By Muluken Yewondwossen

The Ethiopian Investment Holdings (EIH) voices out bottleneck concerns over the highly anticipated proposed public procurement proclamation that has been submitted to parliament for confirmation.

Abdurehman Eid Tahir, CEO of EIH, stated during the meeting with the Public Enterprise Standing Committee on Wednesday, December 6, that an article requiring all organizations, including public enterprises, to follow the proclamation for their procurement process is included in the draft proclamation that seeks to amend the procurement and property administration proclamation no. 649/2009, which was issued in 2009.

According to him, it does not take into account the competitive hemispheric dynamics that public enterprise encounters.

“The laws that could impact their operations would not be included for public enterprises that are competitive with the private sector, including global payers,” stated the CEO. The much awaited draft proclamation has been in the works and under discussion for years.

It was supposed to solve a number of concerns that would have made it easier to combat unlawful activity and expedite government procurement, including e-procurement.

But according to EIH, “We are in danger if we include Ethiopian Airlines to be governed under the procurement proclamation, therefore it is inappropriate for public businesses.”

“We will use various tools to manage the businesses, but in order for them to become more competitive, they must have some degree of autonomy,” Abdurehman emphasized.

He informed Capital that while his organization had previously discussed the matter and believed it had been resolved, “We are now hearing that the case has returned back at its previous position.”

“We don’t know how it went back to square one, but the Ministry of Finance, which is the higher body for overlooking the government procurement administration, which developed the draft proclamation, and other pertinent government offices understand and support the businesses’ position,” he continued.

He pushed for the standing committee to be involved in the matter. According to Abdurehman’s first quarter report, the 26 public firms that are a part of the newly created SWF generated revenue of 250 billion birr during the first quarter of the budget year, which is 83 percent of the target.

Public enterprises as a whole made 36.5 billion birr in profit before taxes within the specified period, or 69 percent of the goal. The CEO emphasized that once the full year operational report is acquired, the true performance of the company would be fully understood.

According to him, Ethiopian Airlines, Ethiopian Petroleum Supply Enterprise (EPSE), and Commercial Bank of Ethiopia (CBE) accounted for 76% of the total income.

The CEO clarified that some companies, like Ethiopian Electric Utility, disclose their profit at the end of the year, which is one of the reasons for the lower profit compared with the target. “However, that will be corrected when they embark the quarterly reporting scheme,” he cited.

With respect to the profit-sharing companies, Ethiopian Airlines (ET) and Ethio Telecom contributed 80 percent of the total profit before taxes.

CBE’s portion of the profit was 7.5 percent, meaning that the combined profit contribution of the three firms was over 87 percent.

Ethiopian Pulp and Paper, Ethiopian Minerals Corporation, and Ethiopian Sugar Industry Group were the three businesses that did not make a profit during the reported period.

According to the Sugar Industry Group, the first quarter of the year was a major maintenance time, and was thus not operational. During the specified time, EPSE’s profit was 157.7 million birr, despite its revenue being one of the highest at 56.6 billion birr.

“The enterprise is a tool to supply energy for the economy, so even though it undertook reforms, the profit margin was almost zero, and we are not expected to earn a profit from it,” the CEO stated.

He continued by saying that EIH is interested in partnering on the oil depot project. In comparison to the same period last year, its profit and sales have decreased by 20% and 28%, respectively.

However, it has supplied more petroleum than expected in comparison to the same period last year.

The largest airline on the continent, ET, had a 55 percent increase in earnings in the first quarter of the budget year as compared to the same period of the previous year.

The airline achieved a profit before tax of 19.5 billion birr, representing 118 percent of the objective. Similarly, its income reached over 102 billion birr, up 21 percent from the same period last year. Between July and September, ET carried over 4.49 million people, which is 36 percent higher than the previous year and 102 percent of the anticipated figure. According to EIH CEO, the airlines requires a new airport because of Bole’s saturation and also because of a solution for fuel supply.

Regarding Ethiopian Shipping and Logistics (ESL), a prosperous company, the CEO said that it is prepared for the impending competition, “The industry will be open to other players soon.”

He asked the standing committee to assist ESL in regaining access to the accumulated payments that are owed to various government agencies and businesses.

The other portfolio, the massive insurer Ethiopian Insurance Corporation, has brought in 4.6 billion birr in income and is insuring property valued at 5.5 trillion birr, an increase of 86% over the previous year. In comparison to the same time last year, its profit before tax increased by 403 percent to reach almost half a billion birr.

According to the CEO, 23 out of the 26 portfolios had good book endings for the reporting time.

EIH has made it a goal to incorporate private parties, mostly international investors, in its investments in the chosen, established businesses, including greenfield ventures.

Among the targets that EIH plans to jointly invest in are the: Hospitality, Paper and Pulp, National Lottery Service, Ethiopian Tourist Trading Enterprise, a duty-free trading enterprise with stores at the airport and in the town, and Educational Materials Production and Distribution Enterprise.

“Investor identification will be carried out, and some of them have already begun,” stated Abdurehman, adding, “This will be followed by due diligence process. Furthermore, business optimization will be implemented on both greenfield and existing business investments.

According to the CEO, “Audit is crucial to have consolidating financial statement, which is key to attracting foreign investors.”

The CEO also elaborated that EIH has been conducting audits of the businesses to better understand their situation and plan for future capital investments.

With regards to capital increase, the EIH board has given Ethiopian Airlines permission to increase its capital from 100 billion to 300 billion birr in five years.

Abdurehman told Capital, “Its capital has already reached 200 billion birr, so we are confident it will attain the set amount in two and a half years rather than five years.”

The other EIH portfolio, Ethiopian Agricultural Business Corporation, received a capital increase from two billion to seven billion.

The state businesses under EIH’s management brought in a total of 924 billion birr in income during the previous budget year, with 115 billion birr in profit before taxes. The profit margin for the year was 12.5 percent, and the dividend paid was 19.2 billion birr.

ET, Ethio Telecom, CBE, EPSE, and ESL were the five public firms that accounted for more over 90% of the income. Financial services, manufacturing, trade, chemicals, utilities and connection, hospitality, real estate and construction, transportation, and logistics are also all included in the EIH portfolio.

By our staff reporter

Graced by the president of Djibouti, the Djibouti Chamber of Commerce hosts the opening of the Third Edition of the Djibouti International Trade Fair on December 3, at the Exhibition Center in Red Sea World.

The chamber, which previously held two successful trade shows before the Covid-19 outbreak, had gone on a hiatus for three years stemming from the pandemic.

The event, which showcases advancements in each edition, this year, attracted a diverse range of attendees and exhibitors from across the globe.

The Ethiopian Ambassador to Djibouti, Berhanu Tsegaye, disclosed that prominent government figures, such as President Ismaïl Omar Guelleh, Prime Minister Abdoulkader Kamil Mohamed and First Lady Kadra Mahamoud Haïd, visited Ethiopian products and services during the event.

The Ethiopian night was celebrated as part of the trade fair, with the presence of Youssouf Moussa Dawaleh, the president of the Djibouti Chamber of Commerce. The ambassador at the ceremony stated, “Along with the 3rd International Trade Fair, we are pleased to explore new business and trade opportunities in Ethiopia.”

President Guelleh, who opened the fair, said such platforms offer Djibouti “the image of a country where tradition and modernity coexist in an atmosphere of conviviality and of fraternity, a country proud to embody the values of peace, freedom, tolerance and solidarity in its identity.”

As Lanation reported that the president welcomed the increasingly obvious enthusiasm generated by the Djibouti international fair, “and put this positive aspect down to the natural vocation of our country to serve, given its geographical position, the crossroads of several continents, a pivot in regional and global trade.”

In his speech, President Guelleh also cited the structural assets and comparative advantages conferred on the country as eminent factors militating in the direction of the attraction which reflects on the business communities of brotherly and friendly countries.

“It is these structural assets and its comparative advantages which create a favorable ecosystem and make Djibouti a privileged destination for doing business in complete freedom and security,” declared the President.

“The Government is sparing no effort to implement reforms, whether macroeconomic, sectoral or legal, in order to create a climate of confidence conducive to investments,” indicated the Head of State.

President Guelleh also took advantage of his speech to emphasize how the Djibouti international fair goes in the direction of adaptation to a world increasingly marked by a process of economic interdependence.

“No country can claim today to prosper in self-sufficiency,” remarked the Head of State, who called for the current interdependence of economies to, “leave room for fully assumed regional integration of our economies”

“The political frameworks for regional and continental integration which are supposed to lead to a single market have been established. This is obviously COMESA and the Continental Free Trade Area,” applauded President Guelleh, reiterating the availability of, “Djibouti to serve as a strategic platform to contribute to considerably increasing the volume of intra-trade. African.”

By Muluken Yewondwossen

The financial heavy weight bank, Commercial Bank of Ethiopia (CBE), drops disbursing new loans to public firms by 94 percent. Savings also drop by 56 percent in the first quarter of this fiscal year, in contrast to the same period of last year.

The financial powerhouse, which controls about half of the market share in the banking sector, revealed that it had significantly lowered the amount of new loans it was disbursing to public firms in the first quarter of the 2023/2024 fiscal year, a move that was applauded by President Abie Sano.

The government’s main financial arm, the commercial bank, has been arguing that funding the public sector reduces its ability to compete in the market.

To this end, the state giant’s leadership suggested easing some of the burdens placed on it so that it can restructure itself to properly compete on the market with interest rates like its private counterparts.  

As per the directives of the government, CBE’s loan disbursement is directed towards the private sector, as assessed by the macroeconomic team and recently declared by the government, according to Abdurehman Eid Tahir, CEO of Ethiopian Investment Holdings (EIH), a sovereign wealth fund (SWF) in charge of managing 26 large public enterprises including CBE.

He stated that, in the past, the public sector received the majority of loan disbursements; however, this is no longer the case, “For instance our enterprises loan proportion is very minimal.”

“The government created the SWF to resemble the private sector, which forces our businesses to compete in the market,” he continued.

CBE has disbursed 44.6 billion birr in additional loans in the first three months of the 2023/24 fiscal year, up 116 percent over the same time in the 2022/23 fiscal year, but only reaching 63 percent of its target.

According to Abie, the majority of the loan was given to state businesses that had a significant impact on CBE rather than private sector players. This let CBE escape the market and competition and resulted in it losing its private sector clientele.

Public companies obtained loans from the bank with the lowest interest rate, but they failed to make regular loan repayments. According to him, throughout the past two years, there has been a significant decline in the quantity of loans granted for state enterprises.

The financial sector guru Abie said, “In the first quarter of last year, the bank disbursed 5.9 billion birr loan for public enterprises, which is 356 million in the current quarter.” When comparing the amount to a similar period last year, the percentage was at 6 percent.

According to the president, “In total, CBE has released 44 billion in the quarter, compared to 15 billion the previous year. Of the stated amount, 22.8 billion birr was allocated for fertilizer, which we considered to be a private sector loan. Its noteworthy that due to the late start of fertilizer purchase, it was 5.4 billion a year ago.”

The private sector obtained a commercial loan of 21 billion birr that was nine billion birr a year earlier. According to Abie, “The bank’s biggest challenge is still the loan that was disbursed for the public enterprises in the prior years.” According to Abie, the majority of foreign exchange is allocated to key commodities that are mostly managed by government agencies.

The state bank allotted USD 2.6 billion for the import of products and services throughout the quarter. Petroleum imports accounted about half of the foreign exchange indicated. Eleven percent went for public projects; the remaining nine, eleven, and 19 percent went toward government transfers, public projects fertilizer and the private sector, which either manages government projects or spends its own foreign cash has accessed 11 percent of the foreign currency that CBE allocated in the period.

In terms of foreign exchange generation, the bank was able to obtain USD 829 million within the specified timeframe.

Ninety five percent of the objective was reached by CBE in the first quarter with revenue of 31.7 billion birr, an increase of 6 percent over the previous quarter.

Profit before taxes was 2.7 billion birr, in a similar vein. The performance has increased by 39 percent over the previous year’s profit and only 57 percent of the objective has been reached. The CEO of EIH stated, “CBE should work on cost minimization to meet the target.”

“As a sector, savings have fallen by 56 percent from the same period last year, but they have only reached 14 percent of their aim. One of the issues is the state of the economy,” the CEO stated.

In terms of non-performing loans, it demonstrated encouraging performance, allowing it to decline by 33% from the previous year and reach 96% of the goal for the time frame.

According to Abdurehman, “CBE is the government’s financial arm that handles projects and public enterprises, which has big contributions for EIH portfolios.”

Abdurehman informed Capital stating, “We are evaluating to expand the capital” in reference to CBE’s situation, which is not at what it should be. The strategy calls for increasing CBE’s capital from its present 40 billion birr to 250 billion birr over the next five years.