A Market Nether Logic Nor Theory Explains

The most bizarre aspect of the Ethiopian economy is the constant surge in the prices of properties, particularly in the capital. The fast price growth trajectory which started almost two decades ago has increased its momentum in recent years.

In a properly functioning property market, the trend in house prices is somehow anchored to some economic fundamentals such as real income and rental value. Defying these economic fundamentals, the price of houses, particularly in the capital, is soaring to an alarming level. What is surprising is that the increase in rent is far behind the growth in property value, considerably squeezing the yield (rent/property value). This indicates that there is something serious that has gone terribly wrong.

The Council of Ministers in its 13th regular session held on August 4, 2022, resolved to open the banking sector to foreign investors by endorsing a policy document. Following this decision, the National Bank of Ethiopia (NBE) circulated the policy along with a draft amendment to the banking business proclamation. The policy document as well as the draft legislation allow four models for the entry of foreign banks into Ethiopia, viz., acquisition of stakes in existing banks, subsidiary formation, the opening of branches, and opening of representative offices. While opening a representative office cannot amount to market entry, it has long been permitted for some foreign banks. Representative offices can only do promotional activities and, most importantly, cannot offer services to customers. There is no mention of the joint venture as an entry model, contrary to earlier reports in some media. This is not to suggest that the proposed models are not good enough. On the contrary, one may be tempted to judge that the policy gives too much in terms of entry options. With Ethiopia being the second most populous country in the continent with one of the lowest rates of financial inclusion, there was no doubt that Ethiopia’s banking market would attract interest even if the country restricts the modes of entry.

In terms of the market situation and marketplace in Ethiopia, there are many issues that need to be modernized and improved. Of these, the marketing process and implementation, which has not redeemed the time, takes the biggest portion. Paying attention to this issue will greatly help the challenging journey of the Ethiopian economy to maintain its health and move on the path of modernization.

It is very difficult to communicate and move along with the global marketing system while running a marketing application that lacks modernity. Transforming the process of how the trading practice is done is becoming inevitable in all our marketplaces. It makes the issue serious when we think of the famous foreign companies that have entered the country—and are preparing to enter—following the economic reform Ethiopia is carrying out. Eliminating these challenges in time and changing it to a modern marketing process should be one of the main issues.