December 2016 – Ethiopian Business Review

Fuel’s Small Profit Margin Creates Strain Between Private Sector, Government

Private investors involved in the sale and distribution of fuel know Ethiopia has the smallest profit margin on these goods in Africa – just 1Pct. As a result, investors shy away from the business, thereby contributing to imbalanced supply and demand, even as the number of vehicles in the country increases on a daily basis. To remedy this, the government has stepped in, announcing plans to build fuel stations throughout the capital. However, private sector insiders say they should work instead to improve the profit margin. EBR’s Ashenafi Endale spoke with key stakeholders to learn more about the debate and the growing tension between the public and private sector.

Ever since coming to Ethiopia, Heineken has been prone to making splashes in the beer market. First, they purchased two national breweries: Bedele and Harar. In 2015, they launched their Walia brand with great success, shaking up the competition through a strategic pricing strategy that helped them increase market share. Now, the company has launched its signature Heineken brand in the local market, which is produced in their state-of-the-art brewery in Kilinto, which cost more than EUR200 million to build and expand.
At the helm of Heineken’s Ethiopia office is Gerrit van Loo, a man with nearly three decades of experience with the company. After studying law and economics in the Netherlands, he enlisted in the Dutch navy before starting his first job as a management trainee at Heineken’s headquarters in Amsterdam. Since then, he’s worked throughout Europe and Africa in marketing and sales before becoming a manager.
Van Loo says Africa is brimming with potential – and Ethiopia is no exception. Since arriving in 2015, he’s accomplished quite a bit – the Klinto expansion, launching the flagship Heineken brand, and helping develop Ethiopia’s agriculture value chain. EBR’s Tinbete Ermyas spoke with van Loo to learn more about their work in Ethiopia, including their environmental protection efforts, developing local talent, and the unique challenges he’s faced working in the local context. The following is an excerpt.

What’s the Private Sector’s Role?

The solar energy potential in Ethiopia is massive. By some estimates, the country could produce up to 5.6kWh per day, on par with or exceeding the capacity of countries that are known for their solar energy production, like Germany. If properly harvested, this could help the country develop a robust energy infrastructure and even export to neighbouring countries. Despite this promise, however, a number of roadblocks stand in the way of the country realising its full potential – and many say the private sector is key in bridging the divide. EBR’s Tamirat Astatkie delved further into the issue to learn more about harvesting the country’s potential for solar energy.

Given the prominence of the WARYT conglomerate, it may come as a surprise that Legesse Zerihun began the business by chance, having been inspired by the lack of petrol stations in Addis Ababa. Years later, the company is known for its multitude of businesses – ranging from importing goods to manufacturing.
Legesse attributes the proliferation of his company to his decades-long career in business and his mother’s support. The ubiquity – and significance – of the WARYT logo, which stands for ‘Work and Reach Your Target’, is a testament to this drive and commitment to perseverance.
A father of four, Legesse says that his family and marriage have been central to his success – and it’s this familial outlook that drives his compassion and charitable activities, of which there are many.
EBR’s Tamirat Astatkie spoke with the seasoned businessman to learn more about his trajectory and his insights into the role the private sector should play in the country’s development.

Entrepreneurs try to Boost Honey Production Through Technology

Global demand for honey is on the rise. According to the BBC, global demand almost always exceeds supply, especially in recent years, when bee colonies in the West have been plagued by parasites. This leaves a large window of opportunity for countries like Ethiopia, which produce thousands of tonnes of honey per year. However, insiders say that bee farmers could be doing more to harness the local production capacity – and earn more money from this prized commodity. EBR’s Ashenafi Endale spoke with scientists and farmers to learn more about methods to increase honey production.

How Do Nations Do so without Victimising Genuine Importers?

While tariffs on customs are a key income generator for developing countries, they also have the potential for misuse. Government agencies may inflate figures to increase tariffs. Importers, however, may under-invoice products to pay lower taxes or increase profit margins. This tension, experts argue, is best solved through a fair and consistent valuation system to help a country earn as much income as possible. EBR’s Ashenafi Endale spoke with key stakeholders and consulted researches to learn more about what’s being done to bring this type of system to Ethiopia.

Divorce is on the rise in Ethiopia. According to data from the Lideta Federal First Instance Court, within a three-year span, more than 16,000 divorces were recorded, a trend that doesn’t seem to be slowing down any time soon. A number of reasons may lead to the dissolution of marriage, but some are concerned about the potential effects of divorce on individuals and the society in general. EBR adjunct staff writer Meseret Mamo spoke with lawyers, counsellors and divorcees to learn more about this trend and its potentially harmful effects.

Darts – also known is lawn darts or javelin darts – is a sport that consists of players attempting to hit a circular board with coloured targets for points. Historically, the game is affiliated with the pubs and working classes of Europe. However, a few enthusiasts are trying to popularise the sport within Ethiopia. EBR adjunct staff writer Abiy Wendifraw spoke with a few of them to learn more about their efforts to raise awareness about the sport within the country.

I recently heard former World Trade Organisation Director-General Pascal Lamy paraphrasing a classic Buddhist proverb, wherein China’s Sixth Buddhist Patriarch Huineng tells the nun Wu Jincang: “When the philosopher points at the moon, the fool looks at the finger.” Lamy added that, “Market capitalism is the moon. Globalisation is the finger.”

The World Bank Group has just released Doing Business 2017: Equal Opportunity for All, the latest version of its flagship report. According to the Bank, the annual report is one of the world’s most influential policy publications, as it encourages countries to reduce the regulatory burden on the private sector. But there is a serious flaw in the report’s formula: the way it treats corporate taxation.

Fuelling Tension:

Fuel’s Small Profit Margin Creates Strain Between Private Sector, Government

‘We Call Our Strategy ‘Growing with Ethiopia”

Ethiopia’s Quest to Harness Solar Energy:

What’s the Private Sector’s Role?

Family, Dedication Keys to Success Legesse Zerihun

Converting Honey into Money

Entrepreneurs try to Boost Honey Production Through Technology

Reducing customs Valuation Fraud

How Do Nations Do so without Victimising Genuine Importers?

As Divorce Rates Increase, Concerns About its Adverse Effects

Bringing Darts to Ethiopia

Missing the Economic Big Picture

‘Doing Business’ Should Stop Promoting Tax Competition