Barely two years in office, the administration of PM Abiy Ahmed...

March 7 , 2020

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Barely two years in office, the administration of Prime Minister Abiy Ahmed has changed guard at the state-owned Commercial Bank of Ethiopia (CBE). The administration has brought back Abie Sano, a bold and courageous man who had challenged the might of the most feared cadres under the late Meles Zenawi, which led to his departure from the CBE, gossip recalled. Revered in the industry, it is hoped that Abie can sort out the mess that is now left behind by Bacha Gina, a not-so-well-regarded person among bankers but brought to the scene from obscurity in the earlier days of the current administration, gossip disclosed.

Bacha was offered an unceremonious exit last week from his job as president of the CBE. He has been appointed as an ambassador, despite no prior experience in international affairs, but demonstrating once again the volatility of power dynamics in the administration, claims gossip.

Many in the gossip corridors would agree on a couple of things about Bacha’s debut at the CBE. That he was nowhere close to qualified for the responsibilities of running a bank that mobilises over 80pc of the country’s resources, and that his appointment was based on all but merit. His brief but consequential stay at the CBE says it all; the warning signs were all over the wall the whole time, claims gossip.

First was the Hejiraof senior executives from the bank a few months after his arrival at Churchill Road. Not much was said by the board of directors, under the chairmanship of Ahmed Abitew, when six of the eight vice presidents resigned one after the other. Bacha replaced almost all of them with people he has worked with while he was at Awash and Oromia International banks, the first being an institution he was forced to leave.

Bullish about his political masters, Bacha’s working relationship with the board of directors was never cordial; it was a norm for him to skip subsequent meetings with the board of directors, gossip disclosed. In the short time he was at the CBE, he spent more time on international travel than any of his predecessors, according to gossip. Bacha’s priorities tended to skew toward showcase matters, such as opening branches staffed by women or dedicated interest-free branches. If anything, he is credited by the staff for convincing the board to restructure the salary scheme, attributing the high staff turnover to low pay rate compared to what private banks offer. Never mind that he was the largest beneficiary in the process, awarding the president of the bank with a monthly gross pay of 200,000 Br, gossip disclosed.

Underneath though, the Bank’s position in the market has been in constant erosion with alarmingly depleted deposit mobilisation that was feared to have escalated to a systemic level. The crises in liquidity may have predated Bacha’s arrival to the CBE. The Bank was designed for retail banking services but was recently transformed into a policy bank with development financing while mobilising short-term deposits, which explains many of the institution's current problems.

However, the mismatch between what the CBE collects from depositors and the loans it has advanced was exacerbated over the past two years, gossip observed. The loans it advanced, including the bills and bonds it purchased from the central bank, had reached close to 109pc of its deposits, passing the prudent ceiling by almost 30pc, as of December 2019, gossip disclosed.

The CBE may not be alone in this saga, which should have been closely monitored by authorities at the central bank, claims gossip. With the exception of four banks - Lion, Zemen, Abay and Addis International - all the commercial banks in the country exceeded the 100pc mark during this period, showing that the financial sector has entered a rather structural liquidity crunch rather than a temporary glitch that can be addressed by short-term loan injections, says gossip.

What makes the CBE's situation and the ineptness of the senior management so worrisome is that the Bank claims close to half of the 460 billion Br dished out in loans by the whole banking system and over half of the 900 billion dollars collected in deposits up until June 2019, gossip revealed. With mountains of outstanding loans advanced to state-owned enterprises in power, railway and sugar estates, it was just a matter of time before the CBE hit the wall in the open.

This was a depressing reality not lost on Teklewold Atnafu, former governor of the central bank recently appointed to chair the board of directors of the CBE, says gossip. Teklewold’s first board meeting as chairman of the CBE was confrontational, with exchanges of tough words with Bacha, unusual for such sessions, gossip disclosed. It was clear the two gentlemen would not go far together, and one had to go; Abiy has made his choice and has decided to appoint an old hand in the bureaucratic state in favor of a political firebrand, gossip says.

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PUBLISHED ON Mar 07,2020 [ VOL 20 , NO 1036]

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