Franco Valuta & the Path to Market Liberalisation

Ethiopia’s recent liberalisation of its foreign exchange regime has significantly changed its economic landscape. One of the most notable developments is the expanded use of Franco Valuta imports.

This scheme, which allows importers to settle their obligations with foreign currency outside the domestic banking system, has been controversial. While it offers businesses greater flexibility and potentially relieves pressure on the central bank’s foreign exchange reserves, concerns remain about its potential impact on inflation, parallel exchange markets, and illicit financial flows, reports EBR’s Munir Shemsu.

Balancing Inflation Control with Economic Growth

Ethiopia’s central bank has imposed a credit cap to tame soaring inflation, but the measure has unintended consequences for businesses, especially exporters. While inflation has eased since the bank introduced the policy a year ago, the credit crunch stifles economic growth. Economists advise policymakers to strike a delicate balance. According to economists, targeted credit measures, support for SMEs, and fiscal discipline are crucial. By fostering a conducive business environment and prioritizing key sectors, Ethiopia can achieve both price stability and sustainable economic expansion, writes EBR’s Eden Teshome.

Red Sea Crisis Cripples Ethiopian Trade Exposes Economic Vulnerabilities

As a landlocked country, Ethiopia relies heavily on the ports of Djibouti and Eritrea for its international trade, with the Red Sea serving as a crucial maritime corridor. However, the ongoing crisis in the region, which began on October 7 with Hamas attacking Israel, is having significant ramifications for Ethiopia.

EBR’s Eden Teshome delves into the challenges faced by Ethiopian businesses amidst the escalating conflict between the Houthi rebels in Yemen and Israel’s retaliatory strikes in the Red Sea. Ethiopian importers and exporters are feeling the strain, from rerouting shipments and enduring longer transit times to dealing with skyrocketing freight rates and potential infrastructure bottlenecks. This piece explores how this regional security issue disrupts global maritime trade and forces Ethiopian firms to explore alternative markets and distribution channels.

Ethiopia’s media landscape is undergoing a seismic shift with the rapid growth of podcasts. This new medium has empowered diverse voices, creating a platform for everything from business advice to entertainment. Podcasts are increasingly popular among the youth, with YouTube becoming the preferred platform.

While the democratization of media is a positive development, there are potential challenges. The overreliance on video formats, often driven by advertising revenue, limits the reach of podcasts. Moreover, the lack of diversity in formats and the potential for misinformation and disinformation also raise concerns.

Despite these issues, podcasts’ impact is undeniable. They are filling a void in the media landscape, providing accessible and engaging content. Fostering a balanced ecosystem that promotes creativity and responsibility as the industry matures is crucial. By addressing the challenges and capitalizing on the opportunities, Ethiopia can harness the full potential of podcasts to inform, entertain, and empower its citizens. EBR’s Brook Genene looks at the rise of podcasts in Ethiopia and assesses the advantages and impacts of this trend.

A Growing Challenge for Ethiopia’s Workforce and Economy

Ethiopia’s rapidly growing economy presents a promising landscape, but beneath the surface lies a critical challenge: a significant mismatch between the aspirations of its young population and the realities of the job market. While the nation strives for economic diversification and job creation, societal pressures often steer students towards prestigious professions like medicine or engineering, regardless of personal interests. This misalignment leads to job dissatisfaction, reduced productivity, and increased turnover rates for companies.

EBR’s Mintesnot Nigusse delves into the stories of individuals grappling with this issue, highlighting the personal and economic consequences. He explores potential solutions, including the importance of career guidance, parental involvement, and fostering a workplace culture that prioritizes employee well-being. Addressing this mismatch is crucial for Ethiopia to harness its full economic potential and create a more fulfilling and productive workforce.

A Beacon of Excellence Driving Ethiopia’s Industrial Transformation

Since its inception in 2008, the Ethiopian Quality Award (EQA) Organization, a collaborative effort of Addis Ababa University and Walta Media and Communications, has been a unique beacon for Ethiopian businesses striving for excellence. Unlike other awards, the EQA doesn’t just hand out trophies; it rigorously evaluates companies based on international quality standards. This unique approach spurs organisations to refine their leadership, customer focus, and internal operations, leading to improved resource management, streamlined processes, and a more competitive Ethiopian business landscape.

The EQA’s impact transcends individual companies. By establishing a national benchmark for quality, it sparks a collective drive for improvement. Furthermore, the EQA plays a pivotal role in fostering a culture of continuous learning, providing a platform for businesses to share best practices and elevate the overall discourse on quality within Ethiopia. The EQA is more than an award; it’s a powerful catalyst for Ethiopian business transformation and industrial competitiveness.

Ethiopia’s Import Substitution Strategy Fuels Economic Growth

Ethiopia has long grappled with a reliance on imported construction materials, stifling the growth of its domestic industries. However, a renewed push towards local production is poised to transform the country’s construction and telecom landscapes. The government’s import substitution strategy has identified over 90 products, including telecom equipment and construction materials, to be produced domestically within the next decade. Companies like Woda Metal Industry have established local manufacturing facilities, providing network operators with telecom towers and other critical infrastructure. This shift towards domestic production is a significant catalyst for Ethiopia’s industrialization and economic development, unlocking cost savings, job creation, and export opportunities. By reducing reliance on imported materials, Ethiopia aims to build a more self-reliant, globally competitive economy bolstered by technological innovation and a thriving ecosystem of local suppliers and manufacturers, writes EBR’s Eden Teshome.

Will Trade Liberalization, Local Production Uplift Consumers or Overwhelm Domestic Businesses?

The recent policy change in Ethiopia regarding industrial parks and trade liberalisation presents opportunities and challenges for businesses and consumers in the country. By allowing companies in the industrial parks to sell up to 50% of their produce locally and opening retail/wholesale sectors to foreign participation, policymakers aim to boost domestic production, increase competition, and stabilise market prices amidst persistent inflationary pressures. However, the implementation and impact of these measures remain to be seen. EBR’s Eden Teshome has spoken to key stakeholders – manufacturers and consumers – to understand how these policy shifts will likely reshape Ethiopia’s economic landscape.

The National Bank of Ethiopia’s (NBE) latest report reveals encouraging progress in the fight against inflation. In April 2024, the country witnessed a significant decrease in inflation rates compared to previous years. Year-on-year inflation fell to 23.3%, marking a substantial ten percentage point decline from the prior year. While food inflation remains relatively high at 27.0%, non-food inflation has experienced a remarkable drop to 18.0%. Many attribute the decline to the slowdown in money supply growth. The report suggests that inflationary pressures will continue moderating, with a projected year-on-year inflation rate of approximately 20% by June 2024. These developments signal positive strides in Ethiopia’s efforts to achieve macroeconomic stability, EBR’s Eden Teshome reports.

Addis Ababa, Ethiopia’s capital, is embracing a transportation revolution by introducing electric buses and minibuses; th e future s e ems greener for Addis. This shift promises a more sustainable and efficient public transport system, potentially reducing traffic congestion and pollution. The large-scale electric vehicle (EV) import and local assembly plan presents challenges and opportunities. EBR’s Eden Teshome writes that this future envisions EVs coexisting with traditional taxis and minibuses, ultimately improving commutes and promoting a more sustainable urban environment.