MOTORISTS HIT BRAKES ON TOUGHER FINES

Posted on January 26, 2025January 26, 2025 by Yeabkal

Many motorists face new and stricter traffic regulations introduced by the Council of Ministers. The regulations include a three-tier penalty system with higher fines and demerit points, hitting offenders for everything from running a red light to improperly seating a child. A new demerit point system means licenses can be suspended for six months to a year or more once a driver accumulates between 14 and 21 points. Fuel price hikes and costly vehicle maintenance add further pressure, prompting many taxi drivers to consider leaving their jobs in search of better prospects.

Taxi association leaders argue the regulations were implemented without sufficient consultation. They raise concerns that drivers are being penalised for mistakes caused by pedestrians, and that the city government should focus on improving infrastructure, including parking facilities, before levying heavy fines. Addis Abeba Traffic Management Authority officials counter that they carried out extensive public awareness campaigns, insisting that increased fines will save lives by curbing driver negligence. Although traffic-related fatalities dropped from 480 to 401 over the last year, the total number of traffic violations rose from 1.2 million to 1.4 million in six months. Officials credit stricter enforcement for the declining death toll, though many drivers fear the new fines will devastate those with limited incomes. The Authority also reports a drop in fined drivers from 14,716 to 11,174 in two consecutive weeks, attributing the latest measures to prompting greater caution on the roads.

Yet experts caution that fines amounting to over 25pc of many drivers’ monthly earnings are unrealistic, noting that penalties represent one or two percent of drivers’ average incomes in most countries. They call for modernised approaches such as cameras and digital tracking systems, combined with continued public awareness, to achieve the intended safety benefits without imposing a crushing economic burden on those who keep the city’s transport network running. Drivers say they have switched to night shifts to avoid fines of up to 1,500 Br for infractions such as stopping in no-parking zones. A driver says he makes around 800 Br a day after expenses, but each fine can easily wipe out two days’ earnings, an amount he and others view as unsustainable.

Birr in Tumble, Reform Rhetoric Meets Bitter Economic Realities

Posted on January 26, 2025January 26, 2025 by Yeabkal

Grand ambitions have long driven Ethiopia’s successive leaders, but they remain weighed down by deep structural vulnerabilities. But, nowhere is this more evident than in the monetary policy front, where policymakers let market forces guide Birr’s value against a basket of major currencies.

The bold policy measure, introduced after 50 years, initially reduced the gap between the official and parallel exchange rates from more than 100pc to around five percent. Yet, barely six months later, the gap has climbed toward 25pc, raising doubts about whether the reform will be truly maintained. It should be no surprise if the liberalisation slide reinforces concerns that the economic policy goals remain hostage to the authorities’ reluctance to accept short-term pain mainly due to worries about a weaker currency rooted in the country’s debt position.

Nearly 45.8pc of Ethiopia’s external obligations are denominated in dollars; each depreciation of the Birr drives up debt-servicing costs when converted into local currency. Although external debt rose by two percentage points in the 2022/23 fiscal year – a modest expansion – currency swings alone added 133.84 million dollars to the overall burden. Debt-service payments for last year were 2.21 billion dollars, with nearly half going to external creditors. The balance is consumed by domestic-debt servicing, which has climbed toward a billion dollars, reducing the money available for development programmes in areas like education and health.

Foreign currency reserves remain too thin. Although they have improved considerably compared to the years before the forex regime liberalisation, they cover about 2.3 months of imports, short of the three months the International Monetary Fund (IMF) advises for economies in Ethiopia’s position. The balance of payments showed a small surplus of 59.4 million dollars in the fourth quarter of 2023/24, but this bright spot conceals deeper weaknesses.

The current account deficit widened from 826.3 million dollars the previous year to 1.1 billion dollars during the fourth quarter of last fiscal year, in large part because the trade gap swelled by 30.8pc. Exports rose by 27.3pc, reaching 1.3 billion dollars, helped by stronger earnings from coffee, live animals, gold and electricity. Yet, during the same quarter, imports grew even faster, by 29.9pc, to 5.1 billion dollars, as demand for capital goods, fuel and other essentials climbed in an economy seeking to industrialise and meet rising consumer needs.

However, those headline export figures hide structural constraints.

Coffee exports earned 34.3pc more than before, but revenues from oilseeds fell by 5.6pc, and khat exports plunged by 39.4pc. The bigger picture is also discouraging. External debt claimed 179.8pc of exports, above the 150pc threshold considered risky for low-income countries. This mismatch between debt obligations and forex inflows uncovers a long-running problem. One or two star exports cannot carry a country of over 100 million people.

Efforts to limit non-essential imports have had limited success. The economy still needs machinery, fuel, and pharmaceuticals to keep infrastructure projects and daily life running.

Such strains become more apparent when looking at the federal government’s broader debt position. By June 2024, total public debt reached 68.9 billion dollars, equivalent to 32.9pc of gross domestic product (GDP). At first glance, that number may not seem alarming for a growing economy. The trouble emerges in the details. Domestic debt of 39.97 billion dollars, having grown by 12pc in dollar terms in one year, comes from Treasury bills, government bonds and direct advances from the central bank. It created a large rollover risk in a capital market that is still nascent.

State-owned enterprises (SOEs) account for over one-third of domestic debt, adding to the government’s liabilities and leaving less room for private borrowers.

External debt, at 28.89 billion dollars, created its own difficulties. About 65pc of this is concessional, with terms easier than market rates. But, many SOEs have variable-rate loans due to the large share of these debts in dollars. Birr’s depreciation can only heighten repayment costs. Servicing external debt amounted to 1.27 billion dollars last year, nearly matching the 1.48 billion dollars in fresh disbursements, a scenario that makes it challenging to build up foreign exchange reserves over time.

At 11.3pc, the external-debt-service-to-export ratio exceeds the 10pc threshold, which is considered a warning sign. Reducing non-concessional borrowing, matching the currency of debts with that of major exports and developing more sophisticated debt-management skills will all be essential.

Officials have tried to keep inflation in check and defend the Birr, setting high interest rates and imposing large reserve requirements. Commercial banks are compelled to buy government bonds, diverting funds that might otherwise support private investment. These measures prop up the Birr in the official market but at the cost of higher borrowing expenses for everyone else, with an outcome that stifles growth.

Federal authorities insist that they still maintain a market-determined exchange rate. Yet, the renewed divergence between the official and parallel rates is not in their favour. Interventions persist behind the scenes. The state-owned Commercial Bank of Ethiopia (CBE) often quotes lower rates for foreign currencies than private banks do, acting more like an arm of policy than a commercial lender.

However, there are signs of progress. Foreign direct investment (FDI jumped by 49.4pc in the fourth quarter of 2023/24, while private-sector long-term financing rose by 24.4pc. Nonetheless, short-term capital flows reversed from a surplus of 23 million dollars to a deficit of 195.3 million dollars, a shift that may signal the jitters of lenders who can withdraw funds at the first sign of trouble.

Public-private partnerships (PPPs) may help them tap private capital for infrastructure projects. However, investors complain about a tangled and unpredictable regulatory environment, frequent policy shifts, unreasonable tax law enforcement, and a cumbersome logistics sector. The federal government still places SOEs at the front of the line for credit, crowding out private firms that might be more nimble exporters.

The economy needs to diversify beyond commodities like coffee and livestock to raise more revenue. Better roads, smoother customs procedures and more reliable power could encourage greater investment in manufacturing and agro-processing. This would allow Ethiopia to wean itself off high levels of borrowing gradually. Policymakers hope that multilateral lenders will offer some breathing room. The 3.4 billion dollars from the IMF, 3.75 billion dollars from the World Bank and relief from the G20 Common Framework for debt restructuring are in the pipeline. But, success depends on convincing these creditors that reforms are genuine.

Ambition without discipline, however, can easily turn into peril. Previous administrations’ drive to build roads, dams and industrial parks might have fuelled growth, but it has also heightened vulnerability to exchange rate shocks and global interest rate rises. The large stock of dollar debt from previous years remains a drag on the economy. Debt re-profiling can ease payment pressures in the short term, but it does not fix deeper problems like an underperforming export sector and uneven policy enforcement in a country under political spells that have led to ongoing violent conflicts.

A more realistic exchange rate could spur exporters and attract foreign investors, although it would likely push up prices in the short run. A fully floating Birr might drop quickly, lifting inflation and triggering public discontent. Yet letting the currency drift into a grey zone between official and parallel markets simply drives people toward unofficial channels. When policymakers trumpet reforms, then reverse course the moment the Birr trembles, they damage the credibility they need to bring in new capital. That wariness can spark the very flight of funds the authorities are trying to avoid.

New Traffic Rules Add Financial Strain on Addis Abeba Drivers

Posted on January 26, 2025January 26, 2025 by Yeabkal

Binyam Tesfaye, a 31-year-old father of two, is struggling under the weight of Addis Abeba’s new traffic regulations. Earning 7,000 Br a month, he spends 5,000 Br on rent, leaving little for other expenses.

“Living in Addis Abeba on this salary is very difficult,” he said. Biniyam and his wife, a teacher earning 5,800 Br, find it hard to make ends meet. To cover his child’s 2,100 Br school fees, he had been relying on part-time work and borrowing money. However, this fragile financial balance has been disrupted by the city’s newly enforced traffic fines.

In just a few days, Biniyam has been fined twice. The first fine, 1,500 Br, was for transporting furniture that extended out of his pickup truck (oversize load), a common practice. Unable to pay, he had to borrow the money.

Shortly after, he was fined another 1,000 Br for stopping on a pedestrian crossing to avoid running a red light and being hit by a car from behind. Despite explaining the situation, he says, the traffic officer dismissed his plea.

These fines, totalling 2,500 Br, amount to over 35pc of his monthly income. “Being a driver is becoming too costly,” he said. Biniyam is considering resigning, but the tough job market makes him hesitant. He admits migration might be his only option.

He is not alone. Many drivers face job losses and financial strain due to new traffic regulations recently implemented by the Council of Ministers. The higher fines add to the burden of rising fuel and car maintenance costs.

Gebre Mengiste, a taxi driver, has also been hit hard by the new rules. “The only way to avoid these fines is to work at night,” he said. He had to switch to night shifts after being fined 1,500 Br for picking up a passenger in a no-stopping zone. Though the night shift disrupts his family routine, including taking his daughter to school, it helps him avoid fines.

Working from 8 PM to 6 AM, Gebre earns 2,000 Br daily after expenses but must pay 1,200 Br to the car’s owner, leaving him with just 800 Br. “The fines are equivalent to two days’ income, which is unsustainable,” he said. The driver says that the lack of parking spaces worsens the situation. “The government should improve infrastructure before enforcing these rules.”

Nuredin Ditamo, chairperson of the Bilen Taxi Association, criticised the regulations, saying they threaten the livelihoods of taxi drivers. Rising fuel and spare part costs have already forced many drivers to work without assistants to cut expenses.

He worries about the new demerit point system and the three-tier penalty structure for minor offences. “We were not consulted as stakeholders,” he said. “They only involved us when the regulation was being released.”

Nuredin says drivers are being unfairly fined for penalties caused by pedestrians. “Even when pedestrians cause accidents, taxi drivers are fined and suspended,” he said.

Drivers causing accidents with bodily injuries now face strict penalties under the new Council of Ministers regulation 557/2016. A driver causing bodily injury may have their license suspended for six months and receive 14 demerit points. For accidents resulting in serious injuries, the suspension increases to one year, with 17 demerit points.

The regulation enforces a three-tier penalty system for traffic violations. Stage one offences which include smoking while driving, seating a child under 13 in the front, or giving money to beggars result in a 500 Br fine and one demerit point.

Second-tier violations including using earphones, driving without lights, signalling incorrectly, or failing to yield to pedestrians result in a 1,000 Br fine and two demerit points. Stage three penalties incur a 1,500 Br fine and three demerit points for more severe infractions, including running red lights, driving out of lane, stopping on bridges, using phones while driving, and exceeding passenger limits.

Speeding also carries heavy fines. Driving up to 5 km/h above the speed limit incurs no penalty, but exceeding it by 6-10 km/h results in a 1,500 Br fine and three demerit points. Speeds 11-20 km/h over the limit attract a 1,700 Br fine and three points.

A Bloomberg Philanthropies Initiative for Global Road Safety (BIGRS) study revealed widespread speeding in Addis Abeba. Around 44pc of drivers exceed speed limits, averaging 57 km/h, while 46pc of motorcyclists were also found speeding.

The new traffic regulations include offences with fines up to 20,000 Br and legal consequences. Driving with a suspended license incurs a 3,000 Br fine and eight demerit points.

A point-based driver suspension system is also introduced. Accumulating 14-16 points in a year leads to a 6-month suspension, 17-20 points a one-year suspension, and 21 and more points 18-month suspension.

Suspended drivers must complete mandatory training and retesting for license reinstatement.

For child safety, children under seven must use secured safety seats in the rear, although this will be enforced once the Ministry of Transport & Logistics (MoTL) issues a directive. Children under 13 are prohibited from sitting in the front passenger seat.

Amare Tarekegn, deputy director of the Addis Abeba Traffic Management Authority (TMA), stated that enforcement began after extensive public awareness efforts. “We have worked with schools and the media to educate the public,” he said.

Despite a decline in fatalities, traffic violations increased from 1.2 million to 1.4 million in the past six months. Over 18,000 pedestrians were also caught breaking traffic rules. Fatalities from traffic accidents decreased from 480 to 401 last year.

“Driver carelessness needs to be reduced, and this regulation will help us,” Amare said. The new law consolidates scattered road safety rules into one regulation.

“The only way to avoid fines is to drive carefully and stay aware,” he said.

Recent data from the Authority shows a drop in fined drivers, from 14,716 between December 24, 2024, and January 8, 2025, to 11,174 between January 9 and January 23, 2025, a decrease of 3,542 after the enforcement of new traffic regulations.

Genet Dibaba, TMA’s communication head, praised the regulation for addressing key causes of road accidents, including speeding, drunk driving, red-light violations, and phone use. She says the Authority is working on educating the public before implementation. To reduce traffic congestion, TMA has also enforced basement parking requirements in over 145 buildings, creating 2,490 additional parking spaces.

“The accessibility of parking spaces is very crucial,” she said.

The Addis Abeba Police Commission’s (AAPC) traffic department collaborates with TMA to ensure road safety. Solomon Adane (inspector) stated that over the past six months, more than one million drivers were fined for violations. These include over 27,600 for speeding, more than 100,000 for ignoring traffic lights, over 1,000 for driving without a license, and more than 11,000 for operating vehicles without quality licenses.

Abiy Aleneh, a lecturer at Kotebe University of Education (KUE), supports the regulation but worries about the steep fines, which he believes are disproportionate to drivers’ incomes. He says that most countries fine one percent to two percent of drivers’ average income, while the current system fines over 25pc of many drivers’ salaries.

“While the regulation will boost government revenue, the fines are not fair for many drivers,” he said.

Abiy recommends the application of advanced solutions like cameras and digital tracking systems, along with public awareness campaigns, to enhance road safety and reduce accidents.

Capital Crossfire Catches Geez Bank, Promoters Bicker Over Future

Posted on January 26, 2025January 27, 2025 by Yeabkal

Geez Bank, a nascent commercial bank, currently under formation, is embroiled in a tense dispute that has overshadowed its promoters’ plans to begin operations. Organisers are divided over whether to proceed and meet strict capital requirements, invest in other banks, or shift to services such as microfinance and insurance.

The result is a tangled process in which the Bank’s future remains in limbo, with two groups claiming control. Differences have surfaced over negotiations with an existing bank, Lion International Bank, over a possible share transfer.

Geez Bank’s troubles can be traced back to November 2020, when the civil war in the north erupted as organisers were racing to meet a deadline set by the National Bank of Ethiopia (NBE). In April 2021, the NBE raised the minimum capital requirements for commercial banks from two billion Birr to five billion Birr, with existing banks given time until June 2026. For emerging banks, the deadline was set two years later. Geez Bank needed to collect half a billion Birr in paid-up capital within six months to begin operations.

However, the war upended much of the process and caused disruptions, leading the Bank to miss key windows. The initial plan was to close share sales by July 2021, with 345 million Br in shares. The war, however, derailed that goal and left the Bank struggling to stay on track.

Despite this setback, and once the conflict subsided, organisers resumed selling shares about two years later. They have since raised 610 million Br equity, with a subscribed capital of two billion Birr from around 12,200 shareholders.

Compounding the challenge is a deep rift among those responsible for Geez Bank’s formation. Led initially by a team of individuals that included Abraha Gebrewahed, the founding committee’s chairman, Gebremedhin Hailu, and Abraha Hailemariam, the committee ran into internal disagreements over strategy and direction. Other members included Azenaw Berhe, Tesfay Hadera, Meresa Tsehaye, Mihret Mehari, Thomas Hailu, Gebrewahed Weldegiwergis, Mulugeta Hagos, Habte Hadush, and Fatume Siraj.

In July last year, a new committee was formed to resolve the disputes and find ways to quickly boost paid-up capital. It comprises Etsegenet Berhe, Angesom Haile, Isaias Tadesse, Gebregziabher Gebremariam, Mulualem Gebrehiwet, Gebremedhin Gebremariam, Tsigabu Belay, Tesfay Gebregergis, and Seid Mohammedbirhan.

Yet, individuals close to the process attributed the stalled transition to “certain members in the old committee” refusing to hand over responsibilities. The alleged refusal has prevented a smooth change in leadership and heightened tensions over the Bank’s future direction.

“The bank is in a mess,” said a member.

Organisers have debated three options, deadlines looming and capital requirements being more pressing than ever. To continue raising capital to reach the five-billion-Birr threshold by 2026, which requires an aggressive push for funds in a market with intense competition. Consider investing equity mobilised in other banks. Transform Geez Bank’s effort into a microfinance institution, investment bank, or insurance company.

In November 2024, a mediation committee comprising civil society groups, religious leaders, and public figures tried intervening, hoping to calm nerves and chart a path forward. Among those who joined the mediation were Tigray Public Diplomacy, Gerealta Forum, Fiseha Asgedom (Amb.), and religious leaders such as Selama Woldesamuel (Abune). The group recommended reforming the organising committee, bringing in new investors and influential figures considered capable of steering Geez Bank out of its current troubles. A provisional assembly approved the plan on December 24, 2024.

Despite nine founding committee members agreeing to the proposed transition, three key figures — Abraha Gebrewahed, Gebremedhin Hailu, and Azenaw Berha — did not go along with the plan. However, they began discussions with Lion Bank about the potential to buy its shares at par value, effectively putting the transition on hold and deepening the institutional split. According to a member of the mediation group, the three, along with Lion Bank executives, have been meeting with shareholders in Adigrat, Meqele, and Addis Abeba for about a month, hoping to seal a share transfer deal.

The first committee sent a report to the NBE on January 10, 2025, signed by Abraha Gebrewahed. The report revealed that some shareholders are considering share transfers to other banks or forming an investment firm. Others consider converting the initiative into microfinance, insurance, or investment banking. According to the document, there is limited time available and an urgent need to find better options for shareholders after their equity has been idle for five years.

“We’ve to unlock shareholders’ accounts,” said Gebrelibanos Gebremariam, executive manager, from his office in Addis Abeba.

He disclosed that Geez Bank is running short on time and that its shareholders should explore all options. Multiple meetings have been held to let investors decide how to proceed, while members of the previous organising committee, such as Thomas, believe in trying to rally enough supporters to keep Geez Bank alive.

“The bank’s future is at stake,” said Thomas Hailu, a member of the existing committee. “The opportunity to raise more equity has not disappeared. It should be quickly seized.”

According to observers, Lion Bank stands to gain from any takeover or acquisition of Geez Bank’s shareholders. With deposits of 35 billion Br, total assets of 43 billion Br, and 30.4 billion Br in loans and advances, the Bank is already a sizable player in the banking industry. Worku Lemma, a financial consultant, sees such a deal would allow Lion Bank to expand its capital, customer base, and liquidity instantly.

“It provides an opportunity to increase its overall capacity,” he said.

However, he cautioned shareholders to consider the costs of buying shares in an existing bank.

Another industry veteran, Eshetu Fantaye, echoed his caution and urged organisers to avoid making decisions based on emotions or immediate resolution. He believes the Lion Bank proposal could improve liquidity without a high-interest burden. However, he also recommends that treasury bills (T-bills) offer a risk-free return of 15pc and that other banks might have higher earnings potential than Lion Bank could eventually deliver.

“Shareholders should consider better returns,” he said, adding that a close look at Lion Bank’s finances, including general reserves and paid-up capital, is essential.

Lion Bank, which has 3.1 billion Br in capital and close to meeting the Central Bank’s minimum requirement, has reportedly offered to allow Geez Bank shareholders to buy its shares at par value and potentially access non-collateralised loans. Lion Bank directors reportedly indicated they might be willing to hire 23 Geez Bank employees on board, a move that one organising committee member described as an “attractive investment opportunity.”

“We’re still discussing with shareholders,” said Mulugeta Teklu, Lion Bank’s director of secretary. “It’s too early to provide detailed information.”

Nothing is set in stone until late last week, as negotiations continue, and opinions vary widely among Geez Bank shareholders.

“There is a divide among shareholders, delaying final decisions,” said Thomas.

Most newly elected organising committee members prefer establishing Geez Bank as a commercial bank. They believe that strong leadership and more capital can steer the initiative to success, even though the losses caused by the war have doubted the Bank’s viability.

However, Eshetu wondered if Geez Bank could compete with well-established domestic lenders and the potential arrival of foreign banks. He predicted that small and recently formed banks would struggle to survive without adequate capital or strong management.

“Commercial banks lacking enough resources will face serious challenges,” he warns.

Geez Bank’s shareholders say they are under pressure. Roughly 10pc of Geez Bank’s shareholders are from the Tigray Regional State, which was severely affected by the two-year conflict. Many shareholders say their money has been tied up for too long. Some blame the founding committee as “weak” for the dispute, alleging that Geez’s leadership should have adapted more quickly to wartime conditions and changing regulations.

“I’ve lost faith in the initiate,” said Tesmegen Demoz, who joined in 2021 with high hopes. “A stronger team would have served the Bank better.”

He believes the crisis comes from inadequate leadership, arguing that a more capable team could have handled the war’s challenges and prevented the current deadlock.

Central Bank officials have shown no sign of relaxing the capital requirements or bending the rules to accommodate newcomers struggling to raise sufficient equity.

“All banks should comply with the rules,” said Vice Governor Fikadu Digafe. “There’ll be no exceptions.

When the Brewed Buck Bucks, Banks Play Tug-of-War in Forex Frenzy

Posted on January 26, 2025January 26, 2025 by Yeabkal

The foreign exchange market has been quirky lately, marked by sudden shifts and divergent strategies among commercial banks and the Central Bank.

Abay Bank (ABY) captured the limelight with an unexpectedly low buying rate of around 120.062 Br to the Dollar, departing sharply from the 124.9 Br range common among its peers. An anomaly spanned three days last week; this might have come from internal liquidity strains or a misalignment in pricing to attract short-term forex inflows. By January 24, Abay Bank appeared to revert to near-market levels, signalling exceptional measures its forex managers had taken to boost dollar receipts that were no longer in play.

Most banks maintained a two percent spread between their buying and selling rates during this period, but the National Bank of Ethiopia (NBE) was distinctly more volatile. On January 21, the Central Bank’s spread was 0.99pc, climbed to 1.23pc between January 22 and 23, then dipped toward one percent by January 25. The swing could be part of an ongoing regulatory fine-tuning or testing of short-run policy tools meant to keep the market in balance.

Yet, the unpredictable approach by the Central Bank contrasted with the more uniform tactics used by most commercial lenders, who largely kept their margins within its imposed limits.

Enat Bank (ENT) and Tsehay Bank (TES) established themselves at the upper end of the market, with buying rates surpassing 125 Br. They were vying to secure hard currency from exporters and remittance senders, a possible indicator of intensifying competition for scarce forex. Global Bank (GBE) and Hibret Bank (HB), meanwhile, took a more conservative position, showing lower-than-average rates in GBE’s case and a steady, albeit premium, selling price of 127.98 Br at HB. This pricing could result from an effort to avoid sudden shocks, even if it means letting high-rate banks scoop up a greater share of forex transactions.

Nib Bank also joined the ranks of lenders that quoted above 125 Br for buying last week. Tsehay Bank, whose executives have already taken an assertive position, edged closer to 126 Br and has now led the market for four consecutive weeks. The state-owned Commercial Bank of Ethiopia (CBE) continued offering the lowest buying rate — still below 125 Br — a clear sign it remains a crucial policy tool for containing volatility. CBE’s status as the largest bank in the country and as a quasi-policy instrument has historically exerted downward pressure on private banks’ attempts to adjust their rates aggressively.

A downward drift of the Brewed Buck against the Green Buck accelerated for roughly six days, beginning on January 20. The market’s average buying rate was 124.8 Br, and the average selling rate topped 127 Br. Banks such as Goh Betoch Bank (HoH) and ZamZam Bank frequently posted higher numbers than their competitors, while the major players, including CBE, generally maintained more moderate quotes. Tsehay Bank remained at the forefront of private banks, frequently nearing the 126 Br thresholds in its drive to capture larger forex from exporters and the diaspora.

A catalyst behind the continued drop in the rate of Brewed Bucks was the Central Bank’s daily weighted average crossing 125 Br (for a third week), an event many see as psychologically important. Faced with persistent forex shortages, officials appear to be weighing whether to let the Birr weaken further or inject more dollars into the system. The four biggest private banks — Awash, Dashen, Abyssinia, and Wegagen — have all responded by setting more conservative rates, generally below the new 125 Br benchmark.

There appears to be a conscious effort among these banks’ forex managers to slow Birr’s decline and uphold Governor Mamo Mehirtu’s monetary policy objectives.

Yet, a handful of private banks have pursued a different path.

Gadaa, Goh Betoch, and ZamZam banks have consistently offered higher rates on both ends of the exchange. Goh Betoch’s buying rate has been north of 125.4 Br, with selling hitting 128 Br, while ZamZam has also positioned itself to draw inflows from remittances and exports. Such steps might help smaller banks carve out a niche, though they risk fueling greater volatility if the Central Bank’s efforts with tighter monetary policies.

The market has effectively sorted banks into tiers as Tsehay and Nib banks were at the upper end with buying rates that exceed 125 Br, revealing an eagerness to absorb hard currency. By comparison, CBE anchors the lower end near 124 Br, acting as a stabilising ballast. Banks such as Dashen, Awash, Wegagen and Abyssinia occupied a middle zone, largely heeding Central Bank signals to avoid triggering bigger shocks.

In the coming days, a mild appreciation of the Birr could be anticipated, with forecasts showing a modest rise in the average buying rate from 125.18 Br to around 125.41 Br, and the average selling rate inching up from 127.57 to roughly 127.80. While not dramatic, this gentle upward shift could signal the Birr might benefit from a combination of steady external inflows and a slight easing in import demand. Commercial banks could see more uniformity in their quotes, aligning their spreads with the NBE’s signals if that holds.

Nib Bank Sees Year of Reckoning

Posted on January 26, 2025February 1, 2025 by Yeabkal

Nib International Bank’s (NIB) financial results for the 2023/24 fiscal year painted a picture of a financial institution determined to steady its footing despite difficult economic conditions. In an industry long regarded for strong growth and profitability, NIB’s recent performance displayed a year marked by resource constraints, corporate governance reforms, and an ambitious desire to refocus on core strengths.

Yet, despite NIB’s setbacks, its directors, executives, and shareholders showed optimism that the steps now underway will help restore depositors’ confidence, improve liquidity, and eventually deliver steadier profits from a year that has been all but flattering.

The Bank’s total assets decreased by 12pc to 67 billion Br, signalling pressure on a balance sheet that had once tracked consistently with the broader industry’s expansion. Its deposit base contracted by 24.1pc to 45.1 billion Br, contrasting with the trend observed at many other private banks, where deposit mobilisation has generally held up despite inflationary headwinds. Over the last decade, private banks have seen moderate to robust deposit growth, which they have channelled into new loans.

At NIB, these pillars weakened during the year as the Bank scrambled to replace outflows with external financing, demonstrated by borrowings that jumped by over 105pc. The growing reliance on external funds has come with added costs, creating what executives recognise as a short-term measure they hope to ease as more stable deposits return.

Abdulmenan Mohammed (PhD), a finance analyst based in London, has called for a strategic overhaul to reverse the downward trend, as this decline has likely unsettled shareholders.

“The performance ought to be disappointing, if not shocking,” he said.

However, the newly appointed President of NIB, Henok Kebede, remained optimistic that the Bank’s strategic realignment, from attracting longer-term deposits to streamlining its credit portfolio, will improve the situation. Executives see technology as key to regaining a competitive edge and drawing new accounts.

“The customer base has now been significantly increased,” Henok told Fortune.

However, liquidity remained an ongoing concern. Cash and bank balances dropped by 48pc to 6.27 billion Br, while the liquid assets-to-total-assets ratio slipped to 9.4pc from 15.7pc. Executives conceded that the loan-to-deposit ratio of 109.2pc was higher than the Bank’s internal threshold, and above the previous year’s 89.8pc. The heavy borrowings, which more than doubled to 5.33 billion Br, unveiled the liquidity pressures.

According to the President, NIB is now in the process of settling overdue commitments, including borrowings, and expects the ratio to fall closer to industry norms. Across the private banking industry, the loan-to-deposit ratio generally stayed closer to 80pc. While NIB’s total outstanding loans and advances declined by about nine percent to 48.47 billion Br, the majority remain concentrated in the construction and manufacturing sectors.

Analysts saw the aggressively pursued lending activities as a double-edged sword. While they may have presented opportunities, they can also pose heightened risks if an industry-specific slowdown arises.

NIB executives remain confident that a system is in place to manage credit risk, pointing to ongoing monitoring and a commitment to allocate loans to reliable borrowers who can generate the needed liquidity. According to the President, the Bank’s lending approach is built around partnering with borrowers who can generate steady cash flow. He believes these strategic partnerships can reinforce liquidity.

“NIB’s internal risk appetite allows it to maintain a balanced approach to sectoral exposure,” Henok told Fortune.

Profitability metrics uncover the strain.

Net profit declined by 49.6pc to 957.9 million Br, positioning Nib behind newer players such as Berhan Bank, which posted 1.19 billion Br, and Abay Bank’s 1.5 billion Br. Return on Equity (RoE) fell from 27.7pc to 14.1pc, while Return on Assets (RoA) slipped by one percentage point to 1.7pc. Most private banks have shown consistent double-digit asset growth and improved profits over the past decade. NIB, however, experienced a contraction in its net profit margin on total assets to 1.43pc, signalling a noted departure from this industry-wide trend.

The Bank’s dependence on interest income, which accounted for almost 89pc of overall earnings, also revealed a concerning issue. There is less of a buffer from non-interest-based revenue sources, which many other banks leveraged to diversify their income. The environment dissuades some depositors from parking large sums in bank accounts, but NIB has felt the effects more directly than many of its peers.

Executives say that they recognise depositor confidence needs rebuilding. Indeed, NIB has been susceptible to negative real interest rates, as inflation was about 19.9pc year-on-year (YoY).

Despite the difficulties, NIB increased its paid-up capital to 7.6 billion Br, raising its capital-to-asset ratio to 15.47pc, compared with 11.53pc a year earlier. This injection offers a stronger cushion against systemic shocks and positions NIB to meet regulatory requirements comfortably. The Bank’s executives see this development as a foundation for restoring stability.

Some cost control measures appear to be paying off, although higher administrative outlays, attributable to governance changes and operational adjustments, raised total costs.

Private lenders have increasingly outpaced state-owned competitors in loan disbursements in the broader banking industry, expanding their networks and product offerings to attract deposits and borrowers. NIB remains among the sizable credit providers, holding a loan portfolio of 49.2 billion Br, yet its deposits per branch trail the industry average.

With deposits per branch at about 102 million Br, Henok says the Bank will focus on digital banking enhancements, including partnerships with fintech providers, to give customers more efficient and innovative banking experiences. Though the total branch count remains at 441, some offices were relocated to more visible or accessible areas, and three conventional branches were converted to full-fledged interest-free banking services in response to shifting market preferences. One was reverted to a conventional branch for the same reason.

According to Gizachew Abebaw, manager of the Bank’s premium branch at the Head Office, on Dejach Wolde Michael St., the Bank has undergone changes since March, spurred by a leadership team intent on identifying and catering to high-value clients. He acknowledged that recent governance issues, widely covered in local media, briefly unsettled some customers.

“They paused for a moment,” he said, describing a period when operational disruptions forced many to re-evaluate their banking options. “But it was temporary.”

The premium branch, overseen by Gizachew, offers specialised services to top-tier clients, including on-site service deliveries for large transactions. He reported robust progress in resource mobilisation, digitisation initiatives, and foreign exchange investments, attributing these as indicators of the Bank’s ongoing recovery.

“We’re on an upward trajectory,” Gizachew said.

He is confident that NIB Bank’s renewed focus on high-value account holders will reinforce its position in the industry.

His senior executives have introduced a 120-day liquidity recovery plan designed to revitalise deposit flows, refine governance structures, and tighten costs. The President attributed much of the pressure to surges in the cost of funds, prompting the Bank to focus on rebalancing its deposit mix. The aim was to secure more stable sources by attracting new customers willing to maintain deposits for longer periods.

According to Henok, these efforts have already led to a substantial expansion of the customer base, which he hopes will stabilise the deposit profile over time.

The past fiscal year also saw the Bank’s Earnings per Share (EPS) halved to 70 Br. The decline can be attributed to a combination of lower profitability and the capital boost that spread earnings more thinly across shares.

However, provisions for loan and other asset impairments rose to 401.8 million Br from 104 million Br, revealing more cautious risk assessments. Wage expenses and operating costs climbed considerably as well. Interest expenses reached 4.44 billion Br, a 36.6pc rise, while wages and benefits increased by 15.5pc to 2.91 billion Br. Other operating expenses jumped to 1.76 billion Br, 67.6pc growth.

Costs expanded faster than revenues, hitting 9.6 billion Br and reducing net profits. Losses from foreign exchange dealings more than doubled, reaching 256.25 million Br, and penalty expenses soared to 140.25 million Br from a mere 3.9 million Br the previous year.

A further complication came from a prior year adjustment of over one billion Birr, surpassing last year’s net profit and pushing retained earnings into negative territory at 378.17 million Br. The adjustment was attributed to several factors, including the application of incorrect exchange rates on a Letter of Credit (LC) payment, an expanded severance pay reserve calculation, unrecorded fees for MasterCard and VisaCard services, and an exchange rate regime shift that affected a dollar payment.

This revelation led to an overstatement of earlier earnings and dividends, making dividend payments for shareholders unattainable in the current year. Analysts expressed concern about the scale of these adjustments and called for careful review to ensure that the Bank’s financial statements accurately reflect its standing.

“Management should provide an adequate explanation for this,” said Abdulmenan.

According to Henok, improved controls and oversight are in place, arguing that many of these additional outlays are tied to cleaning up legacy issues and making the Bank more efficient in the long run.

The President stated that NIB’s capital structure is still robust, with a capital adequacy ratio of 19.8pc, more than double the regulatory minimum. While current standards are being met, he wants to strengthen capital further for the Bank to respond to unanticipated shocks and continue expanding. He also sees balancing the push to grow capital with preserving shareholder returns as important.

Incorporated 25 years ago with a paid-up capital of 27.6 million Br raised from 717 founding shareholders, NIB increased its paid-up capital by 26pc to 7.6 billion Br. Its capital adequacy ratio (CAR) stood at 19.8pc, more than twice the regulatory minimum. According to Henok, while the capital structure meets acceptable standards, it needs further strengthening to establish a strong capital base.

“We’re working to further strengthen capital base without compromising the returns to the shareholders,” he said.

Shareholders convened at Millennium Hall, where they learned that dividend payouts would not be possible this year, were disappointed. The news arrived at a time when NIB was restructuring its corporate governance and senior managment team, following the departure of more than a dozen senior staff and directors. A new board chaired by Shisema Shewaneka briefly appointed Emebet Melese (PhD) as president; she later moved to the Development Bank of Ethiopia (DBE), the state policy bank, making way for Henok to take the helm two months ago.

Henok brings two decades of industry experience, having served at the state-owned Commercial Bank of Ethiopia (CBE), Dashen Bank, and as founding president of Amhara Bank, where he spent two years. A graduate of management and international business studies from Addis Abeba and Greenwich universities, he took the reigns at NIB at a moment when the Central Bank’s tight monetary policy influences borrowing costs and pushes banks to compete more aggressively for deposits.

For longtime shareholders like Nigussie Ambo, who has held shares for over a decade and has not attended the annual meeting, the situation was disheartening, especially since no dividends were declared this year.

“I held a negative view,” he told Fortune, speaking of his absence.

He recalled signing forms related to the capital market initiative and learning the news about the Bank’s earnings shortfalls. Although he worried that the departure of experienced staff could affect the Bank’s future, he remained hopeful that fresh leadership and employees would be willing to undertake the hard work required to restore the Bank’s reputation.

“I don’t expect an immediate solution,” he said. “I believe NIB can return to its former glory, provided the new team is willing to dedicate themselves to the necessary hard work.”

Another shareholder, Haimanot Tessema (MD), who has held shares for seven years, attributed the dividend loss to “historical mismanagement.”

“Our dividends went away to mask the mismanagement of the previous leadership and their associates,” he said.

He called the new board and executives to ensure qualified professionals fill key roles and that strict oversight prevents past mistakes from resurfacing. The management team acknowledged these concerns and pledged a thorough review of prior practices while promising a merit-based approach, prioritising stability and sustainable growth. Henok disclosed that risk management structures have been upgraded, credit policies refined, and international best practices more closely followed. He revealed plans for revenue diversification, potentially through capital market ventures that allow for expanded product lines.

According to Henok, NIB has increased interest income by 20.9pc to 9.65 billion Br, primarily from loans and treasury investments. Fee and commission income rose to 713.34 million Br (11.4pc growth), helping total income climb by 21.3pc to 10.8 billion Br.

“We’re diversifying income sources through product diversification and capitalising on the new capital market to balance our revenue portfolio,” he told Fortune.

More banks are seen increasingly broadening income streams beyond interest earnings in the face of foreign exchange constraints and tightening local credit markets.

Some analysts see positive signs in NIB’s liquidity recovery plan, capital growth, and management overhaul. They believe the Bank will move toward greater stability if it can attract reliable depositors and methodically reduce high-cost borrowings. However, the concurrent growth of private banks, combined with evolving regulatory changes, may test Henok and his team’s ability to maintain a competitive edge. Still, analysts believe the Bank’s stronger capital position, combined with a refocused strategy, has the potential to boost its resilience against external shocks.

Whether NIB can regain the traction lost in 2023/24 will depend on its directors and executives ability to reinforce liquidity buffers, manage credit risk in their core lending segments, and reclaim the confidence of depositors at a time when all banks are trying to defend their franchises in a difficult market.

Leather Exports Face a Hard Floor as Officials Try to Patch Forex Crunch

Posted on January 26, 2025January 27, 2025 by Yeabkal

Ministry of Industry (MoI) officials have taken exporters by surprise, imposing minimum export prices for 12 leather products, a move they say is designed to raise foreign currency earnings and fight under-invoicing. The directive, issued by State Minister Tarekegn Bululta to the Ethiopian Customs Commission, came into effect without giving exporters much time to react, leaving many unable to meet their contractual obligations.

Under the new rules, 12 types of semi-processed and finished leather should be sold abroad at prices that meet or exceed specific thresholds. Semi-finished sheep wet blue skins, for instance, now carry a minimum price of 24 dollars a dozen, while goat wet blue is set at 15 dollars. Finished leather prices range from 0.70 dollars a square foot for cattle lining to 1.25 dollars for sheep dress glove leather. One of the higher-end materials, finished sheep upper, often used in fashionable shoe manufacturing, is priced at 1.20 dollars a square foot.

The Customs Commission’s enforcement of these new floor prices created a new challenge for exporters struggling with shifting global conditions. Many had negotiated supply contracts at prices below the newly mandated minimums, putting them at risk of contract cancellations. Exporters say they feel caught off guard, as no clear transitional period was provided to adjust their existing deals.

Ministry officials blame persistent discrepancies between export volumes and foreign currency earnings for the intervention. In his half-year report to Parliament, Melaku Alebel, the minister, disclosed export volumes from the manufacturing sector reached 95,167tns, equal to 80.93pc of the 117,586tns target for the period. This represents a marked jump from 74,954tns exported during the same period last year.

However, revenue has not kept pace with that increase in volume. Foreign currency earnings of 149.33 million dollars, amounting to just 58.18pc of the projected 256.69 million dollars, were 9.02 million dollars higher than the same period last year. Officials argue that the gap uncovered how lower prices and invoice values have eroded the sector’s potential revenue.

“Export volumes are rising, but our revenues are not,” said the Minister. “We believe the biggest factor here is the reduced product prices and inaccurate invoices. The minimum pricing strategy is meant to address that imbalance.”

In the past six months, 20 tanneries generated 13 million dollars in combined export revenues.

Rising logistics costs and extended maritime routes have exacerbated the situation. Shipments that once took 45 days to reach European markets could now take up to 65 days, and security threats along the Red Sea corridor are often blamed for these delays.

“We chose this sector because of its high capital flight and under-invoicing,” said Tilahun Abay, strategic affairs lead at the Ministry. “The plan is to review and adjust these prices in line with international market conditions.”

Both officials and industry operators agree that the leather industry has been in decline for quite some time, especially in the quality of raw materials and revenue generation.

“We believe this policy can help reverse that downward trend,” said Tilahun.

Industry insiders say the leather sector’s overall performance has suffered under tough global conditions, but some also point to practices within the sector itself. According to a veteran exporter who asked for anonymity, he signed contracts before receiving news of the price floors, creating a situation where he may have to renege on his deals. He associates the season with lower-quality leather due to weaker local purchasing power and greater dependence on alternative materials like silicone.

“We don’t have any choice but to export lower-grade leather,” he said. “However, that lower grade does not meet the new minimum price.”

According to this exporter, foreign investors who have entered the leather industry in recent years have contributed to stagnant market conditions and a perceived drop in quality. He recalled that before the influx of foreign capital, domestic exporters could collectively surpass 100 million dollars in annual exports. The sector now struggles to earn even 30 million dollars annually despite foreign investors’ participation. His company once exported up to 10 million dollars worth of finished leather annually but now barely hits one million dollars.

He also criticized the Ministry for not including enough stakeholder input before enforcing the new rule.

“When dealing with natural products like leather, you’re bound to get a percentage of lower-quality raw materials,” he said. “I would estimate about half of the raw hides we buy from local traders are low grade, which is impossible to sell at higher prices. Sometimes, to keep your business running, you have to sell below the new floor price.”

The question of how grades should be treated under the new regulation worries tanneries of all sizes. The Ministry’s letter to the Customs Commission did not differentiate among the seven grades of finished leather, even though top-tier products can be twice as expensive as lower-grade materials. Many exporters are concerned they will be forced to store subpar leather or risk shipping it at a loss.

“Quality variations are important,” said an exporter who has dealt in various grades for years. “You can have top-grade leather commanding a price 100pc higher than the set minimum. Meanwhile, lesser grades go for much less. That difference hasn’t been taken into account.”

Others in the industry appear cautiously optimistic.

Bruk Haile, deputy general manager of Bahir Dar Tannery, believes the new initiative is essential for boosting foreign currency earnings. However, he doubts its implementation and warns that strict controls could unintentionally delay export processes.

“Precise and swift execution is needed to prevent disruptions to delivery timelines,” he said.

Bruk criticised the lack of clarity about leather grades, stating that the rules fail to address the different types definitively. He argued that branding and marketing often involve varying product names, which the Commission does not recognise. His company exports up to three million dollars worth of leather annually, focusing on higher-quality grades up to grade four, less affected by price changes.

For Dagnachew Abebe, secretary of the Ethiopian Leather Industries Association (ELIA), the floor price is the right step. He observed a price gap between domestic and foreign direct investment players, which he believes could be rooted in questionable pricing practices.

“We see export numbers going up, but the revenues have been stagnant, which suggests under-invoicing,” he told Fortune. “If we want to bring more foreign currency into the country, we have to deal with that issue directly.”

Dagnachew believes that price regulation of this kind is not new. He recalls that the National Bank of Ethiopia (NBE) used to follow a similar approach.

“It brought some results,” he said.

During recent discussions with the Ministry of Industry officials, exporters voiced concerns about the contracts they had signed before the rule’s introduction. Ministry officials acknowledged that these specific deals might be treated as exceptions, but how that will be applied remains unclear. Some exporters also contended that foreign-owned tanneries, importing semi-processed leather and exporting finished products, should face a higher minimum price to reflect the added value.

Yet, some experts caution that the new rules lack essential detail and have arrived with little runway for exporters.

“They’ve the right to sell lower-grade products at reduced prices,” said leather technology specialist Kebede Amede, arguing that the government’s strategy overlooks major benchmarks in leather marketing. While he supports the measure, he doubts about its practicality. “Compliance is also tough because you’d have to inspect export-ready stock for quality. That’s not always practical.”

Hibret Bank Names Tsigereda Tesfaye as President During Shifting Industry Dynamics

Posted on January 26, 2025January 26, 2025 by Yeabkal

Hibret Bank’s board of directors, chaired by Samrwit Getamesay, has nominated Tsigereda Tesfaye as its sixth president, submitting the request for regulatory clearance to the National Bank of Ethiopia on January 21, 2025.

Tsigereda emerged from a final shortlist of three candidates and will become the third woman to head a bank if approved, following the appointments of Emebet Melese (PhD) at the Development Bank of Ethiopia (DBE) and Melika Bedri at ZamZam Bank. She is set to replace Melaku Kebede, who stepped down months ago after nearly two decades with Hibret Bank and previously served in senior roles at Zemen Bank.

A graduate of Addis Abeba University, he was previously a senior executive at Zemen Bank before returning to Hibret in top leadership. During his tenure, he oversaw the launch of multi-channel banking services, introduced interest-free banking, and implemented a Broadband Local Money Transfer system. He also guided the Bank’s early push into technology, championing an ambitious internal systems upgrade to boost efficiency.

Nonetheless, in his final year, Hibret Bank suffered considerable losses from its foreign currency earnings following the liberalisation of the forex regime in July last year.

However, Hibret Bank reported robust growth in the 2023/24 fiscal year, as net profits reached 2.3 billion Br and revenue rose by 28.1pc to 13.23 billion Br. The Bank’s total assets climbed 16pc to 96.58 billion Br, while deposits grew by 15.6pc to 74.65 billion Br. Loans and advances stood at 68.89 billion Br, with earnings per share (EpS) hitting 383 Br. During the year, Hibret opened 26 new branches, expanding its network to 499.

The Bank’s equity also grew, increasing by 3.27 billion Br to 12.65 billion Br. The Bank also invested 50 million Br in equity in the Ethiopian Securities Exchange (ESX), adding to its broader strategy of strengthening its market presence.

Acting president since August 2024, Tsigereda brings three decades of banking experience. She did her undergraduate studies in business management and an MBA in finance from Addis Abeba University. Her career began at the Construction & Business Bank (CBE) in 1995, where she rose to lead its general accounts division by 2003. She moved to Dashen Bank as head of credit analysis before joining Hibret Bank in 2004.

Over two decades at Hibret, she held successive roles in credit and risk management, advanced to assistant vice president for credit management, and later became senior vice president of business and operations.

Since joining the industry, Tsigereda has observed that senior leadership often remains out of reach for many women. According to her, the slow progress in the banking industry echoes concerns shared by peers. Melika has led ZamZam Bank S.C. for four years, having formerly served as Chief Financial Officer (CFO) at the Commercial Bank of Ethiopia (CBE). Emebet assumed the presidency of the DBE after briefly heading Nib Bank last year.

Underrepresentation of women persists in the banking industry, according to financial consultant Tilahun Girma.

“The sector has long been governed by the belief that men are more suited to lead banks,” he said. “Recruitment policies need reform.”

He urged institutions to promote in-house talent.

Tsigereda credited her ascent to commitment and perseverance, remaining at Hibret Bank despite offers from elsewhere.

Colleagues say her decision to stay at Hibret Bank through demanding times reflects her deep commitment to the institution. She played an instrumental role in strategic initiatives, especially in risk management, which they regard as critical for the Bank’s growth. Her continued presence over the years has enhanced her reputation for reliability and expertise, qualities that, individuals close to her believe, will help her guide Hibret Bank through technological shifts and heightened competition.

“I plan to advance the Bank’s vision, prioritising digital expansion,” she said.

Ethiopia, Djibouti Trade Blame Over Deteriorating Corridor

Posted on January 26, 2025January 27, 2025 by Yeabkal

The Ethio-Djibouti transport corridor, a vital trade route, is facing severe problems due to deteriorating infrastructure, outdated vehicles, and regulatory disputes, with both sides blaming each other for the issues.

A key trouble spot is the 143km road between Dikhil in Djibouti and Galafi on the Ethiopian border. Flood damage has left the road filled with two-metre-high gravel, making it hazardous for drivers and damaging trucks.

Dejene Luche, representing the Ethiopia Cross Border Transporters Confederation (CBTC), criticised the lack of improvements to the corridor, calling it “one of the biggest hassles.” Dejene, also general manager of Yegna Hilm Cross Border Freight Association, which operates 150 trucks, says that the poor condition of the road has caused damages to vehicles and drivers face risks.

Tesfaye Abebe, a truck driver with nine years of experience, described the road as life-threatening, with every trip posing serious dangers.

Djiboutian officials defended their efforts to repair the road but blamed Ethiopian authorities for allowing trucks to exceed the 40-ton weight limit, often carrying over 70 tons. Mohammed Ali, from the Djibouti Corridor Operation team, argued that overloaded trucks are a major cause of the damage. “Recklessness and lack of regulation by Ethiopian authorities is why the road is in such a state,” he said.

The Djiboutian government has completed 42km of repairs and plans to enforce stricter regulations once the remaining 58km are finished. Officials also cited climate conditions and the road reaching its lifespan as contributing factors.

The Ethiopian Roads Administration (ERA) rejected the accusations, claiming the government enforces strict load capacity regulations on trucks.

Sisay Bekele, deputy head of corporate affairs at the ERA, dismissed Djibouti’s claims about overloading trucks causing road damage. He says that Ethiopia enforces strict axle load regulations to protect roads in both countries.

“Weighbridges are being strengthened nationwide, particularly in busy export-import corridors,” Sisay said. He argued that trucks exceeding weight limits have been held up in Awash, proving that controls are in place. Additionally, an automated overloading detection system is being implemented, according to him. “We are safeguarding not just Ethiopia’s roads but also Djibouti’s,” he added.

The regulations restrict a truck’s three rear axles to a combined load of 56 tons, while banning vehicles with four rear axles.

Djibouti’s ports handle 95pc of Ethiopia’s imports, with 7.6 million tons of goods entering Ethiopia through the ports in the first half of this year. However, a bilateral agreement covering transit, transportation, documentation, and tariffs remains unrevised, with a July 2025 deadline approaching.

Freight forwarders have voiced complaints over bureaucratic delays. Mulugeta Assefa, board chairman of MACCFA Freight Logistics, cited persistent issues with pre-clearance and transit, warning that any decline in Djibouti’s port competitiveness could impact Ethiopia’s economy.

A key issue is the disparity in customs working hours. Djibouti customs operates 24/7, while Ethiopian customs does not. “This costs Ethiopia the equivalent of 56 working days annually,” said Elizabeth Getahun, president of the Ethiopian Logistics & Sectoral Association (ELSA).

A trilateral agreement between Ethiopia, Djibouti, and South Sudan also remains stalled, according to Djiboutian officials. Ethiopia has resisted using its route as a trans-shipment point.

Syad Ali, coordinator at the Djibouti Chamber of Commerce, said that Ethiopia’s reluctance has hindered South Sudanese trade opportunities. Currently, South Sudan relies on Mombasa (Kenya), located 1,700km from Juba, for its imports and exports.

Sisay stated that agreements with South Sudan are in place for constructing a border-crossing road. The project, funded by a 738 million dollars loan agreement with South Sudan, aims to improve transport routes, boost trade, and ease logistical hurdles. Repayment will be made in cash and crude oil over 10 years.

Port operations remain a vital revenue source for Djibouti, but declining competitiveness poses risks. Djibouti’s ranking on the Container Port Performance Index (CPPI) plummeted from 26th to 379th out of 405. Over the past year, 21 million tons of essential goods, including 814,000 tons of sugar, 1.9 million tons of fuel, and 2.2 million tons of fertilizer, were imported through Djibouti’s ports. Geopolitical instability, infrastructure problems, port congestion, and rising transportation costs have further strained the corridor.

Ethiopian officials blame a 20-year-old agreement with Djibouti, which they say hinders efforts to modernize logistics. The government is pushing for revisions to address transit times, transportation modes, operational procedures, customs clearance, and tariffs, planning to increase private sector participation in multimodal logistics.

Transport consultant Mitiku Asmare says that the 10-year strategy launched by the Ministry of Transport & Logistics (MoTL) in 2018 will strengthen Ethiopia’s logistics sector. However, he said progress has been minimal. “Digitising customs systems, cargo tracking, and transit monitoring to improve efficiency and competitiveness are very important,” he said.

A 2023 logistics performance study scored Ethiopia 2.94 out of five, with a 53.9pc ranking in areas such as customs efficiency, infrastructure, logistics service quality, tracing and tracking, ease of international shipping, and delivery time. The lowest performance areas were infrastructure, international shipment competitiveness, and delivery times.

Mathewos Ensermu (PhD), a logistics expert and co-author of the study, attributed the poor infrastructure to transparency issues at the federal level and the absence of an autonomous oversight body.

He says that Djibouti’s reluctance to establish the proposed Ethiopia-Djibouti Management Authority has left many issues unresolved along the corridor.

“The logistics supply chain is only as strong as its weakest link,” he said, warning that these weaknesses could severely impact the country’s economic ambitions.

Parliament Moves Closer to Establishing Certified Accountants Institute

Posted on January 26, 2025January 26, 2025 by Yeabkal

Parliament is moving close to establishing the country’s first institute for certified public accountants and auditors, as a draft proclamation was submitted for ratification following a final public consultation last week.

The legislation aims to overhaul the country’s accounting and auditing standards, addressing the acute shortage of internationally certified professionals and improving the credibility of financial practices. The law will also ban regional offices from certifying accountants and auditors to ensure reliability and consistency across the country.

The Ethiopian Institute of Certified Public Accountants, once established, will focus on training and certifying professionals in International Financial Reporting Standards (IFRS).

Stakeholders argue that this is a critical move as the country opens its capital market and seeks to attract foreign investors who demand reliable, globally certified auditors for financial decisions.

Prepared by the Accounting & Auditing Board of Ethiopia (AABE), the institute will initially be overseen by the Board which is accountable to the Ministry of Finance (MoF) for seven years before transitioning to self-governance by auditors and accountants. Fikadu Agonafir, director of AABE, acknowledged that “auditors are not capable of being sole administrators for the time being.”

Currently, the country has only 500 internationally certified auditors, with less than half licensed by AABE. Legal head Samson Negash says that there is an urgent need for reform. “There is a severe shortage of capable professionals in the country,” he said.

The institute is expected to improve regulatory oversight, aligning operating procedures with global standards such as the International Standards of Auditing (ISA) and the International Public Sector Accounting Standards (IPSAS). It will have the authority to regulate, certify, and oversee accounting students and professionals, ensuring compliance with the International Federation of Accountants (IFA).

The governance structure of the proposed institute includes a general assembly, an administrative council, an accountancy education committee, a discipline and audit committee, and executive bodies. The general assembly will oversee strategy formulation, approve annual budgets and bylaws, and hire independent auditors.

The administrative council will include six certified accountants, five government and academic officials, and a president and vice president, both of whom must be accounting professionals.

The institute’s funding will come from annual membership fees, school fees, government sponsorships, and donations.

However, participants during the consultative meeting questioned the availability of professionals capable of training and examining at international standards and the credibility of certifications for global recognition.

A scattered licensing system and overlapping mandates between the AABE and regional auditing bureaus were raised as major issues. Fikadu says that there are ongoing discussions with regional states to transfer full licensing authority to AABE. The general assembly will determine whether regionally licensed accountants or AABE-licensed auditors will need additional certification.

“It’s a work in progress,” Fikadu stated.

The bill also proposes a discipline tribunal comprising certified accountants, a member of the Federal Lawyers Association, and three government officials. This tribunal will have the authority to suspend, revoke, or repeal certifications and publicly announce disciplinary actions.

Participants voiced worries about the potential human rights violations of publicly shaming temporarily suspended professionals. To address this, an appellate committee will be established by the general assembly to handle disputes and appeals.

Gashe Yemane, CEO of Auditors Service Corporation, says the absence of a reputable national institution has forced companies to rely on international firms for auditing services. He says overlapping mandates between the AABE and regional auditing bureaus has led to inconsistent licensing requirements.

Neighbouring African countries, such as Kenya, Uganda, Rwanda, and Tanzania, established certified accountants institutes in the 1970s and 1980s. Kenya, with a population of 55 million, established its institute in 1978 and now has 45,000 certified accountants.

According to Tesfa Tadesse, an auditing consultant, Ethiopia’s accounting profession has lagged behind. He questioned who would oversee the quality of certified public accountancy and whether there are enough qualified professionals to ensure fair assessments within the institute.

Yidnekachew Gezahegn, a lecturer at Dilla University worries about the high cost of international certification. He stated that many aspiring professionals have abandoned certification efforts due to unaffordable costs.

“For years, the country moved forward with principles but lacked uniform standards,” Yidnekachew said. This inconsistency, he says, has resulted in overvalued and undervalued financial and tax audits performed by auditors.

“Auditors have long been overlooked,” he said.

Shimelis Adugna, Unyielding Force in Ethiopia’s Humanitarian Struggles, Dies at 89

Posted on January 26, 2025January 27, 2025 by Yeabkal

Few understood the deep scars of famine as keenly as Shimelis Adugna, whose personal rituals hinted at the hardships he witnessed. Leftovers never seemed an option on his plate. Instead, he measured out his portions and cleared them with dutiful precision. This habit, shaped by the lessons he drew from serving as Commissioner of the Relief & Rehabilitation Commission (RRC), followed him for much of his life.

Colleagues observed his meticulousness. They believe it likely came from a time when every grain of rice or a scrap of food could save a life.

Shimelis’s name became synonymous with humanitarianism and voluntarism. During the mid-1970s, one of the country’s darkest chapters unfolded when famine devastated its northern regions, putting countless lives at risk. He took the lead role in establishing the Commission to coordinate the influx of international aid. He displayed a tireless resolve to alleviate people’s suffering, and he did it with the unyielding dedication that many of his contemporaries still speak about today.

Shimeles was in charge of ensuring that vast shipments of relief supplies arriving from different parts of the world reached the hands of those who needed them most. Overseeing these operations, he faced grim realities daily. He spoke about the plight of his fellow citizens with a voice that carried the weight of sorrow. His eyes brimmed with tears as he offered updates to anyone who would listen — government officials, humanitarian agencies, or curious onlookers.

Former colleagues recall that no matter how often he spoke about the crisis, his empathy remained raw and genuine. Some say this palpable emotion served as a moral call to action for everyone around him.

According to Shibeshi Lemma, who worked as the Commission’s public relations officer during those turbulent times, international aid providers sought out Shimelis, convinced that his sincerity and commitment were unmatched. They understood that beneath his calm demeanour was an unwavering drive to help people survive unimaginable hardship.

“He was trusted and respected,” said Shibeshi.

Despite the constant demands of relief work, Shimelis did not allow his responsibilities to overshadow his life at home. He was, by all accounts, a devoted family man. His wife, Yeworkwuha Zewdie, and his five children had a father who guided them with calm conversations rather than lectures. Books were familiar in their household, and he instilled in his children the belief that truthfulness was a foundation of character.

His son, Brook, remembers that having convictions was not enough; one had to be ready to face the consequences of standing by them.

“That was very important to him,” said his son Brook, who remembers his father as someone with a clear set of principles.

He described Shimelis as a man who worked relentlessly, always willing to hear people out.

“His emotions were always on display,” Brook said. “Tears would roll down his cheeks when people shared their pain.”

That compassion left a lasting mark on the family, teaching them to lend an ear to others, respect their needs, and offer help whenever possible. Brook recalled how people in need never required any reference or formal introduction to approach his father.

“They didn’t need anyone to vouch for them,” he said. “They simply had to show up at home or his office.”

They would find a man ready to avail himself of his resources, connections, or simply his time to lighten another’s burden.

Shimelis’s public service career spanned multiple roles and institutions, illustrating his far-reaching influence. He began as a lecturer at Addis Abeba University, where he obtained his first degree. Later, he served as Deputy Minister for Internal Affairs and assumed his role as Commissioner of Relief & Rehabilitation. Throughout these appointments, he took assignments ranging from urban community development to social research and disaster relief coordination.

His reach extended beyond Ethiopia’s borders. Over the years, Shimelis held diplomatic and advisory posts with UNICEF, the United Nations Development Programme (UNDP), and the International Labour Organisation (ILO). In those international arenas, he remained the same empathetic leader he was at home, someone who believed in the fundamental dignity of all people and dedicated himself to improving their circumstances.

Friends and acquaintances describe Shimelis as a man who never wavered in his willingness to help. Even when posted as an Ambassador to India, he prioritised connecting families back home with life-saving medical and humanitarian resources. For Shimelis, no problem seemed too mundane to tackle if it could alleviate someone’s anxiety or distress.

Yayehyirad Eshetu recalled discussing the possibility of sending his father for treatment to India with classmates in the Indian Community School. Upon learning of the issue from his son, Lealem, Shimelis himself promptly reached out to the Eshetu family. He provided a list of reputable hospitals and facilitated communication through fax, demonstrating that no request was too small or cumbersome to him.

“His generosity knew no bounds,” said Yayehyirad, describing the reassurance Shimelis’s help offered at a critical time.

Such acts earned Shimeles the admiration of countless individuals, many of whom recall him with gratitude and affection.

Honesty and dedication were qualities that deeply appealed to him. He sought out people he could trust, forging bonds that emphasised integrity and collaboration. His work with the Ethiopian Red Cross, where he served as president for eight years, and with the International Federation of Red Cross & Red Crescent Societies as vice president, broadened his reach in humanitarian efforts. He was honoured with the Henry Dunant Medal, along with several other accolades, cementing his stature in the global humanitarian community.

During his later years, he continued to champion worthy causes by helping establish and lead organisations such as the Ethiopian Heritage Trust and the Addis Abeba Pensioners’ Association. Through these initiatives, he remained a public servant in the broadest sense, engaging citizens of different ages and backgrounds.

Shimelis died on December 24, 2024, at the age of 89. Colleagues and friends paid tribute to his decades of service, bemoaning that his life’s work never received the full scope of formal recognition that many believed it deserved, bar the recognition Jimma University bestowed on him. However, those who understood the importance and scale of his contributions stood by to honour him as he was laid to rest at Holy Trinity Cathedral Church. His funeral was a moment of collective remembrance, a reminder of how one individual’s quiet dedication could shape many lives.

Born in Jijiga, in the Somali Regional State, to Adugna Kasa and Muluemebet Haile Selassie, Shimelis spent part of his early life displaced by the Italian invasion. He spent five years in exile in Kenya before returning to Harer Medhanealem School and later moving on to Wingate School. He excelled academically, a pattern that continued at the Tata Institute of Social Sciences in India, where he studied Social Service Administration and was named student of the year. From there, he went to England to complete a diploma in Hospital Administration through the King Edward Memorial Fund.

Despite his serious responsibilities, Shimelis displayed a keen sense of humour. Friends recall his knack for injecting lightness into tense situations. One longtime friend, Yemane Bisrat, knew him for over 50 years and remembers how Shimelis, though he held high government positions, personally followed up on the construction of his house next door. Such unassuming kindness, Yemane said, was typical of Shimelis’s approach to public service.

Their friendship remained close for over the decades. Yemane recalled how Shimelis once stepped in to lead the delegation of elders when Yemane’s son sought his future in-laws’ blessing for marriage. Customs often dictated that these elders return multiple times before receiving approval, but the parents granted permission immediately upon recognising Shimelis. At the subsequent ceremony, butter was to be placed upon the elders as a symbol of blessing. Sensing hesitation among his peers, Shimelis volunteered to receive the anointing alone.

“It’s a moment that will stay with me,” Yemane said, describing how Shimelis used humour and grace to ease everyone else’s concerns.

In the rare moments when he could rest, Shimelis found simple joys in sports and gardening. He enjoyed tennis, played football when he could, and took pride in growing flowers. Gardening contests became a hobby, and he nurtured his plants with as much care as he dedicated to his humanitarian efforts.

In Green Energy Gridlock, Markets Alone Can’t Power the Transition

Posted on January 26, 2025January 26, 2025 by Yeabkal

The international community has long recognized the urgent need to reduce dependence on fossil fuels and shift to renewable energy, and in recent years many governments have pledged to reach net-zero greenhouse-gas emissions, albeit over extremely long timeframes. But they will never get there so long as they treat electricity, which is central to the clean-energy transition, like any other market good.

The green transition is driven by several factors, such as energy intensity, investment flows, consumption patterns, and distribution systems. But its success hinges on humanity’s ability to move away from “dirty” fossil fuels toward clean, renewable energy sources, particularly solar and wind. And that requires a profound transformation in how electricity is generated, distributed, and consumed.

Economists and policymakers have long framed the energy transition as a question of relative prices. In recent decades, wind and solar costs have plummeted, driven by technological advances, especially in China, where government interventions have helped scale up green industries and drive down the levelised cost of energy (LCOE). According to this widely used metric for comparing power sources, renewables have consistently outperformed fossil fuels, even before external shocks like the Ukraine war sent oil and gas prices soaring.

In theory, these developments should have expedited the global transition away from fossil fuels. In practice, however, renewable energy sources merely supplement the total power supply. Developed and developing countries continue to increase fossil fuel production and invest heavily in exploring new reserves.

The discrepancy cannot be fully explained by market forces or relative prices. Over the years, many have blamed political leaders for the lack of climate progress, especially after climate-change denialists rose to power in countries like the United States and Argentina. But this explanation, too, is incomplete.

As economic geographer Brett Christophers argues in his book “The Price is Wrong: Why Capitalism Won’t Save the Planet,” the real problem lies in the failure to confront two fundamental truths about the limitations of open markets. First, the driving force behind private-sector investment and production is not output prices but relative profitability. Second, the nature of electricity makes it ill-suited to being “governed by the market,” inevitably leading to suboptimal outcomes in the absence of massive government intervention.

Electricity, Christophers notes, aligns with economic historian Karl Polanyi’s definition of “fictitious commodities.” In his seminal work “The Great Transformation,” Polanyi argued that land, labour, and money were not intended to function within market systems. Unlike conventional goods explicitly produced for trade, commercialising fictitious commodities leads to inefficient and unstable market transactions and inevitably results in economic and social distortions.

To operate, these markets rely on extensive public intervention in the form of explicit and implicit laws, regulations, social norms, and subsidies. Such interventions create the illusion of a functioning market, even though prices and profits are ultimately shaped by public and social mechanisms.

For much of its existence, Christophers notes, electricity was treated as essential public infrastructure, with its production and distribution operating outside the market. In recent decades, the pursuit of profits has fueled a global push to unbundle and commercialise generation, distribution, and consumption. But, despite the facade of competitive markets, the sector still depends heavily on various forms of state intervention.

Electricity’s unique characteristics pose substantial challenges for the clean-energy transition. Wind and solar power are inherently intermittent, resulting in fluctuating output and price volatility. Compounding the problem, public subsidies for “green” investments can lead to overcapacity during periods of low demand, while their withdrawal often causes investors to exit the sector. Although renewable energy has become cheaper than fossil fuels, the profits it generates are low and unreliable. Christophers vividly describes this self-cannibalising dynamic, outlining how it has played out across different economies, from the US and Norway to India.

Instability undermines the “bankability” of green projects, making it harder to secure financing for renewable energy. It should be no surprise, then, that the much-hyped Glasgow Alliance for Net Zero, launched in April 2021 at COP26 and championed by former Bank of England Governor and UN Special Envoy on Climate Action and Finance Mark Carney, has already begun to falter after the six largest US banks withdrew from it in quick succession. This was before Donald Trump’s return to the White House further disincentivised such investment by issuing an Executive Order that effectively terminated efforts to achieve a Green New Deal in the US.

But the solution is not to subsidise green capitalism by derisking investments, although such measures are unavoidable if renewable energy is to remain viable. Instead, the key is recognising that electricity is not a commodity. Consequently, we should restructure all aspects of energy production and distribution, encompassing renewables and fossil fuels alike. Most importantly, achieving true decarbonisation requires governments to adopt a more proactive approach. Instead of acting as behind-the-scenes market facilitators, policymakers should take direct responsibility for producing and distributing renewable energy.

Such an approach is far from radical. Before the rise of neoliberalism, governments played a vital role in building and managing critical infrastructure, including energy systems. To facilitate the green transition, they should reclaim that responsibility. The expected private-sector profits from renewable-energy generation are simply not sufficient to drive the necessary transformation, despite the urgent global demand.

Until policymakers come to terms with this reality, their efforts to accelerate the shift to renewables will continue to fall short.

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Month: January 2025