EBR 114 – Ethiopian Business Review

Since the founding of the first bank in the early 20th century, the banking sector had witnessed the heavy-handed interventions of the government. Since NBE started functioning as a central bank as stipulated in Proclamation No. 206 in 1964 this role of the government has continued.

Despite the lack of independence, the central bank has had relative competence in the way its governors execute their duties. There have also been proclamations that limit the government’s excessive interventions and borrowing. These restrictions enabled the bank to control inflation and other economic anomalies. However, the restrictions were lifted in 2008. Since then, inflation has become a major nuisance in the economy, among others.

Endowed with abundant natural resources, Ethiopia has one of the most diverse agro-ecological configurations in the world. With 74.3 million hectares of arable land spread over 18 major agro-ecological zones at altitudes ranging from 148 meters to 4,620 meters above sea level, the country’s diversity makes it suitable for growing over 100 types of crops. Agriculture forms the biggest component and bedrock of Ethiopia’s economic development, contributing to about 32.7 Pct of the country’s GDP and 65.6 Pct of employment. With 85 Pct of Ethiopia’s 105 million people living in rural areas, the agriculture sector primarily consists of smallholder farmers who make their living from less than one hectare of land. The agricultural sector has reported considerable growth rates over the past decade as the result of an estimated doubling in the use of modern farm inputs, rapid expansion of arable land, increased labor productivity, government investments in the extension system, and an improved road network. The light of hope in the farming fields, however, is dimmed by startling losses following harvests, writes EBR’s Bamlak Fekadu.

Yehdego Abeselom CEO, Keste Damena

Abeselom Yehdego was a legendary businessman, humanitarian, patriotic Ethiopian, and a champion of the underdog. He made a name for himself with his forward thinking and his ability to see far beyond his years in how he operated and conducted himself. Abeselom had humble beginnings but eventually established Keste Damena Foam & Plastic Industry in 1995 – a mega business that is going strong today. When the legendary businessman passed away in 2012, his eldest son – Yehdego Abeselom – took over the helm.

Having completed his education in the US, Yehdego returned to Ethiopia in 2008. As someone who studied filmmaking, he made his first splash as the producer and director of “13 Months of Sunshine” – a film that debuted successfully. Yehdego’s first attempt to make a name for himself as an independent businessman and step out from under the shadow of his father was the launch of Jolly Bar, whose motto “Think Outside of Bole’’ made a lasting impression on Addis Ababa’s nightlife.

The National Bank of Ethiopia (NBE) has ordered a ban on issuing letters of credit for the import of close to 40 selected goods. These include all fuel-consuming automobiles, alcoholic drinks, and cosmetics products, among many others. The decision is seen by few as a proactive move to encourage local manufacturing and exports, while others have taken it as a reactive measure in response to the nation’s dire shortage of forex reserves. Some go as far as claiming the move is an official admission of the beginning of the end for the Ethiopian economy. Regardless of which side is right, the impact of the prohibition on consumers has been rough. Prices for the embargoed commodities are only climbing as importers scramble to find new, and more expensive, ways to ship them into the country. EBR’s Eden Teshome looks into the government’s decision and what it means for the consumer.

The Ethiopian-Chinese partnership has developed substantially over the past three decades. Ethiopia is a central hub for China’s Belt and Road Initiative, adopted by the Chinese government in 2013 to invest in nearly 150 countries as part of the centerpiece of Xi Jinping’s foreign policy. Over 300,000 Chinese immigrants are thought to be living in Ethiopia, creating a niche market for Chinese food. The phenomenon has led to the thriving Rwanda Market, where dozens of stores cater to their customers with a focus on Chinese ingredients. More and more Chinese restaurants are springing up throughout Addis Ababa as well, offering a new kind of cuisine to an increasingly curious
Due to the nations’ economic cooperation, Over 300,000 Chinese immigrants are thought to be living in Ethiopia, creating a niche market for the consumption of Chinese food and turning the former Rwanda Market into the only urban food market in Addis Ababa that focuses on Chinese items. Due to the close economic ties with China and other Asian nations, in addition to the open-air China market, many restaurants have sprung up throughout Addis Ababa offering a variety of Chinese dishes to fellow Chinese expatriates as well as a growing number of Far East Asian cuisine fans, altering the city’s food landscape, writes EBR’s Bamlak Fekadu.

The history of duty-free privileges dates back as far back as 1986, when they were applied to petroleum extraction investments, and 1993 when they were applied to the mining sector. Recently, Ethiopia has adopted a new investment incentive regulation, Number 517/2022, which was approved by the Council of Ministers in May and was published in the Federal Negarit Gazette in July. The incentive regulation has repealed the investment incentives provided under a 2012 Council of Ministers regulation. However, directives issued prior to the enactment of the new incentive regulation will remain under enforcement until replaced by new ones to be issued by the Ministry of Finance . In this article, EBR’s Bamlak Fekadu reviews the new incentive regulation.

The purpose of the holidays is to honor the things that bind people together in life. The holidays are also a time for giving beyond offering appreciation and expressing gratitude to loved ones– often in the way of gifts. This year, the culture of gift-giving faces a formidable foe in the form of unabated inflation, writes EBR’s Trualem Asmare.

String art is the process of creating geometric designs by weaving colorful string, wool, wire, or yarn between hammered nails. Thread lines are used by artists to produce carving patterns that can take on a variety of appealing shapes. Using thread and nails to create angles was an organic notion that evolved into a unique style of art. Not long ago, it was not well understood in Addis Ababa. Since recently, however, this form of art is making its way to luxurious residences and taking center stage at art exhibitions, writes EBR’s Trualem Asmare.

On 20 January 2023, Prime Minister Abiy Ahmed made changes to his cabinet and other appointments. The PM announced the nomination of new ministers, including the Ministry of Transport and Logistics, Ministry of Mines and Petroleum, and Ministry of Agriculture. The PM has also appointed new central bank governor.

New appointments are common in political life, and as usual people are discussing the reasons behind the new appointments. Is the major reason of appointment a result of the desire to change economic policy? Is it related to a search for “able, creative, and experienced people” who can manage the bureaucracy. Is it related to a search for loyalty? Whatever the reasons, quality matters for government performance.

It is said that merger and acquisition (M&A) is one of the two ways of corporate growth, the other being organic growth by increasing capital from internal sources. However, a good number of the banks in Ethiopia have opted for organic growth through rights issues, most of them resolving to increase their capitals by three to four folds to be implemented in the coming years. Quite invariably these capital increase resolutions rely on capitalizing dividends the companies expect to earn in the years to come – a rather slow process. Apparently, there is a clear lack of innovation in raising capital. The institutions are not the only ones to blame, however. Unfortunately, the banking (and insurance) regulation does not innovate. For instance, it outlaws the creation of varied classes of shares. One can issue only common shares in Ethiopian financial institutions.

Central Bank Independence is Central

Post-Harvest Loss Dims Agricultural Hope

“My Father’s Spirit is our Competitive Edge..”

Consumers Real Victims of Import Embargo

Transcending Taste Asian Businesses Strengthening Ties

New Tax Incentive Regime Offers More to Investors, Overlooks Health and Education

Inflation Threatening the Culture of Giving

String Art Making its Way into Living Rooms

PM Abiy Ahmed’s New Ministerial Appointments & Ethiopia’s Economic Future

Bank Mergers in Ethiopia: The ‘Who is Who’ Question