“The worsening environment for the private sector must be known”

Last December, the Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) held its annual general assembly. The meeting was greatly anticipated because members would elect a new board of directors, a vice president and president to lead the Chamber for the next two years. Elias Geneti, managing director of Agro Prom International PLC, who had served for two years on the Chamber’s board, was elected president with an overwhelming majority of the vote. The soft spoken technocrat got his MSc in Agronomy and Soil Science from a university in Ukraine. Elias, who was winner of the Lenin Award for his outstanding academic achievement, has served as a board member in a number of organizations including AACCSA. He is currently the Chairperson of the Board of Directors of Oromia Insurance Company. In this interview with Amanyehun R. Sisay, executive editor of Ethiopian Business Review, the new Chamber President talks about the problems of the private sector, his plan for the Chamber the controversy over the quorum issue and the size of the general assembly that over shadowed the chamber’s meeting:

EBR: In the past two years the Addis Ababa Chamber of Commerce was silent when it came to vocally bringing the problems of the private sector to the attention of the public and to the government. Under your leadership is this going to change?
Elias Geneti: During the last two years chamber board was laying very fundamental springboards such as institutionalizing most of its service centers so that it can best serve business. Now, based on those foundations, the incoming board will organize, analyze, and prioritize the existing bottlenecks that hinder the business climate and present our findings to the relevant government institutions in a very constructive manner with anticipated solutions. That is the only way I believe we can be vocal.

What particular projects do you plan to undertake in the next two years?
There are many ongoing projects that the new board will carry on to maturity. One particular focus is to institutionalize the information dissemination center. Access to information is very weak and most of the members do not know how to access local and international information. The Chamber must fill the information gap by delivering the appropriate information related to all businesses and investments so that all Ethiopian business stakeholders and foreign investors can get adequate information.
The second is to work on advocacy. Limited advocacy is the biggest challenge to addressing problems faced by the private sector. The Existing Research department will be upgraded to a Center for Research and Advocacy. This center will address all sorts of problems. For that, we will open up a call center where every business person can call to the Chamber to discuss a problem their business faces. These problems will be recorded, analyzed, and prioritized in order to find a solution and/or they will be directed to appropriate institutions. Bottlenecks that can be solved at the Chamber level will get immediate solutions that conform with the law of the land. Others policy issues will be handled in consultation with relevant government institutions. The third important agenda of the new board is to get land from the City Administration and start building AACSA’s Headquarters.

Does that mean members will receive more support from the chamber, which they say has been lacking recently?
Yes. This call center will serve both ways because the chamber membership department will also call the members to ask if they need assistance from the chamber. The new Board will also set indicators for measuring the quality of the services that the chamber is rendering. On top of that, sector based forums will be organized to bring businesses together to develop a strategy and talk about problems and plan a way forward. Such forums will commission the chamber Research and Advocacy center to do research on critical issues raised during such forums. I do believe therefore, that the interests of the members will be addressed and support from them can be improved.

There are some reports that the secretariat of the Chamber is filled with nepotism and maladministration. Are you going to clean house?
You are telling me about a problem that existed two or three years ago. In the last two years what we did was actually cleaning, reinstituting and constituting the entire management. Currently, the management has no such problem. If there is still a problem we will continue cleaning since it is a normal management process.

Regarding the Addis Africa Convention and Exhibition Center will you encourage other African Chambers of Commerce to buy shares and be part of the ownership?
It is not fully owned by the Addis Ababa Chamber, we are only a shareholder. The major shareholder is the Addis Ababa City government. So it is the decision of the Board and the general assembly to sale shares to other African chambers.

The Ethiopian government wants the private sector to engage in manufacturing; however, most Ethiopian investors are in the service sector, what do you think is the reason?
The Ethiopian private sector is still in its infancy which means it is not yet mentally, financially and technically ready to invest in manufacturing. That is why foreign direct investment is increasing. However, promising steps are well underway as the Ethiopian private sector is gradually joining manufacturing. I do believe that in the future more people will invest in manufacturing as government policies are focusing on this sector of economy. It is very clear that investment by Ethiopian nationals is very important for our sustainable development. To that effect, packages on incentives, financial resource availability and technical support from the government are critically important to encourage the Ethiopian private sector to join manufacturing.
The other point is that there are packages of unutilized government supports like, tax free imports for machines which I have practical knowledge of. The question is how a weak private sector can come into that picture. It may be by organizing individual businesses in different forms to build their capacity for investment, talking with the government to open up international financial institutions from where they can obtain loans easily with relatively lower rates. Investment promotion is one of our objectives in the future.

At the moment, profits from manufacturing are not as lucrative as they are in the trading business. Making a profit might even be unthinkable for some years. And the infant private sector does not have capacity to stand such problems. So would it be surprising if the private sector is not interested in investing in manufacturing?
This is where the role of the Chamber comes. Other than the mentioned facts, the Chamber has to conduct detailed research on why the Ethiopian private sector is not encouraged to invest. The findings then will be brought to the attention of the Public Private Consultative Forum. The Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA) own the Public Private Partnership (PPP) Forum with the Ministry of Trade (MoT) at the federal level. AACSA is planning to organize a minimum of two forums with Regional governments and with the Addis Ababa City Government. Currently we are waiting for their approval and preparing a Memorandum of Understanding (MoU) where we engage in a permanent Public Private Partnership Forum with the Addis Ababa City Government. The Forums will give the chamber an opportunity to talk with the government about solving challenges in investment and other businesses. The Chamber is expected to explicitly demonstrate the challenges based on facts and figures, national and international experiences in order to convince the policy makers to tackle the challenges.

The last four years have been very difficult for the private sector. One of the reasons was the introduction of the Multimodal Transport System, a system which set aside many transistors in the country. Instead of solving the transport problem as promised by the government, it worsened the already existing problem. Do you plan to engage the government to solve the problem?
At the last PPCF we held discussions about this critical problem and came up with some solutions which have brought some relief and improvement. More dry ports are operating and demurrage costs at Djibouti are also minimizing. The problem with inefficiency of the custom service is still alarming. So, efforts to speak with the Customs Authority will continue to smoothen the process.

There are reports that the customs and logistics offices at some of the dry ports do not issue documents that are necessary to clear goods on time. In the meantime, the goods remain in the port for a longer period and businesses are required to pay demurrage for the period the goods stay at the port. Do you have any plan to intervene to stop this waste of money?
For the last two years the Chamber was vocal regarding this issue. The reason behind that was the failure of the customs office to actually avail clearance processes on time. Since then two or three dry ports including Modjo and Gelan started to function properly as the result of the continuous discussions between customs and the private sector and the Chamber. So, we will continue to engage in a very constructive and developed manner to solve the problem. That is the only way.

Sometimes the government doesn’t take predictable action and things happen abruptly. Don’t you think that the chamber has to be vocal in such cases as a considerable number of businesses have been victims?
We will attempt to understand the reason behind the sudden directives being issued by government officials. Most of the directives are not open to the public and the private sector cannot prepare to handle these problems because of the new directives. What we are saying to the government is that proclamations and directives should not be issued before the private sector and other stakeholders fully engage in the process. Let the consensus be reached. Let the content, the application and the implications as well as the anticipated directives be known by the community before they are issued.

Last year, the Addis Ababa City Trade and Industry Bureau refused to renew trade licenses for thousands of businesses because of their failure to fulfill the additional requirements posed by the government. For instance, to renew the license of a barber, the shop needs to have a toilet and hire an accountant. To run an Internet café, one needs to hire an accountant and an IT expert. When the government tries to set such kinds of requirements, do they consult with you?
It is a mandate of the Ministry of Trade (MoT). Applying such new requirements without the consensuses of the operators is harming the business. So, the Chamber’s role is to study the consequences of such new directives and handle them through dialogue with the government.

Ethiopia’s growth is characterized by an imbalance between the public and private sector. The former is the third fastest growing in the world; while the later is the sixth slowest growing. There are lots of factors contributing to this. One among the many is the central bank’s regulation which requires private banks to buy Treasury bills worth 27Pct of the loan they advance. This has eroded the capacity of the private banks to finance the private sector. The chamber has never done anything meaningful to solve this problem. Why?
It is a good question. What I do personally believe, and what we were trying to do was to really table the issue for discussion with the government.
The government is applying different financial instruments to control inflation. This is one of the factors that eventually eroded the liquidity of the banks. Private Banks are not liquid enough to finance businesses throughout the year. It is clear that inflation must be controlled but one action should not kill another. So, a solution must be sought. To that effect, Chamber will organize forums for discussion on the issue with financial institutions and relevant stakeholders to jointly solve the problem

It is clear that inflation in this country is the result of huge public spending; cutting the source of finance for the private sector will not contain inflation substantially.
I believe that we need to honestly engage the government officials so that they understand the kind of environment within which the private sector operates. We need to concretely research the problems that the sector faces, with facts and evidence. Hostile confrontation with the government in the past did not bring any positive result. If you come closer to the government, you will understand that most officials do not want to harm the interest of the private sector. So we need to engage government officials and show them our problems by supporting our causes with thorough studies.

Are you saying that there is no need to confront the government?
There is a need to confront them but we confront them based on facts and figures.
The government follows a developmental state theory. So we need to spell out the role of the private sector in a developmental state. And act in a mutually beneficial way.
The worsening environment for the private sector must be made known to relevant institutions supported by evidence so that it can be addressed with continuous effort to alleviate it. Such common understandings could provide an opportunity to understand the real reasons for inflation and curb it.
The chamber needs to prioritize facts and show the exact situation of the private sector to the government. If we confront the government officials in a very constructive way, a solution will be found for most problems.

On the day you were to be elected the new President of Addis Ababa Chamber, I witnessed the incident where the former president of the Chamber, Zafu Eyesuswork Zafu was mistreated by the coordinators. He was the President of the Chamber and under his leadership he tried to promote the interest of the private sector. Even now as an individual he voices the concern of the private sector more vocally than the city as well as the national chambers. However, he was not allowed to enter inside the meetings of the chamber. Why is that?
I have few things to say about that. I know the Chamber follows rules and regulations. Rules and regulations should be adhered to. The Board has to implement the resolutions of the general Assembly meetings. As far as my knowledge goes the minimum quorum endorsed by the General assembly was 500 plus one and this one was not accepted by Ato Eyesuswork Zafu That disagreement was the basic cause for the situation.

Although Zafu Eyesuswork doesn’t have a company where he is a general manager, he is the largest shareholder and chairman of the Board of Directors of United Insurance. However, the Chamber wrote a letter to United Insurance telling them not to send Zafu Eyesuswork as its representative to the Chamber’s meeting. The secretary general of the Chamber instead signed a letter to the Insurance Company telling them to send a different representative other than Zafu. Does the Secretary General or the Board have the mandate to write such a letter?
For more clarity, the issue that was debated at the Board was what I said before. If you ask me what it will be in the future, every individual member of the Chamber has to adhere to the Chamber’s rules, and procedures. In addition to that, following the direction given by the last general Assembly meeting, the new board will commission a detailed study in order to clear such loopholes in the bylaws and present it to the next meeting of the members.

Zafu Eyesuswork has been vocal about the issue of what constitutes a quorum. The Chamber has more than 14,000 members and to fulfill the quorum, it needs 50 plus one in attendance. The Chamber has stated a regulation approved by the Board that if there are 500 attendants, then the quorum is enough to hold a general assembly meeting. However, for the quorum to be fulfilled, it needs more than seven thousand participants which will be difficult to manage especially during voting. So it seems logical to go for the delegation through representation. If the Chamber adheres to this, there will not be such a confrontation. Why didn’t the Chamber organize this general assembly based on constituency and on representation?
The proclamation that governs all associations including the Addis Ababa Chamber gave 100Pct power to the general assembly. The general Assembly delegates power to the Board. What I remember is that in the presence of Zafu Eyesuswork, the issue of 500 participants fulfilling the quorum was endorsed by the general assembly.

During the meeting, a large number of participants were from the sectoral associations. Why is that?
Every member was invited through newspapers, radio and television. I cannot comment on why more members came from sectoral associations and why others didn’t come. I don’t think there is a special reason for this. However, that incident has given me an obligation as a president. Why the majority of the traders are not coming to the meeting is another concern that we need to find out about.
If you noticed, the big business people also did not show up
Most of them did not. May be they are not getting good services, like they had expected, or they have different problems and those problems must be addressed. But interest in participating in the Chamber’s meetings is growing. Two years ago, the attendance of the general assembly was close to 600. This year it reached about 1,000.

Do you have anything to say to the private sector?
What I say to the private sector is that the existing free market economy policy has so many challenges that cannot be solved through individual efforts; therefore, we have to jointly address the challenges in consultation with government. So we have to come together and strengthen our Chamber to address this. We don’t have to sit outside and say this and that but we have to really empower the Chamber and clearly inform the government about what problems there are. I encourage members and non members to join the Chamber in advocating our common agenda and working toward a partnership with the government for the economic development of our country. AACSA is working to the extent of building its own headquarters in Addis Ababa which is a very promising step forward to strengthen our Chamber. We need people to contribute by focusing on the common agenda that we can talk about and then come up with joint solutions to the problems. EBR

2nd Year • January 2014 • No 11