest to 3.7, up from three.

The civil war in Tigray Regional State, which involves Eritrean troops and the plodding killings of civilians across the country from intercommunal conflicts and insurgencies, has contributed to the increase in the risk level.

Out of 11 billion premiums the 18 insurance firms had written by the third quarter of the current fiscal year, political violence and terrorism insurance policies, also known as PVT, account for below three percent of their portfolio. However, claims they pay on these policies are likely to be much higher than for other policies, considering the large volume of assets the products cover. The policies give coverage to clients against losses due to riots, strikes, protests, and unexpected outcomes driven by political volatilities.

“We’ve alerted them to make risk management practice more stringent and avoid the accumulation of risk,” said Habtamu Debela, country director for Africa Re. “The combined risks that could be involved in a single loss event, due to an increase in exposure to political violence, can be higher. We haven’t, however, adjusted premium as we have not seen an accumulation of risk thus far.”

Political uncertainty is already high, and it is difficult to know when and where violence could happen, which make both insurers and reinsurers exposed to a large number of claims, risking their financial statements, according to Ebsa Mohammed, an insurance expert and manager of Alpha Consultancy.

Deadly and destructive protests in the Amhara and Oromia regional states led to the loss of more than five billion Birr worth of properties during the two years before the ascent of Prime Minister Abiy Ahmed (PhD) in 2018, according to an individual who has seen an assessment report. Many of these losses were not covered with PVT, imploring businesses to scramble in buying new policies to cover potential losses.

“Such amount of loss would have been catastrophic to insurance firms if they were covered,” said Habtamu. “With an increase in political risks, it would be appropriate to avoid risky businesses.”

Globally, political violence resulted in a significant increase in insurance claims last year. In the US alone, the protests after the death of George Floyd cost the insurance industry between one billion and two billion dollars in claims, according to Axios, an advisory firm involved in the insurance sector since 1974. Taking such global experiences into account, experts advise insurance companies in Ethiopia to act together.

“They have to do a risk mapping before it`s too late,” said Ebsa.

Nyala and United insurance companies took the pioneering role in introducing political violence and terrorism insurance policies in 2017. Almost all insurance companies provide this policy, with a premium amount between 0.7 Br and four Birr for 1,000 Br in assets. But the final deal depends on the risk involves where the property covered is located.

African Re sets a premium rate for some properties, including houses and vehicles, while it does a case-by-case review if the insured assets involve higher risks, according to  Habtamu.

Leaders and executives of the domestic insurance industry have little incertitude over what they face. They have already moved to soothe their risk factor, applying stringent measures in reviewing offerings of a product such as PVT. Awash Insurance, a market leader among private insurers, is among these firms.

“When there is an increase in risk, it means the chance of something unfortunate happening turns from probability to reality,” said Gudissa Legesse, CEO of Awash. “With the recurring political violence in the country, it’s obvious that the policy should be categorised as a real risk.”

Meseret Bezabih, CEO of United Insurance, echoed the same caution over providing political risk and terrorism coverage.

“We’ve already started turning back properties that involve higher risk,” said Meseret. “This includes vehicles and assets located in areas where there has been higher exposure to violence.”

Despite Gov’t Feud, Kelal Ticketing Expands Horizons

Posted on by Web Master

Despite a dispute over the taxation of e-ticketing with the Ministry of Revenues (MoR), Kelal Ticket Online Travel Agency has partnered with Nib International Bank to facilitate electronic payments for cross-country transportation. The company is the owner of Kelal Ticketing, a digital services technology that allows users to buy cross-country bus tickets remotely.

The company was established by two members of the diaspora, Hamdi Jami and Ephrem Getachew, in March 2020 with a capital of 1.5 million Br. The digital platform was launched in September last year and Kelal started its operation in partnership with Zemen Bus.

The platform came in handy for transport companies in light of a regulation issued by the Transport Authority under the Ministry of Transport obligating them to sign a partnership with electronic payment issuers. The letter sent out in mid-December of last year states that, as the previous working mechanism is backwards and susceptible to illegal dealing, ticketing is to be transitioned into electronic systems.

The cross-country transport companies were asked to report back to the Authority having made dealing with digital services provider of their choosing by the end of 2020, just weeks after receiving the letter.

However, the road has not been rosy for the founders who relocated from Europe in hopes of investing in digital technology in Ethiopia. The ticketing system was operating seamlessly for four months in partnership with Zemen Bus until Kelal got into a dispute with the Ministry of Revenues.

Hoping to expand its services by partnering with private limited companies (PLCs), Kelal requested permission from the Revenues Ministry, according to Ephrem Demesa, deputy CEO and shareholder of the company. The company submitted a permission request letter to the Ministry in August 2020 but came upon a stumbling block.

As a sole proprietorship, cross-country buses are obliged to pay a pre-defined amount of tax while for private limited companies, the amount must be calculated based on each sale generated. This procedure created a complication whereby the Ministry had to interject and request Kelal to fulfil certain requirements to be allowed to work with PLCs.

The outstanding issue that is yet to be addressed was the accuracy of the data generated by the online platform. The hesitance from the Ministry arose from its belief that the online transactions made could be tampered with, making it hard to accurately impose taxation on the companies.

The owners were asked to comply with requirements such as enabling a sequential ticketing system and providing details about travellers. However, even though these requirements were fulfilled, the Ministry was still sceptical and raised the question of trust, according to Ephrem.

“We come up with options and they tell us no,” said Ephrem.

Despite continuous deliberation with the Ministry on the matter, Kelal has yet to receive a solution. Several attempts to elicit a response from the Ministry of Revenues proved unfruitful before this edition went to print.

An electronic transaction law passed in May last year states that electronic receipts are legally recognised as long as the e-receipt is prepared in the form of an electronic message. The electronic message fulfils the contents of a paper-based invoice and ensures that it is traceable, reachable and readable if and when it is needed for future comparison or investigation.

Yohannes Woldegebrie, a tax law expert, cites that this law has given the green light for online transactions to be made and it is unreasonable for the Ministry to prohibit the ticketing service provider to be operational.

In addition to its partnership with Kelal Ticketing, Nib Bank, which has collected 39 billion Br in deposits so far, announced last week that it is working with Ethio-telecom to facilitate telecom utility payments digitally. It is also partnering with Flocash, an online payment facilitator, and GuzoGo, a digital travel booking platform, to allow its customers to purchase air tickets through their devices.

Second Mortgage Bank Begins Selling Shares

Posted on by Web Master

The second mortgage bank in the process of formation, Selam Bank has availed two million shares up for sale. The shares have a par value of 1,000 Br, with a minimum purchase of 10 shares required to join while the maximum amount an individual can buy amounts to 100,000 shares.

Selam, which now plans to go into operation in five months, was initially conceived in 2019 but selling shares was delayed due to the COVID-19 pandemic, which has taken the lives of more than 4,000 people in Ethiopia so far. In five years, the Bank plans to raise a paid-up capital of five billion Br, of which two billion Birr is expected to be collected before opening its doors to customers.

In a country where there has been no housing bank since 2017 after the acquisition of the then Construction & Business Bank, this has coincided with the establishment of the first mortgage bank. Founded by popular financial experts, including Getahun Nana, former vice governor of NBE and Eshetu Fantaye, former president of Bunna Bank, Goh Mortgage Bank is currently at the final stage of acquiring a license after the National Bank of Ethiopia greenlighted its request to begin the signing of documents of incorporation.

Selam Bank’s formation is led by 11 individuals including renowned businesspersons like Bethlehem Tilahun, owner of soleRebels eco-friendly footwear manufacturer, Zemedeneh Nigatu, an investment consultant and formerly a partner at Ernst & Young now serving as a Global Chairman of Fairfax, and Aman Fissehazion, founder of EBS television. Once the Bank begins its operations, customers will be able to take out mortgage loans with a down payment of as little as 15pc with a repayment period of up to 30 years.

Selam will lend at an interest rate a little above the inflation rate, according to Zemedeneh Nigatu. The organisers state that they are hoping the 10-year Perspective Plan, which aims to lower inflation to the single digits, will take hold in a decade’s time. Inflation in the past nine months of the current fiscal year has been hovering around 20pc. Last month’s inflation was registered at 19.9pc.

It however appears that the current figure of inflation will remain for the years to come, according to experts. This would mean that Selam Bank is planning to charge an interest rate above 20pc, which is slightly higher than the existing average lending rate at commercial banks, which hover around 14.25pc, and almost equal to the maximum lending rate of 21.5pc recorded in the first quarter of the current fiscal year.

“In a highly unstable economic environment, agreeing with a fixed interest rate for 30 years is too risky for the Bank. The risk will become pronounced if the saving rates increase. And this is a highly likely scenario considering the recent rise in treasury bill rates,” said Abdulmenan Mohammed, a finance expert with over a decade of experience.

The latest report from the NBE, published two weeks ago, reveals that the annual weighted average yield of a treasury bill has reached 10.7pc, an increase from 4.8pc at the end of the last fiscal year.

Additionally, Selam plans to lend up to 200 Billion Br within five years with an average loan of two million Br for each borrower. Complementary to traditional deposit collection, the organisers plan to partner with development partners to mobilise cash.

“As housing development is one of the priority areas of the government, we expect them to react as well,” said Zemedeneh. “From the experience of other countries, borrowers from mortgage banks have the tendency to be loyal customers, presenting an opportunity to raise additional working deposits as well.”

The terms and structure of their funding sources is also an issue. Deposits are short-term funds, which can be withdrawn at the customers’ whim. They are not suitable for funding a mortgage loan that has a term of 30 years, according to Abdulmenan.

Worku Lemma, a banking expert with two decades of experience, agrees, saying that mortgage banking services require sizable long-term funding. He added that the Bank should not rush to go into operation, rather it should take time to garner a decent amount of capital.

Prime Minister Abiy Ahmed (PhD) recently remarked that it is necessary to open up the mortgage banking sector to foreign banks, citing that housing is a critical issue and its solution lies in the banking system.

The pioneer, Goh Mortgage Bank, which is also in the race to start its operations soon, began floating shares to the public two years ago, mobilising 530 million Br in paid-up capital of the 1.2 billion Br subscribed.

The increasing number of mortgage banks coming up is not threatening to the sector as there is enough demand in the market and high housing need in the county, according to Worku. These banks will also have an opportunity to understand the potential risks tied specifically to mortgage banking and are capable of providing better financial packages specifically designed for the segment.

Housing demand and supply have been concerning issues in the country for years, with experts stating there is an outstanding housing deficit in the country. The National Ten Year Perspective plan conculded “the mismatch between the supply and demand of housing in the cities has led to complex economic and social problems, leading to unjustified spending and abuse of the majority of the population.”

Five Billion Birr Edible Oil Plant Goes Operational

Posted on by Web Master

A domestically-owned edible oil processing plant worth five billion Br, equivalent to the minimum paid-up capital required to establish a bank, has kicked off its operations. WA Oil Factory, built under the watch of its major shareholder and Chief Executive Officer, Worku Aytenew, the renowned businessperson involved in different sectors, has been under construction for almost five years.

The construction was handled by Chinese contractors, while expatriates were hired during the installation of machinery, commissioning, and testing periods. It will be inaugurated by the end of next week in the presence of government officials and other guests.

Having the capacity to process 1.3 million litres of edible oil daily, the plant is located in East Gojjam Zone, Amhara Regional State. It is the ninth investment of the WA group, which has been involved in the mining, aviation, farming, real estate, petroleum, and water bottling sectors as well as the trading and distribution of imported oil.

Having its head office in Addis Abeba, the new plant can also crush and produce edible oil from niger seed, sesame seed, peanut, soya bean, and haricot bean, besides being able to process crude palm oil imported from abroad.

Even though the factory’s civil works were completed earlier this year, its management had been waiting until the state-owned Ethiopian Electric Power builds a transformer and connects it with the national grid. Four megawatts of electricity is needed to run the factory.

“We’re getting enough amounts of electricity to run the factory,” said Alazar Ahmed, chief marketing officer of WA. “Testing has been completed successfully.” With a target of creating a linkage with at least 2,500 farmers to source raw materials, the factory has already stocked inputs needed to fully start production, according to him. “We have applied the latest German technology to run our machines,” the marketing chief added.

WA is the third edible oil factory to be inaugurated this year. With an investment capital of 4.5 billion Birr, Phibela Industrial, having the potential of processing 1.6 million litres a day, was inaugurated in February 2021. A month later, another factory in Dire Dawa, Shemu Plc, officially began its operations with a daily production capacity of 220,000 litres of edible oil, investing 1.6 billion Br thus far. While both started production with a refinery, WA wants to buck the trend.

“Aiming to save foreign currency, we’d like to source our raw materials from farmers,” Alazar said. But he did not hide the difficulty of accessing inputs locally because of the low production of agricultural commodities in the country.

During the last fiscal year, 7.7 million quintals of oilseeds, including sunflower and sesame, were produced across Ethiopia, portraying an eight percent annual decline. With a large chunk of such commodities exported abroad, most edible oil plants prefer to import the crude edible oil and refine it here, a path which has been followed by Phibela because of the unreliability of supplying inputs locally.

“In three years, we want to produce input on our own farm to make sure the supply chain is reliable. Until then, we’ll keep refining the crude edible oil,” remarked Eniyew Wassie, chief executive officer of Phibela.

Understanding such challenges and as a strategy to substitute direct imports of edible oil, the government has given a priority to refineries in availing foreign currency needed to import the crude edible oil, largely from Malaysia and Indonesia. The per capita monthly consumption of edible oil stands at 0.7 litres in Ethiopia, where the total demand stands at 71 million litres a month, half of which is being produced locally.

With the joining of four oil manufacturing projects, the country would be able to produce 50.6 million litres of palm, 27 million litres of sunflower, and 21.8 million litres of soybean oil annually.

But for Getachew Asfaw, an expert in economic planning with vast experience, this is only possible if there will be enough amount of forex required to import crude edible oil.

“This is a country where every dollar matters. The ultimate solution is boosting local production and substituting the raw materials, which can be harvested easily in the country,” said Getachew, suggesting that commercial farmers must be given an incentive to produce such commodities to satisfy the demand of the edible oil plants.

New Directive to Govern Online Media Outlets

Posted on by Web Master

The Ethiopian Media Authority has drafted a new directive to govern the previously unregulated and growing online media outlet market. Any individual or licensed business using the internet to disseminate the information in the form of programmes, news, or digital print must now be registered with the Authority and will be subject to the guidelines in the directive. Anyone using an online media platform for commercial purposes is also expected to register.

The move is in line with the media proclamation passed in parliament two months ago, which decreed that online media outlets must register with the Authority in much the same way as traditional print and broadcast outlets.

An online media outlet is able to get a business license only if it is registered by the Authority. The outlets eligible for registration are those under the proprietorship of Ethiopian citizens or domestically registered businesses with a maximum of 25pc foreign ownership.

The directive grants legal status to outlets that manage to fulfil the requirements set forth by the Authority, which hopes the legal framework will play a big role in improving press freedom laws, access to information, and provision of new financial opportunities to digital media outlets.

The requirements include adhering to laws against hate speech, curating content to make it appropriate for viewers, and protecting users’ data. The new media outlets are expected to keep their publications in their archive for six months.

They are also required to submit the short biography of their owner as well as the name and address of their Editor-in-Chief and General Manager, a stipulation which their representatives opposed during a discussion held two months ago at Sapphire Addis, situated along Namibia Street in Bole District.

Fanatahun Asres, mass media licensing and registration officer at the Authority downplayed the concern.

“Knowing their whereabouts is crucial since the public has the right to know and contact them whenever they think it necessary. Doing so is also crucial to hold them accountable for their actions,” said Fantahun. “This has been common practice in the media industry for long, not something introduced to regulate the online media outlets.”

A call for registration was advertised by the Authority two weeks ago even though the new draft directive is yet to be approved. Capitalising on the opportunity, DireTube became the first to get the license out of 28 online media outlets that showed interest. During the process, digital media outlets are expected to submit their internet provider, social media address, and a copy of an agreement with the social media providing company, if they have one.

“If any online media has a similar name with an already registered entity or is missing even one of the requirements, they can’t register,” said Fantahun. So far, 17 online media outlets have been registered.

“This will allow us to attract local advertisers, which is something that was unthinkable before, and also its the first official license available to online media outlets,” said Firew Abebe, director of DireTube, one of the most prominent online media outlets operating in the country.

Owned and managed by Hobinet Media Plc, which was founded in 2008 as a media production company, DireTube currently has over three million followers on Facebook. Approximately 31pc of Ethiopian social media users, which are estimated to number around five million out of over 24 million internet users, are active on Facebook while less than 10pc use YouTube.

Bante Abera, owner and founder of Andafta, which was founded in 2017 as a media production entity and now has over 408,000 followers on Facebook, says the directive falls short of understanding technological constraints. “It has failed to understand how digital media works. For instance, it has totally ignored that social media outlets have their own censorship rules. Some of the rules that are stated under the directive are already being regulated by the social media outlets that we use, including Google, YouTube, and Facebook.”

Anyone violating any of the laws stated under the new directive will be fined 200,000 Br and might even be suspended depending on the degree of the violation. Even though some expressed their concern on the enforcement of the new directive, citing the complexity of digital media due to its dynamic nature, Solomon Goshu, a legal expert specialising in media law, says the Authority can regulate based on complaints it receives.

“Even though it’s hard to regulate each activity of the online media outlets, the Authority, by establishing a separate directorate, can at least solve complaints in the digital media sector,” he said.

The directive allows the Authority to take administrative measures if any complaints brought against any online media outlets are valid. If neither party is satisfied, they have the right to take the issue to court 30 days after the Authority notifies the administrative measures.

Only Urgent Economic Rehabilitation Will ‘Liberate’ Tigray

Posted on by Web Master

On November 04, 2020, a war broke out between forces of the federal government and those of Tigray Regional State, including between players loyal to either side. Eventually, the Tigray People’s Liberation Front (TPLF) and forces loyal to it were ousted from Meqelle, the region’s capital, and the major cities. Despite this, recurrent fighting has continued, in what seems like guerilla warfare, using hit and run strategies and tactics to weaken the ‘invading forces’ and ‘liberate’ territories in the Tigray region.

What all of this has done is unleash a dire crisis, making Tigray ungovernable. The region is overwhelmed by security and humanitarian crises. With civilians losing their lives and being displaced, the situation has dashed the hopes of many that expected the region to return to a semblance of normalcy.

The TPLF-led forces, which are said to be fighting as Tigray Defense Forces, do not seem to have a centralised command system, and are fragmented in terms of command-chain, areas of operation and military organisation. This has aggravated the security and humanitarian crises. While such scattered military units may not anymore be a challenge to the power of those in the federal government or a threat to the territorial integrity of Ethiopia, it nonetheless makes it difficult to restore order and stability in Tigray.

Six months since the conventional war was ended and morphed into a form of an insurgency, the security situation in the region has shown little recovery. Several areas have remained without any essential government services. Only the northern, eastern, and southern regions of the region have seen some improvements. The humanitarian situation is worrying. Almost in all areas except Meqelle, there is no policing service and civil administration could not be re-established. Government institutions have remained mostly closed.

This situation will continue, but for a reason that does not seem to be getting much attention. Peace and stability in Tigray can not be returned without urgently rehabilitating the economy. The security and humanitarian crises should be addressed first and then the economy, many may argue. But this will not work for a region that has been maintained by federal subsidies and a federal army – the Northern Command – that made its base there.

To understand this, one has to go back to the bloody Ethio-Eritrea War, which took place with a pretext of a border conflict. The war created significant frustration within the TPLF camp and led to a split. The late Prime Minister Meles Zenawi, who was the first among equals before the war, subsequently dominated the TPLF leadership.

A no-peace-no-war situation reigned for the following two decades. It also devastated the economy of Tigray as the regional state was suddenly cut off from utilising the Massawa Port in Eritrea. Tigray could not be viable for genuine economic growth and development since it has been forced to look for other distant ports, such as Djibouti and Sudan, which are two to three times farther. The region also remained far from the centre of the Ethiopian political economy, which is Addis Abeba. It became a periphery and economically neglected.

TPLF had understood that Tigray would not be governable and economically sustainable without large federal spending and a vast security apparatus. As it had monopolised the media, security, and financial resources of the country, the regional ruling party put in place a large army in the regional state.

For the past two decades in Tigray, the major investments and development projects were coming from the Endowment Fund for the Rehabilitation of Tigray (EFFORT), which was eventually elevated to a public company by the regional administration. The region, nonetheless, did not receive private investments capable of creating significant employment opportunities and necessary for boosting the region’s export.

Take, for instance, the total credit provided to micro and small enterprises (MSEs) across the country, around 27.4pc of which went to the Tigray region, according to the Federal Urban Job Creation & Food Security Agency. But they created only 4.2pc of the total jobs created by MSEs throughout the country.

Since employment opportunities have been very limited, except by government institutions, migration to different parts of the country and the Middle East has become normalised.

Over the decades, extreme poverty has also remained rampant and unalleviated. More than a quarter of Tigray’s residents live under the poverty line, higher than the national average. Close to 30pc of the rural households are included in the Productive Safety Net Programme (PSNP), while only 10.8pc of rural households are at the national level.

Tigray also has the lowest percentage of potable water accessibility in the country, as well as the highest inflation rate compared to the other regions.

Such widespread extreme poverty and large youth unemployment have not been addressed or even significantly reduced. For such a long time, the region could not be competitive and viable for economic development due to the no-peace-no-war situation that forced the region to remain cut off from the Massawa Port.

The TPLF has had a media and narratives monopoly that levied a tight intelligence gathering system in Tigray for the last three decades. It had imposed a heavy top-down power structure. These scenes, together with the socio-economic problems, make the ongoing crises too hard to address.

This is why the ongoing Tigray crises can not be solved without urgent economic rehabilitation. Only healing the economy will normalise the current situation and stabilise the regional state. If economic activities, mostly trade, begin to operate, the youth could be engaged in economic activities and employed. Unemployed youth are always targeted for one cause or another, regardless of how just or unjust it may be.

The efforts made to normalise the situation and stabilise the region would be in vain if they are severed from economic rehabilitation programs. The latter should be aimed at reconstruction, and reconnection to the Massawa port and the commercial and industrial base of the country, Addis Abeba and the other major cities. The two tasks must be carried out in tandem.