New Directive Mandates Central Oversight, Digital Integration for SOEs

New Directive Mandates Central Oversight, Digital Integration for SOEs

Aug 2 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

A sweeping new directive has been issued, marking a shift in the governance of state-owned enterprise (SOE) procurement. This directive brings over 40 major enterprises under unified oversight and digital control for the first time.

Issued by Ethiopia’s Federal Public Procurement & Property Authority (FPPA) on May 26, 2025, the directive is hoped to end years of fragmented and often opaque practices, merging procurement protocols with the federal government's push for digital governance and fiscal transparency.

The directive encourages the adoption of Ethiopia’s Electronic Government Procurement (eGP) system by SOEs managed under Ethiopian Investment Holdings (EIH), the sovereign wealth fund overseeing assets exceeding 150 billion dollars, including heavyweights such as Ethiopian Airlines Group and Ethio telecom. Until now, these entities operated autonomously, largely avoiding the scrutiny and uniform procedures applied to conventional public institutions.

“Unlike federal service providers, SOEs are profit-oriented entities,” said Melaku Teguade Aregu, executive for Property Reform & Capacity Building at the FPPA. “The directive reflects that distinction,”

Historically, procurement within the SOEs has been marred by inconsistent practices, bureaucratic inertia, and a lack of specialised auditing. General auditors, lacking in procurement-specific expertise, were tasked with oversight, creating space for inefficiencies and, in some cases, corruption.

One prominent case is the former Metals & Engineering Corporation (now Ethio Engineering Group), whose senior executives, including ex-CEO Kinfe Dagnew (Maj. Gen.), were implicated in an alleged multimillion-dollar corruption trial at the Federal High Court.

Re-established in September 2020 under a Council of Ministers regulation, EEG operates nine subsidiary industries incorporating automotive, agricultural machinery, construction equipment, electronics, and plastics. Given its scale, EEG is one of the highest-volume buyers of industrial equipment in the country.

“We’re no longer just looking at sticker price.” Dagmawi Zeleke Communications Director Ethiopian Investment Holdings (EIH)

"This will increase the bidder base," said Tamrat Dilla, head of supply chain at Ethio Engineering Group, seeing the new directive as a corrective step. "It will give us the clarity and flexibility we need at the design and procurement stages," he noted.

The directive grants the FPPA an explicit auditing authority and encourages SOEs to comply with digital procurement practices. Although the eGP platform remains optional currently, FPPA officials have made clear it will soon become obligatory. According to officials, the system will reduce audit complexity and enable remote and real-time monitoring.

One of the directive’s most notable aspects is its flexibility, which is tailored to the commercial realities of SOEs. For the first time, direct purchasing methods, prohibited for conventional government agencies, are permitted. The framework supports strategic procurement relationships with original equipment manufacturers, a measure meant to improve quality and cost efficiency for high-value purchases such as aviation components, industrial machinery, and IT infrastructure.

Also embedded is a whole-life cost approach, replacing the narrow focus on initial prices with a holistic evaluation that includes maintenance, depreciation, and lifecycle sustainability. The authors of the directive state that this recalibration is designed to improve procurement outcomes, particularly for capital-intensive sectors.

“We’re no longer just looking at sticker price,” said Dagmawi Zeleke, communications director at EIH. “That’s how responsible procurement works.”

Regional governments have already demonstrated the viability of localised e-procurement platforms. Six regional states have developed systems that have reduced procurement costs and timelines. Nonetheless, the FPPA directive positions the federal eGP system as the single authoritative platform for SOEs. It also encourages interoperability, allowing regional innovations to complement the centralised framework.

“Procurement from other SOEs should be about quality, not relationships,” said Tamrat.

The Group is now transitioning from a localised e-procurement system developed with INSA to the federal platform.

The directive also encourages procurement among SOEs, provided quality standards are met. The authorities believe this could break entrenched practices of favouritism and institutional nepotism.

“The goal is to stimulate a competitive, intra-public market anchored on performance, not political affiliations,” said officials.

Tadesse Kebede, a former senior official at the procurement authority and current EU project manager, praised the initiative’s ambition but flagged institutional bottlenecks. He pointed to structural weaknesses in contract management, especially in construction and industrial procurement, which have historically contributed to project cost overruns and failures.

"Many construction and industrial projects failed because contracts weren't managed properly," he said.

Repeated findings by general auditors had exposed systemic issues in procurement, from unnecessary criteria to flawed evaluations. Tadesse cited contract management as a persistent weakness.

“Transparency isn’t only about putting up an ad,” he cautioned. “It should be embedded in every phase of the process.”

Tadesse lauded FPPA’s auditing mandate, now anchored to international benchmarks, but warned that success depends on upskilling procurement professionals and auditors.

“Without a robust training regime,” he argued, “the new oversight mechanisms risk faltering in implementation.”

He also voiced scepticism about decentralised procurement platforms developed at the regional level, insisting that a unified, mandatory federal eGP system is essential for long-term credibility and efficiency.

“Centralised eGP should be mandatory,” Tadesse told Fortune.

PUBLISHED ON Aug 02,2025 [ VOL 26 , NO 1318]