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Author: Yeabkal

Regulators Tighten the Noose on Fuel Market

Posted on by Yeabkal

The fuel industry is facing its biggest shakeup in decades as federal regulators roll out a sweeping directive weeks after lawmakers ratified a new petroleum marketing law.

The changes bring real-time digital reporting to a sector long criticised for opacity, with every distributor and station now required to upload transaction details within 24 hours.

For decades, fuel distribution has operated in the shadows, plagued by unrecorded markups, hoarding, and widespread contraband. The Petroleum & Energy Authority’s (PEA) new measures, under  Destaw Mekuanent (PhD), director general, seek to implement a systemic reset.

The most disruptive change comes in the form of digital enforcement and real-time reporting. All market actors in the fuel supply chain, from distributors to station owners and transporters, are now subject to enhanced scrutiny. They are required to submit detailed transaction data within 24 hours to both the Authority and the Ministry of Trade & Regional Integration (MTRI), ensuring a dual layer of bureaucratic oversight. The directive has effectively made the traditional paper trail and informal communications obsolete.

Fuel stations are required to install flow metres, replacing deep-stick methods, a technological upgrade that not only promises measurement accuracy but also exposes loss patterns.

“We’re not just modernising the system,” said Habtamu Milki, the Authority’s legal head. “We’re closing loopholes that have enabled theft and fraud to flourish. There wasn’t a proper penalty framework for distributors and stations. This regulation brings the entire trade under a legalised system.”

This state-backed support helped cushion EPSE’s razor-thin trading margins. Gross profit rose to 1.37 billion Br, up from 1.18 billion Br in 2022/23, while operating profit soared to 917.4 million Br, marking a stunning turnaround from the 117.3 million Br booked a year earlier.

Transporters diverting fuel trucks face escalating sanctions, and regional governments are moving swiftly. In the Somali Regional State, the Trade Bureau fined 136 stations 150,000 Br each, collecting 20.4 million Br in penalties. Only 20 companies were spared after proving technical connectivity issues with Ethio telecom, Abdulah Sheikh-Hassen, head of the Bureau, disclosed.

This shows a broader shift towards accountability in enforcement, moving beyond dependence on Telebirr logs to include other platforms, such as E-Birr, signalling the officials’ newfound digital awareness.

“This change unveiled our region’s heavy reliance on E-birr,” he said.

Despite the regulatory muscle-flexing, the economic reality for many operators remains grim. Distributors complain that they earn as little as 40,000 Br a load, on deliveries worth up to 60 million Br. Station owners fare even worse, often eking out 8,000 Br a truck. With annual overheads such as rent running into millions of Birr, even large increases in margins would barely make a dent.

“Some stations pay up to one million Br monthly for rent, relying on illicit trade,” said one official, speaking anonymously. “Even a threefold increase in margins wouldn’t make many of them profitable.”

The official confirmed that the Authority is reviewing profit margin reforms, but acknowledged that incomplete audited financials from many operators may complicate efforts. This uncovered the broader informality embedded in the fuel economy, where low returns and operational opacity have fed the informal trade.

The Ethiopian Petroleum Dealers Association (EPDA), representing 1,590 stations, is in favour of mandatory flow meters. Losses due to discrepancies, up to 1,000 litres a vehicle, translate into tens of thousands of Birr gone, often untraceably.

“We’re pleased about this,” said Ephrem Tesfaye, board member of the Association.

However, this solution brings its own technical challenges. Fuel volume changes with temperature, an issue that Ethiopia’s hot climate heightens.

“A single truck can lose 500 litres on a hot day,” said Ephrem.

Unless the meters adjust for these fluctuations, station owners may still absorb the cost, undermining the reform’s intent. While quantity losses dominate the debate, quality degradation looms larger. The influx of counterfeit lubricants has raised red flags, with the Ethiopian Oil Companies Association calling for enforceable standards.

“We’ve been lobbying for a national standard,” said Tadesse Girma, the secretary general.

He disclosed that the Standards Institute is developing specifications to eliminate substandard imports, a move seen as vital to safeguarding engines, public trust, and the broader downstream market.

The crackdown is not merely theoretical. Several companies, such as Ful M Oil Ethiopia, Halfay Petroleum, Nejashi Petroleum, Top Oil, and Yenat Petroleum, were suspended for failing compliance checks. They face a two-month embargo on receiving fuel, a clear signal that the rules now carry consequences.

According to Ahmed Tusa, a former adviser to the Ministry of Trade, scaling up fuel sales, not margin tweaks, is the only sustainable solution.

“The industry thrives on volume,” he told Fortune. “The more you sell, the more you earn.”

While Ahmed welcomed the flow metre requirement, he believes that for the system to self-correct, reforms should incentivise volume, not just punish divergence.

The ongoing regulatory intervention represents the authorities’ most serious attempt yet to formalise and digitalise a fuel industry long dominated by informality and inefficiency. While implementation issues remain, particularly around technology calibration, profit structures, and supply chain discipline, PEA officials hope the foundation is being laid for a more accountable and transparent market.

Capital Market Ambitions Face Credibility Test Over Conflicted Oversight

Posted on by Yeabkal

A decade ago, a case in the United States (US) jolted Wall Street. An ambulance operator in the State of Arizona had, in 2011, accepted a buy-out that valued it below earlier indications. Shareholders said their bankers, lured by lucrative financing fees, had pressed the board of Rural-Metro Corporation to bless the deal without adequate valuation analysis.

A judge agreed and in 2014 ordered the adviser to pay 75.8 million dollars, about 83pc of the investors’ losses, for having “aided and abetted” directors who breached their fiduciary duties. The ruling shocked bankers by showing how conflicted advisers and sleepy boards can erode confidence in the wider marketplace.

Those active in Ethiopia’s fledgling capital market should heed this cautionary tale. The Ethiopian Securities Exchange (ESX) has yet to host its first trade, yet directorships are already piling on a single pair of shoulders.

Brook Taye (PhD), the chief executive of Ethiopian Investment Holdings (EIH), a state vehicle poised to become the Exchange’s anchor shareholder, has been nominated to the Ethiopian Securities Exchange (ESX) board. He also sits on the board of the regulator, the Ethiopian Capital Market Authority (ECMA), a body he once led as founding director general. If his nomination goes through, the question of who guards the guard becomes more than academic.

Directors are not ornamental lapel pins. They shape strategy, appoint and dismiss executives, set risk limits and, above all, safeguard other people’s money. When one individual owes loyalty to entities with conflicting mandates, something usually gives.

The history of universal banking shows the tension. A commercial-bank arm should protect deposits; the investment-bank arm goes after underwriting fees. Decisions on loan syndications, proprietary trading or merger advice often pit those duties against each other, with the side promising richer remuneration winning the director’s attention. In practice, the conflict could seep into day-to-day decisions, from pricing a working capital line for a prospective client to determining whose research report receives privileged airtime in the boardroom.

Globally, these risks are well-documented.

America’s Office of the Comptroller of the Currency lists the tricks that blossom when mandates overlap. They steer underwriting business to affiliates, favour in-house products over superior outsider options and trade on privileged information. After the 2008 crash, post-mortems across jurisdictions found that “overboarding” dulled independent challenge and bred groupthink. Large asset managers responded by capping the number of seats executives may hold, forcing companies to refresh boards and deepen expertise.

Academic studies link dense interlock networks to lower shareholder returns and higher volatility. This is a cocktail a frontier economy keen on wooing long-term capital would do well to steer clear of.

Similar rumbles are already being echoed on the streets of Ras Abebe Aregay and Ras Mekonnen. The state-owned Commercial Bank of Ethiopia (CBE) and Wegagen Bank have permitted their directors and senior executives to serve on the boards of their respective investment-bank subsidiaries, CBE Capital and Wegagen Investment Capital. Others will undoubtedly follow on the same path.

Defenders note that financial centres such as London, Toronto and Sydney do not impose blanket bans on overlapping seats. What they do insist on is rigorous disclosure and automatic recusals whenever a director’s impartiality might be called into question.

However, history lends weight to the sceptics. In the Rural-Metro saga, advisers wearing several hats buried shoddy valuations and hidden side deals until shares had changed hands. Investors eventually recovered 89.4 million dollars, cash that a cleaner governance process might have preserved. The 2012 merger between pipeline giants El Paso and Kinder Morgan echoed the pattern. Advisers with substantial equity stakes and board seats on both sides promoted a transaction that was lucrative for themselves but suspect for shareholders, who duly sued.

Ethiopia’s would-be dealmakers are unlikely to resist the same temptations unless clear rules are in place to stop them. Investment bankers, such as Brutawit Dawit of Wegagen Investment Capital and Zemedeneh Negatu of CBE Capital, hungry for fees from both buyers and sellers, could be tempted to keep critical conflicts under wraps.

Regulators have spent a century wrestling with such temptations. After the 1929 crash, America’s Glass-Steagall Act walled off commercial banking from investment banking to curb deposit-funded speculation. Eight decades later, the Gramm-Leach-Bliley Act largely dismantled that barrier in pursuit of greater efficiency. When the 2008 crisis exposed the hazards of universal banking, the Dodd-Frank Act’s Volcker rule clipped proprietary trading but left cross-directorships largely intact.

Elsewhere, the European Central Bank limits outside mandates for directors of big lenders. Canada insists that non-executives chair audit committees, and Britain’s regulators demand enough independent voices to challenge groupthink.

Ethiopia’s legal scaffold is far thinner. The law governing the Capital Market, issued in 2021, and the ESX rulebook repeat global platitudes, instructing directors to avoid conflicts “in fact and appearance” and to remain independent of the entities they oversee. Yet, allowing one individual to occupy the regulator, the Exchange, and serve as a dominant shareholder undermines those principles before the opening bell.

The ECMA, still drafting subsidiary regulations, lacks the institutional muscle to police nuanced conflicts, such as silent votes in self-interest or slow-motion insider capture of risk committees. This is a type of fragility that carries a price.

Households already distrust formal finance after years of negative real deposit rates and sporadic cash shortages. Persuading them to shift savings into equities will require proof that rules, not relationships, govern the game. Foreign portfolio investors will dissect the first enforcement action, or the absence of one, before wiring funds. If initial headlines portray insiders judging insiders, capital will stay on the sidelines. The diaspora, a potential source of badly needed foreign exchange, will also pay close attention.

Sound markets rest on three pillars of financial stability, market integrity and efficient capital allocation. Proponents of strict separation argue that bright firewalls cut systemic risk and moral hazard, shielding depositors from speculative bets. Advocates of universal banking counter that integrated firms can harvest economies of scale and a more comprehensive view of risk, which can strengthen the system.

Both camps, however, agree on the indispensability of boards remaining independent and free of conflicting loyalties.

The International Organisation of Securities Commissions warns that even a whiff of bias can repel foreign capital from emerging markets. Perception quickly hardens into reality. Spreading authority across separate and accountable boards reduces the concentration of power and signals a resolve to police conflicts. It also spares conscientious directors the impossible task of serving two masters when interests diverge. Policymakers do not need to choose between growth and probity. They should know that the world’s deepest markets thrive where both coexist, and wither where either fails.

History offers more than enough such warnings.

Ethiopia, struggling with a weakening currency and a swelling public debt burden, cannot afford such a chill. Investors already fret over thin liquidity, patchy disclosure and political risk. Add governance doubts, and the balance may tip against fresh inflows.

What, then, should policymakers do?

A plain fix is to bar employees and directors of regulated firms from serving on the ECMA board, reserving those seats for outsiders with no financial ties to prospective licensees. Another is to require that ESX directors hold no direct or indirect stake in exchange shareholders. At a minimum, any cross-board member should promptly disclose conflicts, abstain from related deliberations, and have the recusal recorded in minutes that are open to inspection.

These are not draconian curbs but standard practice in markets that aspire to be taken seriously.

A Country in Secondhand Threads Struggles to Sew Its Own Future

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Addis Abeba’s streets blaze with colour. Under grey concrete and mirrored glass, crowds stream by in hoodies boasting distant universities and faded T-shirts advertising rock bands that never set foot on Ethiopian soil. At first glance, the capital appears to be a fashion carnival. In reality, the riot of logos is less about taste than numbers.

For someone earning the typical 6,000 to 7,000 Br a month, a pair of trousers hanging in a boutique can swallow a quarter of that paycheck. A locally made Cottex T-shirt costs a tenth of the price. Hoodies and jackets sit beyond reach. The answer lies under plastic tarps in Mercato and countless open-air markets. Piles of imported cast-offs are sold for a song. To many families, these bales are a lifeline, not a lifestyle.

Officially, Ethiopia bans second-hand clothing. Unofficially, the trade dominates the market, holding 53pc by volume, according to customs estimates. Smugglers fill the gap between law and demand, depriving the treasury of about 2.5 billion Br in taxes each year. In 2020, nearly 224,000tns of used garments slipped into the country, a jump of 315pc since 2007. Only a sliver is caught at the border.

Most come through Djibouti or Kenya, but the journey often begins in closets in Europe or the United States. Customs agents concede the flow is too large to police truck by truck. On market days, whole neighbourhoods smell of mothballs as fresh bales are sliced open and bargain hunters dive in.

The appeal is clear. A shirt that costs 1,000 Br new can be had for 200 Br after one tour through a foreign washing machine. For millions, that discount is the difference between being clothed and being cold. But cheap relief for consumers is a chokehold on the textile industry’s ambitions.

Textile history is economic history. The Industrial Age began with spinning frames, while capitalism grew up draped in Venetian silk and British wool. When Spain’s feudal empire sailed west, it hunted silver; when industrial England sailed, it hunted cotton. Factories that turned thread into cloth also turned countries into world powers.

Ethiopia never made that transition. Traditional weavers, known as “Shemanes,” still produce fine, hand-loomed fabric, but the craft has never scaled. As cities swelled, imports filled closets. Today’s formal industry relies heavily on foreign raw materials, especially cotton, despite the fact that 2.6 million hectares within Ethiopia are suitable for the crop. Yields trail global averages, and most of what is grown is consumed at home, leaving too little to feed both export ambitions and local wardrobes.

A decade ago, industrial parks like Hawassa were intended to change the equation. They created jobs and generated export receipts, primarily for foreign brands. Shirts sewn on Ethiopian lines travel across oceans, sell in concert halls or boutiques, get worn a few times, then return in compressed bales to the same markets where the seamstresses shop. Workers earn about 26 dollars a month and often buy the garments they stitched only after the rest of the world has discarded them.

That feedback loop is a trap of affordability. Cheap used clothes keep household budgets intact today, but they also push wages down, weaken factories, and lock the economy into dependence on overseas supply chains. A sudden border closure or shipping glitch could empty stalls overnight.

Other countries have escaped similar binds. Bangladesh used targeted tariffs, infrastructure spending and aggressive training to build a garment sector that now employs millions. Vietnam and Turkey paired state policy with private capital to create vertically integrated mills that guard domestic markets while courting export orders.

Ethiopia already has some of the pieces in place. Expanding cotton cultivation to its full potential would enable mills to operate year-round. Modernising ginneries and spinning plants would lift quality and volume. Fully integrated factories that weave, dye and cut under one roof would trim costs now lost to importing yarn and fabric.

Policy has to move in step. Seasonal duties on second-hand clothing during peak shopping months could provide local producers with breathing room without penalising low-income buyers throughout the year. Tighter patrols on smuggling routes, matched with affordable alternatives, could steer shoppers toward homegrown labels. Duty-free perks now being targeted at exporters could be tied to a promise that a portion of production stays at home.

Turnover in industrial parks touched 100pc in their early years as wages lagged behind living costs. A wage floor that lets workers buy the clothes they make would reduce churn and lift productivity. A trained and stable workforce stitches better garments, and better garments compete with imports on quality as well as price.

The payoff could be large. Analysts see as many as 800,000 new jobs in the near term, a reduction in foreign-exchange drain worth billions of Birr, and a homegrown buffer against global shocks. Above all, building a wardrobe from cotton field to buttonhole would restore a measure of economic sovereignty that years of hand-me-downs have eroded.

Second-hand stalls should not vanish. They are lively, resourceful and, by extending the life of garments, environmentally sensible. But they should be part of an ecosystem, not its spine. Currently, too much depends on the choices made by distant wholesalers and the agility of smugglers.

Clothing a country is infrastructure as vital as grain silos or power plants. It requires land and machines, as well as coordination and patience. Ethiopia can either weave an industry sturdy enough to weather storms or continue to dress itself in the cast-offs of strangers, one colourful bale at a time.

Can Democracy Survive AI?

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Digital technology was supposed to disperse power. Early internet visionaries hoped that the revolution they were unleashing would empower individuals to free themselves from ignorance, poverty, and tyranny. And for a while, at least, it did.

But today, ever-smarter algorithms increasingly predict and shape our every choice, enabling unprecedentedly effective forms of centralised, unaccountable surveillance and control. That means the coming artificial intelligence (AI) revolution may render closed political systems more stable than open ones. In an age of rapid change, transparency, pluralism, checks and balances, and other key democratic features could prove to be liabilities.

Could the openness that long gave democracies their edge become the cause of their undoing?

Two decades ago, I sketched a “J-curve” to illustrate the link between a country’s openness and its stability. My argument, in a nutshell, was that while mature democracies are stable because they are open, and consolidated autocracies are stable because they are closed, countries stuck in the messy middle (the nadir of the “J”) are more likely to crack under stress.

But this relationship is not static. It is shaped by technology. Back then, the world was riding a wave of decentralisation. Information and communications technologies (ICT) and the internet were connecting people everywhere, arming them with more information than they had ever had access to, and tipping the scales toward citizens and open political systems. From the fall of the Berlin Wall and the Soviet Union to the colour revolutions in Eastern Europe and the Arab Spring in the Middle East, global liberalisation appeared inexorable.

That progress has since been thrown into reverse. The decentralising ICT revolution gave way to a centralising data revolution built on network effects, digital surveillance, and algorithmic nudging. Instead of diffusing power, this technology concentrated it, handing those who control the largest datasets, be they governments or big technology companies, the ability to shape what billions of people see, do, and believe.

As citizens were turned from principal agents into objects of technological filters and data collection, closed systems gained ground. The gains made by the colour revolutions and the Arab Spring were clawed back. Hungary and Turkey muzzled their free press and politicised their judiciaries. The Communist Party of China (CPC), under Xi Jinping, has consolidated power and reversed two decades of economic opening.

And most dramatically, the United States has gone from being the world’s leading exporter of democracy, however inconsistently and hypocritically, to the leading exporter of the tools that undermine it. The diffusion of AI capabilities will supercharge these trends.

Models trained on our private data will soon “know” us better than we know ourselves, programming us faster than we can program them, and transferring even more power to the few who control the data and the algorithms.

Here, the J-curve warps and comes to look more like a shallow “U.” As AI spreads, both tightly closed and hyper-open societies will become relatively more fragile than they were. But over time, as the technology improves and control over the most advanced models is consolidated, AI could harden autocracies and fray democracies, flipping the shape back toward an inverted J whose stable slope now favours closed systems.

In this world, the CPC would be able to convert its vast data troves, state control of the economy, and existing surveillance apparatus into an even more potent tool of repression. The US would drift toward a more top-down, kleptocratic system in which a small club of tech titans exerts growing influence over public life in pursuit of their private interests. Both systems would become similarly centralised, and dominant, at the expense of citizens.

Countries like India and the Gulf states would head the same way, while Europe and Japan would face geopolitical irrelevance (or worse, internal instability) as they fall behind in the race for AI supremacy.

Dystopian scenarios, such as those outlined here, can be avoided, but only if decentralised, open-source AI models ultimately prevail. In Taiwan, engineers and activists are crowdsourcing an open-source model built on DeepSeek, hoping to keep advanced AI in civic, rather than corporate or state, hands. (The paradox here is that DeepSeek was developed in authoritarian China.) Success for these Taiwanese developers could restore some of the decentralisation the early internet once promised (though it could also lower the barrier for malicious actors to deploy harmful capabilities).

For now, however, the momentum lies with closed models centralising power.

History offers at least a sliver of hope. Every previous technological revolution, from the printing press and railroads to broadcast media, destabilised politics and compelled the emergence of new norms and institutions that eventually restored balance between openness and stability. The question is whether democracies can adapt once again, and in time, before AI writes them out of the script.

The World Needs a New Economics of Water

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As African leaders gather in Cape Town for the African Water Investment Summit, there can be no equivocation that the world faces an unprecedented water crisis that demands a paradigm shift in how we value and govern our most precious resource.

The scale of the challenge is staggering. Over half the world’s food production now comes from areas experiencing declining freshwater supplies. Two-thirds of the global population face water scarcity at least one month a year. More than 1,000 children under five die every day, on average, from water-related diseases. And if current trends continue, high-income countries could see their GDP shrink by eight per  cent by 2050, while lower-income countries (many in Africa) face losses of 10pc to 15pc.

Yet, this crisis also presents an extraordinary opportunity. As South Africa assumes the G20 presidency (for which I have been appointed special adviser to President Cyril Ramaphosa), it can champion a new economics of water that treats the hydrological cycle as a global common good, rather than as the source of a commodity to be hoarded or traded.

The economic case for action is compelling. The International High-Level Panel on Water Investments for Africa shows that every one dollar invested in climate-resilient water and sanitation delivers a return of seven dollars. With Africa requiring an additional 30 billion dollars annually to meet the Sustainable Development Goal (SDG) on water security and sustainable sanitation, the financing gap is significant. But it is surmountable with the right strategy.

The Global Commission on the Economics of Water (which I co-chaired with Ngozi Okonjo-Iweala, the director-general of the World Trade Organisation, Johan Rockstrom, the director of the Potsdam Institute for Climate Impact Research, and Singaporean President Tharman Shanmugaratnam) recently called for such a strategy.

Treating water as a global common good and adopting mission-oriented approaches to transform the crisis into an opportunity requires that we recognise three critical facts.

Water connects us all, not merely through visible rivers and lakes, but through atmospheric moisture flows that travel across continents. The water crisis is inextricably linked to climate change and biodiversity loss, each of which exacerbates the other in a vicious cycle. And, water runs through every Sustainable Development Goal (SDG), from food security and health to economic growth.

Yet too often, water investments follow the failed playbook of climate and development finance. There is a tendency to derisk private capital without ensuring public returns; to fund projects without strategic direction; and to treat water as a technical problem, rather than a systemic challenge. Such approaches risk creating water infrastructure that serves investors more than communities, exacerbates existing inequalities, and fails to address the interconnected nature of the water, climate, and biodiversity crises.

This interconnectedness demands a new economic framework that aims to shape markets proactively rather than simply fixing failures after the fact. We need to shift from short-term cost-benefit thinking to long-term value creation, which calls for mission-oriented investments that shape markets for the common good.

Missions require clear goals, like ensuring that no child dies from unsafe water by 2030. Once goals are established, all financing can be aligned with them through cross-sectoral approaches spanning agriculture, energy, manufacturing, and digital infrastructure. Rather than picking sectors or technologies, the point is to find willing partners across all industries to tackle shared challenges. Such mission-oriented investments can also lead to economic diversification, creating new export opportunities and development pathways.

Consider Bolivia’s approach to lithium extraction. Rather than simply exporting raw materials, the country is developing strategies to avoid the traditional “resource curse” by building domestic battery-production capabilities and participating directly in the energy transition. In doing so, it is converting its resource wealth into innovation capacity, strengthening value chains, and creating new export markets for higher-value activities.

More than 700 million dollars a year is channelled into water and agriculture subsidies that often incentivise overuse and pollution. By redirecting these resources toward water-efficient agriculture and ecosystem restoration, with clear conditions attached, we could transform the economics of water overnight. To that end, public development banks can provide patient capital for water infrastructure, while requiring private partners to reinvest profits in watershed protection.

Africa is uniquely positioned to lead this transformation.

Its vast supply of groundwater remains largely untapped, with 225 million urban inhabitants living above known supplies. Combined with affordable solar power, these supplies present an opportunity to revolutionise agriculture. By focusing on efficiency and reuse, as well as capacity building, data sharing, and monitoring and evaluation, this relatively stable groundwater resource, accessed by solar-powered pumps, can serve as a decentralised alternative, minimising the emissions, waste, and other environmental costs associated with larger infrastructure projects that disrupt natural water flows.

Through Just Water Partnerships, collaborative frameworks that pool such solar-groundwater projects for increased bankability while ensuring community ownership, international finance can be channelled toward water infrastructure that serves both national development goals and the global common good.

The African Water Investment Summit is not simply another gathering, but should be a watershed. This is the moment when we should shift from treating water as a local resource to governing it as a global common good, moving from crisis management to proactive market shaping and from viewing mission-oriented investment as a cost to recognising it as the foundation of sustainable growth.

South Africa’s G20 presidency, the first ever for an African country, offers a historic platform to advance this agenda globally. Just as Brazil has used its G20 leadership and role as host of the upcoming United Nations Climate Change Conference (COP30) to drive climate action, South Africa can make water security central to the global economic agenda. With the 2026 UN Water Conference on the horizon, and with the international community recognising that climate change cannot be tackled without also addressing the water crisis, the time is right for bold leadership.

Water security underpins Africa’s aspirations for health, climate resilience, prosperity, and peace. With young Africans set to constitute 42pc of global youth by 2030, investing in water is tantamount to investing in the world’s future. The question is not whether we can afford to act, but whether we can afford not to.

Financial Sector Reforms a Test of Execution, Not Intention

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Ethiopia is undergoing one of the most ambitious financial reform drives in its modern history. With the economy under strain from foreign exchange shortages, inflation, and stagnant private investment, policymakers have turned to sweeping reforms that promise to unlock capital, boost trust, and modernise the country’s financial infrastructure. The challenge now is not policy design, but execution.

The federal government authorities made substantial progress on paper. They have introduced legislative reforms and pushed through structural changes meant to liberalise capital markets, attracting foreign capital, and stabilising the macroeconomic environment. A centrepiece of these efforts is the newly launched Ethiopian Securities Exchange (ESX), supported by a central securities depository.

Although activity remains minimal, the framework exists. Institutions are in place. So are incentives. What remains missing is traction.

The country’s chronic shortage of foreign exchange has birthed a thriving parallel market, which has morphed from a currency arbitrage mechanism into a visible barometer of public trust. Investors, both local and foreign, monitor exchange rates in the parallel market not merely for better pricing but for cues on institutional credibility. The formal financial system, by contrast, has failed to absorb available supply, mainly because it has not yet earned that trust.

The federal officials appear to recognise that long-term solutions, such as increasing exports or attracting substantial foreign direct investment, will require time. They have shifted toward the diaspora, whose remittances and investable capital represent the most viable short-term source of foreign currency. But converting goodwill into deposits and deposits into investment will require more than patriotic appeals or new rules. What is needed is a reliable and predictable system that mirrors the standards diaspora Ethiopians are used to in the United States, Canada, and Europe.

Time deposits in Ethiopia now offer returns of up to 16.5pc annually, considerably higher than the near-zero rates in developed markets. In theory, that should be enough to attract diaspora savings. But the trust gap remains wide. High interest rates are of little value if investors cannot confirm account security, repatriate profits, or resolve disputes through credible institutions. Yield without reliability does not inspire confidence.

Policymakers have taken steps to address this. Backed by programs from the International Monetary Fund (IMF), they have clarified rules around profit repatriation for foreign and diaspora investors, an important signal, and not simply symbolic. Regulatory frameworks have been strengthened, the Central Bank has become more active in oversight, and the legislative environment has improved. However, these top-down interventions require corresponding bottom-up implementation.

The burden now lies with the domestic financial sector, including commercial banks, capital market intermediaries, and regulators. Their role is not merely transactional. They should build investor-facing systems that meet international standards. That includes verifiable onboarding for diaspora accounts, transparent correspondent banking relationships, clear repatriation rules, and credible complaint resolution mechanisms.

These are not abstract concerns. In the post-2008 global financial landscape, correspondent banking relationships, once taken for granted, have become scarce. Heightened enforcement of anti-money laundering laws, the Bank Secrecy Act, and tighter know-your-customer (KYC) rules have made international banks more cautious. Even compliant African banks have been excluded from these networks simply for being outside the risk comfort zone. Without these relationships, Ethiopia’s banks cannot plug into global finance.

This context is particularly relevant for diaspora Ethiopians, whose financial expectations are shaped by their environments abroad. In mature markets, banks are regulated, deposits are insured, disclosures are standard, and legal recourse is clear. Visibility campaigns and promotional offers won’t suffice. Trust is built on structure, not slogans.

Inflation in recent years has eroded local purchasing power and decimated domestic savings. Ethiopia now faces a capital formation gap, one that diaspora inflows could help close. The math is compelling. U.S. savings accounts yield less than one percent. Even money market funds struggle to return more than four percent. Equities offer higher potential gains, but with substantial volatility. Ethiopian bank deposits, by contrast, can yield over 16pc with relative predictability. The opportunity is real, but so is the perception of risk.

A persistent narrative portrays Ethiopia’s foreign exchange crunch as purely structural. But a significant portion is behavioural, rooted in investor psychology and institutional credibility. Export earnings are sluggish, donor disbursements are unpredictable, yet remittances continue to flow, albeit through informal channels. This is where policy can make a difference, by formalising what already exists.

What is needed is a functioning system, including straightforward onboarding, transparent repatriation pathways, enforceable investor rights, and adherence to global norms. The current legal, regulatory and technical tools are already available. What is missing is institutional will.

Until Ethiopian banks and financial intermediaries shift from being order takers to becoming trust platforms, the diaspora will remain cautious. The government and the IMF have laid the groundwork. Laws are on the books. What comes next is not legislative but operational. The formal financial sector should now deliver not simply promises but performance.

The parallel market will not vanish on its own. It will persist, not as a failure of policy, but as a living referendum on the credibility of the system. Only when that trust is rebuilt, through concrete, verifiable, and user-friendly systems, will the opportunity of financial reform translate into capital mobilisation and lasting economic change.

Climate Resilience Is a Strategic Investment

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For emerging markets and developing economies (EMDEs), investing in resilience is not a luxury. It is an imperative. Climate disasters and ecological degradation are impeding their economic prospects and straining their finances. Perhaps more importantly, these shocks are exacerbating unsustainable debt burdens at a time when donor countries are slashing development aid, making it harder for EMDEs to finance investments in climate adaptation.

Over the past two decades, the 74 economies comprising the Climate Vulnerable Forum and the Vulnerable Group of Twenty have suffered losses exceeding 525 billion dollars, equivalent to roughly 20pc of their collective GDP, due to climate-related shocks. This includes acute disasters, such as floods, hurricanes, and droughts, as well as slower-moving events, including desertification and coastal erosion.

Meanwhile, the degradation of natural ecosystems through deforestation and biodiversity loss has aggravated food and water insecurity as well as increased climate risks by eliminating natural carbon sinks. These dynamics create formidable obstacles, such as limited fiscal space and high capital costs, that trap countries in a vicious cycle of vulnerability. Breaking free requires a major scaling up in financing for climate adaptation efforts.

The Sharm El-Sheikh Adaptation Agenda, launched in 2022, proposes 30 adaptation targets in key sectors such as agriculture, public health, and infrastructure with the goal of spurring inclusive, effective, and equitable action by 2030. The proposed outcomes are not merely defensive; they create jobs, boost productivity, and improve creditworthiness. Unfortunately, these benefits are not reflected in current macroeconomic frameworks.

The problem is structural. Existing macro-fiscal tools, such as the debt-sustainability frameworks used by the International Monetary Fund (IMF), the World Bank, and, by extension, sovereign credit ratings, account for climate- and nature-related risks but do not sufficiently recognise the economic benefits of reducing those risks. Natural disasters (climate-related or otherwise) are (rightly) treated as threats to fiscal stability.

But, the investments required to mitigate their effects are seen only as adding to the debt burden, rather than as critical for reducing losses or as driving the development of growth-enhancing strategic assets. For example, investments in flood-resilient infrastructure in Vietnam have not only reduced damage costs but also boosted land values, improved public health, and increased worker productivity. Investments in nature-based solutions, such as restoring mangroves and wetlands, can simultaneously address climate, food, and water challenges, while also enhancing the performance of infrastructure.

High-impact interventions, such as coastal defences, underground power lines, and mangrove restoration, are often sidelined in favour of more conventional infrastructure projects, including roads, bridges, and ports.

These perverse incentives are reflected in EMDEs’ planning and budgeting processes. The environment ministries that oversee Nationally Determined Contributions (NDCs) and National Adaptation Plans (NAPs) under the Paris Climate Agreement tend not to engage systematically with finance ministries, resulting in these resilience strategies not being fully integrated into medium- and long-term national financial planning. That leaves NDCs and NAPs at risk of being aspirational, rather than actionable.

With critical adaptation investments overlooked in budgets, and with insufficient volumes of grant or concessional finance to plug ensuing gaps, many are calling for changes in how debt is treated, including reforms of fiscal frameworks so that investments in climate and nature resilience are treated as productive. A recent paper by the Bridgetown Initiative outlines four steps that governments can take to achieve this goal.

EMDEs should quantify acute and chronic climate and nature risks. A better understanding of the potential macroeconomic effects can help guide assessments of the financing required to reduce those risks. The paper offers a new typology to help categorise investments by risk type and sector, which would streamline the process.

Once policymakers have identified which investments are needed, they should assess their impact on the economy’s growth trajectory. Investing in resilience measures can mitigate future losses from climate disasters, enhance productivity, and increase incomes. These benefits should be incorporated into forecasting models, as is already done for traditional infrastructure investments.

The long-term growth benefits of resilience-focused capital projects could then be factored into debt-sustainability analyses. This would demonstrate that such investments are, in fact, fiscally prudent under the right financing conditions, thereby strengthening the case for more concessional and longer-term borrowing.

Lastly, with a more comprehensive understanding of the macroeconomic effects of resilience-based interventions, EMDEs can devise credible investment plans and financing strategies that align with fiscal and budgetary policy.

Factoring climate resilience into macroeconomic planning should strengthen, not diminish, a country’s growth narrative. When done well, this empowers finance ministries to engage more effectively with donors, credit-rating agencies, markets, and international financial institutions, all of which play a critical direct or indirect role in supporting resilience and adaptation efforts.

With the IMF and the World Bank reviewing their Debt Sustainability Framework for Low-Income Countries, this is an opportune time for EMDEs to update their methodologies to reflect the benefits of adaptation measures. Climate and nature shocks are now an economic reality, not a distant threat. Building resilience to these shocks will form the foundation of sustainable development and fiscal stability for years to come.

When Trust Becomes a Thief’s Weapon

Posted on by Yeabkal

In recent months, I’ve spoken to several contacts who fell victim to a troubling online scam—one that hijacks personal Telegram accounts, deceives close friends and family, and leaves innocent people deeply in debt. This wave of fraud exploits not only digital security gaps but also trust within tight-knit communities.

The scam targets everyday Telegram users, seizing their accounts to trick friends and relatives into sending large sums of money. By the time the victim realises the truth, the scammer has disappeared with the cash, leaving behind financial hardship and broken trust.

The scheme relies on manipulation and speed. Scammers pose as Telegram security agents or officials, claiming they must verify the account. They request the victim’s password or one-time login code, making the demand sound urgent and legitimate.

Many comply, believing they are protecting their accounts. In reality, once scammers get this information, they seize control, lock out the rightful owner, and alter recovery settings. The victim’s Telegram account is now fully under their control.

Once inside, the scammers impersonate the victim. They send messages in Amharic to friends, relatives, and colleagues, claiming to face a sudden family emergency. The emotional pull is strong, and because the request comes from a trusted contact, many send money without question.

They claim the victim’s bank is inaccessible and provide their details instead. Under emotional pressure, recipients act fast, skipping verification.

Meanwhile, victims are powerless. Locked out of their accounts, they watch helplessly as their reputation and relationships suffer. Some try desperate measures, such as upgrading to premium and deleting their accounts to alert Telegram for urgent help.

Even then, recovery can take days. For my contacts, it took a full week for Telegram to remove the hackers and restore access. By then, the money had vanished.

When the real account owner regains control, the damage is often severe, with hundreds of thousands of birr gone, transferred directly into the scammers’ bank accounts.

When police investigate, they often find the scammers’ accounts registered with IDs from regional states, making tracking difficult. The scam is effective because it targets individuals who personally know the victim, making them more likely to send money quickly.

An information gap worsens the problem. Many do not realise that Telegram, or any legitimate platform, will never ask for a password or login code. Victims without Two-Step Verification are especially vulnerable; even if someone gets their one-time code, they still cannot log in if this protection is active.

Recovering the account is just the beginning. Victims face huge debts as friends and relatives expect repayment, even though the victim never received the money. In some cases, those who never sent money still demand compensation, further damaging relationships.

Approaching law enforcement can be equally challenging. In many areas, police have limited training in cybercrime, and some initially refuse to open cases. Victims often push for days before an officer agrees to investigate.

Eventually, a sergeant may freeze the scammers’ accounts and trace the IDs used to open them. Yet by that time, the scammers have usually withdrawn the funds. Months later, they remain at large.

Law enforcement is still struggling to keep pace with the complexity of online fraud. Even when identities are found, cross-regional cooperation is slow, and resources are scarce.

Police must be equipped to recognise, document, and investigate digital theft. Laws should clearly define and address liability in online impersonation scams.

This scam thrives on two elements: trust and speed. Trust becomes the scammer’s greatest weapon, and speed denies victims time to react. Recovery is slow, justice uncertain, and financial losses often permanent.

Prevention is the safest route. Once a scammer takes over an account, victims must fight not just for access but to protect their reputation, relationships, and financial future.

One of the most difficult burdens for victims is the pressure to repay stolen money, often driven by a sense of moral responsibility. Though they were defrauded, they acknowledge that their friends and family acted in good faith.

This obligation can push victims deeper into debt and prolong emotional harm. In some cases, others accuse the victim of being the scammer, pretending to be hacked to mask theft.

Such suspicion adds another layer of pain. Instead of sympathy, victims face doubt. In communities where reputation is everything, such accusations can be as damaging as the financial loss.

Often, these accusations come from people who do not understand how account takeovers work. They cannot believe a criminal could access an account, send messages to dozens, and vanish without a trace. For them, the more straightforward explanation is dishonesty.

This misunderstanding can destroy friendships, strain family ties, and isolate victims. A lack of public awareness fuels these suspicions, as online impersonation is still unfamiliar in Ethiopia.

Without a better understanding, bystanders misinterpret events and assign blame wrongly. This makes community education crucial, explaining how scams operate and how to recognise genuine victims.

Prevention demands a habit of verification, stronger safeguards, and treating online security as part of daily life.

Justice Finds Voice in The Hague as Climate Fight Ends on a Rare High

Posted on by Yeabkal

Although the International Court of Justice (ICJ) turned 80 this year, there is a sense in which it has never felt younger.

In a David-versus-Goliath moment, the tiny Pacific Island state of Vanuatu recently changed international law forever, bringing the world’s most crucial issue before its highest court. The result is an ICJ advisory opinion on “the legal obligations of states in respect of climate change,” as requested by the United Nations General Assembly (with 132 co-sponsoring countries) at the urging of Vanuatu. The questions posed to the ICJ were as simple as they were seismic.

What obligations, under international law, do states have to tackle climate change? And what are the legal consequences if they fail to do so?

The ICJ’s answer was unequivocal. States have a duty to protect their citizens from climate change, a duty rooted not only in treaties like the Paris Climate Agreement but also in environmental, human rights, and customary international laws.

“Climate change,” said the court’s president, Yuji Iwasawa, speaking from the Peace Palace in The Hague, “is an urgent and existential threat of planetary proportions.”

According to John Silk, the Marshall Islands’ representative to the UN, “the science is clear and now the law is, too.”

That this bold message was delivered unanimously by the highest court in the international system would have been extraordinary enough. But the path that led to this outcome is even more remarkable.

The most significant climate case ever heard by the ICJ began not in a ministry or a think tank, but in a classroom. It was conceived by a group of 27 Pacific Islands law students who formed the Pacific Islands Students Fighting Climate Change (PISFCC), initially led by Solomon Yeo and later by Cynthia Houniuhi, both from the Solomon Islands, as well as Vishal Prasad from Fiji, and Siosiua Veikune from Tonga.

These were not seasoned diplomats, nor were they backed by billionaires. But they were determined.

“Whether you win or lose, some fights are worth fighting,” argued Justin Rose, a former lecturer at the University of the South Pacific (in Fiji), whose classroom exercise first planted the seed of this unlikely revolution in 2019.

The ruling delivers a resounding victory for the climate-justice movement, which has been gaining momentum ever since the Swedish activist Greta Thunberg staged her first solo protest. Now, for the first time, the movement’s intergenerational demand for dignity and legal recognition has a concrete judicial imprimatur.

It is also a triumph for the Global South. For decades, developing countries have called attention to the injustice of being exposed to the gravest consequences of a problem they did not cause. Now, the ICJ has acknowledged this asymmetry and taken the first step toward correcting it, vindicating, in particular, the countries most vulnerable to the effects of climate change. Small island states are experiencing vanishing coastlines, salinisation of freshwater, and intensification of cyclones.

Countries, long treated as voiceless victims, have become the protagonists in a world-spanning legal story.

This was not the first attempt to bring climate justice to The Hague. Palau and the Marshall Islands made a similar effort in 2012, but it stalled due to a lack of political backing. The difference this time lay not only in the Pacific Islanders’ persistence, but also in their strategy for building solidarity. Refusing to follow the usual, stodgy diplomatic script, they brought the warmth of the South Pacific to international law.

Houniuhi always wore a rorodara (a seashell-studded ceremonial headdress) to address the UN, and her group treated the courtroom drama as an occasion for song and dance. Hearings were celebrated as watch parties. The Pacific Islanders also built coalitions across oceans and generations, working with Vanuatu’s then-Foreign Minister, Ralph Regenvanu, as well as Caribbean allies and youth activists worldwide. With some countries even calling for financial reparations, the ICJ process became a movement in itself.

The ICJ’s ruling comes at a time when other international courts are converging on similar conclusions. The International Tribunal for the Law of the Sea has affirmed that states must curb marine pollution from greenhouse-gas emissions; the Inter-American Court of Human Rights has, in an opinion on climate obligations, recognised the right to a healthy climate as a human right; and the African Court on Human & Peoples’ Rights is in the process of weighing in on the matter.

The ICJ’s opinion is not legally binding, but it is far from toothless. Its authority comes not from enforcement, but from amplification. It crystallises a set of norms for courts, lawmakers, and activists around the world, and it sharpens the tools of transnational litigation. Hence, the ICJ decision is already expected to influence domestic cases, such as Greenpeace’s suit against the Italian oil company Eni. It may also mean that countries can sue each other for damages related to climate change.

The evolution of climate justice from a slogan into a legal standard may be the most important signal yet that a genuinely global legal system is emerging. By that, I do not mean a world government, but rather a legal system defined by what the legal theorist H. Hart called “the union of primary and secondary rules” recognised across jurisdictions. Climate law, once a patchwork of soft pledges and nonbinding resolutions, is being stitched into something more cohesive and robust.

What the Pacific Islands students lacked in money and influence, they made up for in conviction. They worked on shoestring budgets, faced visa barriers, and repeatedly were told that their campaign would go nowhere. However, they persisted, demonstrating that legal innovation does not have to originate from men in suits; it can emerge from the margins and ultimately transform international law.

“We were there. And we were heard,” said Houniuhi in disbelief when the opinion was published, speaking for the two communities most impacted by climate change, Pacific Islanders and young people. The subaltern spoke, and the world’s highest court listened. Flawed and slow-moving though it may be, international law still holds transformative potential.

As Justin Rose told me, “International law is itself a repository of stories.” The ICJ’s decision is a much-needed reminder that happy endings are still possible.

A Day at the Tax Office

Posted on by Yeabkal

I have reached a conclusion: many people struggle to sit quietly and let public servants do their work. Instead, interruptions occur every few minutes, slowing progress, or attempts are made to bypass queues entirely. This behaviour appears in banks, markets, and, most noticeably, in revenue collection offices. Such scenes are less an example of mere disorganisation than a reflection of collective chaos.

During my last visit, a crowd had gathered before sunrise, prepared for a long wait. Hours passed on hard benches or in tired lines before reaching the counters. Inside, the same sense of strain persisted, with the system appearing to be on the verge of collapse. Power outages left generators idle, and at peak tax season, staff often skipped lunch to keep up with demand.

The problems extended beyond infrastructure to communication. Some joined queues without confirming their purpose, assuming they were in the right place. Only after long waits did they ask basic questions about the line or required documents. “What is this line for?” or “What documents are needed?” This lack of clarity wasted time for everyone, speaking to a culture of assumption rather than inquiry.

In another corner, a single young employee bore the brunt of the workload, her voice too faint to carry across the crowded hall. The result was a tight circle of people, a physical wall, pressing forward and blocking her workspace, drowning out her calls. This physical and auditory barrier further slowed service, turning an already difficult process into an ordeal. Taxpayers fulfilling their civic duty received no welcome, only the treatment of an inconvenience.

Sitting there and watching all this unfold, possible solutions came to mind. Increasing staff during peak seasons could ease the burden. Sorting queues alphabetically or introducing a ticket-based numbering system would bring order to the process. A respectful, efficient process would benefit both citizens and staff, fostering a culture of mutual consideration.

This visit was not even for making a payment, but for retrieving the amount due. Two years ago, merchants began receiving tax statements by phone, a promising step forward. I thought, “Finally! This is the way it should be done.”

Yet administrative errors soon forced a return to in-person registration of names and numbers. A well-intentioned innovation had faltered through poor execution.

Payment methods, at least, have advanced with services like Telebirr and mobile banking. These tools save time, reduce physical queues, and suggest the potential for broader efficiency. However, bureaucratic errors have shifted into the digital realm. Mistakes in billing or payment registration remain common, and the effort required to correct them deters many from attempting to do so.

Such inaction risks creating recurring problems in future tax cycles. The digitalisation of inefficiency threatens to replace one form of frustration with another. A genuine improvement requires both technological competence and reliable follow-through. Without these, the cycle of error and resignation will persist.

Civic behaviour also plays a role in shaping the experience. While persistence is sometimes necessary to receive attention, swarming officials like predators achieve little but heightened tension. It makes their job harder, creates an atmosphere of anxiety, and ultimately makes the collective wait longer. It lengthens the wait for everyone and undermines the dignity of the process.

A more humane approach would include dedicated coordinators to manage queues and answer simple questions. They could shield service staff from interruptions, ensuring the flow of work remains steady. Order would be maintained, frustration reduced, and respect reinforced on both sides of the counter.

This issue, while rooted in one tax office, reflects a wider need for balance between technological progress and human courtesy. Efficient systems, paired with considerate public conduct, would transform such tasks from wearying obligations into smoother, mutually respectful exchanges.