SURREAL SAUNTERS

The Big Art Sale in Hilton attracts notable dignitaries like Minister of Labor & Skills Muferiat Kamil. During its 18th rendition this year, thousands of visitors showed up to see the works of over 100 artists. Ethiopia’s rich art history has been subjected to theft and destruction through the ages due to successive wars over the centuries. Most recently, Ethiopians have been asking for the return of a 19th-century shield, taken by British soldiers more than 150 years ago. The engraved shield is part of a vast cache of royal, religious, and military artefacts looted during the 1868 Battle of Maqdala.

 

BOHEMIAN MORPHEMES

A 123-year-old newspaper adorns a cafe around Bole, inspiring the inquisitive gaze of its sole customer on a late afternoon. “Aimro” was the first government newspaper published in Ethiopia in 1901, and it had Emperor Menelik II on its front page. The Emperor introduced the first motor car, postal system, telephone, telegraph, and typewriter. Menelik also reorganized the tithe system to fund the army, issued the first national currency in 1894, and built the first mint nine years later

SOFT SLOUCH

A road sign around Zewditu leans into the main road as if desperately reaching to remind passers of road safety. The Addis Abeba Transport Bureau has recently started to issue tickets to transgressing pedestrians in a last-ditch effort to reign in traffic accidents. The recent nine-month performance review by the capital’s transport bureau revealed that around 286 people have died, with the majority being working-age young men. Massive digitization of the road infrastructure has been underway for the past four years, with a smart traffic management centre around Megenagna and self-regulating traffic lights in condensed areas, which has not yet materialized.

High-Level Event Aims to Address Humanitarian Crisis

Development partners and government officials are expected to discuss improved humanitarian responses at a crucial event in Geneva, Switzerland this week. Co-hosted by the Ethiopian government and the UN Office for the Coordination of Humanitarian Affairs (OCHA), the primary goal is to secure pledges from both development partners and the government, according to officials.

Millions face hardship due to conflicts, economic downturns, climate shocks, and disease outbreaks, according to a UN statement. Last year’s aid diversion incident eroded donor confidence, calling the need for stronger accountability. Development partners will pledge to increase resources and advocate for sustainable development strategies. Collaboration with humanitarian organisations will be crucial for boosting the impact of aid on vulnerable populations.

Partners will urge the government to prioritise emergency funding, implement pro-poor policies, and strengthen accountability measures to prevent future aid diversions. Calls are expected to be made to streamline bureaucracy, ensuring tax exemptions for humanitarian goods, simplified visa/work permit processes, and the safe, voluntary movement of internally displaced persons (IDPs).

Foundation Announces Up to $2.5m Grants for Agribusinesses

Small and medium enterprises (SMEs) in the agricultural sector are poised for financial support as the Mastercard Foundation Fund pledges to award grants over the next three years. The Agribusiness Challenge Fund will award grants ranging from half a million dollars to 2.5 million dollars to qualifying businesses in Ethiopia and 19 other countries.

According to Smita Sanghrajika, an engagement partner at the Foundation, agribusinesses have lacked the financial resources needed to scale up and improve their business practices.

The program aims to empower agribusinesses by providing financial resources, mentorship from established businesses, and technical assistance. Organisers hope to create jobs, increase agricultural productivity, and accelerate the commercialisation of agricultural products.

Daniel Hailu, executive director of Pan-African Programs at the Foundation, emphasised that the project aims to act as a catalyst for growth and propel participating businesses to reach their full potential.

The application window is open for 12 weeks, closing on November 22, 2024. Unsuccessful applicants will have a chance to re-apply with improved proposals.

Document Authentication Service Gets Fee Revamp

The Council of Ministers approved a new regulation for the Federal Document Authentication & Registration Service last week which introduces a two-tier fee structure for citizens and foreigners, with an overall increase.

Beginning at 100 Br for citizens seeking document authentication for an assigning agency of single documents, the ceiling goes up to 500 Br while foreigners pay double these rates.

Implementation of the new fees began this week. These changes come alongside a digitisation effort, serving about 7,000 people daily. According to officials, the goal is to improve service efficiency and reduce wait times. In the past nine months, the Service has identified over 1,000 fraudulent documents submitted for authentication. The 85-year-old institution recently partnered with Oberthur Solutions, a French company, to improve its digital archiving process. It has also offered the option to pay through Telebirr, a mobile banking service, for the past two years.

Ministry Consults on New National WASH Program

Officials at the Ministry of Water & Energy are launching a new 10-year National Drinking Water, Sanitation & Hygiene (WASH) Program, funded by a 500 million dollar World Bank loan. It aims to improve access to clean water and sanitation services across 118 weredas.

A consultation forum aimed to gather input on the program’s design and implementation was held last week. Kebede Gerba (PhD), advisor to the Minister, outlined key changes such as a shift from an input-based approach focusing on construction to a results-based payment system. He said the funding will be tied to achieving specific service delivery goals while ensuring service providers deliver at the best of their capacity.

Asfaw Dingamo, state minister, stressed the importance of policies and strategies to ensure fair and sustainable service delivery. He said the government’s role in coordinating WASH sector activities since the establishment has room for improvement with most residents lacking access to the essential services.

EU Renews National, Continental Commitment

European Union delegation pledges continued humanitarian aid, strong trade ties, and support for major infrastructure projects in Ethiopia, during a press conference held at its headquarters on Cape Verde Road. The announcement comes in light of Hope Day celebrations held on May 9th, which marks a significant step towards the formation of the Union 71 years ago.

Outgoing EU Ambassador to Ethiopia, Roland Kobia, put forth a historical context of the Union’s formation in post-World War II Europe, emphasising peace as the cornerstone of development. He asserted the Union’s willingness to assist in resolving conflicts in several parts of Ethiopia and plans to reinstate budgetary support, conditional on reforms to the macroeconomic policy framework.

EU is the largest contributor to the African Union (AU), providing approximately 40pc of the annual budget exceeding 600 million dollars. Niño Pérez, EU Ambassador to the AU, reiterated the commitment to Africa’s continued development by strengthening economic and political ties.

Digital Transformation Council Holds Inaugural Meeting

The newly formed National Digital Transformation Council, led by Deputy Prime Minister Temesgen Tiruneh, held its inaugural meeting last week. This follows Prime Minister Abiy Ahmed’s (PhD) announcement establishing the council to oversee the implementation of “Digital Ethiopia 2025,” the nation’s digital transformation strategy.

It brought together officials like Belete Molla, minister of Innovation & Technology; Firehiwot Tamiru, CEO of Ethio telecom; and Tigist Hamid, head of Information Network Security Administration (INSA). The council discussed the overall progress of Ethiopia’s digital transformation efforts focusing on monitoring the execution of national digital policies and strategies, along with evaluating the effectiveness of development measures.

According to Tigist, the council is making headway in coordinating and implementing the long-term vision for digital transformation. Firehiwot said plans need to be refined to achieve the strategy goals. Ethio telecom, with its expanding reach (4G in 340 cities and a launched 5G network), and over 70 million subscribers, is playing a crucial role.

Ethiopia’s digital transformation strategy, launched in 2020, shows promise with skyrocketed internet access, exceeding 36 million users by 2023. It represents 35pc of the population with a mobile penetration rate exceeding 40 million accounts.

However, as highlighted by the World Economic Forum, challenges remain. Bridging the digital skills gap, expanding infrastructure, and promoting digital literacy are crucial hurdles to overcome for a truly inclusive digital transformation.

Electric Utility Advances to Off-Grid Power, Electric Vehicles

Ethiopian Electric Utility (EEU) aims to establish off-grid electricity services in remote regions and develop battery charging stations for electric vehicles in partnership with Huawei Technology S.C. Shiferaw Telila, CEO of the Utility signed the agreement with Michael Liu, head of Huawei’s Ethiopian office.

Ethiopia recently became the first African country to ban the use of internal combustion vehicles for personal use. EEU kicked off a 339 million dollar World Bank-backed project in November of last year that would see the electrification of up to 200 rural towns using 30 off-grid power generation stations in one of the largest off-grid projects.

While off-grid electricity presents significant potential to enhance energy access and reach throughout the country, legislative hurdles have presented a formidable challenge for investors throughout the years, according to Shiferaw.

Ethiopia has abundant renewable energy resources and has the potential to generate over 60,000MW of electric power from hydroelectric, wind, solar, and geothermal sources despite only half of the population receiving electricity.

Prime Minister Abiy Ahmed’s (PhD) green economy strategy also entails a shift towards renewable sources. With only 60 electric car charging stations in the capital and a shortage of spare parts for EVs nationwide, experts recommend massive investments in the development of the necessary infrastructure to accommodate the ambitious strategy.

STRANGLED BANKS, INFLATION CURE’S COST

A severe financial stranglehold has been imposed on the banking industry, undermining businesses due to a loan cap policy imposed by the central bank to control inflation. While reducing inflation to 28pc by the end of 2023, the monetary tightening has cast a long shadow over the fledgling third-generation (3G) banks that have sprung up in recent years. These finance institutions are now being stifled under the weight of a one-size-fits-all regulatory cap, severely limiting their lending abilities.

The credit scene shows a banking sector that has expanded its loan portfolios — up 24.3pc to 1.8 trillion Br — with significant lending to manufacturing, domestic trade, services, and consumer banking. However, the distribution of credit across sectors has been overshadowed by the overarching constraints imposed on total loan growth, which remains capped at an annual 14pc irrespective of a bank’s size or market reach. The uniform cap penalised newer banks that have faced severe restrictions on their operational scale and investment in growth, as evidenced by a shortfall in branch expansion and constrained staff recruitment. Executives blame the policy’s lack of flexibility to account for financial institutions’ diversity and varying capacities to contribute to the economy.

The repercussions extend beyond the banks themselves to the broader economy, affecting investor confidence and the capital market, where share prices have been observed to falter. The directive requiring banks to increase their paid-up capital, while well-intentioned, further strains these financial entities, compelling some to consider mergers or face potential failure. There is a growing call among financial experts and bank executives for a more nuanced approach to loan growth regulation that considers the unique circumstances of newer banks and their strategic importance to economic diversification and growth. As the central bank continues its study on the impacts of the loan cap, the hope is for adjustments that will allow these financial institutions to thrive.

Policy Espresso Demands a Strong Brew to Transform Negative Dynamic

In the hushed corridors of the legislative house on Lorenzo Te’azaz Road (Arat Kilo), a chilly reception awaited Gebremesqel Chala, the minister of Trade & Regional Integration (MoTRI). Trusted by the administration to lead crucial negotiations with the World Trade Organisation (WTO) and several other bilateral trade partners, he faced the unenviable task of delivering grim news. Export revenues had fallen short by 164 million dollars to 2.16 billion dollars in the first eight months of the fiscal year, compared to the same period last year.

The shortfall is particularly troubling for a country where foreign currency reserves barely cover a month’s imports, averaging 1.5 billion dollars a month in 2023. The fuel bill, more than three billion dollars, takes the biggest share, registering a 37.6pc growth from the previous year. This expenditure consumed all the revenues generated from exports during the same year.

Undoubtedly, economic reforms are urgently needed to overhaul such a massive imbalance in external trade, causing a distorted foreign exchange regime.

The decline in exports is only a symptom of deeper structural maladies. A weak export strategy is compounded by bureaucratic inefficiencies, substandard product quality, and a supply chain compromised by insecurity from the ongoing violent confrontations. The export sector remains perilously dependent on the international coffee market, where price fluctuations directly impact national revenues. A 26pc spike in coffee prices two years ago boosted export earnings to 4.1 billion dollars. Yet a 35pc price drop erased an 11.9 million dollar gain to the 900 million dollars in earnings made the following year. Psychologists may describe such an over-reliance on coffee, comprising a quarter of the total export value, as a “maladaptive attachment,” evidencing a failure to diversify export products and to compete on quality and price on the global stage.

Major coffee buyers—Germany, Japan, Belgium, the United States, and Saudi Arabia—have halved their orders. Together, they account for more than 60pc of Ethiopia’s coffee exports. Germany cut its imports by a staggering 36,000tns last year, while Japan reduced its demand by 17,400tns, citing inflated prices, declining quality, and logistical delays as their main concerns. Such vulnerability was apparent when other traditional foreign exchange earners like khat and gold also faltered.

Khat, which had contributed 392 million dollars to export revenue two years ago, saw a 36pc decline following a surge in contraband, driven by heavy taxation and tariffs by regional authorities. In response, the Ministry doubled down its ill-advised policy. Gebremesqel centralised the regulation, requiring exporters to secure permits from the capital, a move that did little to stem the tide. Meanwhile, Kenya, a newcomer to khat export, is already threatening Ethiopia’s market share in Somalia.

The mining sector, too, is underperforming. Earnings from gold mining in regional states like Gambela, Oromia, and Benishangul Gumuz reached only half of the annual target, at about 210 million dollars. Increased contraband activities further plague the sector. The Council of Ministers is poised to approve a new export strategy, hoping to revive this crucial sector. However, the strategy may fall short without recognising that the root causes of the export woes are as much about a lack of overriding strategy as they are about the political crises that sap productivity.

Generously funded by multilaterals like the World Bank, the consulting industry may crunch all the data and create enticing PowerPoint presentations. However, there is a simple truth. Ethiopia is not producing enough to meet its basic needs, lest it realise its economic potential. Yet, this seems lost on contemporary policymakers who face the pressing need to boost productivity. Agriculture and services, which dominate the GDP, suffer from infrastructural deficiencies and low technological integration, undermining their efficiency and contribution to growth.

The agriculture sector, primarily reliant on subsistence farming, suffers from a lack of mechanisation, which keeps yields low and operations inefficient. No less, the services sector, despite its diversity, is crippled by inadequate digital infrastructure, limiting its market reach and overall performance.

Tenacious macroeconomic imbalances due to large budget deficits, high external debts, insufficient foreign direct investment (FDI), rampant inflation, and meagre export revenues mar the broader economic landscape. These are not isolated issues but interconnected, forming a web constraining economic growth and development. For instance, the heavy burden of external debt absorbs a significant portion of the federal budget for debt servicing, restricting public investment in vital sectors like agriculture and infrastructure. The lack of FDI, deterred by an ongoing armed conflict, and the low export revenues further limit the economy’s ability to integrate into the global market, thus impeding improvements in productivity.

Substantial public investment in infrastructure is essential to break out of this negative dynamic. Reliable transportation, efficient energy sources, and robust digital infrastructure can drastically transform the agricultural and service sectors by reducing costs, improving access to markets, and facilitating the adoption of modern technologies.

Technological advancements are essential. Introducing technologies like precision farming, drones, and improved irrigation systems could revolutionise productivity in agriculture. Digital platforms could expand market reach and enhance delivery for the services sector. Education and training must also be prioritised to equip the workforce with the necessary skills for these new technologies. But all these demand enormous resources at the state’s disposal. If handled unwisely, such high public spending could exacerbate the budget deficit, which would displease the guys from the International Monetary Fund (IMF).

Policy reforms currently negotiated with the IMF could help create a more conducive environment for productivity enhancements. These reforms should simplify regulatory frameworks, strengthen property rights, and reduce trade barriers to attract more FDI, a crucial driver of technology transfer and capital investment.

However, global economic structures also play a role. International cooperation and support from development partners are vital for managing external debt and facilitating access to global markets. Yet, the ongoing conflicts in regions like Amhara and Oromia deter these partners from engaging fully. Despite these daunting challenges, the highly anticipated IMF credit facility, while helpful, should not be viewed as a panacea but rather as part of a broader strategy to stabilise the economy and stimulate a shift.

Policymakers must undertake comprehensive and coordinated efforts to address the cycle of low productivity and economic stagnation, filled by political polarisation that should be settled through negotiations. Having a political force in charge of the state with a popular mandate perceived with legitimacy to rule can help enhance supply chain management for key commodities, create better export incentives, and improve agricultural produce in quality and volume. Beyond the over-reliance on commodities like coffee, a more diversified export strategy could provide the positive dynamic for stability and growth.

Only through comprehensive and concerted efforts will they break the cycle of low productivity and economic stagnation, setting the stage for a future of sustainable development and improved living standards for citizens. Be wary; the clock is ticking.