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

Fortune Logo

Month: December 2022

YES Launches New Job Platform in Ethiopia

Posted on by Web Master

YES Launches New Job Platform in Ethiopia | www.yes.et

In a bid to curb rising unemployment rates in Ethiopia, YES | Your Employment Solutions has launched a new job platform, www.yes.et, to fast-track the employment process for both employers and job seekers. The platform, which is due to be officially launched in January 2023, is designed to be comprehensive and accessible, making it easy for employers to find top talent and for job seekers to find employment.

One of the standout features of www.yes.et is its user-friendly interface. With an intuitive design, the platform is easy to navigate, allowing both employers and job seekers to quickly find the information they need. It also features a responsive design, allowing it to be accessed from any device at any time.

As an employer, finding the right fit for your company can be a time-consuming and stressful process. However, www.yes.et offers a solution to streamline this process. By posting job openings and reviewing candidate qualifications on the platform, you can easily find qualified candidates. Additionally, the platform provides an opportunity to submit job orders for recruitment assignments, allowing you to find a recruitment partner to take on the task of finding the right fit for your company while you focus on growing your business.

Job seekers, take control of your career with the launch of www.yes.et – your direct gateway to new and exciting employment opportunities. The platform’s broad list of openings across a range of industries ensures that you can find a career suited just for you. Don’t miss out on the platform’s strategic resources either, including resume builder tools and the ability to upload your resume so employers can come knocking at your door.

www.yes.et stands out with its all-encompassing approach to career possibilities. The platform facilitates an effortless transition from entry-level recruitment to executive roles, catering to every stage of your professional journey. With a wide range of industries and positions available, you’re sure to find the perfect fit for your skills and experience.

According to Abel, a job seeker who worked with YES, “I had an amazing experience with YES Employment. Starting from the application process to the final interview, it was very streamlined and professional. Throughout the whole process, the staff was very polite, friendly, and helpful.” Another job seeker, Michael Getachew, who was placed in a company by YES, had similar experiences, stating “it was professional, quick, and satisfactory. I have been recommending and will continue recommending YES for their amazing service.”

In addition to the already existing platforms, employers and job seekers in Ethiopia now have an additional innovative and accessible platform for connecting. As a tech-based HR and employment solutions provider, YES aims to significantly transform the recruitment process in Ethiopia through the creation of an extensive online marketplace for job matching. By using YES, employers and job seekers in Ethiopia can access valuable opportunities. Join the movement and start pursuing success at www.yes.et

The Year in Rear Sight

Posted on by Tizita S.

January

Liquidity Crunch Casts Menacing Shadow Over Banking Industry

The financial market is nervous, central bank authorities are relaxed, and industry executives remain sanguine over their prospects. Nonetheless, Ethiopia’s banks are heading to a liquidity crunch due to sluggish deposit mobilisation imposed by the militarised conflict in the north and a resurged demand for credit.

February

Ballooning Input Prices Batter Construction Industry in Tatters

The construction industry continues to wallow in the murky waters brought on by the COVID-19 pandemic, foreign currency shortages, and illicit business in the trade of building materials. Construction firms increasingly avoid contracts that include the responsibility to buy the materials for fear of runaway inflation. Neither are project owners faring well.

March

Edible Oil Oily Prices, No Respite for Consumers

Consumers were shocked by an absurd jump in the price of cooking oil last week. It occurred in less than a year for the second time, casting serious doubts over the authorities’ desire for import substitution and improved domestic production. Consumers and experts are left wondering whether the billions of Birr spent on building giant oil plants and importing raw materials could have been put to better use elsewhere.

April

Lamb to the Slaughter: Livestock Markets in Disarray

With the season of Lent over, the busiest time of the year for innumerable butcheries in Addis Abeba begins as consumers flock in for their fill of meat. However, rising prices mean that consumers have not been as quick to do so this year. A dreadful drought in pastoralist areas, ballooning costs for feed, transport disruptions due to war and conflict, contraband trade and an overly complex supply chain are pushing prices upward, displeasing consumers.

May

Anything But Numb

A debilitating shortage of anaesthetic drugs has left patients in need of surgical intervention and desperately waiting. Public hospitals have been forced to stop admitting patients for surgery as stocks run dangerously low despite record spending on medical imports. It is a frustrating predicament for medical professionals who have toiled on the frontlines of the battle against the pandemic, and a nightmare for patients who have nowhere to turn.

Jun

Crime on the Rise in Addis Abeba

Runaway inflation and unbridled unemployment are pushing the youth of Addis Abeba deeper into a life of crime. Purses and phones being snatched on the roads is hardly newsworthy anymore, while cars are reportedly being stolen in broad daylight. Even more worrisome is the lack of solutions.

July

The Great Scramble for Skilled Labour

A flood of new entrants and industry hopefuls are queued at the thriving financial sector even after the central bank raised the minimum capital threshold to five billion Birr. The rush presents opportunities for a country with low financial penetration, but with it comes a challenge for the industry. The banking sector is scrambling for a skilled and experienced workforce. Executives are forced to choose between ballooning expenses for wage and operating costs and professional staff.

August

Deluge & Disaster

Here is another year with torrential rains causing floods, menacing Addis Abeba and populations across the country. Residents wade through the rainy season, adding anxiety: mud, chilly weather, and sudden rainfall cause much grumbling in the capital. Yet, the storms also bring them mayhem as floods claim lives and damage properties worth tens of millions of Birr. Poor drainage systems, ill-advised housing developments, and pollution are among the culprits. And the capital is hardly prepared.

September

Back to School. At What Cost?

The academic year has begun. For most students, it is simply back to the routine after a three-month rainy break, known elsewhere as a summer break. For parents, it is a pressure growing worse each year due to ballooning prices for school supplies.

October

HOPE OR HYPE?

Ethiopian authorities pledge to see it not only become self-sufficient in wheat production. The prospect of becoming a net exporter country next year is within reach. Their field visits are often followed with pictures and video clips displaying lush green lands where tractors and agri machines roam around. However, it is not conclusive whether this is media hype or hopes to be realized.

November

Truculent Foreign Banks, Fragile Industry, Bullish Central Bank

The entry by foreign-owned banks and non-nationals into the financial sector has reached a point of inevitability. However, how to navigate through the web of opportunities they are hoped to bring and the risks they pose concerns many. The authorities have their blueprint; if not caution, the industry reacts with mixed feelings.

December

KNEE-JERK LOSS!

Adanech Abiebie’s mayorship of Addis Abeba over the last year is marred by news about the partial or complete hiatus on land-related services, all too familiar to residents of Addis Abeba. In August last year, the City Administration suspended all land-related services claiming to battle extensive illicit construction activities before rescinding them four months later. The consequences they impose go beyond disrupting plans and inconveniencing citizens; the city administration loses over half a billion Birr from service fees and capital gain taxes.

A TALE OF TWO LOGISTICS CORRIDORS

Posted on by Tizita S.

Ethiopia’s vital trade corridors have dual stories to tell, securing the well-being of truck drivers. Thousands prefer to drive on the Dewale passage, trying what they can to avoid driving through Galafi. The road had been damaged, and security was precarious, leading to the death of several. Drivers’ ordeal is only a glimpse of the tribulations of an industry the authorities are pushing to transform against resistance.

Policy Unpredictability Pernicious, When Frequented Dreadful

Posted on by Tizita S.

Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But he also has the unfortunate reputation for sighing ordinances that disrupt businesses, if not cause self-inflicted damage to the city administration’s revenues. Three weeks ago, he instructed the heads of seven bureaus and 11 districts to stall processing ownership transfers of immovable assets pending further notice.

It was not to be the first capricious decision.

Last year, the Mayor’s Office took a similar decision before rescinding it six months later. It may be unfair to blame Adanech and her team for these unpredictable policy decisions. The Mayor is not the first or would be the only official compelled to take actions on the go, prompted by market dynamics the authorities deem undesirable. A decade ago, the city administration under Kuma Demekisa froze all construction activities in the capital for nearly two years, causing painful losses to many businesses.

A few months ago, the State Minister for Finance, Semereta Sewasew, signed an order banning the imports of hundreds of goods bundled under 38 categories. The uproar and chaos the decision brought into the market and the havoc it inflicted on livelihoods imposed a sense of realism on the federal authorities responsible for it. A few weeks later, they had tinkered with the initial list, allowing the hospitality industry and supermarkets to use their forex sources to import liquors and consumer goods.

The disruption a state interference caused in the cement prices eventually led the product to fade from the retail market. Caping cement prices at factory gates while letting loose the cost of inputs the plants no longer control and inconsiderate of the growing cost of production in labour and energy pushed the manufacturers to desperation. The losers remain the end users subjected to paying close to 2,000 Br for a quintal of cement in the retail market, more than double the price the factories sell.

Minister Gebremeskel Challa and his team at the Ministry of Trade & Regional Integration (MoTRI), known for their meddling in the cement value chain, were driven last week to take a policy U-turn. They let the factories sell what they produce to whoever could be interested in buying from them.

These episodes can help reveal the state of utter confusion in policymaking meant to respond to existing crises and shortages. However, the abruptness and spontaneity of policymaking harm businesses that are averse to unpredictable environments.

Corporate managers design strategies, board directors nod, and businesses thrive with the assumption that the future is predictable – mostly. Such an assumption also considers risk factors and unexpected shocks, some of which could even be what Nassim Taleb characterises as “the Black Swans”. These are highly improbable events with enormous impacts, but people try to explain them afterwards. From the global financial meltdown of the late 1990s to the economic collapse a decade later and from the September 11th attack to the global pandemic (again a decade later), the world is abounding of Black Swans.

Business leaders often stretch their imaginations to prepare to respond to these improbabilities. They plan contingencies and reorganise themselves and reallocate resources to overcome external shocks to contain losses and survive.

However, when a political and business environment gets defined by perpetual unpredictability whose source is policymaking in a knee-jerk manner, the loss could only be regrettable. Foresight, planning and competence in executions would have made the losses avoidable.

Perhaps with insensitivity to consequences that may have become an official attribute, the authorities often try to justify what forces their whimsical policy actions. It could be about weeding out intermediaries in the cement value chain, taming speculators in the forex market, or arresting upsurges in the property transactions fuelled by federal authorities’ zeal to combat official corruption.

Citizens may bear the brunt of these actions, but the city government and federal agencies subject themselves to loss of revenues in hundreds of millions of Birr. The Addis Abeba City Administration had collected over a billion Birr from capital gain tax and related service fees in the six months property transaction were permitted last year. The fewer individuals and businesses appear before officers at the public notary offices, the more federal agencies providing authentication services lose from unpaid fees.

These are opportunity costs from transactions that were to be had. Undoubtedly, they are damaging to residents, businesses and the administrations. Nonetheless, the recurrence of economic policy unpredictability should be dreaded for its plunging impacts in creating economic inequality, political marginalisation and deepening unemployment. It is more alarming when this happens, as often as it does, in a society where weak institutions are unable to discourage and prevent an emerging class from gaining from political connections.

The shenanigan observed following state intervention in the cement value chain could serve as a piece of evidence of how the few connected with the political class – known as agents – enriched themselves unduly and at the expense of the many.

Unbridled unpredictability in economic policymaking where political connections work in feral leads companies to suffer from the unfairly high cost of business. Executives try to shield their companies from unpleasant surprises, jacking up their margins to avoid painful losses due to uncertainty. The real estate market responded by pegging the cost of housing to a Dollar to protect itself from volatility in the forex market immediately after the central bank depreciated Birr’s value against the dollar by five Birr from 13 Br in the early 2010s. Again, consumers shoulder the added cost businesses bear from economic policy unpredictability.

Unlike external shocks that would not discriminate on their impacts, unpredictable policies damage markets and consumers beyond uncertainties could have while aiding the few politically connected who benefit from privileged information. Those who are tipped of impending policy moves or the removal of restrictions prepare to profit better than the many who are set to be taken by surprise. To the least, they can hedge themselves from risks associated with abrupt policy changes. Experts describe this phenomenon as “asymmetrical information”; it is a discovery that won Jospeh Stglitiz (PhD) a Noble prize in economics.

Two researchers from China have surveyed politically and non-politically connected companies in 99 countries. Their findings can be startling: “The probability of firms cultivating ties with the ruling elites is higher in countries with high economic policy uncertainties.”

The current administration mainly comprises power proxies shaped by decades of political hegemony under the EPRDFites. The ruthless competition for positions of power might have rendered their attitude towards policymaking as a short conciliation to their immediate bosses. The unpredictability could be a mere symptom.

A Tale of Two Logistics Corridors

Posted on by Tizita S.

A station in Qality, on the outskirts of Addis Abeba, was filled last week with heavy trucks and freight loaded with all kinds of imported goods. Four security personnel wearing blue uniforms and keenly observing their surroundings guarded the front gate.

Blue, red and white coloured trucks roam around with roaring sounds from their engines. Inside the compound, three others clad in green uniforms checked each truck’s plate number and loaded items before issuing permits to leave the premises. The dust blows underneath the large tires as the trucks depart.

This was the starting point for the tedious days-long round trip to ports in Djibouti. The trucks make their way to the border.

Customs Controlling & Monitoring Station, a few kilometres off the station, allows drivers to choose which highway to take, with most taking the Dewale route, one of the two roads leading to the borders with Djibouti, an indispensable sea outlet for Ethiopia’s import and export trade. Many find the alternative, the Galafi route, posing a risk; they have security concerns.

Yetsione Shewa, a driver in a white shirt with sunken red eyes, was one of these concerned drivers. His frustration was evident, striding from one place to another with a stack of paper in his hand, searching for the transport authorities. He has been waiting for his truck to be unloaded for four days with no luck. The warehouses were full, and many drivers before him were waiting to unload their freight.

Yetsione hoped to demand payment for staying long, but he found it uneasy.

“I’ve got to wait until next week to unload,” he said. “The system here is debilitating.”

Drivers are paid 2,500 Br a day for staying at the station, depending on how long they get held up.

The father of two and a cross-country driver under Millennium Logistics, he has experienced rough moments on the Galafi road, crossing the Afar Regional State. A truck driver for five years, he witnessed the business getting precarious as he had found it difficult to cross the border through Galafi at night. He recalled an incident; 10 individuals holding hands formed a line in the middle of the road between Awash Arba and Mille towns, awaiting drivers.

For fear of facing imprisonment of six years and a settlement of 350,000 Br if they hit a person, drivers often feel they have no choice but to stop and face the consequences.

“They don’t touch the freights,” Yestione told Fortune. “They only attack and rob drivers.”

He had once been shot in his right arm by robbers who fired at him; they took 10,000 Br.

“Thank God I survived,” he said, showing the scar.

He has faced such troubles two times in the past two years. He claims that police scoffed at his plight and told him to wait until the culprits were found.

However, an officer working for a police commission of the Afar Regional State denied any security problems and claimed things were fine. He declined to be identified and provide further information.

Despite troubles on the highway, drivers are subjected to a 5,000 Br penalty should they fail to make it to the Qality station in three days.

“We decide whether troubles happen or not,” said Eshetu Fikadu, controlling and monitoring officer at Customs Commission.

The Ethiopian Roads Authority claimed the road leading to Galafi had been rehabilitated. However, the town 163Km from Djibouti city remains detrimental, according to cross-border drivers. Many had been in despair over the rough road and unreliable security on the Galafi highway.

According to Sultan Husen, the customs officer in charge at Galafi checkpoint, the Authority has attempted to reconstruct the road. He agreed that there had been desperate safety issues, with drivers frequently reporting security concerns on the road.

Their predicament is, however, a glimpse of the turmoil the trucking industry has faced lately.

Cross-border freight transport associations have been voicing their concern following a law forcing them to incorporate, ratified by Parliament five months ago. They should transfer accumulated assets in nine months, a decision that displeased the associations’ leaders, who claimed it was made without consultation with those whose interests were most at stake.

Consequent panels were held with officials of the Ministry of Transport & Logistics, under Dagmawit Moges, drawing their concerns on the implementation. Four weeks ago, the Ethiopian Transport Employers’ Federation, formed in 2018 with 4,000 trucks under its fleet, urged changes to be considered after submitting a draft to the Ministry, calling for amendments.

Dejene Luche serves as a public relations officer for the Federation, led by 18 board members representing public and oil transports, dry cargo, and construction. He believes the associations needed time to understand how companies are incorporated, raising the required equity from members within the deadline. He blames transport authorities for burying their faces in the sand, unwilling to see stakeholders’ ordeals.

The law requires the 65 trucking associations to invest in acquiring a minimum of 50 trucks in four months.

“They can’t buy more than two,” Dejene told Fortune. “They risk falling into a diminished state if the transition is rapid.”

Whether mobilised under associations or managed by corporate entities, 11,000 trucks make rounds to Djibouti daily on one of the two corridors.

Dewale town is in the Shinile Zone of the Somali Regional State, 166Km before the border crossing to Djibouti. It also houses a checkpoint on the Addis Abeba-Djibouti railway line.

Ahmed Mohammed, administrative officer at Dewale Customs, confirmed that more trucks were coming through the gates for two months due to the damage Galafi sustained. The capacity of the scanning machines is limited to inspecting 30 to 50 trucks a day. It has been challenging to keep up with an average of 165 trucks passing through the checkpoint.

“We couldn’t handle the excess flow,” he said.

The Ethiopian Customs Commission allows trucks to cross the borders to Djibouti with verified documents, approved by Parliament in 2008. The document contains data on the type of freight, license plate, the driver’s name and address, and the route it is allowed to cross.

Officers at the Dewale customs checkpoint, under the supervision of the Dire-Dewa Customs Commission, issued a notice two months ago to drivers forewarning penalties for crossing the border without an authorised document. Nonetheless, many prefer this route over the Galafi crossing.

“We feel safe crossing through Dewale,” said Tesfaye Argaw. “The road is not as difficult as Galafi.”

Tesfaye is a truck driver under Yegna Freight Association. A father of one, he has been providing freight transport services for nine years, a job that keeps his family on their toes, fearing for him whenever crossing the border. He is frightened to go out on the road after 6:00pm, preferring to spend the night in Mille town, 100Km from Awash.

“We pleaded our case to the Dewale Customs Commission only to be left hanging,” he said.

Fetan Freight Transport Association which has 180 drivers under its wing, has stopped transporting freight from Djibouti since August, limiting its service to the Addis-Adama route. Its General Manager, Mersha Tsega, attributed the decision to growing insecurity.

“The drivers are paying with their lives,” he said.

Girma Deboch was one of the drivers who paid such an ultimate price.

He was 38 years old and a father of three, driving an Isuzu between Addis Abeba and Galafi. Two months ago, passing Undufu, a small town between Gedamytu and Awash Arba, he was forced to stop by gunmen who shot him in the belly. Doctors at the nearby Berta Hospital, where he was rushed, could not have saved his life as the bullet had deeply penetrated his organ.

“I was told of my brother’s death over the phone,” his brother told Fortune.

Awel Seid drove trucks on this route for more than a decade, working for the Continental Freight Transport Association. He witnessed his friends murdered while driving on the Galafi route.

“I saw my friends get killed in cold blood,” he said with an agonising tone.

The risks to life were recurrent in three areas: Adaytu of Mille, Undufo of Gewane, and Gedamaytu of Arambia weredas in the Afar Regional State. Essential locations along the highway, such as grazing lands and water, including the Awash River, are sources of contention between communities in Afar and Somali regional states. The watercourse is immensely valuable for pastoralist communities of both regions who rely on it during the dry season.

What was once a domestic rivalry was transformed into an open and armed conflict last year, making this vital corridor insecure. The Federal and regional police officers had their eyes on the northern war, making it hard to calm the situation.

“Authorities had a difficult time controlling the situation at the time,” said Bereo Hassen, state minister for Transport & Logistics.

In the one year beginning 2021, 35 trucks were hit by robbers, leaving 20 drivers injured. Twelve drivers were killed. The following year, seven drivers were injured and one was killed four months ago. However, the situation has improved considerably; no deaths or injuries have been reported since. Regional prosecutors have charged 35 people suspected of involvement, where conviction led to the sentencing of some defendants to 15 years imprisonment.

“Now things are fine,” said Hussien Musa, head of Gabi Rasu Zone 3 Police. “There is nothing to worry about.”

Officials of the Ministry of Transport & Logistics, recognising truck drivers’ grievances, discussed with the Federal Police Commission a few months ago and pledged to safeguard the highway. There has been a security improvement, according to Tatek Negash, public relations of the Ministry at the time of an interview with Fortune a few weeks ago.

Transport officials have been having prolonged discussions with heads of the Afar Transport Bureau and freight associations’ leaders.

“There hasn’t been any report of injuries from our side in the last four months,” said Bereo.

Drivers appear to be caving in from past trauma. According to the State Minister, drivers facing security problems should voice their concerns through the freight associations.

One of these associations is led by Dejene Luche. Yegna Cross-Border Level 2B Freight Transport Owners’ Association was established in 2010 by 15 members, with a fleet of 23 trucks. The Association has reached a seven million Birr capital, providing freight transport services from ports in Djibouti to Modjo dry port.

“It hasn’t been any easy, only worse,” said Dejene, who also leads the Federation.

Associations’ leaders argue that the law that allows the Ministry to set tariffs for their services contradicts the transport policy to make a competitive industry.

Dereje Legesse manages Segon Crossborder Freight Transport Association, established in 2009 with more than 230 freight trucks. It is one of the 17 freight associations progressing in the incorporation path. He believes that the associations have not benefited for a long time, and pushing them to incorporate has its benefits if done in time. They can access credit collateralising movable assets; however, he wants to see the transition take not shorter than five years.

“They will be put in jeopardy,” Dereje said, emphasising the importance of an extension period.

Fikadu Petros, a business lawyer at Fekadu Petros & Partners Law Office, echoed the sentiment. For him, whether this will help the economy is a matter to speculate with a prolonged feasibility study. But pushing the associations to lose the identity they held for more than five decades with little to no time is uncalled for. He believes transport authorities should formulate laws and policies after consultations with the associations’ leaders.

“They deserve sufficient time for transition,” he said.

The associations have found only four of the proposed seven modalities, such as partnerships, share or private limited companies, or sole proprietorships, feasible to reinvent themselves, leaving out the limited or liability partnerships and joint venture options.

For Dereje, who doubles as the Federation’s secretary general, the transport and logistics sector has not grown.

“It’s incomparably underdeveloped,” he said.

Regulators at the Ministry seem to have ears for associations and the Federation leaders. They are formulating a directive that would apply to the re-formed commercial entities, disclosed Yirga Tadesse, the Ministry’s road transport monitoring and regulations.

“The tariff will be opened to the freight associations,” he said.

One of the re-formed corporate transport firms is Fetan Logistics & Trading S.C., incorporated a month ago with 100 million Br in equity raised from 221 shareholders. The authorities hope the company heralds a new beginning in an otherwise distressed industry.

Geda Special Economic Zone Commence Construction

Posted on by Tizita S.

Special Economic Zone that is half the size of Addis Abeba and six folds Adama town is under construction with over 46 billion Br budget. Oromia Regional State commenced Geda Special Economic Zone (GSEZ) located 65Km east of the capital with the aims of connecting it with Mojo, Adama, and Shashemane towns.

According to CEO Motuma Temesgen, domestic and international investors, developers, and enterprises are expected to join the zone. He believes collecting industrial zones and giving a one-stop service will increase foreign direct investment and highly encourages private-public partnerships.

The World Bank reports show that Ethiopia’s Foreign Direct Investment rate has declined since 2016, earning 4.14 billion dollars taken as a pick season. By the end of 2020, the country has generated 2.4 billion dollars from FDI.

The Geda economic zone lies on 23,656hct of undeveloped land, of which close to 300hct is sourced from the local farmers with a 3.4 million Br compensation fee for a hectare. The 3,114hct is set to be developed in the next five years while 8,000hct is under construction.

“It’s a project for the coming 40 years,” said Motuma.

The GSEZ will have a free market zone, logistics centre, housing, and industrial flocks, mainly focusing on exporting quality product-producing local and international companies. Over 300 people are currently working in the economic zone, with the prospect of employing 70 million people when it is fully operational, according to the CEO.

“Companies have already started showing interest,” he said, inviting prospective investors to benefit from the incentives of the Ethiopian Investment Commission.

The infrastructure of two water holes with a depth of a little over 600 meters, two reserves, an electric power substation, and projects is underway, while a five-kilometre-long asphalt road construction is being constructed by MCG construction.

Over 5,500 special economic zones are there in the world. According to the United Nations Conference on Trade and Development (UNCTAD), over 200 are in Africa. According to Motuma, they are consulting with the Gabon Special Economic Zone on the first phase of the construction.

Last month, executives at the economic zone signed an agreement with Adama Science Technology University (ASTU) for a website domain and access development.

Hussen Adem, manager at Ethiopian Electric Power (EEP) procurement office, said that they had announced a bid for the construction and installation of the GSEZ substation and plant design, manufacture and supply of Qoqa – Gelan and TL LILO to GSEZ transmission line, which was closed on September 07, 2022.

Hussen said that two Chinese companies, Sino Hydro Company and Xiang Hydropower plant, have been selected to construct this infrastructure. Yet, their contract is not signed, and they are negotiating the price. The Chinese CCECC is also studying the planting of a railway connecting the zone with the Mojo dry port, the Kenyan border, and the Ethio Djibouti railway.

Aklilu Tadesse, CEO of the Industrial Parks Development Corporation (IPDC), said that the IPDC had taken part in the planning process even though it is under the Oromia Regional State.

The Engineering Corporation of Oromia has done the study and design projects in partnership with universities and financial and tech companies. Amare Matebu (PhD), a lead researcher for Ethiopia’s Industrial Development Policy Studies Centre under Policy Studies Institute, said that their institute had not received an invitation to participate in the policy studies even if it is their main turf to survey such projects. He suggests that the government should develop separate trade laws to govern free trade zones.

Nataniye Kassaye, an expert with rich experience in industrial parks under IPDC, recommends that peacekeeping in the area should be kept in mind as the significant aim is raising foreign direct investment keeping domestic and export-aimed companies in mind.

“The exaggerated budget being publicized is false,” said Motuma.

Tour Operators Timid Over Taxation

Posted on by Tizita S.

Tour operators are dissatisfied with the draft by the Ministry of Finance that will not exempt them from paying Value Added Tax (VAT). They have been in uproars over what they believe is an “unfair tax” levied on the tourism sector, although it generates foreign currency. However, the law does not exempt the sector from VAT as it applies to the export sector.

Ethiopian Tour Operators Association (ETOA) President Andinet Feleke said that the association had asked the Ministry to revise the proclamation with claims that these organisations’ services be viewed differently. She said that although the Ministry had promised to look into it, the new draft did not change anything.

They are apprehensive about double taxation as they already pay tax dues when the tourist accounts for hotel fees. However, policymakers at the Ministry do not recognise tour operators as entitled to the exemption as the export sector enjoys.

The association has been working with the Addis Ababa Chamber of Commerce & Sectoral Associations (AACCSA) to voice the dilemma. According to Secretary-General Shibeshi Betemariam, tour operators should not be imposed to pay this tax as they play a crucial role in facilitation.

A draft from the chamber with the voices of hundreds of tour operators on the verge of collapse was submitted to the Ministry of Finance three weeks ago. It suggested that tour operators pay the highest-low rate of six percent, mentioning other countries’ experiences, such as Greek and Spain.

Tourism has hit a rough patch in the past three years in the aftermath of the worldwide pandemic coupled with the two-year war in northern Ethiopia. The industry is apprehensive that adding tax to the dwindling business seals on their unfortunate fate. Tour operators have been subjected to 15pc VAT for nearly two decades following the Parliament’s approving an edict for business organisations that make over 500,000 Br transactions to register.

Currently, over 2,000 tour guides are estimated to be operating nationwide. Established in 2003, the association comprising 248 individuals and tour and travel agencies has seen 10 of them dwindle with the prospect of more shutting down.

“If the civil war hadn’t done the damage, the VAT affects tourism badly,” said Andinet.

Kibran Tourists Agency was incorporated two decades ago with three million Birr capital. After becoming a private limited company in 2006, its capital has increased to 7.5 million Br.

The founder Assefa Azene, recalls superintending to more than 2,000 tourists each year with five million Birr in annual revenues before the pandemic hit. With the business dwindling to almost non-existent, Assefa says he works with 20pc of his employees.

“I had to let go of forty people,” he told Fortune.

Tour operators claim that authorities should have extended a saving hand, considering what the industry has been going through for the last two years.

According to the associations, the absence of clear and separate regulations from the Ministry of Tourism is a hazard in fulfilling tax obligations. Andinet blames the constant reshuffle of officials at the Ministry for the inconsistency.

“Authorities don’t understand the value tour operators bring to the industry,” she said.

Legal and tax-policy officials from the Ministry of Finance have received several grievances from the tourism industry over the last year. They plan to discuss with the association to address the claims raised by tour operators with the prospect of draft revision if enough justification is provided.

In 2020, around 2.28 billion dollars was generated from the tourism sector. Close to two billion dollars was generated last year, suffering the loss of a third of its annual average revenues. The previous Ministry of Tourism & Culture had hoped to generate 23 billion dollars by the end of 2022. However, according to Andinet, more than three thousand tourists that had visited the country three years before downsized in number to twenty in a year.

The federal budget generated revenue growth of 17pc from 51 billion Br in 2020/21 from value-added tax on services, eyeing an increase of nine billion Birr in revenue last year.

Tadesse Lencho is an Assistant Professor at Addis Abeba University and managing partner of Tbest Law Firm, whose research interest has been Ethiopian tax policy and legislation. He explained that VAT should come from the consumer rather than the service provider, with the tourist exempted in this case as they are not citizens and get service for a few weeks.

According to him, tourists covertly pay unlawful tax to the operator, anticipating the VAT they will pay for the services. Therefore, he recommended an overt demand requiring the operator to pay VAT and refund the tourist at the airport, as European countries operate.

“Tourists are at a disadvantage here, not tour operators,” he said.

He believes that when a complaint arises from any sector concerning VAT, the fear is actually about being subjected to regular reporting and compliance costs every three months. “VAT is an informant, and some may want to avoid transparency,” Tadesse told Fortune.

Although Tadesse acknowledges that no law has identified tourism as an export sector, he does not deny its role in economic growth. He suggests a three-year tax relief period to let the sector revive from the aftermath of the pandemic and war.

Norwegian Mining Company Strikes Gold

Posted on by Tizita S.

In the next two months, Norway-based boutique mining company Akobo Minerals will begin gold production south of the Akobo River, Gambela Regional State. The company has explored the gold project since 2010 despite completing drilling holes on 59 sites this year.  The gold project is located in the Segele Shama gold district in the Dima Wereda 720Km southwest of the capital.

The current dimensions of the project allow for a processing capacity of over 113Kg per month at estimated monthly operation costs that may reach up to 300,000 dollars. The total capital expenditure up to initial extraction was estimated to be around 10 million dollars.

The mining license is held by Etno Mining Plc, the Ethiopian subsidiary within the ownership of Akobo Minerals, which has 99.97pc ownership. General Manager, Tesfaye Medhane, confirmed that the company will start manufacturing in early 2023.

The name Akobo is derived from a river that flows from Mizan Teferi to the Pibor River bordering South Sudan.

Another private company had an exploration license with a nearly identical name, “Akobo Mining Plc”, in a converging location to the project area, at the same time as Etno Mining. The regional state issued a renewable exploration license of one year to Fikru Gebrekidan in 2009, 13 years ago. The licence is unacceptable to the Ministry of Mines as it neither passed through the proper “due diligence” nor did the regional state has the authority to issue a licence, according to the letter issued to the company a decade ago.

The legal dispute between the Ministry and this company was finally settled by a supreme court ruling that the company’s claims were illegitimate.

“I nearly lost my mind,” Fikru told Fortune.

He claims to have invested 20 million Br for exploration operations in that short stint.

The Ministry of Mines has netted over 500 million dollars in 10 months of the previous fiscal year from the export of gold, which is significant considering it was about 123 million dollars in 2019.  This made gold the second largest export product of the country, only preceded by coffee which grossed almost 1.4 billion dollars last year.

A scoping study by Michael Lowry of SRK Consulting revealed an indicated estimate of 1.16tn at a grade of 20.1 grams of gold in the project area. SRK is an independent consultancy firm based in South Africa which conducted scoping study. The firm suggested in their study last year that the unknown depth of the artisanal mining in the area impacts the confidence of the geological survey.

Birhanu Jobrie is a lecturer at Bule Hora University and does contract work for mining companies.

“Gold mining is like a gamble,” said Birhanu.

According to the engineer, the only thing holding back the mining sector is engagement from the private sector, as large-scale mining operations require large capital.

The project area under the Norwegian company currently covers 182sqkm of highly prospective geology site within the Arabian-Nubian Shield. The region has been home to artisanal miners for hundreds of years, particularly around Yubdo and Nejo areas a little North of the Akobo gold project. While this specific area within Dima was dispersedly populated before the company began its operations. The scoping study claimed that the area has close to 30,000 inhabitants, with small farming communities engaged in artisanal mining.

Elias Kasahun, a lecturer at Addis Abeba Science & Technology University, also considers artisanal mining to hinder the growth of large-scale gold mining. The expert said that when a deposit is confirmed, artisanal miners crowd in to eat off the mining companies’ several years of labour and capital to explore the potential.

The CEO of Akobo Jorgen said, “sadly, there isn’t much to go about on large-scale gold projects in Ethiopia.” He hopes to attain a large-scale status in the future.

Midroc was Ethiopia’s largest private mining company that received a mining license in 1997.

Even though they retained it within a year, MIDROC had its license suspended by the Ministry in 2018 following tension with locals in the project area, indicative of another hurdle in the mining industry. It is estimated that the company currently produces nearly three tons of gold annually, making it the most significant contributor to Ethiopia’s gold exports.

Akata Cham, head of Gambela Mineral & Water Agency, said that it is difficult to get insight into the number of artisanal miners in the area.

“All we know is that they sell gold to the central bank,” said Akata. The National Bank of Ethiopia recently raised the premium fee for artisanal miners from 29pc to 35pc. Akata also revealed the existence of three other mining companies under exploration despite not being willing to reveal their names.

According to the regional state press communication in early December, a team of advisors from the customs commission headed by Kefyalew Biyazen visited the Gambela Regional State to hold discussions with artisanal miners, particularly around Dima. They discussed the small 18Kg of gold handed to the central bank in November as indicative of large-scale contraband mining.

The Extraction Industries Transparency Initiative, which has 55 members, of which Ethiopia is one, estimated that Ethiopia’s gold deposits are around 200tn. The Federal Ministry of Revenues collects 25pc corporate tax from the mining operations with a seven percent royalty fee to be collected by the Ministry of Mines. The royalty fees for most all mineral resources mined are between two and seven percent.

The expert Elias with nearly two decades of experience in the mining sector, explains that most of the mineral deposits are scattered, making pinpointing a domain area with specific output unlikely.

Parliament Pass Foreign FinTechs to Operate Payment Systems

Posted on by Tizita S.

Foreign companies can operate in the national payment systems as Parliamentarians voted to revise the law enacted for the past decade. The bill was passed to allow investment fees during involvement in business blocked for foreign nationals.

Yinager Dessie(PhD), governor of the National Bank of Ethiopia (NBE), told members of the Parliament that the bill addresses payment issuers and facilitators, allowing them to operate in areas the banks cannot cover.

Foreign companies can also establish subsidiaries to run the business and settle their investment fees in foreign currencies. The amount of the investment fee is yet to be decided.

Sources at NBE told Fortune that the recently operational foreign telecom company Safaricom and the federal government are discussing the amount of investment fee the company will pay to engage in the digital payment system. According to Yinager, Safaricom is waiting for the settlement to obtain its license.

Last month, the bill was up for discussion in the presence of representatives from the Ministry of Finance, the central bank and the two telecom operators Safaricom and Ethiotelecom.

Although the previous proclamation was given the green light early, licensing and authorisation for the operation started two years ago. Seven payment operators have been granted licenses fulfilling the requirements of a paid-up capital from three million to 300 million Br.

Established by 42 shareholders with an initial capital of 14 million Br, Arifpay Financial Technologies was the first to obtain an operating license. It launched its digital payment service a couple of weeks ago after securing a commercial license from the central bank a month ago. It provides digital payment services for utility bills, air time top-ups and school fees in smartphones, point of sales and QR payment terminals. Arifpay plans to facilitate 100 transactions within one POS machine in a day.

According to Bernard Lorined, CEO of Arifpay, the foreign fintech providers will have better investment and human capital to engage as switch operators.

“There may be proper management of ATMs if Banks outsource it,” he said.

The lack of management of ATMs has forced the state-owned Commercial Bank of Ethiopia to float a tender to outsource it earlier this year.

Telebirr garnered more than 24 million customers and facilitated transactions valued at more than 100 billion Br. After its launch, it integrated 16 banks and partnered with dozen of federal institutions.

Kacha Digital Financial Services was the second payment issuer next to Telebirr, which Ethiotelecom runs. The payment issuers mainly open accounts on potential users’ to let the user deposit and transact the cash electronically. The issuers should partner with at least one bank to deposit the money in a trusted account.

Yigermal Meshesha, marketing & business development manager, is also hopeful that there will be technological advancement and knowledge transfer with the open doors.

These operators provide fintech platforms directly to customers via existing financial institutions, including microfinance institutions, while some autonomously provide electronic money issuance.

These platforms facilitated 320 billion Br transactions last year. Commercial banks were paving the way for mobile money services, with most service providers interoperable with them, such as CBE birr of Commercial Bank of Ethiopia and Amole of Dashen Bank.

Industry players fear money laundering can be exacerbated unless robust monitoring tools are prepared to regulate the sector.

Endashaw Tesfaye works at United Nations Capital Development Fund (UNCDF) and previously served as deputy CEO of M-Birr. He fears that allowing foreign fintech firms might tend to swallow the domestic ones on shaky grounds. Even though the regulators set different requirements for foreigners, his best bet goes to them penetrating the market.

He said that they must prepare complementary services to counter the competition while studying who will be interested in the market.

“We will conduct research”, said the CEO of Arifpay.

Amhara Regional State Partially Suspends Land Transfers

Posted on by Tizita S.

Property deed transfers in the rural areas of the Amhara Regional State are suspended after the Land Bureau banned property transactions indefinitely in the outskirt of regional cities, effective December 14, 2022.

Head of the regional Land Bureau, Sisay Damte, signed the circular which orders designated officials and employees to comply. Officials claim the ban is enforced to address mismanaged land transactions in the rural areas of the regional states.

According to Sisay, the move is made to curb illegal land transfers and transactions that stall development plans with the town master plan. His management observed that invasion of lands, particularly in the outskirts of relatively developed towns, was observed where land is transferred, and authenticated document is given without following the legal procedure.

Farmers were given the right to transfer their plots to their family members, provided their heir would take the baton. They can only transfer their land as a gift if it exceeds a quarter of a hectare. The Bureau is formulating a directive that governs the system of land endowment.

Tadesse Demelash, 63, a father of five, is from the outskirt area of Bahir Dar and owns two hectares of land. He transferred a portion of his plot as a gift to his firstborn son and was planning to transfer the remaining to his second born who turned 30 years old. He dropped out of school and helped on the farm until he was ready to fly off the nest.

“This land was the only thing I have to pass to my children,” he said. “It is not fair.”

The regional state, where four million farmers are registered, started land registration two years ago, divided into 10 administrative zones with 106 rural, nine urban woredas, and 2,927 rural kebeles. Out of the 18 million square meters of farmland, seven million square metres have not been registered, which are the ones being misused, according to Sisay.

Tiliksew Enbakom, head of Bahir Dar city land bureau, said that the law was taken advantage of by farmers who want to benefit from buyers and get compensation from the administration. The city Land Bureau collected 65,000 Br from the gift transactions last year and 12,000 Br in the past three months. The Land Bureau collects 150 Br from each transaction.

Debre Birhan town is located in the Northern Shewa zone of the Amhara Regional State with five districts, 37 kebeles and 22,871 farmers registered from 15 rural kebeles. The town’s Land Bureau Team Leader, Dereje Kura, said they have not processed any land transactions for the past three months as they are working on implementing a system that documents land ownership boundaries to provide reliable property registration.

Gebreye Sheferaw,40, a father of two, lives around the outskirt of Debre Birhan. He has one hectare of land that he wants to transfer to his children.

A month ago, he started transferring his land to his children. He went to the Land Bureau after getting the documents that authenticated his claim, only to find out that the service was no longer available.

“Giving a right and not allowing its use does not make sense,” said Gebrye.

Hussein Mohammed is a law and governance researcher that argues against the suspension. He believes that the problem lies in the interpretation and implementation of the law instead of revoking farmers’ rights to grant their land to their offspring.

“Such trends are copied from other city administrations,” he said. “Suspending the service will not be a solution.”

 

Understanding Tax Obligations in Real Estate Transactions

Posted on by Tizita S.

The real estate business is a very recent phenomenon in Ethiopia. It flourished with the advent of privatization in the early 1990s – more pertinently after 2002 – when the government took drastic measures to incentivize the construction of condominium housing with a market-oriented lease law.

Driving economic development, the real estate industry has also significantly contributed to both middle and high-income earners.

However, the industry is not sufficiently regulated, creating undesirable consequences and a lack of trust between developers and home buyers in the case of unfinished properties or those that have not even started. The unconcluded debacle with Access Real Estate can illustrate this point.

The real estate industry is growing despite the lack of trust between developers and buyers. Without a comprehensive legal regime, it is primarily governed by contractual arrangements. Some tax items concern the buyers, while others affect the real estate developers. However, it is possible to shift the economic burden of tax by way of a contractual arrangement.

The primary legal rule governing the real estate industry is the Civil Code. By far, deals in real estate are contracts between developers and buyers. Even though parties can determine the terms and conditions, mandatory requirements override the contract. Being lawful appears to be the objective of the agreements.

One of the most frequently probed issues is stipulating the contractual price in the US dollar. It is common practice that the housing price is indicated in US dollars to reduce the devaluation effect. Although there is no prohibition under the law to refer to the cost of the properties in forex as long as the payment is made in Birr, the central bank had an earlier habit of discouraging this practice. However, under various provisions of the Civil Code, the law permits the contracting parties to stipulate the sum of money in foreign currency.

Yet, the debtor can at any time discharge an obligation, paying a sum equal to the overall value of the foreign exchange at the prevailing rate at the time of the payment.

Other than the mandatory provisions of the law, the real estate industry is regulated by laws governing condominium housing, urban land lease holding, and buildings. The tax regime also governs the transactions.

There are various taxes applied during a sale by a real estate developer. This impact is different on the buyers; the tax rates applicable for buyers when a real estate sells properties could differ when the buyer is an entity or individual.

The capital gains tax is taken as the primary obligation of real estate developers, where the buyer is subject to 15pc capital gain tax. The tax system is not applicable for new properties not registered under the developer’s name. The transfer and issuance would be approved once declared and the tax paid. The tax regime usually imposes the difference between the price and cost of acquisition.

Under the withholding tax obligation, developers claim two percent withhold tax only when a business entity is a buyer, paid upon the transfer of properties. Value-added tax (VAT) is another taxable transaction where the developer must charge 15pc at the time of payment and make an invoice. Despite this, a dwelling can be exempted from tax payment for a minimum of two years if used for the referred years.

Under Ethiopia’s property law, the transfer of immovable properties such as buildings is presumed to have been made when the contract is registered before the relevant government authority, the Document Authentication & Registration Agency (DARA). At the same time, the Land Administration Office charges a two percent stamp duty tax from the buyer and seller, paid before certificates for title deeds are issued.

The capital gains tax, popularly referred to as “Ashura”, is the most important tax obligation.

The Land Administration Office of the City Administration also has its service charge to effect the registration and effectively issue ownership title to the buyer. The city administration charges four percent of the value of the building to be transferred to the buyer in the case of residential buildings and 19pc of the value of the building for commercial purposes, including capital gains tax. Buyers pay for property transfer tax for residential as well as commercial buildings.

All Progress Local, If Seen Granularly

Posted on by Tizita S.

Until the COVID-19 pandemic, humanity was making great strides in extending lives and increasing economic prosperity. It is critical that we return to that trajectory as the global economy recovers. New research, which examines progress at a granular level, can help us get there.

Typically, human progress is assessed at a country level.

On average, the 178 countries where data are readily available have an area of 700,000Sqm, populations of some 40 million people, and produce around 700 billion dollars in GDP. But there are vast differences across and within countries, and the effectiveness of efforts to enhance economic prosperity and human well-being depends on understanding these differences.

That is why our new report, “Pixels of Progress: A Granular Look at Human Development Around the World”, paints a picture that is 230 times more detailed than a country-level perspective. Using night-time luminosity and other cutting-edge techniques to gather and analyze data, we examine population patterns, economic performance, and changes in life expectancy from 2000 to 2019 across more than 40,000 microregions, each averaging 3,000Sqm in area, 180,000 people, and three billion dollars in GDP.

This approach revealed, for example, that in 2019, almost half of the world’s population enjoyed living standards that, just 20 years earlier, had been attained by only 21pc of humanity (largely in OECD countries).

In 2000, 12 microregions along China’s coast – with populations of 71 million – boasted life expectancies of more than 72.5 years and GDP exceeding 8,300 dollars per capita, putting them in the top 30pc globally for both of these metrics. By 2019, 86pc of China’s population – 1.2 billion people – lived in a microregion with living standards exceeding those thresholds.

Beyond China, microregions containing 920 million people spread across 75 countries crossed the same threshold.

Similar gains were made at the other end of the spectrum. In 2000, more than one billion people resided in microregions with the lowest living standards. By 2019, the figure had dropped to just over 400 million people, despite population growth. India in 2000 accounted for 43pc of microregions where longevity was less than 65.6 years and income was lower than 2,400 dollars (the bottom 30pc globally); in 2019, it no longer had a single microregion in that category.

Overall, our granular approach shows that living standards declined only rarely and in places often identifiable only through a microregional lens. Country averages obscure differences in microregional realities: using regression analysis, we found that a country’s GDP per capita growth rate explains only about 20pc of the variation in growth rates in its microregions. In other words, economic progress is primarily explained locally.

For example, our analysis tells a more nuanced story in places where a country-level view showed falling GDP per capita. A country-level analysis shows that 191 million people in 20 countries experienced negative income growth from 2000 to 2019. But as we zoom in, we can see exactly where GDP per capita fell: in 6,300 microregions that are home to three times as many people – 574 million – in 100 countries. For 80pc of these people, income losses can be explained not by overall economic decline but rather by rapid population growth.

Then there are the microregions that have made particularly rapid progress.

Consider Dibër, a microregion tucked away in the Albanian Alps. Dibër’s economy remains highly agrarian, but since Albania joined NATO in 2009, the local authorities have been working to revive its once-thriving tourism sector – catering to affluent European travellers visiting the Peshkopi thermal baths – with the help of international agencies.

During the period we studied, the number of health tourists rose steadily as accommodations increased, while glacial lakes and old-growth forests attracted hikers and trekkers. Such developments may have helped to boost health and incomes in Dibër, where GDP per capita more than tripled – from 3,300 dollars to 10,200 dollars – between 2000 and 2019, and average life expectancy rose from 74.1 to 78.3 years.

Dibër’s experience represents a broader trend: income and longevity have grown faster in microregions that started out further behind, narrowing global gaps in health and prosperity. In 2000, the bottom five percent of the world’s population lived in microregions where life expectancy was less than 49.7 years, and the top five percent could expect to live over 30 years longer (more than 79.5 years). By 2019, that gap had narrowed to 23 years.

The pandemic interrupted – and even reversed – the progress we examined, but it did not extinguish the potential for further gains. With a more granular understanding of how past progress unfolded – one that informs, for example, how we deploy resources – we can put ourselves on a path toward fulfilling that potential. We may even be able to chart a faster, clearer, and more efficient course.