ETHIOPIA: Finance mismanaged & more – 20th Jun 2024

Salaam salaam from BA! This is the Rorshok Ethiopia Update from the 20th of June twenty twenty-four. A quick summary of what's going down in Ethiopia.

Let’s start this edition with some economic news, Ethiopia's twenty twenty-three/twenty twenty-four fiscal year is coming to an end and various government institutions are reporting their annual execution to the House of People's Representatives. One of them is the Federal Audit Office which presented its annual report on Tuesday the 18th. Even though all the Ministers and some government officers were required to be present at parliament that day, only four ministers attended the session. The opposition criticized the lack of attendance, saying that the point of obliging ministers to attend the House was for them to see where they came short and what they can improve.

The report indicated that there was budgetary abuse and misuse among government entities. Some offices have used more than their budgetary allowances, while others have left a significant amount unused. For instance, the Ministry of Finance didn’t use about eight billion, which is over a hundred and forty million US dollars, whereas the Addis Ababa University used over two hundred and fifty million birr, which is four million US dollars, more than what it had been allocated.

Money isn’t the only thing being left unused. The Ministry of Agriculture revealed that a significant parcel of land given to private investors for development is not being used. As a matter of fact, private investors have developed only forty percent of the total land they received from the government. The State Minister of Agriculture said that investors haven’t been developed the lands because they haven’t been able to access loans as much as they needed. But the matter is more troubling when you find out that about half of the loans that the Development Bank gave out for use in the agriculture sector are non-performing loans.

The current administration has been preparing a legal framework to open up the banking sector to foreigners, It seems that the process is reaching its final stages as the Council of Ministers approved a draft law on the banking sector on Friday the 14th. Although the bill regulates various matters in the banking sector, the prominent provisions are on the opening up of the sector to foreigners and on mergers of banks. Note that the law is yet to enter into force because it needs further approval from the House of People's Representatives.

Still in the banking sector, the National Bank of Ethiopia issued five directives to regulate private banks better, aiming to improve risk management and enhance corporate governance. The Bank said that the directives will help develop the banking sector as well as incorporate international best practice.

The government is also working on another controversial bill which says that if an individual has acquired property using funds sent from abroad and fails to bring a receipt of the money remitted to Ethiopia, the property will be confiscated. Additionally, the bill enables the government to take away any property acquired with funds of unknown sources. The bill is heading towards the final stages of approval and was presented to the House of People’s Representatives for deliberations last week. The House voted to have the draft bill reviewed and referred it to the Legal and Justice Affairs Standing Committee.

Moving on, Purpose Black, a local share company engaged in agriculture, real estate and other business sectors, has had its bank accounts frozen by the Ministry of Justice. The CEO said that the company's and his personal bank accounts were frozen on allegations of money laundering. He added that there were no legal proceedings initiated on this count, and that he heard of the freezing from letters sent to banks from the Ministry of Justice. With the accounts frozen, the company wasn’t able to pay its employees or rent. Additionally, he said that freezing accounts is illegal because it hasn't been made in accordance with a court order.

The company currently has a capital of around two and a half billion birr, which is more than forty million US dollars.

Speaking of large companies, British mining company KEFI announced that it will begin production in Ethiopia in mid- twenty twenty six. The company acquired the site that it will be working on about ten years ago in the West Wollega Zone of the Oromia region. On Monday the 17th, the company said that early works had already started. This is Ethiopia's first industrial-scale mining project, the country's largest single export generator, and will create more than five thousand jobs.

The Tigray region, the northernmost part of the country, has been frequently ravaged with wars and drought. In response to this, there’s a taskforce instituted to procure and distribute food aid. However, the latest round of food aid bought had gone bad. The task force found this out when it was about to distribute it to some thirteen districts of the region. Officials of the task force said that they believe this was an intentional act and that they have referred the matter to the Food and Drugs Administration Bureau to pursue legal action against the supplier.

In other news, About three months ago, the government issued a law to regulate rent. According to this law, all rent contracts have to be registered with the municipality. After registration, landlords are not allowed to increase rent prices for the next two years.

However, Tenants are now complaining that landlords are sharply increasing prices, because they won’t be able to hike prices for two years. The city administration said that, even though it can't control these price increases, it will not register the contracts unless both the landlord and the tenant come to an agreement.

You know who else is thinking about increasing prices? Ethiopian Electric Power. The company said it wanted to revise its tariffs because it is currently working at a loss and hasn't made a profit in recent years. The price increase proposal will be presented to the public so that people can have their say.

The company currently owes more than three hundred and sixty billion birr in debt, which is six and a half billion US dollars, even though its capital has climbed to six hundred and seventy-two billion birr, which is almost twelve billion US dollars.

One of the biggest construction companies in Ethiopia, Ovid Group, says it has made significant progress in the Awar Corporate Social Responsibility Project, a project which the Prime Minister’s Office initiated. In this project, the group is building five blocks of eleven floor housing units built at a prime location close to the financial district and the national palace. The company said that it has completed seventy percent of the project in the last two months and will complete and submit the buildings by early August this year.

The President of Columbia University in New York Minouche Shafik announced that the University has appointed Ethiopian law professor Daniel Abebe as the sixteenth Dean of the University’s law school. His appointment will be effective as of the 1st of August this year. Professor Daniel has been serving as Vice Provost for Academic Affairs and Governance at the University of Chicago. The appointment comes in the backdrop of increasing student protests in US universities in relation to the Israel-Palestine war. Professor Daniel has advocated free speech in his tenure at the University of Chicago, and it will be interesting to see how he’ll handle such protests in his new post.

Aaand that’s it for this week! Thank you for joining us!

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