Listening's Quiet Power in a World of Noise Could Mend Broken Bonds

Listening’s Quiet Power in a World of Noise Could Mend Broken Bonds

Posted on December 29, 2024January 1, 2025 by Web Master

Few would argue against the importance of listening. As Voltaire once wrote, “L’oreille est le chemin du coeur”—the ear is the way to the heart. Yet, we often respond passively, offering superficial acknowledgment instead of truly listening. We would rather have others listen to us, and the rise of social media has made it easier to demand only that. As a result, the world has become noisier.

Thoughts are expressed more readily, and shared more widely, yet people feel lonelier, and less connected. Whether it is the anxiety and uneasiness in one’s heart, the misunderstandings and estrangements among family and friends, or political conflicts, a lack of listening cannot escape sharing in the blame.

How long has it been since we stopped our busy steps and calmly talked with ourselves, listening to the true thoughts deep in our hearts?

In this bustling world, we are always in a hurry, busy catering to a multitude of external norms and expectations, yet often forget to pause and listen to the voice within. Every day, we speak countless words, in meetings, messages, and emails.

But, how many of these words express our authentic selves?

Very often, we either say things we do not indeed mean or, considering our environment, “rationally” divide our inner thoughts into what “should be said” and what “shouldn’t be said.” This makes it inevitable that our desires and preferences are regularly restrained and suppressed. On the one hand, we have to become like everyone else; on the other, we are somewhat reluctant to do so. As a result, we are afflicted with anxiety, nervousness, and hesitation.

The heart is like a treasure house, hiding our most genuine desires, fears, dreams, and passions. Perhaps, if we take a moment and listen, we can hear the soft whisper of the voice that has been covered up by our busy lives, yearning to pursue the projects we abandoned due to life’s demands, and burning to show our true selves without fear.

To be kind to ourselves starts with listening to ourselves. No longer blindly following the pace of others. Setting aside time for ourselves to be alone, feel the rhythm of our hearts, and let it guide our choices; resisting the urge to deny or escape when our hearts feel anxious or uneasy, but gently soothing them, exploring the roots behind those emotions and respecting our own feelings. Whether choosing a career we love or ending a relationship that drains our energy, the comfort and peace of our hearts deserve their due priority.

Everything is constantly changing. Heraclitus said we cannot step into the same river twice, and even if the river remained unchanged, the person stepping into it would not. Relatives and friends once close to us will inevitably develop ideas that collide with ours, partly due to differences in our lived experiences as time passes. It is not uncommon that people become estranged from their parents and relatives, or part ways with friends because of differences in opinions, which fills what should have been beautiful stories with regrets.

Often enough, the root cause is a failure to listen. Listening to those we care about is vital for maintaining strong emotional bonds.

When loved ones share their experiences, attentive listening is the most precious gift we can give them. Listening to our parents talk about the past, we can find wisdom and hope in their stories. Our genuine attention makes them feel respected and cared for, and the family bond becomes stronger. When friends confide their concerns to us, whether about troubles in relationships or problems at work, silent listening may calm their hearts better than any words of comfort.

By listening, we offer them emotional support, letting them know they are not alone.

The United States (US) witnessed an astonishingly absurd election season, marked by an alarming level of political polarisation. Democrats and Republicans are deeply entrenched in their respective positions, leaving little room for compromise. In Congress, legislative deadlocks are commonplace, as lawmakers from both parties prioritise partisan interests over the common good. This is especially evident in issues such as healthcare, immigration, and climate change.

At the societal level, the public is also divided along political lines. People with different political views increasingly find it difficult to engage in rational discussions.

Political polarisation is not a uniquely American disease. It is a global one that has afflicted societies and strained democracies from Brazil to Germany, and Tanzania to Bangladesh. It often feeds on the words and actions of divisive leaders and infects the whole body of society, all the way down to everyday interactions and relationships. Once entrenched, polarisation tends to perpetuate itself, and there are no easy remedies. What is an effective remedy depends on local context, with legal reforms being called for in some places, and changes in political leadership in others. Although the problem is complex, listening is certain to be an essential part of its solution.

Politicians, policymakers, and the public need to actively listen to the concerns and perspectives of those with opposing views. When politicians listen to each other, rather than simply dismissing the ideas of their political rivals, they can better understand the underlying reasons for different policy positions and strive to find common ground. Encouraging the public to listen to diverse viewpoints can help break down barriers, and promote a more informed electorate that is able to make decisions based on a comprehensive understanding of the issues, rather than being swayed by partisan rhetoric.

By promoting a culture of listening at all levels of society, including the government, media, educational institutions, and the citizenry, we can hope to bridge political divides and move towards a more united and harmonious future.

As we bid farewell to the old and usher in the new, opening the door to a hopeful 2025, let us commit to listening – to ourselves and others.

DREAMS BETRAYED, TRAFFICKED, ENSLAVED

Posted on December 29, 2024December 31, 2024 by Web Master

A 25-year-old civil engineer graduate left for Thailand in September 2023, lured by the promise of a high-paying digital marketing job. He had struggled to find stable employment after graduating in 2021, bar a temporary stint as a math teacher that paid him a paltry monthly salary of 3,500 Br. It compelled him to rely on his farmer parents for rent. When a friend from the university touted a seemingly effortless online business opportunity in Thailand that could pay 60,000 Br a month, he seized what felt like a lifeline. Upon arrival in Bangkok, the promised job never surfaced. Instead, he found himself stranded, waiting for days until the same friend sent someone to escort him into Laos. There, he was made to sit through a test for what he believed was an online marketing role, but discovered, to his horror, that he had been recruited into a scam operation. For two months, he endured extreme working hours without pay, tasked with conning social media users. When illness struck, the job’s organisers begrudgingly took him for medical attention in Thailand, only to have him abducted at the airport and trafficked back to Laos and then into Myanmar.

In Myanmar, the young man was detained for 12 days, subjected to electric shocks, and told he owed 5,000 dollars for his release. Unable to produce the ransom in full, his relatives scraped together 2,500 dollars, forcing him to face the threat of 18 months of unpaid work. Exhausted and broken, he was eventually allowed to return to Ethiopia. Today, he is hobbled by debts exceeding 350,000 Br, lingering physical pain, and haunting memories of captivity. He is not alone.

The United Nations (UN) estimates that more than 120,000 people are enslaved in cyber-fraud operations throughout Myanmar and Laos. A parent-led committee in Ethiopia has documented at least 270 individuals held against their will in those countries and Cambodia, but they fear the actual number might be closer to 3,000. Many are college graduate men and women, including medical doctors, who left Ethiopia seeking better prospects but were seized by traffickers operating in the “Golden Triangle,” a hotspot for the scams near the borders of Myanmar, Thailand, and Laos. Families of those held captive describe relentless torture, gruelling 16- to 18-hour work days, and heart-wrenching isolation. They speak of phone confiscations, punishing quotas for defrauding social media users, and prolonged confinement in dark rooms for those who fail to meet targets. Despite raising awareness and repeatedly submitting names to the Ministry of Foreign Affairs, many families remain stuck in perpetual anxiety, powerless to rescue their loved ones from militia-controlled territories beyond the reach of the Myanmar government.

Consumer Unions Become Collateral Damage in a Battle Against Sugar, Oil Distribution Inconvenience

Posted on December 29, 2024 by Web Master

Consumer unions in Addis Abeba are being sidelined as delivery companies take over the distribution of subsidized sugar and cooking oil. The transition has impacted many consumer unions who previously provided these goods through the city’s coupon system.

The Addis Abeba Trade Bureau (AATB) has shifted the responsibility of distributing sugar from the consumer unions to delivery companies. City authorities say this move is aimed at improving service efficiency and preventing product waste.

In four districts, Addis Ketema, Nifas Silk Lafto, Lideta, and Kolfe Qeranio, 45 consumer unions which supplied subsidized basic goods for decades have stepped back from distributing sugar and oil to coupon users as a tech-based delivery company takes over the task.

Makiva Trading Plc, operating under the brand name Agelgil, is leading the transition by delivering government-subsidized goods directly to customers’ homes.

Initially launched in Kolfe Qeranio, the company has expanded its services to four districts, delivering sugar and cooking oil to 317,362 registered consumers. “When we started this work, users were skeptical about our ability to deliver items in short supply,” said Awash Mohammed, general manager of Makiva.

Makiva, which started with an initial capital of 16,000 Br, now has more than 20 million Br in capital and 120 employees in packing, sales, and customer registration. It uses 30 cars, including six Isuzu trucks and 24 minibuses to deliver goods.

The company makes a profit of three percent per kilogram of sugar. Makiva also delivers other consumer goods which it sources directly from manufacturers.

Distributing a large quantity of goods helped the company benefit from economies of scale, enabling it to sell edible oil at relatively lower prices. Makiva offers 5 litres of palm oil for 800 Br, which is sold in various shops for 1,150 Br to 1,350 Br.

Makiva is now processing operational permits for Aqaqi Qality and Gulele districts to register new customers for their delivery services. Customers receive an SMS a day before delivery, specifying the product and price, with payment options including cash or digital methods. Awash states that they do not charge additional fees for delivery.

YBS Marketing, another retailer, is also preparing to enter the basic goods delivery market. Currently, YBS offers vegetables, fruits, and other essentials at Sunday Markets. The company has completed app development and is awaiting final certification to begin operations. YBS plans to start with three warehouses, 250 employees, and three vehicles. The trial will launch in the Lemi Kura district, with plans to expand to other areas in the city. With a capital of 10 million Br, YBS expects to begin operations within a month.

Woldegiorgis Yilkal, general manager of YBS Marketing, stated that they will adhere to selling price rates set by the city’s Trade Bureau.

While the delivery companies offer benefits like convenience, consumer unions become the collateral damage.

West Union which incorporates 15 consumer unions operating in Kolfe Qeranio has been removed from edible oil and sugar distribution in the district. The Union which has 58,000 members has remained in charge of supplying 282 items at its stores and also to government employees and feeding centres run by the city administration.

Consumer unions in Addis Abeba have over 35,000 employees, with 4,000 in Kolfe Qeranio alone. Belay Tolera, the general manager of West Cooperative Union, argues that many of these employees could lose their jobs if the delivery companies continue to expand.

“The delivery companies have completely replaced consumer unions in the distribution of sugar and cooking oil,” Belay said.

Abebe Haileselassie, general manager of Jemo Multipurpose Consumers Union in Lideta district, acknowledges that delivery services offer better convenience, reducing the need to wait in long queues.

He says that consumer unions operate on limited profit margins, with the government’s coupon system allocating an average of 5kg of sugar per person each month. The Union sells about 500qtl of sugar monthly with a margin of approximately two Birr per kg. The Union previously supplied up to 1,100qtl of sugar a month.

Initially, there was skepticism about delivery companies’ ability to supply goods consistently, but the convenience of home delivery has been appreciated. Yared Mersha, a customer of Agelgil delivery in Lideta, says that he no longer has to worry about supplies running out at consumer union shops.

Another customer, Tiblet Kassie, a resident of Abinet, said the delivery service has saved her from many hassles. “Going to the shops often left me vulnerable to malpractices,” Tiblet stated.

However, the shift to delivery services is not without issues. Customers complain about missed deliveries, requiring reorders if they are not present at the time of arrival.

Meketa Adefris, director of trade promotion of AATB says that the move to bring delivery companies into subsidised goods distribution aims to address the widespread inconveniences. He argues that inefficiency in the distribution system created limited availability, consumer annoyance, and product wastage.

“We used to, and still, receive a lot of complaints from consumers about the distribution system”, said Meketa. “The motive behind the scheme is to address these issues.”

Meketa argues that allowing in technology-based deliveries will enhance accessibility, eliminate consumer inconvenience, and alleviate wastage. “The new distribution system brings the products directly to consumers’ homes”, he said. “Previously, consumers had to go wherever the product was available.”

Mustafa Abdela, a business consultant with a knowledge in ecommerce, says that this transition could threaten consumer unions, with tech-based companies replacing their functions. He argues that this may lead to revenue decline and employee layoffs.

He believes the expansion of delivery companies will create employment opportunities and potentially reduce distribution costs through economies of scale. However, Mustafa cautions that, without effective oversight, the market might concentrate among a few dominant players.

Pharma Industry Confronts Customs Over Inflated Valuations

Posted on December 29, 2024 by Web Master

Pharmaceutical manufacturers are in dispute with customs officials over alleged inflated valuation of imported raw materials. The Ethiopian Pharmaceuticals & Medical Supplies Manufacturing Industries Sectoral Association (EPMSMA), representing 24 members, claims that customs officials are overpricing raw material imports by up to 100pc, raising production costs and destabilising drug prices.
In letters to both the Ethiopian Customs Commission (ECC) and the Ministry of Health (MoH), the Association has asked for a fixed price framework and a revised, accurate list of raw materials to resolve these issues.
Daniel Waktola, head of the EPMSMA, said that the problem started when customs began inflating the prices of raw materials, which has caused severe financial burden.
Pharmaceutical manufacturers were exempt from taxes until two years ago, when they began paying a three percent social welfare tax. The inflated raw material prices are further increasing costs and threatening the stability of drug prices, according to him.
“Manufacturers need support, not discouragement,” Waktola said.
Customs officials argue that they are following the World Customs Organization (WCO) Convention on the Valuation of Goods to prevent under-invoicing and increase tax revenue. Mengistu Tefera, the price valuation director at ECC, says his office uses six procedures to determine the transaction value of imported goods, which includes international prices, cost deductions, and the country of manufacture.
Mengistu claims that many importers fail to prove their products are not under-invoiced and that the Commission often uses prices from previous imports to assess current values. “The Commission has responded to the rise in under-invoiced goods,” he said. “We are following our own procedures to determine prices.”
Kedir Sharif, country director of Julphar Plc, which imports over 230 raw materials for pharmaceuticals, said customs officials misunderstood a shipment, inflating its price from 841,000 Br to 1.6 million Br. Customs officials assumed both the freight and cost of goods were under-reported, according to him.
Currently, the 14 local manufacturers are operating at just 20pc of their capacity and meet only eight percent to 12pc of domestic demand, according to Daniel.
In 2021, a new customs tariff book was introduced, covering 8,000 tariff items. The goal was to make domestic producers more competitive by increasing duties on imported goods that compete with locally manufactured items. The tariff book includes six tax rates, ranging from zero to 35pc, depending on the type of goods.
Customs Commissioner Debele Kabeta argues that 86pc of imports are under-invoiced. He says there are discrepancies between declared and actual quantities of imported goods.
The social welfare tax was introduced to broaden the tax base with exemptions for capital goods, fertilisers, and petroleum products. The tax is calculated based on the value of imported goods, including freight and insurance costs.
The government has set an ambitious goal of collecting 400 billion Br in customs duties this fiscal year, doubling last year’s target. In 2023/24, customs duties brought in 190.9 billion Br, with the social welfare tax contributing 18.7 billion Br. The target for social welfare tax revenue has now been raised to 28.7 billion Br.
However, rising drug prices are straining hospitals. Teshome Hunde, medical director of Zewditu Hospital, shared that the hospital’s annual drug procurement budget of 100 million Br covers only half of its needs due to inflated prices.
Tamiru Tilahun, a lawyer with expertise in customs law, explains that WCO allows customs authorities to use their own valuation methods in certain cases, such as when the buyer and seller are related, when discounts are given, or when profit margins are negotiable.
Tamiru said that customs officials focus too heavily on collecting taxes, leading to over-invoicing and unjust rejection of declared prices without proper evaluation. Manufacturers often lack the necessary documentation to effectively negotiate with customs, according to him.
He recommends consolidating the Commission and Ministry of Revenues into a single entity, to create balance, with each department’s interests serving as a check on the other’s actions.
“Reforms are urgently needed in customs,” he said.

Vehicle Importers Fight Back Authorities Over New Tax System

Posted on December 29, 2024January 3, 2025 by Web Master

Over 100 vehicle importers have had their bank accounts frozen by tax authorities, while 41 have filed lawsuits against the Addis Abeba Revenue Bureau (AARB) over a disputed vehicle pricing standard, escalating the legal conflict.

The importers argue that the AARB’s pricing rules lack legal grounds. The dispute stems from a circular issued two years ago by Adem Nuri, head of the AARB, which was only recently implemented. The circular mandates a fixed pricing formula for imported vehicles when declared to tax authorities.

The AARB has introduced new vehicle valuation standards, which are now used by 16 tax office branches across the capital. Tax officials say these standards intend to reduce tax evasion and increase revenue.

The valuation uses a weighted formula that takes into account factors such as the customs declaration, current market prices, the vehicle’s country of origin, the factory where it was made, its intended use, and the profit estimates provided by the importer.

Sewnet Ayele, head of communications at the AARB, stated that studies were conducted to develop the formula, ensuring all scenarios are addressed and leaving no room for tax loopholes.

Importers have voiced frustration over new vehicle price standards, claiming they were caught off guard and not consulted. One importer said that the tax authorities’ price assessments were as much as 70pc higher than their declared values in annual income tax filings. Many importers say they now face additional payments ranging from 10 million to 40 million Br.

The dispute escalated on December 12, 2024, when importers filed a lawsuit against the AARB. They argue the new rules were implemented without proper procedure, violate administrative protocols, and overlap with existing tax laws. Importers also claim that the pricing standard was never registered by the Ministry of Justice (MoJ).

However, tax officials say they are acting within their legal rights, citing the Tax Administration Proclamation, which grants them the authority to conduct price assessments to uncover tax evasion. Sewnet claims that many importers have underreported their income and that these new standards are necessary to address the issue.

On December 18, 2024, the Federal High Court, led by judges Nazareth Zeleke, Abdisa Dashura, and Mehari G. Medhin, issued an injunction halting the new pricing standards pending further investigation starting from December 13, 2024. The court also ordered importers to pledge five million Birr to cover potential losses incurred by the AARB.

To appeal the previous tax demands, importers must file cases with the Ministry of Revenue’s (MoR) tax appellate body, with the option to escalate to the Federal Appeals Tribunal.

The new pricing standards, delayed for a year, were enforced after vehicle importers submitted their annual income tax filings. The AARB rejected these filings and introduced new calculations to determine vehicle prices.

Importers who refused to pay the required amounts had their bank accounts frozen. “They broke the law by refusing to pay,” said Sewnet. “The Bureau has the authority to seize property if bank funds are insufficient.”

The Bureau’s goal for the current fiscal year is to collect 230.4 billion Br in taxes. It has so far collected 75.42 billion Br in the first five months.

An importer with 15 years in the business, has 17 vehicles stuck in Djibouti, incurring demurrage fees because his bank accounts are frozen. He said it has prevented him from settling his Letter of Credit (LC). He claims the AARB has inflated some vehicle valuations by as much as 100pc, reaching up to three million Birr per vehicle.

Despite selling around 170 electric and hybrid vehicles this fiscal year, his declarations were denied by the authorities. “We had no choice but to take our case to court,” he said.

Current market prices show that the BYD Seagull sells for around 2.2 million Br, the Volkswagen ID4 for six million Birr, and the Suzuki Dzire for 3.5 million Br. Most importers have shifted to electric vehicles (EVs) after the government imposed a ban on fuel-powered automobiles. The import of EVs nearly doubled in 2022/23, reaching 72 million dollars.

In addition to income tax issues, authorities say they are targeting tax evasion in vehicle sales. When buyers purchase vehicles, they are required to pay a two percent tax to the Addis Abeba Drivers & Vehicle Licensing and Control Authority (DVLCA) based on the contract between buyer and seller.

However, since July, the Authority has begun using its own standards to calculate vehicle prices, citing underreporting of contract prices as the reason. Tesfaye Abebe, communication director at DVLCA, stated, “Most buyers have been underreporting on their contracts.”

One buyer was forced to pay 800,000 Br more than expected after the Authority assessed the real value of his 1.3 million Br vehicle at over two million Birr.

Ketema Adane, a tax expert, argues that the AARB’s authority is limited by the tax administration proclamation, which grants the Ministry of Finance (MoFA) the power to legislate such laws, and in special cases, the Ministry of Revenues. He states that the Bureau is not authorised to impose these price standards.

Ketema also criticised the use of simple letters and circulars as though they were laws. “Officials should be very careful when writing these letters,” he said.

He believes the Bureau should not apply blanket pricing, as each importer has a different pricing method, influenced by various factors. According to Adane, the AARB’s role is to report and determine taxes, not to set standards for collecting them. “The Bureau has no legal basis.”

Editor’s Note: This article was updated from its original form on January 1, 2024.

Foreign Nationals Face Skyrocketing Fees, Unyielding Regulations

Posted on December 29, 2024December 30, 2024 by Web Master

Foreign residents are facing higher immigration fees and tighter regulations that have left many confused and alarmed. The Immigration & Citizenship Service (ICS) recently increased renewal costs and fees for resident cards issued to Ethiopian natives with foreign nationalities, part of a strategy officials say is designed to curb unlawful activities and unauthorised stays.

Critics, however, contend that the measures have caused unexpected delays and exorbitant penalties for those who inadvertently fail to comply.

An American citizen who has lived in Ethiopia for over a decade, and a member of the Jamaican Rastafari Development Community, applied for an Ethiopian Origin ID, commonly referred to as a “yellow card”, three years ago. She had been promised the card within three months of applying, and other community members informed her that they did not need to renew their visas while awaiting the ID. Instead, it took years for her to obtain the card. When she finally did, she was hit with a penalty of two million Birr for overstaying, in addition to the 41,000 Br fee for the ID.

Describing the fees as “overly expensive”, her experience exposes a system characterised by inconsistencies and long waits. The Jamaican Rastafari Development Community, comprised of about 600 individuals awaiting IDs, claims many of its members encountered similar dilemmas, finding themselves overstaying while waiting for the paperwork they believed would be processed in a matter of months.

The higher fees followed two sets of regulations issued by the Council of Ministers.

The first, published on July 7, 2024, raised service charges across several categories, while the second, issued on October 23, 2024, revised parts of a 2005 immigration law and broadened the scope of penalties for noncompliance.

According to immigration officials, these steps will enable more effective monitoring of foreign nationals staying in Ethiopia, particularly those they accuse of operating businesses without legal permits or engaging in illicit practices such as trafficking, smuggling, and document forgery. Officials say they have encountered numerous cases of individuals forging local identity cards or working in sectors restricted to nationals, making rigorous enforcement their priority.

Business communities abroad say the new rules risk discouraging foreign investments and thinning the ranks of skilled expatriates. According to Ma Tang, the Secretary of the China Chamber of Commerce in Ethiopia, the number of Chinese workers in the country has dropped from nearly 100,000 to around 8,000.

While he attributed some of the decline to other factors, the time-consuming and costly process of renewing work permits remains a major barrier.

“The environment has become unwelcoming,” he told Fortune. “It can take up to five or six months to secure the necessary documentation, often leaving businesses uncertain about their labour force.”

Penalties for overstaying visas beyond their expiry dates have also soared, from five dollars a day to 30 dollars. This has prompted some Chinese entrepreneurs to consider relocating operations to neighbouring Tanzania, which they find more accommodating.

An Ethiopian diaspora also voiced frustration after the fee to renew her Ethiopian Origin ID, which used to be 200 dollars, rose to 300 dollars. She was charged a 100-dollar penalty for being one month late. She did not anticipate such a hike for a document intended to promote connections between Ethiopia and those with Ethiopian heritage. For many diaspora members, the higher fees feel like a deterrent rather than an incentive to maintain their ties to the country.

Sudanese nationals, particularly refugees, have found themselves in similarly difficult situations. One Sudanese refugee, identified as Mohammed Hatim, said he has been jobless for two years and is struggling to cover the cost of maintaining his family’s visas, which now amount to 500 dollars a month, equivalent to his rent. Previously, the Ethiopian government had provided Sudanese refugees with a seven-month exemption on visa renewals, but those fees resumed last October, compounding his financial strains.

The Refugee & Returnee Service (RRS) is mandated to issue refugee IDs within six months, granting refugees legal status and the right to work. Mohammed claims the process can stretch indefinitely, leaving families in limbo.

However, Ethiopia has shown progress in certain immigration metrics. It now claims 19th rank on the African Visa Openness Index (AVOI), up from 46th the previous year, mainly due to visa-on-arrival policies extended to citizens of 46 countries. Nonetheless, the federal government has tightened requirements for travellers from some of its neighbours, including Egypt, Eritrea, and Sudan. It allows nationals from these countries to enter and stay for up to nine days without a visa, with options for a three-month visa on arrival for those who wish to stay longer.

ICS officials defended the renewed vigilance, alleging a rise in foreign nationals setting up unauthorised large-scale operations or engaging in money transfers beyond regulatory oversight. They impose fines of 3,000 dollars in addition to a daily penalty for those who overstay their visas by up to three years, and a 5,000-dollar fine for stays exceeding three years. Transit visas that pass their legitimate period also carry a 3,000-dollar penalty aside from daily fines.

A human rights lawyer, Temelso Gashaw, contended that denying official status to refugees who have adequately registered conflicts with Ethiopia’s law. He argued that inconsistent enforcement only exacerbates the burdens on vulnerable populations.

Others are worried about the economic ramifications.

According to Samson Tsedeke, founder of MultiLink Consulting, rising immigration fees contribute to the decline in the number of foreign workers. He also attributed the fall to the lack of new projects and the suspension of existing ones. The Ministry of Labour & Skills has begun stricter enforcement of rules barring foreigners from taking on low-skill jobs.

Banks Caught in Tax Battle, Raising Investment Slowdown Fears

Posted on December 29, 2024December 30, 2024 by Web Master

Banks and insurance firms are battling tax authorities over whether dividends used to pay for unpaid subscribed capital should be taxed. Nearly 25 financial institutions have already paid 5.7 billion Br, half the assessed amount, to contest the claims before the tax appellate body. Many now await decisions from appellate courts, worried that potential rulings against them could jeopardise their ability to raise capital and discourage much-needed investment in the financial sector.

Federal Large Taxpayers Office officials insist that 10pc tax should be applied to dividends directed toward covering shareholders’ subscribed shares yet to be paid. They classify such dividends as liabilities, subject to tax obligations under Article 61 of a tax law passed in 2016. However, shareholders invested in the financial institutions argue that the dividends amount to reinvested earnings and, hence, should be exempt. They contend their interpretation falls within the scope of existing law.

The Ethiopian Bankers’ Association (EBA), led by Abie Sano, also president of the Commercial Bank of Ethiopia (CBE), has taken the issue directly to the Prime Minister’s Office. In a letter sent two weeks ago, the Association argued that undistributed dividends intended for recapitalisation lack legal grounds for taxation. The Association further warned of far-reaching consequences for the financial sector, which could face financial strain if forced to pay billions in taxes on what they consider reinvested funds.

“It undermines the banks’ capital-raising efforts,” said Demissew Kassah, the Association’s secretary general. “The legal basis for the tax claims is shaky at best.”

Insisting on reinvestment status, the Association’s leaders contended that dividends shareholders choose to reinvest have traditionally been excluded from tax. Many in the financial sector share this view, noting that the Large Taxpayers Office historically did not seek such payments.

The Ministry of Revenues initially pressed its case at its Tax Appeals Tribunal. Several banks deposited 50pc of the disputed amount to lodge their claims before Federal Tax Appellate Commission judges. Some of the cases now appear on a path that has led some to the Federal Supreme Court’s Cassation Bench.

Awash Bank, one of the country’s largest private banks, is among the plaintiffs. Its Chief Financial Officer (CFO), Berhanu Balcha, confirmed that Awash Bank had paid half the tax officials demanded and is bracing for what justices of the Cassation Bench might rule. He anticipated that if the ruling goes against the Bank, the resulting tax bill could severely constrain its capital base.

Tax authorities cited precedent dating back to a ruling in April 2023, which emerged from a six-year legal battle between federal tax authorities and Tsehay Industries. Lawyers representing Tsehay Industries argued that dividends paid for subscribed capital are reinvestments. Justices disagreed. They ruled that undistributed dividends face tax unless they are demonstrably reinvested rather than used to cover prior obligations. The Court’s decision that retained earnings covering subscribed capital are taxable as dividends triggered a chain reaction of further audits of financial institutions.

With oversight responsibilities for about 700 businesses accounting for more than 70pc of the country’s tax revenues, officials of the Large Taxpayers Office have become more assertive. They plan to audit 19 banks this fiscal year for possible claims of back taxes.

According to its Deputy Head of Law Enforcement, Zeleke Jambo, once dividends are determined as existing liability, they cannot be deemed fresh investments. He argued that the ruling against Tsehay Industries serves as an unequivocal precedent. The federal government targets 1.5 trillion Br in domestic taxes in the current fiscal year, causing anxiety in the business community about how assertively tax authorities might pursue collection to meet this ambitious goal.

Officials at the Ministry of Finance see the matter differently, or at least remain divided.

Abere Asfaw, a legal director at MoR, argues that tax exemptions only apply if the subscribed capital is paid within 12 months. A tax advisor disclosed to Fortune a directive addressing dividend recapitalisation and its tax implications. The directive has been drafted and awaits the Ministry of Justice’s approval. The advisor believes treating dividends used for capital subscriptions as a reinvestment rather than a liability is justified.

The financial sector has expressed frustration that the directive remains in bureaucratic limbo, leaving both sides tangled in the courts without regulatory clarity. A president of a mid-tier bank called the tax demand “excessive,” particularly given the industry’s pressing need to raise large sums of capital quickly.

Financial institutions such as Awash Bank and the Bank of Abyssinia account for around 33pc of the industry’s capitalisation of 290.6 billion Br, of which the private banking sector comprises 67.4pc. The National Bank of Ethiopia (NBE) has set a regulatory requirement that all private banks raise a threshold capital of five billion Birr by 2026. Several banks have yet to reach this threshold, and banking executives say that any sudden or retroactive taxation risks derailing their progress.

The uncertainty reached beyond bank managers.

Businesspeople such as Girma Desalegn, a shareholder at Dashen Bank, fear the retroactive enforcement of this tax will undercut the appeal of bank shares. Girma questioned why dividends used for capital buildup, practices encouraged by the country’s central bank, would suddenly be viewed as a taxable transaction.

“It discourages investment,” Girma told Fortune.

He sees it as an unwelcome penalty on those willing to inject more capital into an economy seeking to modernise its financial sector.

Legal experts side with the officials. Tax law scholar and lawyer Tadesse Lencho (PhD) argued that paying subscribed capital with dividends effectively uses earnings to settle a debt rather than making a capital injection. According to him, shareholders owe companies for their subscribed shares, and the final payment merely squares that liability.

“Shareholders are paying their debt owed to the banks,” Tadesse said. “It should be taxed like any other dividend distribution.”

He dismissed calls for special exemptions for banks, arguing that financial institutions “are no different” from other businesses under the law. Yet, he also recognised the economic impact of federal officials pursuing back taxes, penalties, and interest. He cautioned this could potentially weigh heavily on the industry, raising doubts for international investors who see Ethiopia’s financial system as a frontier market with enormous potential.

Escaping Underemployment, Facing Low Wages at Home, Scam Factories in Myanmar

Posted on December 29, 2024December 31, 2024 by Web Master

Shikur Naser, a 25-year-old civil engineering graduate, left for Bangkok, Thailand, in September 2023, hoping to land a job in digital marketing.

Born in Tora, Silte Zone, Central Ethiopia Regional State, Shikur struggled to find employment in his field after graduating from Dilla University in 2021. He eventually took a job as a math teacher at Tanzhe Secondary School in Alicho, teaching grades 11 and 12. Despite earning a net salary of 3,500 Br, he found it impossible to sustain himself and his family.

Shikur expressed deep dissatisfaction with his job and income, saying, “How can anyone live with a 3,500 Br monthly salary?” He paid 3,000 Br for rent, leaving little for basic necessities. His farmer parents regularly sent him money to help make ends meet.

During the school’s two-month summer break, a university friend reached out to him about an online business job in Thailand, promising high earnings with minimal effort. The friend assured him that the work required little from him and offered a tempting salary of 60,000 Br, 17 times his current pay.

To secure the job, Shikur was told he needed to buy his own plane ticket and send 150,000 Br to his friend’s Binance (cryptocurrency) account. Additionally, he was advised to bring 200 dollars for miscellaneous expenses.

When Shikur arrived in Bangkok in late September 2023, the job he was promised never materialised. His friend, who had lured him with a high-paying offer, became unreachable. Stranded in Bangkok for five days, Shikur waited until his friend finally sent someone to help him cross into neighboring Laos.

Upon arrival in Laos, Shikur underwent a test, which he passed. But what awaited him was not the online sales job he expected; it was an internet scam operation. “I thought I would be working as a digital marketer,” Shikur said. Instead, he was tasked with scamming online users.

For nearly two months, Shikur worked at the camp in Laos without pay. The targets set by the cyber-crime operators were impossible to meet, and the long hours took a toll on his health. When he fell seriously ill, he asked for medical treatment and his unpaid wages. The company took him to Thailand for the treatment, after which he requested to return to Ethiopia.

Though he secured a flight ticket, Shikur’s ordeal was far from over. At the Bangkok airport, gunmen suddenly arrived, abducting him. He was taken back to Laos and later to Myanmar, near the Thai border, to another scam camp.

Detained for 12 days, Shikur claimed he endured torture, including electric shocks. His captors demanded 5,000 dollars for his release. Unable to pay the full amount, his relatives managed to raise and send 2,500 dollars, but it wasn’t enough. He was told he would need to work for 18 months without pay if he couldn’t settle the remaining balance.

Exhausted and suffering from pain and depression, he was eventually allowed to return to Ethiopia.

Shikur is now burdened by debt, owing over 350,000 Br to relatives who lent him money to pay traffickers, buy a flight ticket, and cover ransom costs. He continues to suffer from persistent pain in his feet, arms, and back.

While he managed to return home, many Ethiopians remain held in scam mills in Myanmar, Laos, and Cambodia. The UN estimates that more than 120,000 people are being forced to work in these scam operations in Myanmar and Laos. Like Shikur, many were deceived by promises of online marketing jobs offering a basic salary of 700 dollars per month.

Over 270 Ethiopians are officially known to be held in Myanmar, Laos, and Cambodia, according to a parent-led committee formed to secure their release. The committee estimates that as many as 3,000 Ethiopians are trapped in these cyber-fraud operations across the three countries.

Workers trapped in Myanmar, contacted by Fortune, recounted their desperate situation. They are forced to work 16-hour days and their job involves scamming social media users, particularly from high-income countries in North America and Europe.

They are given handbooks containing scripted conversations designed to lure victims into fraud. Their task is to copy and paste these messages. Captors set high daily, weekly, and monthly scam targets, demanding large sums of money.

The workers revealed that failing to meet these targets results in severe punishments, including salary cuts and physical torture.

Families of the victims formed a committee a year ago to raise awareness and urge the Ethiopian government to take action.

Parents who spoke to Fortune said that their children endure torture, severe punishments, electric shocks, and are forced to work for 18 hours a day. When they fail to meet the scam targets set by their captors, they are locked in dark rooms.

According to the parents, many of the trapped individuals have developed kidney problems due to the grueling working conditions. Most have lost contact with their families because captors confiscated their phones. One parent stated that his last communication with his brother-in-law was two months ago, after which all contact was lost.

The families say they suffer distress daily. “Every day is filled with fear,” says a person, whose brother is held in Myanmar. “I can’t sleep,” sighs another parent. “A late-night message sends everyone into panic, fearing the worst.”

The committee has submitted the names of more than 270 Ethiopians still held in scam factories to the Ministry of Foreign Affairs (MoFA). The majority are held in Myanmar.

MoFA states that the situation of Ethiopian migrants trapped in Myanmar differs from those in the Middle East, indicating the difficulty of the condition. An official from MoFA’s Office of the Spokesperson, who requested anonymity, told Fortune that efforts to assist the victims are difficult due to limited information and the fact that the areas where Ethiopians are reportedly held are beyond the control of the Myanmar government.

“Information about the locations and individuals involved is scarce, and the Myanmar government has no authority over these areas,” the official said.

However, parents of the trapped migrants argue that the Ethiopian government is not doing enough. They claim they have been informing and appealing to the government for over a year but have seen little progress in securing their children’s release.

Myanmar has been engulfed in civil war since 2021, following the military’s overthrow of State Counsellor (head of government) Aung San Suu Kyi and the civilian government. The coup ignited ongoing insurgencies, with newly formed coalitions of armed rebel groups battling the military. The country has remained highly unstable.

The MoFA official stated that Ethiopia is collaborating with other countries facing similar issues through its embassy in Japan. The Ethiopian government says that citizens from 19 countries are trapped in Myanmar under similar circumstances.

Media reports identify Myanmar as the primary hub for cyber scam operations in the “Golden Triangle” region, near the borders of Myanmar, Thailand, and Laos. The reports link the scams to a Chinese-affiliated fraud group known as “KK Park.” Victims from countries including China, India, and Malaysia have been rescued.

Daba Debele, Ethiopia’s ambassador to Japan, met with officials from Myanmar’s military government last July to address the plight of Ethiopian migrants trapped in scam centres, the anonymous official from MoFA told Fortune. According to him, following these discussions, seven Ethiopians who were detained by the Myanmar government have returned home.

Aida Awel, chief technical advisor at the International Labour Organization’s (ILO) Addis Abeba Office, mentions four key drivers of Ethiopian migration: unemployment; underemployment; conflict and instability; and climate change. According to Aida, 80pc of Ethiopian migrants leave the country for economic reasons.

Many Ethiopians risk their lives by migrating illegally to the Middle East and South Africa, often enduring harsh working conditions. IOM estimates that approximately 750,000 Ethiopian migrants resided in Saudi Arabia in 2022. In March 2024 alone, over 18,000 Ethiopians, 96pc of whom were economic migrants, traveled to Saudi Arabia and Yemen.

IOM also estimates that between 120,000 and 200,000 Ethiopians currently live in South Africa.

A recent United Nations Development Programme (UNDP) report ranks Ethiopia third, after India and Pakistan, for having the highest number of people living in poverty. The report shows that 86 million Ethiopians, or 72pc of the population, live in ‘multidimensional poverty,’ lacking at least one essential component: health, education, or adequate living standards.

A 2021 survey by the then Ethiopian Statistics Agency (today’s Statistics Service) indicated that the average monthly salary for paid employees in the country was 4,127 Br. In June 2024, the International Labour Organization (ILO) reported that the median wage for employees in Ethiopia stood at 3,000 Br.

Aida says economic factors, unemployment and underemployment, are the primary drivers pushing Ethiopians toward dangerous migration paths.

According to 2022 data from the Ethiopian Statistics Service (ESS), the youth unemployment rate in urban areas stood at 27.2pc, one of the highest in Africa.

Underemployment, characterised by low-paying jobs, remains widespread, forcing many Ethiopians to seek opportunities abroad, often through risky and illegal means.

Many of the Ethiopians trapped in Myanmar hold college or university degrees and had jobs before migrating. However, their salaries were too low to sustain themselves and their families.

Melat Derbe, 28, recounts how her husband, a medical doctor with a master’s degree in project management, struggled to support their family despite working at a hospital in Addis Abeba. His low net salary of 8,000 Br pushed him to migrate to Bangkok, Thailand, six months ago. He hoped to find work as a doctor and improve their lives.

Instead, he was trafficked to Myanmar and forced to work in a scam factory.

Now, Melat earns 5,400 Br per month, barely enough to cover their rent of 5,000 Br. With her parents deceased, she relies on her aunt’s support to care for her child and siblings-in-law.

A 31-year-old graduate, faced a similar fate. He graduated in agriculture from Dilla University and earned a business management degree from Atlas University College in Hawassa. He struggled to support his family while working at a resort in Hawassa due to his low salary.

Hoping for better opportunities, he moved to Addis Abeba in search of a job. In the capital, he found work as a hotel receptionist, earning a net salary of 6,000 Br, and later at a supermarket, earning 10,000 Br. However, the low wages forced him to quit the job.

After six months of unsuccessful job hunting, He migrated to Dubai last June on a two-month visa to continue his search. While in Dubai, agents lured him with promises of better work in Thailand.

After paying over 100,000 Br, He was trafficked to Myanmar.

Atlaw Alemu (PhD), an economist, argues unemployment and underemployment are the main factors driving emigration. He outlines three main types of unemployment: structural, frictional, and cyclical (demand deficiency).

Structural unemployment stems from a discrepancy between worker skills and employer needs, which Atlaw suggests can be mitigated through training and skills development. Frictional unemployment, a short-term issue occurring when workers transition between jobs.

However, Atlaw says that the dominant form of unemployment in Ethiopia is cyclical unemployment where the economy does not create sufficient demand for labour.

“The Ethiopian economy isn’t creating enough jobs because it relies heavily on imports, and locally manufactured goods lack demand,” Atlaw said. He proposes import substitution strategies as the most effective solution to stimulate job creation and reduce cyclical unemployment.

Aida recommends addressing illegal migration through minimum wage policies and salary increases to improve living conditions and reduce economic pressures.

Atlaw, however, argues underemployment requires a different approach. He advocates for collective bargaining, urging workers to organise and negotiate with employers for better wages and conditions.

He acknowledges the mixed effects of minimum wage policies. While they can reduce underemployment, they may also lead employers to reduce their workforce. “Increasing productivity is the more sustainable solution,” Atlaw concluded.

Tsehay Bank Breaks the Buck . . . And the Rules of Caution

Posted on December 29, 2024 by Web Master

Tsehay Bank rattled the foreign exchange market last week by offering a buying rate of over 125 Br to the U.S. Dollar, an unusual move attributed by industry observers to its executives’ heightened scramble for hard currency. The Bank’s rate posted on December 27, 2024, was 125.96 Br for buying, well above the market average.

However, ZamZam Bank flirted with the 125 Br threshold yet held a few cents below it for several consecutive days. That caution could reveal the diverging tactics employed by smaller private lenders, many of which lack either the liquidity or appetite to vie aggressively in the tight market. The gap between Tsehay’s tactics and ZamZam’s shying illustrated a financial sector increasingly fractured by each bank’s cost-benefit calculations.

Amid these divergences, the big four private banks — Awash, Dashen, Abyssinia, and Wegagen — appeared to have inching their daily postings closely with the state-owned Commercial Bank of Ethiopia (CBE). The CBE’s buying rate, firmly at 123.59 Br last week, remained the lowest in the forex market and, in effect, served as a steady hand. Its selling rate, at 126.071 Br, offered a further signal of relative calm. CBE’s near-static postings have historically exerted an outsized influence on the forex marker. Last week was no exception.

The Brewed Buck, however, has shown no sign of reversing its persistent slide against the Green Buck. From December 23 to 28, 2024, it weakened steadily. The National Bank of Ethiopia (NBE), which tracks a weighted average across the banking industry, broke the 125 Br-to-a-Dollar mark in its reference rates, delivering what many analysts see as confirmation that depreciation pressures continue to mount. The Central Bank’s acknowledgement of this psychological threshold offers little comfort to market participants wary of intensifying foreign currency shortages.

Last week, the average buying rate across all banks was 124.57 Br, while the average selling rate reached 127.05 Br, implying a spread of roughly two percent. Industry insiders say this margin is typical for most market players.

What stood out more starkly was Tsehay’s aggressive pricing, which soared highest on December 27 with a 128.48 Br selling rate, an attempt, industry observers suggest, to attract the dwindling supply of dollars held by exporters, diaspora, and other dollar-earning clients. That position placed it well ahead of peers whose forex managers prefer a more measured climb, despite internal pressures to shore up forex buffers.

Commercial banks’ disparate pricing strategies reveal broader fault lines in the forex market.

The CBE, by virtue of its sheer size and state backing, anchors one end with relatively steady rates. By observing CBE’s moves, leading private lenders inch their postings upward but rarely jump to extremes. However, smaller banks tighten their belts, fearing liquidity crunches and regulatory uncertainties. Then there are the outliers like Tsehay Bank, whose willingness to push rates well beyond market consensus signalled a sense of urgency, if not desperation, to attract whatever dollars remain in circulation.

Persistent depreciation pressures indicate that authorities have limited room for manoeuvre. The Central Bank itself breached the 125 Br threshold, reflecting an acceptance of market realities rather than a policy choice. The combination of forex scarcity, divergent strategies, and an economy still coping with a host of structural challenges revealed that the Brewed Buck downward trend may continue. This may prompt banks to adapt in ways that further expose market fragmentation. In doing so, they risk amplifying the volatility already gripping the forex market.

As the Brewed Buck tumbles, commercial banks will be compelled to choose between caution and boldness in setting their rates. They will be torn between protecting their reserves and securing enough liquidity to satisfy external obligations. For some, like Tsehay Bank, the gamble is that higher offers will bring in forex before the currency slips further. The conservative path looks more prudent for others, notably smaller institutions that are mindful of liquidity and risk exposure.

Either way, the multi-tiered nature of the market appears here to stay, foreshadowing a period in which rates could swing sharply from one day to the next, all against the backdrop of a Birr that has yet to find a reliable floor.

Oromia Bank’s Expansion Brings Big Plans, Bigger Costs, Shrinking Profits

Posted on December 29, 2024 by Web Master

Oromia Bank entered its 2023/24 financial year with cautious optimism but delivered a mixed performance as moderate asset growth and deposit gains were tempered by a steep decline in profitability. The Bank’s leadership, led by Teferi Mekonnen, attributed much of the strain on the balance sheet to fast-paced branch expansion and human capital investments. These steps, intended to extend the Bank’s footprint across urban and remote areas, led to higher costs that pressed down on margins and overall earnings.

Incorporated in 2008 with a paid-up capital of 91 million Br raised from around 5,000 shareholders, Oromia Bank emerged as a third-generation financial institution and quickly earned a reputation for pushing the envelope in rural banking. Over the past decade and a half, the Bank has scaled up to a paid-up capital of 6.5 billion Br, posting a 21pc increase year-on-year. The expansion helped raise the Bank’s capital-to-asset ratio by nearly one percentage point to 14.07pc, demonstrating stronger capital buffers even as asset growth softened.

Nonetheless, management’s aggressive push to open branches was based on assumptions that were no longer aligned with market realities, where digital banking is becoming a mainstay rather than a niche offering.

President of the Bank, Teferi, recalled how a similar expansion strategy 15 years ago stirred a seismic shift in the financial sector. The number of bank branches nationwide soared from 634 to nearly 15,000, fueled mainly by banks seeking to capture underserved rural populations. While that approach helped mainstream finance for many Ethiopians, Teferi believes the environment has changed. According to him, digital banking’s rapid uptake has made brick-and-mortar expansion less appealing, even though the Bank’s board of directors remained keen on preserving Oromia Bank’s founding mission of bringing banking services to remote areas.

Board Chairperson Assefa Seme, a medical doctor by training, defended the Bank’s expansionary policy. He believes opening branches spreads deposit concentration risks by diversifying the customer base.

“If deposits come from various regions, the Bank is less reliant on a handful of large depositors,” he told shareholders.

However, the Bank’s moderate deposit growth revealed that new branches did not scale to the extent executives had envisioned. Even with a broader reach, the Bank’s deposit per branch fell from 107.91 million Br to 98.12 million Br. Nonetheless, Assefa stood firm on the idea that a wider reach can insulate the Bank from regional economic shocks, especially in a country where the rural population remains underbanked.

For the President, the Board of Directors is “the boss,” pushing for an aggressive branch rollout despite his reservations. The result was a sharp increase in operational expenses and personnel costs, in particular, ballooned 35pc to 8.5 billion Br. Wages, benefits, and administrative overhead took up over half of the Bank’s total expenses, up from 53pc the previous year. Personnel costs alone jumped from 2.33 billion Br to 3.16 billion Br, a rise that Teferi said had a direct impact on net profit—some of the new outlets generated low returns and drained resources.

“It was a wrong strategy,” he conceded. “Inefficient and unproductive branches were opened.”

Although Oromia Bank’s senior executives tried to moderate the pace of expansion, branch openings continued, bringing a five percent increase in permanent staff and a 13pc bump in temporary employees. Still, Teferi insisted that the motivation behind these branches was a desire to honour the Bank’s founding ideals. Across the banking industry, by contrast, employee growth was 2.9pc, while industry-wide income grew 18.4pc. Oromia Bank found itself with a swelling headcount and decelerating income growth, a combination that whittled away its productivity levels.

Profit per employee halved to 129,290 Br, down from 254,000 Br the previous year, signalling an urgent need to boost efficiency and revenue per staff member.

Internal performance metrics at the branch level have varied. At one of Oromia Bank’s oldest branches, the Abinet Branch, managed by eight-year veteran employee Tiwlidework Tulu, the past year was one of “hiccups,” owing to an uncertain environment that slowed business for distributor and trader clients operating in rural areas. While her branch performed relatively better, Tiwlidework said the key to achieving better performance is expanding the customer base among retail clients, savings and credit cooperatives, and local unions.

“Tapping into these segments can offset weaknesses in larger commercial lending, which has been overshadowed by risk assessments in a slowing economy,” she said.

The Bank’s overall revenue grew by 15pc to 9.5 billion Br, but surging costs overshadowed this uptick. Net income dropped 46.7pc to 840.9 million Br, yielding a considerable decline in Earnings per Share (EPS) to 14.2pc, less than half the industry average. According to Oromia Bank’s executives, while interest income climbed to 7.19 billion Br, marking a solid 21pc expansion, it was not enough to counteract the rising tide of personnel and operational expenses. Interest expenses, meanwhile, nearly reached three billion Birr, up from 2.3 billion Br, further straining profitability.

For Teferi, the Bank’s immediate emphasis is on curtailing costs and recalibrating operational structures. He plans to downgrade or merge poorly performing branches, suspend new openings, and freeze further hiring. Although this may feel like a shift away from Oromia Bank’s longstanding strategy, Teferi believes it is a necessary measure to stem losses and stabilise the bottom line. He hopes that closing unproductive branches and curbing overhead costs will restore confidence.

“We’ll refine and reshape ourselves,” he said, disclosing cost cuts and productivity enhancements as top priorities for the coming year.

Digital transformation has become a game changer in the Bank’s recalibration plan. The rollout of the OrooDigital app attracted 2.9 million users, boosting the Bank’s digital customer base by 47pc. The Bank is also investing in a Tier III data centre and robust disaster recovery facilities, with Teferi framing these investments as “indispensable for modern banking services.” He disclosed the Bank’s goal of channelling more transactions through mobile and online platforms, reducing the need for physical branches and saving overhead costs in the long run.

Analysts say this pivot is long overdue.

Amiru Nuru, a finance expert based in Doha, Qatar, urged Oromia Bank’s executives to “shift their focus from branch-heavy expansion to technology-driven growth.” He believes adopting technology could enhance operational efficiency and customer experience and address liquidity risks while revitalising the Bank’s Interest-Free Banking (IFB) segment, which logged a 30pc dip in profit this year. According to the analyst, digital channels are more cost-effective and offer better outreach to customers who prefer convenience over face-to-face transactions.

Oromia Bank’s deposit base rose by a notable margin this year, although the growth did not keep pace with the industry’s average. Deposits increased 3.97pc to 56.42 billion Br, while the industry recorded 15.2pc growth. Its loans and advances grew by a mere 3.5pc to 43.71 billion Br, a sharp contrast to the 15.5pc expansion seen across the industry. The smaller appetite for credit possibly reflects the Bank’s cautious position amid economic uncertainties and the increased pressure on capital.

Despite the modest growth, the loan-to-deposit ratio climbed to 79.61pc, well above the industry average of about 70pc.

Shareholders who attended the annual general assembly at the Millennium Hall voiced their discontent with the Bank’s performance and strategy. Given last year’s tepid results, several shareholders demanded immediate steps to recover profitability, from cost controls to more balanced loan portfolios.

One of them, 11-year shareholder Ashenafi Zeberga, left the meeting midway, citing frustration over how the Bank allocated its loans.

“I didn’t like what I was hearing,” he told Fortune.

He contended that “it’s better to spread out the loan than put all eggs in one basket,” a critique that resonated with concerns about large borrowers posing a concentrated risk. Another shareholder, Challa Tufa, insisted that Oromia Bank contain costs and finish constructing its new headquarters, near the Goma Quteba area, currently around 31.33pc complete, without further delays. His fury manifested shareholders’ growing weary of initiatives that do not yield measurable returns.

“They better stop disappointing shareholders,” he told Fortune.

However, Oromia Bank’s performance was part of a broader trend in the industry. While many private banks have posted moderate deposit growth, they face mounting competition from legacy institutions and new entrants, leading to narrower margins. Elevated inflation further complicated the equation by pushing real interest rates into negative territory. Financial analysts cautioned that these conditions will challenge even the most stable banks and push the industry toward diversified revenue streams.

Oromia Bank’s fee and commission income remains relatively small, at 1.5 billion Br, representing around two percent of revenue. Foreign exchange earnings declined, producing 327 million dollars, a 12pc drop from the previous year.

The Bank’s capital-to-asset ratio — at 14.07pc — signalled its commitment to maintaining a buffer against unforeseen shocks.

“We heavily invest in assets,” Teferi told Fortune.

He referred to an approach that has historically served Oromia Bank well by enabling it to meet the five billion Birr minimum capital requirement well ahead of schedule. But overall asset growth has stagnated, inching up 4.06pc to 68.07 billion Br, compared to an industry average of 15.2pc. The asset-to-equity ratio slipped slightly to 7.11, down from 7.56, a modest rebalancing between equity and total assets.

Nonetheless, Oromia Bank has done better than many of its peers. Its non-performing loans (NPL) ratio was 2.3pc, comfortably below the industry average of 3.9pc and well within the regulatory threshold of five percent. Teferi attributed this to “prudent credit management and an aggressive loan collection culture,” efforts that have become a priority in an economy where cash circulation has grown tight. Although cost containment and digital transformation remain at the top of Teferi’s mind, he says he will not compromise on underwriting standards, credit monitoring, and collection practices. He viewed these elements as part of the Bank’s foundation, particularly given its legacy of reaching less-banked communities that often face volatile economic circumstances.

The President’s immediate goal is to make the Bank leaner, more agile, and digitally focused so that it can weather potential liquidity shocks without sacrificing profitability.

Teferi’s professional journey traces back to the state-owned Commercial Bank of Ethiopia (CBE), where he cut his teeth as a junior officer and relationship manager. He spent two years at Wegagen Bank before joining Oromia Bank as a vice president 14 years ago. During his five-year tenure as President, he has presided over rapid capital growth and major operational shifts. But, with the Bank’s net profit sliding to about 1.01 billion Br this year, nearly half what it was in the previous year, Teferi and his team face a defining moment. One of his top concerns remains the shrinking net profit margin on total assets, which fell from 2.41pc to 1.24pc, revealing trends that while the Bank has assets in place, it is not converting them into profit as efficiently as before.

Such diminished profitability may explain why the Bank’s push to expand beyond core lending is gaining urgency. Net interest income accounted for the largest share of revenue — 48.2pc — but it is inching lower each year. Aminu wanted that if this continues to trend downward, fees, commissions, and other non-interest income streams will need to compensate, or the Bank risks falling short of the returns demanded by shareholders, who were vocal about what they said were “pilling up needless expenditures.”

The Bureaucrats Turn to Masters of Misrule, Architects of Uncertainty

Posted on December 29, 2024December 29, 2024 by Kirabon

On a flight between Juba and Addis Abeba, Stefan Dercon, a professor of economic policy and former chief economist at Britain’s Department for International Development (DfID), penned a forward to a book, “Deals & Development: The Political Dynamics of Growth Episodes.” It was 2018, a time when many hailed the new Prime Minister, Abiy Ahmed (PhD), as a herald of meaningful political and economic reforms.

Dercon contrasted South Sudan’s dismal slide into patronage-fuelled opulence with Ethiopia’s seemingly brighter trajectory. He pilloried South Sudan’s elite for squandering oil wealth, which he blamed for plunging the population into conflict and famine. He saw Ethiopia, by contrast, posting growth for each citizen for each year exceeding six per cent annually for 12 consecutive years, accompanied by gains in the health, education, and poverty reduction front. Yet Dercon’s caution rang loud. Mishandling such growth could quickly unravel it.

That prophecy seems apt today. Federal and regional state policymakers and regulators have begun overstepping their mandates, sowing confusion and eroding certainty.

Take, for instance, the Ethiopian Petroleum Supply Enterprise (EPSE), a federal agency that supplies petroleum products to distribution companies. Its executives now intend to limit fuel for new or under-construction stations to curb imports and spur vehicle electrification. According to a study by the Ethiopian Petroleum & Energy Authority (EPEA), at least 500 districts lack a single filling station. Charged with ensuring fuel availability, the Authority wields the mandate to license, regulate, and sanction market forces in the energy sector.

Another illustration of bureaucratic overreach was when the Harer city administration shut down local bank branches, even though only the National Bank of Ethiopia (NBE) has the authority to close or permit the operations of branches in the financial sector. The Addis Ababa Revenues Bureau recently announced wage standards for five industries, including hospitality and garment manufacturers, in a bid to deal with alleged tax evasion. Nonetheless, a law Parliament passed five years ago governing the labour market empowers only a Wage Board, composed of government, unions, and employers, to set or revise minimum wages. The Bureau infringed the law by setting its benchmarks, further muddling the regulatory environment.

These episodes expose a creeping tide of bureaucratic intrusion in businesses that prefer stable, transparent rules. It is wise to remember that capital is footloose and will flee if it senses a whiff of unpredictability. Though Ethiopia’s growth story once dazzled, it risks stumbling if decisions continue to be made by officials who disregard legal boundaries. When state agencies act outside their remit, it distorts incentives, discourages investment, and paves the way for corruption.

Certainty is a precious currency in economic development. Once shaken, trust cannot easily be restored.

In many countries, unclear mandates, abrupt policy shifts, and overlapping jurisdictions create what the authors of “Deals & Development” call “regulatory chaos.” Research from Uganda, Cambodia, and Malawi to Ghana and Liberia suggests compliance can eat up to 20pc of a small firm’s annual profits.

In Liberia, over 60pc of the GDP flows from the informal sector, a result of entrepreneurs who fear the morass of paperwork and arbitrary fines that come with formal registration. Uganda’s shifting telecom licensing regime makes contracts a gamble, leaving firms wary of whether their deals will outlast the next election cycle. Malawi’s muddled property rights fuel intractable disputes, driving off agricultural investment.

When rules constantly change, rational businesses hold back, stunting growth and dimming the prospects for poverty alleviation. By some estimates, firms facing ambiguous regulation are 22pc less likely to make large-scale commitments. The knock-on effects include delayed or no investments, lost jobs, and missed opportunities for future growth. For owners of a firm pondering a new factory, the spectre of changing regulations, sudden fee hikes, and bureaucratic snags is often enough to deter them from investing elsewhere.

Interestingly, economists long ago identified the trade-off between rules and discretion. Rules-based frameworks offer clarity but lack flexibility, while discretion-based systems can adapt but breed unpredictability. In low-income countries such as Ethiopia, the worst-case scenario is a proliferation of uncoordinated decisions by local officials and federal agencies alike, culminating in contradictory edicts and wasted resources.

The recent behaviours of a federal enterprise and two city administrations illustrate how bureaucratic mission creep can undermine progress. Federal bodies, regional agencies, and city administrations issue overlapping directives, often ignoring the line between their jurisdictions. This would risk the reversals of gains Ethiopia laboured to achieve over the past decade, threatening to imperil the trust investors place in one of Africa’s growing markets. Once officialdom seems free to do as it pleases, businesses assume the worst.

Understandably, policymakers in social and political transitions could face a volatile environment. A workable alternative is for them to construct a transparent and predictable “deals space,” bridging the gap until rules-based systems are robust. But if officials keep jostling for new powers, the outcome may mirror South Sudan’s or Ghana’s unhappy episodes. The cost of poor governance is immense: Capital retreats, economies stagnate, living standards slump, and the vulnerable pay the price.

Legislators should update arcane laws to restore stability, and policymakers should clarify institutional mandates. Regulations, directives, and circulars, often hidden from public view, need stricter oversight. Agencies should be accountable when they overreach, and citizens or businesses should be able to bring them to court without facing a “Kafkaesque maze,” named after Franz Kafka, a famous author known for his stories with surrealism and disoriented characters.

The civil service protections, ensuring regulators do not rotate with every shift in political power, may help anchor decision-making in the long term. That would restore a vital sense of certainty and guard against the temptation of self-serving discretion.

Ultimately, firms crave consistency, not the absence of rules. Businesses can plan if a tax hike is clearly spelt out and widely expected. But, if local authorities contradict federal directives from one month to the next, trust disintegrates.

Stefan Dercon’s admonition should resonate more with Ethiopia’s contemporary leaders than ever. The lesson echoes that countries that manage to tame bureaucratic sprawl and communicate policy clearly reap the reward of vibrant growth. Those that cannot often languish. They can preserve a stable environment in which entrepreneurs flourish, or they can indulge in discretionary whims that stifle opportunity. It is a question of resisting short-term power grabs in favour of predictable governance. The cost of erring Ethiopia is painfully high before Dercon’s warning becomes its destiny.

Good Growth Requires Getting Public-Private Partnerships Right

Posted on December 29, 2024December 29, 2024 by Kirabon

The United Kingdom’s (UK) Labour government has given serious thought to the public investment needed to get the economy back on track after 14 years of austerity, neglect of social infrastructure, and capital flight triggered by Brexit and uncertain economic conditions. It understands that the situation demands a new strategy to tackle big problems like child poverty, health inequities, a weak industrial base, and struggling public infrastructure.

What should this look like?

The UK Department for Business & Trade’s recent industrial strategy “green paper,” Invest 2035, is a promising start. However, an industrial strategy should be oriented around key “missions” like achieving net-zero emissions, rather than around specific sectors, as the government appears to be doing. While the government has set itself five “missions,” they seem more like goals with some targets, rather than central to how government and industry work together.

For Labour to deliver on its agenda, it should get its public-private partnerships right. Historically, public-private collaborations in the UK have involved the state overpaying and the private sector underdelivering. Following the Brexit referendum, for example, the government secretly gave Nissan 76 million dollars to build new cars in the UK. But, Nissan still abandoned a planned expansion at its Sunderland plant, and the promised jobs never materialised.

Likewise, under the failed “private finance initiative” schemes of the 1990s, the state would pay inflated sums to private contractors to operate public services such as prisons, schools, and hospitals before handing them back to the state, often in poor condition and without any clear improvement to the service. This approach was widely used in the construction of National Health Service hospitals, with the first 15 contracts generating 45 million pounds in fees – some four percent of the capital value of the deals – for advisers across the public and private sectors.

A UK Treasury analysis later showed that the general costs of PFIs were double that of government borrowing.

Fortunately, many public-private partnerships globally have produced more positive results. Germany’s national development bank, KfW, offers low-interest loans to companies that agree to decarbonise. The French government’s COVID-19 bailout of Air France was conditional on the carrier curbing emissions per passenger and reducing domestic flights; by contrast, the UK bailed out easyJet with no strings attached.

In the United States, the CHIPS & Science Act requires companies that receive public funds to commit to climate and workforce development plans, provide childcare, and pay a living wage. Preference is also given to companies that reinvest profits instead of using share buybacks.

The UK does have some experience in shaping markets around clear goals. In developing the Oxford/AstraZeneca COVID-19 vaccine, the government used a risk- and reward-sharing model in which it provided 95pc of the funding in exchange for certain commitments from the company. AstraZeneca would provide the first 100 million doses to the UK and allow the government to donate and reassign surplus vaccines. Octopus Energy’s acquisition of energy supplier Bulb allowed the UK government to reap 1.5 billion pounds in profit as Octopus repaid the public support it had received through an earlier profit-sharing deal.

This agreement safeguarded jobs and prevented consumers from incurring any extra costs.

With a mission-oriented strategy, the Labour government could scale up and systematise this type of public-private engagement. Rather than being “unreservedly pro-business,” as it claims to be in its green paper, it should ensure that public investment targets clear objectives: to crowd in private capital, create new markets, and increase long-term competitiveness.

Consider the UK’s net-zero-emissions target, which is not only about clean power but also about how we eat, move, and build. The state has a crucial role to play as a first-mover, shaping markets so that private incentives are aligned with public goals. Yet, judged by this standard, recent moves by the Labour government appear to fall short.

For example, Prime Minister Keir Starmer’s deals with Macquarie (an investment bank), Blackstone (asset management), and others raised more than 60 million pounds without setting clear, outcomes-oriented expectations or ensuring that risks and rewards are shared. Equally, the government’s support of carbon capture and storage (to the tune of 22 million pounds so far) allows funds to flow to incumbent oil giants without holding them accountable in the green transition.

These deals are structured to achieve growth at any cost, when the UK needs is a growth that is inclusive and sustainable. That requires better corporate governance to prevent situations like Thames Water (a water and waste utility) being saddled with over two billion dollars in debt after Macquarie became a major shareholder in 2006.

Growth itself is not a mission; it is the result of public and private investment, and good growth is a result of directed investment. If the UK’s climate transition is going to deliver for people and the planet over the long term, the government’s engagement with the private sector should reflect confidence, not capitulation. This can start by deploying tools that the government already has. The new National Wealth Fund and Great British Energy (a publicly owned clean-energy company expected to launch early next year) could make a huge difference, but only if policymakers get the implementation right.

For example, the National Wealth Fund should introduce conditionalities for public investments; provide public access to intellectual property and patents for research; create subsidies and other incentives for mission-aligned investments; and use loan guarantees and bailouts to move companies toward decarbonisation, improved working conditions, and fewer share buybacks. Procurement is also a strong lever, because it represents one-third of the government’s total spending and can direct investment toward strategically important goals.

Ultimately, the UK government should shift from a sectoral approach to a mission-oriented one that embraces a confident, outcomes-oriented form of public-private partnership, incentivising the private sector to do its part. Labour understands the problem, but its proposed solution still needs some work.

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Month: December 2024