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Month: September 2023

CONFLICTS DEEPEN TRANSPORT CRISIS

Posted on by Tizita S.

In the misty break of dawn, the usually scuttling Lamberet Bus Terminal in Addis Abeba stood comparatively quiet. This terminal serves as a primary gateway to the conflict-prone regions of Amhara and Tigray. Recent unrest and safety concerns have drastically altered the usual bus routes, leaving many stranded and frustrated. Travellers initially planning a bus journey resort to flying due to unpredictable bus schedules, driven by conflict-induced route changes. These route detours, sometimes adding an extra 180Km, do not just disrupt plans; they also increase costs for passengers and wear down vehicles, especially as they pass through the sweltering heat of the arid landscape in the Afar Regional State.

Long-serving bus drivers reflect on the profound shift in the dynamics of their work. The once straightforward job now bristles with tension and fear. Increased fare prices, meant to cover the added travel costs, hardly compensate for the heightened risks and the longer, more challenging routes. Data from the transport hubs in Addis Abeba show a worrying trend. There has been a drastic drop in passengers – nearly half a million fewer between July and September compared to the previous year. Young intermediaries, who earn commissions by linking passengers with bus services, face the brunt of this downturn.

The broader transportation sector feels the strain. Once-thriving public transport companies are on the brink, forcing many business owners to redirect to other industries. Some are forced to sell their businesses due to stranded vehicles and mounting debts. They blame not only the security situation but also the economic challenges like inflation and crushing loan repayments. The nexus between transport and security is undeniable. Experts, from academia to economics, concur that the state of transportation mirrors the country’s security. While the government can stipulate routes, the onus of guaranteeing road safety falls squarely on its shoulders. In these turbulent times, as the confidence in ground transportation wanes, many seek solace in the skies, making flights not just a matter of speed but security.

Seeking Solvency for a Battered Economy in a Sea of Uncertainty

Posted on by Tizita S.

Ethiopia’s contemporary political leaders and the policy wonks under their command have been in an unfortunate spotlight. Two weeks ago, Moody’s, the global credit-rating agency, downgraded its foreign currency rating for Ethiopia from ‘Caa2’ to ‘Caa3’, casting a shadow over its economic trajectory. At the heart of this gloomy announcement lies the looming threat of private sector creditors defaulting on foreign currency-denominated loans.

The economic quandary is an intricate web of interconnected challenges. Notably, two pressing issues have emerged as the Achilles heel for the macroeconomics advising Prime Minister Abiy Ahmed’s (PhD) administration: a mounting balance of payments crisis exacerbated by dwindling trade balances and a persistent dance between fluctuating export performance and an unsettling level of foreign reserves.

The economic ledger of Ethiopia paints a sobering picture.

Rising import bills have overshadowed export revenues, putting immense strain on foreign currency reserves. Whilst revenues from remittances and sporadic capital inflows have offered temporary reprieves, they are akin to a drop in the ocean against the broader context of almost non-existent external grants. External loans are too marginal to make a difference for an economy besieged by a growing budget deficit and high inflation. Official grants made last year (a little over one billion dollars), loans to the federal government (776 million dollars), and state enterprises (325 million dollars) have all registered significant decline from the five-year average beginning in 2016/17.

The mantra remains consistent for policymakers gazing at this predicament: diversify exports, invigorate domestic production, and lure steady foreign investments. Yet, achieving these aims is akin to navigating a maze, fraught with frustration at every turn.

A snapshot of Ethiopia’s exports in the recent past reveals a mixed bag.

Traditional commodities like coffee and flowers continue their robust performance on the global stage despite an unexpected dip in global coffee prices. However, the downturn in exports of gold and khat, especially since 2016, is a matter of consternation, given gold’s vital role in Ethiopia’s foreign exchange repertoire. Such divergences signify the need to reassess and possibly revamp Ethiopia’s export mix.

Yet, it is the surging imports, jumping from 14 billion to 18 billion dollars, that should raise eyebrows in macroeconomic circles. A melange of reasons – swelling domestic demand, burgeoning infrastructure projects, and sectoral gaps – may have driven this spike. The gravity of this trade imbalance is reflected starkly in the capital flows. A receding capital account balance intimates dwindling foreign investments and loans.

In a silver lining to this otherwise overcast horizon, Foreign Direct Investment (FDI) experienced an unexpected surge in 2020-21, hinting at a transient investor confidence – this, in a country where political instability and militarised confrontations, often dominate headlines. Further bolstering the economic buffer is the ever-reliable inflow from remittances, as the Ethiopian diaspora continues to pour funds back home, support kins back home otherwise traumatised by runaway inflation.

However, the precarious nature of the foreign currency reserves remains the elephant in the room. By 2021-22, the reserves were alarmingly scant, covering a mere month’s worth of imports. The subsequent months have not brought better days, placing the country on a tight economic rope, teetering perilously close to a fall. The much-anticipated deal with the IMF and major creditors to salvage the economy remains a distant dream. One of the IMF demands to resume a “generous” bailout package is to see Ethipia’s authorities change the foreign exchange regime to a market-determined system.

Its negotiators would not be wrong to argue that the Birr is significantly undervalued in the official currency market tightly controlled by the central bank. A comparison between the official and parallel foreign exchange markets unveils these disparities. As of January 2022, while the official market saw modest depreciation, the parallel market, according to Steve Hanke of Johns Hopkins University, experienced a staggering 40pc fall. Last week, the official market offered 56.3 Br for a Dollar, less than half the rate the parallel market had.

Yet, hope springs eternal. Post the Pretoria Accord of November 2022, Ethiopia’s solitary Eurobond witnessed a commendable rally. Whether this upswing is a testament to rejuvenated confidence or merely a fleeting response to geopolitical shifts remains debatable.

However, navigating this treacherous terrain requires vision and audacity.

A little over a decade ago, under the aegis of the late Meles Zenawi, the federal government embarked on the ambitious Grand Ethiopian Renaissance Dam (GERD) project. Heralded as a beacon of domestic prowess, the dam, with a formidable 5,000Mgwt capacity, promised to amplify Ethiopia’s power generation capacities and a forex revenue of over a billion dollars by this year. This initiative, launched in 2011, ignited a palpable national fervour, with millions pledging support.

While GERD’s goals were laudable, the irony is stark: a country that exports electric power, yet has nearly 65 million of its populace in the dark. This dichotomy extends to the agricultural sphere, too. A recent claim by federal authorities in wheat exports led to domestic disruptions – soaring bread prices, shuttered bakeries, and halted production plants.

The crux lies in Ethiopia’s export policy – seemingly a haphazard assemblage rather than a strategically crafted blueprint. The export of flagship products, such as coffee and sesame, often occurs at a loss, solely to finance the more lucrative import businesses. It is like a country that shoots itself in the foot. A rewarding import margin is allowed to undermine the most crucial export scheme, having multiple benefits to the national economy. The degree to which there is policy tolerance and inaction to redeem this toxic deep in the economy is beyond tragic.

Ethiopia needs an export strategy rooted in long-term foresight – one that transcends quick fixes, transient challenges and political manoeuvrings. A shift from sheer volume to specialisation, focusing on areas with competitive advantage, could be a good place to start.

Yet, as critical as these macroeconomic recalibrations are, they might prove futile without addressing the foundational forex trade regime. For Ethiopia to regain its footing and bolster the confidence of investors and bilateral and multilateral development partners, its leaders must usher in political stability, bridging the divides that currently fracturing the country.

Wheeling and Dealing Amidst Conflicts

Posted on by Tizita S.

Amidst the frosty and foggy crack of dawn, Habtam Kassaun made her way to the Lamberet Bus Terminal located on the outskirts of Addis Abeba.

With a jerrycan of soap and a giant backpack, the 21-year-old arrived at the northeastern terminal hoping to catch a bus to Dessie town in Amhara Regional State, where she is a sophomore nursing student at the Health Science College.

Hundreds sparsely roam around the Lamberet Terminal, which serves as a departure point for passengers travelling to conflict-ridden Amhara and Tigray regional states through the Dessie Ber exit.

The routes frequently change due to the sporadic conflicts erupting at different points.

“My bus is not going,” said Habtam while she clenched tightly at the yellow plastic bag which had her clothes.

She had spent the summer with extended family in the capital around the Shola area and was hoping to go back before classes commenced. Buying flight tickets will be her last option if she wishes to continue with her plans.

“I’ll be flying to Komoblcha now,” Habtam told Fortune, dreading the extra 4,850 Br she has to spend and a taxi drive to Dessie town.

The prior day, Habtam had paid 1,030 Br for a seat at one of the “special” buses that feature WiFi, air conditioning, snack and instilled bathroom services, hoping for a comfortable ride. The ones without such accommodations fetch around 322 Br but have doubled in price due to the necessary route changes.

Habtam did not want to risk the trip for fear of arriving after dark.

The Lamberet Terminal can hold up a 100 buses across its two sections; the smaller section has minibuses and Isuzu vehicles, while the other has large Daewoo and Tata buses tightly parked next to each other. The larger buses have bundles of clothes and food items piled atop their roofs with tariffs and destinations plastered across their window.

Driving across the regional states has become a source of frustration and a safety challenge for transporters and passengers.

A long-distance driver for the past six years, Sintayehu Mengiste claims to be in constant fear every time he starts the engine on his white and green Daewoo bus. The father of two earns 6,000 Br monthly salary and a daily allowance paid on long journeys.

“This is the only job I know how to do,” he told Fortune.

Sintayehu argues that the increase in fare barely covers the cost of the travel as security risks have forced them to an additional 180Km distance to avoid conflict and informal checkpoints.

A trip to Dessie town now requires a detour through Metahara and Mille towns within the Oromia and Afar regional states. Sintayehu said the unconventional heat through the Afar desert damages the vehicles and frustrates passengers as the old buses do not have air conditioning.

He is always on the edge of his seat as he drives his 63-seater bus.

“The roads can be difficult to navigate and safety is often a concern,” Sintayehu told Fortune.

The Lamberet terminal is one of five long-distance transport hubs in the capital with Asko, Qality, AyerTena and AutobisTera (which has two terminals) being the most famous of all.

Passengers to and from these terminals have decreased by nearly half a million between July and September compared to 4.5 million during last year’s same period.

The lull in long-distance transport not only impacts drivers and passengers but takes its toll on the youth in the area who make a living by queueing up buses and passengers for the journey.

Draped in khaki overcoats, these young men take commission fees per bus that leaves their terminal and link up passengers with drivers.

Although a number of holidays are lined up in the season, Alemu Demisse who comes to the terminal at the break of dawn every morning, observes the terminal go dry of customers.

He recalls September being a peak for business as students make their way to colleges while families come together for consecutive holidays, competing for available seats in order to beat a seasonal price hike.

“The buses used to vanish into thin air by dawn,” Alemu told Fortune.

The number of buses that made their way across the terminal has declined by 440 between July and September, while 50,000 fewer people travelled compared to the 1.1 million same period last year.

He said an extensive deliberation on safe routes precedes every journey the drivers make nowadays. He noted elevated security concerns, indicating that passengers also berate them on the safety of the roads.

As the day progresses, the larger buses with higher prices due to the elongated route start to fill up and depart while the mini-bus drivers start calling out for passengers headed to destinations near the capital. Shorter routes may sometimes only reach Dukem town, which has a 20 Br tariff.

Close to 2,000 buses are registered by the Ministry of Transport & Logistics, with 384 being luxury vehicles. They provide long-distance transport services operating under 15 associations while two are privately owned.

The precarious conditions of the public transport sector have pushed several people out of business opting to try their hand elsewhere.

Demelash Admasu used to be the proud owner of a public transport company called Yegna Bus, which had 17 vehicles under its fleet until last year. He had entered the business with 100 million Br capital after decades in the import-export sector.

Demelash blames the unpredictable security status for being forced to sell the company to Africa Express Bus.

“The cars were stationary nearly half the time,” he told Fortune.

Yegna was started with bank loans which ended with the right of set off of a massive chunk of the 50 million Br annual revenues of the company. Demelash went back into the import-export business he knows by heart, regretting the day he entered the transport sector.

The former manager recalls his short stint in public transport indicating that he had been considering selling since Covid times.

“Any monetary value we earned was absorbed by inflation,” he ruefully told Fortune.

The 19 luxury transport service providers who have banded together to form an association at the request of the Ministry have not been spared from the plights of the transport sector.

Muluken Melese is the chief executive of the Luxury Buses Associations & Companies Union and manager of Habesha Bus Transport with 16 buses under its fleet.

The Union adjusts tariff rates by considering the price of fuel, loading capacities and daily expenses. Muluken was quick to stress that they are not part of the fuel subsidy program provided by the government as opposed to some transport service providers.

“Most owners are sitting on huge debt,” Muluken told Fortune, indicating the purchases through 50pc bank loans. He said both owners and drivers are choosing to work in routes with guaranteed safety, creating queues of buses waiting for customers.

He fondly recalls a few years back when drivers used to make their way up to Khartoum, Sudan, after having passed through Gonder Amhara Regional State.

“A few kilometres outside the capital is a challenge now,” he said.

The luxury buses cost around 18 million Br each, with interest payments compounding when the owners fail to pay. It costs nearly three times as much as regular ones while providing upgraded services.

Muluken recommends banks provide grace periods, as he points to the prevailing economic downturn with the rise of conflict and tension in most parts of the country.

Officials from the Ministry of Transport & Logistics said they have no mandate over private vehicle owners to get on journeys without their volition.

Mustafa Jemal, head of public transport management at the Ministry underscores the government can only assign routes for the vehicles while the terminal directories decide on the safety of the roads.

The intricate connection between transport and security is evident to academics and economists alike.

Birhanu Zeleke (PhD) is the head of transportation at Kotebe Metropolitan University. He stressed the transport infrastructure goes beyond asphalt and includes every other facet of social life where people are opting to use other modes of transportation such as aeroplanes than risk their safety in these trying times.

“Roads and railways are most sensitive to security,” he told Fortune, referring responsibility of maintaining the security of the country as the duty of the government.

Economists such as Atlaw Alemu (PhD) consider transport as a vital lifeline of the economy, reasoning that no amount of production matters if goods and services cannot be delivered across the country.

He argues that there is trouble in every corner, with people’s insecurity growing by the day describing the plight as a “mess”.

While Atlaw reminded that a large portion of the population cannot afford regular air fairs, he told Fortune that lineation towards it might serve as an indicator of security challenges in other modes of transport.

He said: “Flights used to be preferred for speed; now they are a safety precaution.”

SUR Construction’s Post-War Reckoning

Posted on by Tizita S.

In the wake of a devastating two-year war, SUR Construction Plc, one of Ethiopia’s premier contracting firms, is turning its gaze inward. As its executives grapple with significant losses, including the decimation of approximately 85pc of its machinery through looting, damages, and unfulfilled contracts, the company seeks clarity and, potentially, compensation. The key to this next chapter is a thorough valuation of its assets and business portfolio.

In a deal they signed two weeks ago, Sur Construction executives have enlisted the expertise of Industrial Projects Services (IPS), a state-run consultancy firm. An integral sub-entity of the Industrial Parks Development Corporation (IPDC), IPS has been invited by SUR to take on this significant undertaking.

SUR Construction was first incorporated in January 1992, with 100 million Br initial capital registered under five shareholders, all TPLF central committee members at the time. The company was restructured in August 1995, after the founding shareholders transferred 96pc of the shares to EFFORT, and the remaining to Berhan Building Construction, Messebo Building Materials Production, Meskerem Investment and Arkebe Oqubay, the latter serving as a board chairman early on.

Sur Construction has grown exponentially over the years. As a grade one contractor, it boasts a portfolio brimming with projects worth over nine billion Birr – from road construction to hydropower projects. The company’s vast footprint is evident across Tigray and Amhara regional states, as well as the capital Addis Abeba, where it is headquartered on Africa Avenue (Bole Road).

However, it has not been smooth sailing for SUR in recent years.

Before reaching out for the valuation, it languished under the oversight of Commercial Nominees Plc, a custodian by a court ruling that reportedly took a heavy financial toll. It is one of the 26 companies of 31 subsidiaries under EFFORT to win a court battle to regain its management autonomy.

“It was really huge step for the company,” said Zinfu Asfaw, SUR’s managing director. “It feels right to regain our autonomy, finally.”

The valuation’s purpose extends beyond determining the company’s present state.

As Fitsum Ketema, chief of staff at the IPDC, noted, it is about reconciling SUR’s pre-war reputation against its post-war predicament. The valuation is expected to incorporate a slew of variables – from inflation to the economic recession, from heightened risk to tangible war-inflicted damages. According to the executives, such a comprehensive approach is crucial for determining appropriate compensation. IPS has over four decades of experience consulting over 600 projects in agriculture, manufacturing, construction, transportation, and textiles.

“We are looking for some clarity,” Zinfu told Fortune. “It’ll help us evaluate investments in monetary terms.”

Valuations such as the scope Sur Construction managers demand is more than numbers. Experts in the industry refer to guidelines from the International Valuation Standards Council (IVSC) to provide methodologies to determine asset and company value, proving invaluable across various compensation jurisdictions. As Ethiopia seeks to rebuild structurally and economically, such evaluations will play a critical role.

Abebe Dinku (Prof), a respected civil engineer lecturing at Addis Abeba University, strongly advocates for embracing international valuation standards and methodologies, particularly in light of the gaps in local expertise. To him, and many like him, it is not just about numbers or financial figures but ensuring that these evaluations meet the benchmarks of independence, consistency, and professional rigour. Only then can financial compensation decisions indeed be deemed fair and justifiable.

Yet, challenges loom.

Behailu Kebede, business development manager at IPS, acknowledged the uphill battle of sourcing and meticulously compiling data. For him, the success of such an endeavour hinges on collaboration.

“We’re ultimately looking to understand the extent of the losses to the company,” said Behailu. “It all comes down to the availability of data and sufficient substantiation.”

His words highlight the deal between IPS and SUR Construction, each playing a role in navigating this complex task. Despite the promise that IPS brings with its four decades of experience and prior work for enterprises under the umbrella of the Endowment Fund for the Rehabilitation of Tigray (EFFORT), broader systemic issues are at play.

Abebe emphasised a significant gap in the industry – a dearth of specialisation in property valuation. This vacuum, coupled with the absence of certifying institutions, casts a shadow of scepticism over the reliability of local property valuations.

“It’s a very challenging job to undertake,” he said. “The precise methodology is crucial.”

Such evaluations are more than just financial exercises for a country reeling from the implications of a prolonged war. They are crucial for company owners to pursue compensation claims, becoming touchstones of trust and reliability in an uncertain environment. Abebe believes achieving a threshold of 90pc accuracy in these valuations is paramount.

Sudden Halt on Forward Trading Rattles Ethiopia’s Commodity Exchange

Posted on by Tizita S.

The Ethiopian Commodity Exchange (ECX) executives were taken aback by an unexpected decision from the State Minister for Trade & Regional Integration, Kassahun Goffe, who placed a hold on the four-month-old customised forward trading initiative two weeks ago.

The new scheme had emerged as a response to the more traditional 14-year-old spot trading system, marking a significant evolution in the trading landscape. Unlike spot trades that call for instantaneous settlements of transactions, customised forward trading provided room for future deliveries and payments across 23 commodities traded at the Exchange. However, the swift pause has stirred controversy and uncertainty in the commercial corridors.

Given its short existence, forward trading had rapidly gained traction, carving out a sizable niche against the established spot trades. Contracts on this floor stipulated a flexible settlement time frame, ranging from seven days to a more extended three months. Many in the trading community find its flexibility an attractive proposition.

The remaining two modalities included selling from the ECX warehouse with suppliers allowed to find buyers and deals between buyers and sellers under the purview of the Exchange for the future handover of commodities after the Exchange’s involvement. Although they restricted the over-the-counter modality, citing difficulty in tracing and registering commodities, they were left in the dark with the indefinite suspension not followed by an explanation.

However, the rationale behind the sudden freeze from the Ministry seemed rooted in concerns about the system’s integrity and the potential risk of monopolistic practices.

Mesfin Abebe, an advisor at the Ministry, pointed out instances where dominant players allegedly conspired to corner specific markets, leading to skewed dynamics. He blamed certain exporters for entering agreements without guaranteed supply contracts. Coupled with the perceived oversight lapses by the Exchange, this has cast a shadow on the integrity of the forward trading scheme.

“We never implied having solely upright traders,” Mesfin told Fortune, suggesting that stringent regulatory supervision should be central to the scheme.

Such concerns led to a cascading effect, with the ECX promptly halting one of its three trade modalities.

Dawit Mura, acting communications head at the ECX, voiced the collective sentiment of the Exchange, expressing confusion about the sudden proscription, given the lack of a “comprehensive rationale.”

“We’re trying to grasp the underlying reasons,” said Dawit.

While the controversy rages on, there is a broader acknowledgement of the momentum forward trading had amassed in its brief operation window. Over 400tn of commodities worth 285 million Br had already been transacted through the scheme in the two months since its introduction. Managed by Wondimagegnehu Negera, the third CEO since its launch in 2008 as Africa’s first commodity exchange platform, the ECX has a robust 24 billion Br annual transaction value, trading a quarter of a million tonnes of commodities.

Some business community members have expressed significant disappointment.

Exporters like Alebachew Biyazen had started leveraging the new trading scheme despite encountering hitches due to sporadic security concerns.

Alebachew has become a proponent of the procedural simplicity of forward trades after he shifted his business from the finance realm to the export sector, entering two years ago with 25 million Br capital. He paid 80,000 Br as a non-direct member, annually renewed for 5,000 Br. For the past four months, Alebachew shipped 203,000 dollars worth of pigeon peas to Europe during the short stint of forward trading.

“I prefer it for its procedural simplicity,” he said.

He found the scheme more transparent, particularly when engaging directly with suppliers, ensuring quality assurance. He urged the trade authorities to address illicit activities individually, not suspending a promising initiative.

A study by Taylor Francis shed light on a glaring problem in Ethiopia’s export trade. Annual losses amounting to a staggering 272 million dollars were attributed to quality inconsistencies. This revelation underscores the importance of forward trading as a potential response, ensuring a more stringent quality check process. The study revealed that nearly all the losses were due to non-compliance costs, with recipients refusing to accept the commodities.

Belay Zeleke, a seasoned commodity trader with a dual role as an exporter and intermediary, lauded forward trading as a much-needed mechanism for both ends of the trading spectrum. His experience echoed the prevalent sentiment among many in the trade community. He has served as an intermediary for 20 forward trading contracts, pointing to the decreased logistics hassles and costs in moving shipments from primary markets to ECX warehouses. He argued that spot trades might lead to low-grade quality exports that were frequently rejected, emphasising the utility of exporters getting to assess the quality of commodities by physically appearing at suppliers’ warehouses.

“Exports were slowly growing after the trade,” Belay told Fortune.

Belay challenged the Ministry’s officials, stating their arguments lacked substantial merit.

However, not all concerns are without basis.

Investment consultants highlighted potential roadblocks for the fledgling scheme. The nuances of forward trading might be too intricate for the current institutional capacity of the ECX.

Samson Tsedeke, a veteran manager at Multilink Consulting, pitched futures trading as a more streamlined alternative. While both approaches hinge on a robust capital market framework, he believes futures trading might offer a middle ground for regulators to navigate.

“It’s a matter of the horse before the cart,” said Samson.

While the sudden suspension has jolted the trading community, it has ignited a crucial conversation about the future of commodity trading in the country.

National Bank Raises Creditable Forex Amount for Non Residents

Posted on by Tizita S.

Ethiopians living abroad for over a year and non-residents of Ethiopian origin can now deposit foreign currency notes of up to 10,000 dollars, provided they can present entry visas not exceeding 30 days.

The latest amendment from the National Bank of Ethiopia (NBE) continues the stringent requirements for non-residents hailing from neighbouring countries and the Middle East, compelling them to provide authenticated resident or work permits and file a customs declaration.

Vice Governor of the Central Bank, Fikadu Digafe, underscored the new amendment is primarily directed at simplifying access to funds for people visiting the country.

“The previous amount was just too small,” he told Fortune.

Requirements of a customs declaration for crediting into a foreign currency account for non-residents had been set at 3,000 dollars by the Central Bank directive put forth two and half years ago. Amended later down the months, peculiar modalities were introduced to what is colloquially referred to as a ‘diaspora account’.

A series of directives since the re-establishment of the National Bank of Ethiopia (NBE) in 2008 have defined the circumstances for the ownership and utilisation of foreign currency by both residents and foreigners reflective of the country’s general economic policy orientations.

During favourable winds, withdrawals of up to 10,000 dollars when leaving the country had been permitted while forex lulls had seen the regulators restrict even local currency amounts leaving the country to 3,000 Br such as in September 2022.

While the latest move by the Central Bank repeals three articles regarding the amounts permitted for non-residents and clarifies requirements for a customs declaration, it does not redefine any of the original terms.

Fixed or time deposits with minimum maturities of three months, current accounts based on prearranged agreements for withdrawal from the bank and repatriable saving deposits that may be used for local payments, are the three types of accounts permitted under this modality.

Bankers with experience in handling foreign currency accounts at commercial banks recognise the alluring incentives of the latest amendment.

Sirak Yifru, former head of trade finance and current internal auditor at Nib Bank, observes that tourists already received an accommodating reception from financial institutions, while business people who need cash to make payments have been restricted by the small amount.

He suggests that increasing the amount will benefit entrepreneurs who have frequent trips abroad, whereas incentivising tourism can only reach a certain degree without sustained resolutions to political problems plaguing the country.

“It should be promoted heavily to Ethiopians living abroad,” he told Fortune.

A foreign currency account allows making transfers abroad, withdrawals for travel allowances and payments for imported goods listed as priorities such as fuel and pharmaceuticals for beholders with business licenses.

Over 2.5 million Ethiopians are estimated to be living abroad with a large concentration in the Middle East and North America. While people who hold a power of attorney are not permitted to open an account on the beholder’s behalf, they are entitled to withdraw and make payments from the account.

Awlachew Masre, engagement coordination director at the Ethiopian Diaspora Agency, insisted that no complaints had been formally filed to the Agency with regard to the amount of the forex permitted while its utility is self-evident.

The foreign currency account modality was originally intended for non-residents who mainly make their living abroad. The access has been used by importers who either manage to get work permits in other countries or have associates who can open an account, prompting the regulators at the Central Bank to ban its allocation to non-priority items.

A businessman who spoke to Fortune anonymously disclosed the amount does not really matter as long as one manages to get approval from the Central Bank. He said the ‘diaspora’ account is helpful for importers who bring in priority goods listed by the NBE in small amounts.

“Most people underreport prices when requesting forex,” he told Fortune.

The National Bank of Ethiopia has introduced a slew of reforms aiming to encourage forex inflows into the country in the past year, including raising the retention rates for exporters to 40pc and the issuance of a directive to allow offshore accounts for strategic foreign direct investments into the country.

Despite the reforms, foreign direct investment has gone through a 14pc decline in the third quarter of the fiscal year from the same duration in 2021/22.

Eshetu Fantaye, former president of Ahadu Bank and a veteran of the financial industry, applauded the development, underscoring its commensurate quality with amounts typically allowed to exit from other countries.

“Most countries allow exits with a similar amount,” Eshetu told Fortune.

The Boston University fellow also pointed to the importance of thoughtful and meticulous reflection in designing laws. He cautioned against possible loopholes that might arise with regard to for how long or how much of the forex that entered into the country may be used or even for what purpose.

“Further clarifications or a comprehensive overview are deemed necessary,” he said.

Legal professionals such as Yehualashet Tamiru point out that legally binding interpretations are usually given by cassation benches when there is a lack of clarity in implementation.

He explained that definitions of terms given by original laws are maintained if the amendments do not explicitly state otherwise, or if further clarification is not issued by the responsible body.

Electric Utility Gears Up to Power Addis Abeba Grids

Posted on by Tizita S.

Troubled Addis Abeba’s electric grid system is set for significant rehabilitation with 57 million dollars, as the Ethiopian Electric Utility (EEU) moves to secure a technical consultant and provide an engineering procurement contract for evaluation two weeks ago.

The project aims to decrease power wastage and disruptions in the capital by renovating around 2,000 transformers, 674Km transmission lines, including a new 19Km underground layout and the installation of three switching stations.

Financed by the World Bank, the project is part of the initiative to expand electric access in the country: the Access to Distributed Electricity & Lighting in Ethiopia (ADELE) with a 500 million dollar credit line in 2021 and the Ethiopian Electrification projection (ELEAP) for 375 million dollars in 2018.

The first phase of the project entails strengthening the reliability of grids in urban and semi-urban areas. It was planned for completion by the end of 2023 while subsequent components follow with the expansion of access through off-grid alternatives, capacity building and institutional reform. With  61 million-dollar finance, the third phase across seven other major cities contracted to China Electric Power Equipment & Technology Co.

“We have approached the final stages with these,” said Gebeyehu Dikasa (PhD), head of Addis Abeba Electric Utility.

He indicated that with preliminary work underway, the fourth phase of the citywide project will commence relatively soon.

Communication Director Melaku Taye echoed a similar sentiment, telling Fortune in a humorous tone, “We’ll keep improving as long as there is funding”.

Although Addis Abeba serves as a political and diplomatic epicentre for the rest of Africa, power outages due to an ageing grid which is plagued by theft and damage from traffic accidents have been defining characteristics of life for its residents.

Officials underscore that rehabilitation projects help increase revenues, decrease wastage and boost customer satisfaction in the long run.

Firealem Kure, technical advisor of the Project Portfolio Directorate at EEU, said multiple grid rehabilitation efforts have been launched across several cities over the last few years.

While some are stalled due to conflict, Frealem indicated that transformers and transmission lines reach a saturation level as demand from households rises, requiring maintenance or new procurements.

“As a resident, I also want a reliable grid,” he told Fortune.

Firealem stated that the current project is handled in two sections due to its scale and that the bidding process for the second section is ongoing.

He disclosed that a concurrent African Development Bank (AfDB) power project was in the pipeline. The Bank has approved a 104 million financing package to improve power supply in Eastern Ethiopia this month.

The year-end report by the EEU indicated that a mere 4.4 million households in the country had formal access to the electric grid, averaging a little over 200,000 new customers each year.

It has managed to add around 40,000 new customers yearly while it has a little over 500,000 customers in the capital. The rest of the nation does not fare much better, as Ethiopia is third in electricity deficits in the continent, preceded by Nigeria and the Democratic Republic of Congo.

While the electricity deficit is a nationwide phenomenon, constant power interruptions are frustrating for residents whose professions are intertwined with electricity.

The IT professional Nahom Shewangizaw is in his late 20s and lives around the HanaMariam area. He avoids going home until late on rainy days as he expects a blackout.

Despite observing a marginal improvement through the years, Nahom believes there is a long way to go, considering the capital’s rapid urbanisation.

“Lights should be standard expectation at this point,” he told Fortune, appreciating any effort to upgrade the grid.

The lives of business owners are also marred by anxiety related to uncertain electricity access.

Tsehay Fantahun is a resident of the Jemo area and provides a small cafe service nearby. She tries to cut back on her expenses by usually making the Injera bread at home while in constant fear that lights may go out.

“I can’t make a profit if I resort to buying it elsewhere,” she told Fortune.

A 2017 study by the US National Academies of Science, Engineering and Medicine reasons that while power outages cannot completely be prevented due to the multitude of complex components that work to supply electricity, the reliability of the system can be bolstered by targeted investments in critical areas.

Experts in the energy sector point to a combination of poor design and a lack of awareness as primary causes of outages and disruption to the grid.

Yemanehbrhan Kiros, founder and general manager of Yomener Energy Auditing & Engineering Plc, observes problems arise early on during the design stage of the grid and are further compounded during implementation.

He indicates that power outages are more often a problem of inefficient distribution and management rather than a lack of energy.

“Preventing energy waste is like building brand new virtual dams,” he told Fortune.

Yemanehbrhan recalled the free distribution of LED lamps by the former Ethiopian Electric Light & Power Authority (EELPA), which managed to save up to 80KW from the grid by merely cutting back on waste.

Apart from constant upgrades to the grid, Yemanebrhan recommends key policy orientations to mitigate power outages.

Minimising tax duties for energy-efficient products, allowing the sale of excess power by companies who utilise alternative energy sources and tariff incentives for nighttime usage of energy-intensive establishments are feasible to address the issue, according to the expert.

“Creating awareness on energy management should be a first-order priority,” he told Fortune.

Printed ID Backlogs Prompt Agency to Home Delivery

Posted on by Tizita S.

An unprecedented pile-up of identification cards (IDs) at the city wereda bureaus has prompted the Civil Registration & Residency Service Agency to start door-to-door delivery services before the stamped date runs out.

A flocking demand that could not be met with the available printers was created as ID card renewal which was suspended by the Addis Abeba City Administration a year ago, citing prevailing security concerns and growing fraud led to reopening a couple of months later.

While issuing a new identification is unavailable to the broader public, the service was partially instated prioritising university students, medical travellers to other countries, law enforcement and public servants who had formed cooperatives in a bid to build housing units in April.

Following this, a colossal backlog leaving 259,581 IDs piled up, urged the 11 districts to ease the burden by printing and distributing them through the 119 Weredas within the capital.

The districts managed to catch up with printing the IDs in July. However, residents of the capital had been content to move around the country with temporary acknowledgement papers that confirm registration for the original card.

The miscommunication resulted in 102,000 IDs being deserted at Wereda offices, resulting in the delivery of 28,000 cards in a span of five days last month.

The new identification card is valid for four years.

“We started distributing the printed cards to prevent their expiry,” said Yosef Nigussie, head of the residential services at the Agency.

He disclosed that handing out temporary papers would be suspended soon.

“People have started to use them like regular IDs,” said Yosef.

He acknowledged the Arada District’s backlog of 16,000 IDs due to the malfunction of printing machines is emblematic of the city-wide problem while disclosing that the Agency is awaiting a green light from the City Administration to begin registrations for new identification cards since the ban.

According to its nine-month report last year, the Agency had managed to collect around 12.6 million Br from its registration and associated services.

Despite the possession of IDs being rendered of elevated importance during emergency command posts, urbanites had foregone requesting for their reception, largely frustrated with poor service provision at weredas through the years.

Public administration experts believe the response is a reflection of the dwindling prompt and accountable public service.

Biyadgelegn Dessie, a lecturer of management & public administration at Gonder University, is not surprised by the lagged response of urbanites due to the difficult reputation of acquiring them.

He finds the response by residents to be in line with the snail-paced service given by public offices. The absence of transparency, lack of efficient time usage and unnecessary bureaucracy were behind the misalignment of service delivery and demand, according to Beyadgelen.

“The acknowledgement papers in wide use could easily be counterfeited,” he told Fortune.

Meanwhile, the delivery initiative has two districts riled up in an efficiency bubble as they complete their distribution while suspending the issuance of temporary acknowledgement letters.

A two million Birr procurement of three printing machines trailed the struggle to meet the large demand for printed cards in the Kolfe Qearnyo District. Following an audit which revealed a backlog of 62,000 undistributed IDs, the door-to-door delivery was kicked off by employees.

For Haji Aliye, who heads the district residential affairs bureau, it was a step forward in boosting the public service.

“We tracked each individual and matched the information,” Haji told Fortune.

The initiative was attributed to augmented work hours by the Bole District officials.

Asresash Kumsa, head of the district Residential Affairs Bureau recalls they focused on alleviating the backlog for five consecutive days to sequence the thousands of pile-up requests.

Asresash indicated that home deliveries were made to urbanites who were handicapped and those who could not make it to district offices due to factors beyond their control, such as advanced age, while awareness was attempted by blasting messages through bullhorns.

She lauded her district restructured working hour shifts to print 7,084 IDs that had already been registered onto their system stating: “Everyone knows the struggles of getting an ID.”

Evolving Dynamics of Domestic Travels

Posted on by Tizita S.

Fikresilassie Tsegaye, 34, is an architect by profession, who has seen his favourite holiday pastime grow into a lucrative side hustle over the past couple of years.

He organises trips to different parts of the country, compelled by the authentic experience during his trip to celebrate Epiphany in Gonder, Amhara Regional State.

“I wanted others to feel what I experienced,” Fikresilassie told Fortune.

What started as a moment of inspiration has now grown to become a frequent escape from the capital’s noise with a journey to the green fields of Gurage Zone in the pipeline for the Mesqel holiday; which is emphatically celebrated in the locale with residents dispersed across the country rushing to the embrace of the family back home.

Fikresilassie, known for founding the popular social media trend Bored Cellphone Addis Abeba, posts his trip plans through his rich online presence of 126,000 members with interested adventurers contacting him for details.

Huddled in Coaster bus, groups of about 20 are set for the five-hour drive to Mesqan Wereda under Buttajira Town Administration after paying 6,000 Br for a package that includes food, travel and lodging at a traditional home in the rural villages.

“The networking and camaraderie built is the true value,” said Fikresilassie.

The three-day stay entails a menu of home-cooked specialities of Gurage culture such as Kitfo (minced meat), Zemamojat and Ayib (mix of kale and cottage cheese) and Bulla (porridge made of false banana).

Ceremonial ox slaughter follows a blessing from elders with festivities reaching a fever pitch as a large campfire accompanied by dancing and local alcoholic spirits takes hold of the night, imprinting an indelible memory on visitors.

Despite interest growing over the years, the organiser claims to net around 10,000 Br in profit.

“It’s more of a hobby than a business,” he told Fortune.

Holidays are changing their celebratory manner, giving ground to a budding industry of domestic tourism with urbanites flocking into regional states to get a taste of cultural cuisines and a whiff of fresh air.

While overlooked as a lucrative business, domestic tourism is an industry that was valued at around 61 billion Br last year with 970,000 tourists, according to data from the Ministry of Tourism.

Tariku Negash, communication head of the Ministry of Tourism, said these informal trips are not recognised or supported by them. He indicated there is no compiled data on the extent of these holiday travellers who use social media to gauge if their safety situation is assessed by the Ministry.

“But we protect the international tourists through our scouts,” said Tariku.

The cold shoulder from the Ministry does little to discourage enthusiastic adventurers looking to make the trip this year.

The 33-year-old Faskiaw Kassahun is going on his fifth trip to Gurage this year, after catching onto the Bored Cellphone Facebook page. He has been a long-standing member since its beginning five years ago and ventured on the pilot trip which he now looks forward to every year.

He observes that every trip with different people offers a unique experience.

“The experience is beyond description,” said Fasikaw.

Fasikaw has become enamoured with the traditional cuisine, dancing and fresh air more than the prices have climbed from 3,000 Br to 6,000 Br through the years.

The digital curator with monthly earnings that hover around 40,000 Br believes the price increments go in line with the general inflation and is eagerly awaiting the dancing around the campfire and the organic butter-infused delicacies that await him this year.

“You drink the Kitfo not eat it,” he told Fortune in a sensational tone.

A report by the Harvard Business Review indicates that some businessmen used the pandemic to develop existing trends into lucrative sources of income such as food delivery services, telemedicine companies and at-home exercise instructors.

While the pandemic destroyed several businesses that relied on face-to-face instruction, it gave rise to entrepreneurs like Meron Teferi, who took up the opportunity to enter into new ventures.

In her mid-20s, Meron has picked on the trend of hiking business in the wake of movement restrictions imposed by the Covid-19 pandemic two and half years ago.

“A cord has struck within,” she said.

She founded Seleme Hiking a few months after graduating as a tour operator to give respite to people locked into their homes by organising trips to Wenchi, Zeway, Ensaro and Debre Libanos areas.

“It has evolved into a community,” Meron told Fortune.

The bi-weekly trips a few hundred kilometres from the capital transform into grander adventures during holidays.

She ventured into the festivity last year organising a Mesqel trip to Arba Minch Town in the Southern part of the country, which received encouraging compliments from travellers.

Prices for the package increase as the holiday approaches for the four-holiday trips during the year to Dalol Depression in the Afar region, Chebera Churchura Park in the southern region and Bale Mountains in the Oromia region.

She nets around 15,000 Br in profit from each hiking trip. However, the trips which entail booking huts, making sure food and refreshments are available, and hotel accommodations for customers who seek privacy all for prices ranging between 14,000-16,000 Br prove to be more costly for Meron.

“I usually break even during the holiday trips,” she said.

While the business has yet to receive a nod from the Trade Bureau for a license, this year, she is planning a trip with 15 people to Agena town in Gurage Zone and Arba Minch.

Meron recognises the rising threat of security issues in the country. She has people from several posts who constantly check on the road and update her ahead of time before reaching specific destinations.

“I receive constant updates from across the country,” she said.

Veterans of the tourism industry acknowledge the vast untapped potential of local tourism, praising the recent wave of maverick entrepreneurs.

Three decades in the tourism sector have allowed tour operator Yohannes Assefa to recognise a customer base eager to look out into the country.

“They have the opportunity to plan ahead as opposed to tour companies operating spontaneously,” said Yohannes.

He applauded the communal housing arrangements provided by the organisers, as they cut costs and created a sense of culture. Yohannes notes an intricate link between security and tourism, which he expects will impact the burgeoning domestic tourism industry if it does not improve.

 

The Allure of Screens Trending Media Culture

Posted on by Tizita S.

Kulen Ibrahim’s home grows eerily quiet at night as her three boys become engrossed in Amharic cartoons on the screen. The family resides in a high-rise apartment, which limits their children’s interaction with neighbourhood kids along with their exposure to local languages.

Their mother, who resorted to a 250 Br a month subscription for Canal+ Ethiopia following the advice of teachers who recognised that the boys were handicapped in the Amharic language, is pleased with the results.

Amongst a vast selection of local television and radio stations, the package offers nine channels for Amharic movies, discovery, and a kids and sports section.

“I can already see their language skills improving,” she said.

Gone are the days when families had to stay glued to one channel as there are now 38 television stations to choose from.

Most can be found on the free-to-air Ethio-Sat satellite. In the past couple of years, however, a couple of pay television options have disrupted the entertainment industry. Canal+ and DS-TV have brought with them diversified options and lucrative incentives for filmmakers while providing audiences with an array of choices.

A South African-based Multichoice, known for its sports selections in Ethiopia for the past two decades, has expanded its services to include several packages for local audiences. Through its satellite service, the company offers five monthly subscription packages ranging from 290-3,900 Br.

With over 22 million subscribers across 50 African countries, DS-TV has a selection of 13 channels with Amharic and Oromiffa dubbed shows for children and adults that have pushed the service to gain popularity in Ethiopia. The large population of football fan in Ethiopia has created a lucrative market for sports broadcasting services.

Emebet Megistu is a stay-at-home mother with two sons. In the afternoons, she enjoys watching soap operas, while her boys prefer to watch soccer at night. She humorously refers to their home as a “stadium”, as her sons often invite friends over to watch the games.

With employed and recently graduated children, she feels relieved that her sons will not be out too late at night, as they can watch games from the comfort of their home with the decoder they purchased for 1,200 Br.

Meanwhile, she spends her days catching up on her favourite new shows, which gives her plenty to discuss when meeting with neighbours who do not have access to the selection.

Ethiopia’s airwaves were monopolised by the state-owned Ethiopian Broadcast Corporation from 1964 until the introduction of the first private television station, Ethiopian Broadcasting Service (EBS), in late 2008. Headquartered in the United States, the network has penetrated the market with diverse segments giving priority to entertainment.

Another pay television  was introduced a couple of years ago as Canal+ Ethiopia, a French-based television channel launched in 1984.

It has 24 million subscribers worldwide, making its presence in 40 countries where over half are in Africa.

The Digital Services Officer Tafach Kassahun disclosed that they had to be cautious in selecting their markets since the demand for sports had been fulfilled.

“We opted to provide entertainment,” she said.

The recent transformation in the consumption of media is complementary to filmmakers’ ambitions.

According to Sofonias Tadesse a 36-year-old filmmaker, the expansion of companies has given professionals and audiences a plethora of options.

“The time of mediocrity has ended,” he told Fortune.

He has over a decade of experience in the industry and has worked on several popular series such as Yeger Esat, Mezez, and Besentu. The filmmaker believes that low-quality films will be disregarded by audiences.

“The value put on the work will be reflected in audience reactions,” he said.

Sofonias believes expansion has the potential to leapfrog to the status attained by the developed world. He suggests that the industry needs to invest in quality and pay television, and embrace new technologies such as mobile phones and streaming applications, stating, “entertainment shouldn’t be free.”

The proliferation of media content has led to a sense of impending prosperity among professionals. However, insiders argue that the quality of content has not kept pace with the quantity.

Experts welcome the expansion of channels and economic opportunities for creators but emphasise the need for novel ideas which they believe stifles creativity while stressing the importance of incorporating academic knowledge into production to create films that reflect reality.

Balew Demesse (PhD), an associate professor of theatre at Addis Abeba University (AAU) and editor-in-chief of Policy Study Institute, argues that the film quality and the availability of production equipment remain sub-standard compared to neighbouring countries such as Kenya.

“Most of the concepts are shallow,” he told Fortune.

While he welcomes the expansion of channels and economic opportunities for creators Balew emphasises the need for novel ideas and coupling creativity with the lived experience.

In the meantime, Balew criticises state censorship of media, which he believes stifles creativity.

“Art functions against an economic backdrop but thrives in creative freedom,” he told Fortune.

As the country comes to grips with round-the-clock broadcasts and a selection of nearly 40 television stations, sociologists recommend carefully selecting content and calibrating responsibilities.

Kibur Engidawork (PhD), researcher & sociologist, warns against the misuse of streaming services that are already transforming family meals and social interactions.

Kibur cautions that excessive entertainment can cause people to neglect their responsibilities while advising everyone to be aware of the subtle messages and how much time they spend.

Although he recognises the value of media in disseminating information, Kibur believes that aimless browsing is lenient towards harm. He emphasises the need for time management, particularly when it comes to consuming highly addictive multimedia content.

“Audiences should filter the information they consume,” he told Fortune.

Novel Sector Dawns on Postpartum Care

Posted on by Tizita S.

A month into giving birth to her fourth son, 29-year-old Shewaye Desalegn longs for the caress and attention of her mother, who provided three months-long postpartum care when she brought the other children into the world.

The conflict in Amhara Regional State has prevented her mother from making the 500KM journey from the Wollo area, placing the responsibilities on her husband who has limited awareness of the needs. Although he tried to assist with cleaning, cooking and nursing, his efforts could not bring Shewaye satisfaction.

“His lack of experience is evident,” she said.

A dawning business sector over the past year seeks to seal the gap by providing nurturing services to new mothers deprived of a caretaker. Hasna Endris launched the Aras Package five months ago after a lonely postpartum period spent following delivery in the United States.

Spawned by the loneliness felt in the period, the service has already garnered attention, managing to provide its services to 10 households since its launch.

“We started out real slow,” said Fatuma Abdu, manager of Aras.

Initially launched to provide caretakers who assist in homecare with basic cleaning and nursing services, it has now expanded to a rich four-package deal which incorporates a menu of meals tailored for post-natal care.

With prices ranging from 29,500 Br to 56,000 Br, the top tier 40-day package entails 35Kg of flour used for porridge and hot beverages (atmit), snacks, four rounds of traditional steam and a day of sauna bath while some mothers require special curtains.

“We customise the packages for each client,” Fatuma told Fortune.

While many prefer the attention of their mothers during the postnatal period, Aras’s business slowly picked up through word of mouth. In hopes of getting more clients, Fautma expresses the company’s desire to reach out past the capital despite few knowing such service exists.

Those weary of the customary culture of a mother nursing her daughter after birth seem to be welcoming the emerging business.

The 60-year-old grandmother, Bilchanesh Desalew, feels like half her lifetime was spent taking care of her daughter and grandchildren. She traversed all the way from Harari Regional State following the birth of her fourth grandchild two months ago.

Bilchanesh recalls the days when she had to prepare meals multiple times a day while barely getting enough sleep at night.

“It’s an absolute burden,” she told Fortune in exasperation.

Although the frequent demand and pulling an all-nighter had become tedious with age, she disclosed the task was draining even in her prime.

“I wish this to be the last time I have to do it,” she said.

According to Macrotrends review the current birth rate for Ethiopia stands at 20.262 births per 1,000 people. While showing a 1.5pc decline from 2022, the figure is still high by international standards.

The postpartum period involves the first 12 hours with the potential for immediate crisis, the next few weeks while undergoing physical and emotional recuperation and up to six months before full recovery.

In the past year, 165,000 children have been delivered in the capital from 12 public hospitals and 101 healthcare facilities giving maternal-care services.

The Addis Abeba Health Bureau works through a technical consultation process and new guidelines which dictate that a new mother shall receive postnatal care inside the health facility for 24 hours which extends to 72 hours if a surgical process is involved.

“Strengthening postpartum care in health facilities is amongst our priorities,” said Sindu Mekria, head of the Reproductive Maternal Nutrition & Child Health Directorate. She stresses the importance of ongoing follow-up for a new mother at least seven times.

Medical professionals point out the new businesses could be a relief to parents who have no caretaker by their side while a familiar environment is preferable for emotional support.

Ousman Hussien (MD), a gynaecology & obstetrics resident at Tikur Anbesa Hospital reiterates that new mothers who are through postpartum depression would have a better coping mechanism emotionally if they stayed around a familiar environment for a year after giving birth.

He indicates that the health status of caretakers is a crucial point to go over besides unburdening the mother from workload.

Experiencing highs and lows during birth in the first weeks are common symptoms for new mothers, according to the gynaecologist who emphasises the importance of continuous company of adults after giving birth.

“The emotional state of the mother should be evaluated before hiring a caretaker,” he said.

Women who wish to take the burden off of their mothers embraced the emerging businesses.

Girum Tagelu had her third child with her mother by her side. Even though she is grateful for the emotional and physical support, Girum wishes to give her mother some space had she been aware of such service providers.

She said her mother does the constant cooking, answers the demands of a newborn and frequent health check-ups which have visibly taken a toll on her.

“I really feel bad,” she said.

Girum raises the issue of affordability pointing to the importance of pricing for these businesses to grow. With plans to have more children in the next couple of years, the 33-year-old mother underscores these businesses significantly alleviate her concerns going ahead.

Realising the tight budget of households, affordable alternatives despite their short-lived span.

Companies like Ethio-Medicure Consulting have noted this blossoming demand and kicked off a postnatal care service dubbed Arash-Ende-Enat which translates to Care Like a Mother five months ago.

They provided packages ranging between 4,000 Br and 9,000 Br, which include a 50Kg flour for porridge and options for a permanent or temporary caretaker for 90 days.

A contract signed a few days prior to the onset of labour, which included a medically screened caretaker who could read, write and had received training, was the business format of the now-defunct company which has only provided service to two households.

Elsaday Lemma, the manager, said slow growth and financial difficulties forced her to close down last month due to difficulties settling payments for hired caretakers.

“We could only pay them on a commission basis,” she said.

Elshaday expects to pool funds and rebound soon, hoping to re-evaluate the standing by incorporating a new business model.

Experts forecast the potential of the business while indicating the importance of promotion and utilising digital media in an emerging market.

Yoseph Getachew, a finance and investment consultant, underscores the role of financial literacy and networks for a growing business. He argued that most startups take hints of business ideas without adequately addressing the needs of their clients.

“Businesses that take off based on presumptions rather than evidentiary appraisals are bound for failure,” he said.

 

Protectionism Started the Geopolitical Fire

Posted on by Tizita S.

Seeing many prominent economists decry the Trump Administration’s tariffs as welfare-reducing protectionism has been puzzling, while approving of the Biden Administration’s even more drastic steps to reshore, friend-shore, and decouple from China.

In a March 2018 Chicago Booth poll of economists, 100pc of respondents opposed new US tariffs; but then a largely overlapping set of respondents were sceptical of global supply chains when asked in January 2022. Only two respondents (with me being one of them) disagreed that a reliance on foreign inputs had made US industries vulnerable to disruptions. One exception to this broader pattern is Dani Rodrik, who argued in a recent commentary that the ramifications of geopolitics are much more severe than renewed protectionism.

He makes an important point; still, one must remember that protectionism was a major catalyst for today’s escalating geopolitical tensions.

The Trump tariffs both reversed a long-term trend toward trade liberalisation and imposed real costs on the US economy by raising prices for American consumers and firms using imported intermediate inputs from China. But Trump’s policies had little impact on global trade overall. While trade between the United States and China declined, as expected, many other countries’ exports – both to the US and to the rest of the world – increased. Trade flows were reallocated, not reduced.

But the belief in the benefits of international trade took a hit as more people regarded it as a zero-sum game.

The Trump Administration pushed the narrative that many of America’s longstanding economic problems were due to trade with China. Inequality in the US had risen sharply, and younger generations were not doing as well as their parents. As if that was not bad enough, Chinese children did seem to be doing better than their parents. Indeed, there had to be a connection between the two. If China was doing so well, America must be falling behind.

Initially, many criticised this narrative as populist pandering. But it gradually gained traction, and when COVID-19 struck, arguments in favour of protectionism and against China went mainstream. Suddenly, everyone agreed that the pandemic-related supply-chain problems resulted from international trade. Never mind that many of the bottlenecks originated domestically and had nothing to do with global supply chains; or that without imported masks from China, shortages of personal protective equipment would have been worse; or that, despite COVID-19 being the biggest global shock since World War II, the world economy proved quite resilient.

The narrative was shifting toward blaming international trade, and particularly trade with China, for every problem in the modern economy.

Then came Russia’s full-scale invasion of Ukraine – the final straw. Though the aggressor was Russia, not China, it was now all too easy to imagine what would happen to the global economy if China invaded Taiwan. Concerns about geopolitical risks and national security came to the fore, lending momentum to calls not for protectionism but for a broader economic decoupling from China. Again, blaming the Russian invasion for ushering in a new cold war is easy.

But would we be where we are without the resurgent protectionism and calls for supply-chain resilience in recent years?

By undermining the belief in international cooperation and pushing the trade narrative as a zero-sum game, those policies and strategic objectives created some of the preconditions for today’s economic warfare. Whereas trade was presented as a zero-sum game in 2015-16, when Trump was elected, now national welfare is being framed in these terms. The issue is no longer just about tariffs and trade. Those are relevant only to the extent that they can be used to stop China from developing its technological capabilities.

The primary concerns now, we are told, are “de-risking” and national security, rather than America’s desire to maintain economic dominance. But such justifications are problematic.

Consider de-risking. It sounds prudent, but is it really about China?

Global production of the most advanced semiconductors is concentrated within a single Taiwanese company (TSMC), which certainly does imply a high risk of disruption should the company suffer some shock. But such a shock need not come from a Chinese invasion; it could also be a health crisis, a natural disaster, or even personnel issues. The root problem is not China, but high market concentration. The same risk would still be salient if the company were US-based.

While worrying about optimal diversification and de-risking makes sense, casting everything in geopolitical terms does not. When Trump recently vowed to impose massive new tariffs if re-elected, the international community rushed to condemn such policies. But tariffs matter less now, because the damage has already been done.

We live in a new era. Drawing on work by economic historians, I noted eerie parallels between the period leading up to World War II and recent developments in US trade and foreign policy. Protectionism is a problem, not just because of its impact on trade, but also on international relations and geopolitics.