Ethiopian Business Review – Page 5 – Ethiopian Business Review

Ethiopia and France have solidified their ongoing economic partnership with the signing of a significant financial agreement aimed at advancing Ethiopia’s reform agenda. The agreement, concluded between Ethiopia’s Ministry of Finance and Agence Française de Développement (AFD), signals a critical step in supporting Ethiopia’s economic transformation through both budgetary and technical assistance.

The deal includes a USD27 million budget support package, with USD11.34 million already disbursed in December 2024, alongside a USD4.07 million grant for technical assistance. On December 21, 2024, Ethiopian Finance Minister H.E. Ahmed Shide and AFD CEO Rémy Rioux finalized the budget support agreement, while today’s technical assistance agreement was signed by State Minister of Finance H.E. Dr. Eyob Tekalign and AFD Country Director Mr. Louis-Antoine Souchet.

This agreement focuses on strengthening Ethiopia’s Homegrown Economic Reform (HGER) 2.0 through strategic reforms in key sectors. The technical assistance will be managed by the Ministry of Finance and the National Bank of Ethiopia, with a strong emphasis on financial sector reforms, restructuring State-Owned Enterprises (SOEs), refining Public-Private Partnership (PPP) regulatory frameworks, and implementing sectoral reforms across multiple agencies.

State Minister of Finance Dr. Eyob Tekalign expressed that this partnership represents a significant milestone in Ethiopia’s reform journey. He explained that while the budgetary support will provide vital fiscal space, the technical assistance would play a pivotal role in enhancing the country’s Public-Private Partnerships, improving governance within SOEs, increasing financial sector competitiveness, and strengthening institutional capacity for effective policy execution.

Dr. Eyob further acknowledged AFD’s ongoing support, highlighting the flexibility of the technical assistance program, which accommodates multiple partners and ensures value for money.

In a similar vein, Mr. Louis-Antoine Souchet, AFD’s Country Director, reaffirmed his institution’s commitment to Ethiopia’s reform agenda. He emphasized that this collaboration was a reflection of France’s sustained investment in Ethiopia’s economic sustainability and public sector efficiency. AFD, he added, would continue to foster peer-to-peer exchanges and knowledge-sharing between French and Ethiopian institutions, ensuring successful reform implementation and long-term economic resilience.

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In the business world, a merger refers to joining two companies into one entity. The concept has made headlines recently because the government is preparing to open the sector to foreign competition. This is the second time in recent years that the issue has taken Centre stage in Ethiopia’s financial news after the two state-owned banks – the Commercial Bank of Ethiopia (CBE) and the Construction and Business Bank (CBB)– ‘merged’ in December 2015. Advocates of mergers say they provide several benefits to the financial sector, the least of which is weeding out young banks, thereby strengthening the overall sector. Others, however, think that the concept may be too cumbersome for Ethiopia’s nascent private banking industry, which needs more time to mature. EBR updates an article published from the 4th Year • January 16 2016 – February 15 2016 • No. 35. We spoke with banking leaders and experts to get a better grasp of the concept and its potential role in Ethiopia’s fledging banking sector.

Africa has witnessed remarkable growth in cryptocurrency adoption, fueled by rising investments and individual interest. According to Chainalysis, Sub-Saharan Africa contributed 2.7% to the global crypto economy’s transaction volume, with an estimated on-chain value of USD 125 billion in the past year. Diverse uses of cryptocurrencies, such as business payments, inflation hedging, and smaller transactions, drive this surge. Nigeria leads the continent, receiving approximately USD 59 billion in crypto value from mid-2023 to mid-2024, despite government crackdowns on its use. These crackdowns, which primarily involve regulatory measures to control the use of cryptocurrencies, have not dampened the population’s interest in crypto. In fact, some reports show that 33% of the population in Nigeria invests in cryptocurrency, indicating the growing momentum of this trend. Other African nations are also beginning to recognize the potential benefits of digital assets, showcasing a broader trend toward crypto adoption.

Despite the significant economic challenges Ethiopia has recently faced, the country has the potential to overcome these hurdles. The incumbent government, which took office in March 2018, has made commendable efforts to address the inherited macroeconomic imbalances. However, certain policy decisions, particularly those influenced by International Monetary Fund (IMF) prescriptions, have inadvertently exacerbated the situation. It’s important to remember that Ethiopia is not defined by its challenges but by its potential to overcome its challenges.

Wegagen Bank has officially launched its new mobile wallet service in collaboration with E-Birr Mobile Financial Services, offering customers a seamless way to manage their finances on the go. With the launch of this service, users can open wallet accounts, transfer funds, make payments, and manage their accounts without the need to visit a branch. The service is accessible via the E-Birr app, available for download on the Play Store or App Store, or through short text messages.

In the latest African Top 100 Banks rankings, Ethiopia stands out with five banks represented, highlighted by the state-owned Commercial Bank of Ethiopia, which ranks 28th overall. This bank boasts a Tier 1 capital of USD 1 billion, a key indicator of its financial strength and ability to absorb losses, and an impressive ROE of 30%, a measure of its profitability. Tier 1 capital is a bank’s core capital, including equity capital and disclosed reserves, which is a crucial indicator of a bank’s financial strength and ability to absorb potential losses. ROE, or Return on Equity, measures a bank’s profitability and calculates how much profit a bank generates with the money shareholders have invested. The Development Bank of Ethiopia is close behind, coming in at 44th with a Tier 1 capital of USD 613 million.

Ethiopia’s state-owned enterprises (SOEs) are not just a problem but a beacon of potential. They can play a pivotal role in driving economic growth and social development. However, their persistent inefficiencies have hindered the nation’s progress. These inefficiencies, rooted in weak corporate governance, political interference, and a lack of capacity, have led to significant financial losses, distorted markets, and stifled innovation.

East African Holding (EAH) has signed a Memorandum of Understanding (MoU) with the Ethiopian Construction Works Corporation (ECWC). This partnership aims to enhance Ethiopia’s infrastructure development through the supply of high-quality cement products from Lemi and Dire Dawa National Cement, along with experience sharing in key areas.

Top 10 African Nations Pioneering Electric Vehicle Adoption

Government policies are crucial in driving the growth of electric vehicles in Africa. Ethiopia, for instance, is emerging as a critical player in the continent’s electric vehicle landscape, with an estimated 5,000 to 7,000 electric vehicles on the roads. This growth is largely driven by favourable government policies that promote sustainable transport and attract investment. Ethiopia’s abundant renewable energy resources, mainly hydroelectric power, further support its commitment to electric mobility.

Balancing Growth with Equity

Ethiopia’s recent announcement of a 10% quarterly electricity tariff adjustment is a significant step towards ensuring the sustainability of its power sector. This move, aimed at bridging the revenue gap and funding expansion projects, has the potential to bring about positive changes. However, it’s crucial to address the potential negative impacts on low-income citizens and small businesses to ensure a balanced outcome.

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Powering Ethiopia’s Future

Balancing Growth with Equity