Foreign national companies deviate from stipulated rules by engaging in investment areas which are not allowed for foreign investors based on the investment regulation.
According to sources, the number of foreign companies which are engaging in investment areas only reserved for local investors has been noted to be increasing from time to time, as various fields of business continue to boom in the country.
As sources who prefer to stay anonymous inform capital, the investment commission has also been made aware of the issue yet there has not been any legal action taken by the commission or other respective government authorities.
According to sources, foreigners from mainly Middle-East, Asia and European countries are said to be engaged in investment areas majorly in; Brokerage services, private employment agency services, producing bakery products and pastries for domestic market, hotel, lodge, resort, motel, guesthouse, and pension services, excluding those that are star-designated; Restaurant, tearoom, coffee shops, bars, and nightclubs.
As per regulation, investment areas not listed under Articles 3, 4 and 5 in the regulation which are Investment Areas Reserved for Joint Investment with the Government Investment Areas, Investment Areas Reserved for Domestic Investors, Reserved for Joint Investment with Domestic and Foreign Investors is said to be open to foreign investors which is subject to applicable by the law.
The investment regulation No. 474/2020 reserves 32 ‘Investment Areas’ only for Domestic Investors including banking, insurance and microfinance businesses, excluding capital goods finance business, Transmission and distribution of electrical energy through integrated national grid system, Primary and middle level health services, Wholesale trade, petroleum products, Retail trade, Export trade of raw coffee, khat, oil seeds, pulses, minerals, hides and skins, products of natural forest, chicken, and livestock including pack animals bought on the market; Construction and drilling services below Grade I; Hotel, lodge, resort, motel, guesthouse, and pension services, excluding those that are star-designated; Restaurant, tearoom, coffee shops, bars, nightclubs, and catering services, excluding star-designated national cuisine restaurant service, Travel agency, travel ticket sales and trade auxiliary services; Tour operation; Operating lease of equipment’s, machineries and vehicles, excluding industry-specific heavy equipment’s, machineries and specialized vehicles, Producing bakery products and pastries for domestic market, Barbershop and beauty salon services, smithery, and tailoring except by garment factories, Quarrying, Lottery and sports betting, Laundry services, Translation and secretarial services, Security services, Brokerage services, Private employment agency services.
Capital’s effort to contact investment commission authorities was not successful.
Foreign companies ditch rules to engage in booming businesses
Akobo Minerals eyes gold production for March
Akobo Minerals of Etno Mining discloses that it will declare an additional huge gold reserve from its exploration site at Gambella region, close to South Sudan’s border. The mining company revealed that it has its eyes set for gold production towards the end of the first quarter of 2023.
The company which has been engaged on gold exploration in the south west tip of Gambella region for over a decade secured a large scale gold mining license in September 2021 through the Council of Minister, for its first production at Akobo area, on the reserve that it found.
Tesfaye Medhane, General Manager of Akobo Minerals, said that the company has been engaged on exploration, and with the license its received the production of the precious metal is well on course.
“If you get three or four grams of gold from the crushing of one ton rock it is profitable but when it comes to our site we are expected to produce over 21 grams of gold from one ton of rock, which is a very high grade,” he explained showing that the site in contrast to the global mining sites was highly profitable.
“Currently, we are on the development stage to start production by the end of March,” he said, elaborating that at the initial stage the company will crush ten tons of rock per hour to mine the precious metal .
So far machineries that are vital to commence production have arrived at the site, which is 10 km from the South Sudan border and about 750 km south west of Addis Ababa. Similarly the company has hired IW Mining, a South African company, to operate the underground mine and transfer knowledge for local staffs, who will take over the operation when the contractor eventually leaves the site in the coming few months.
Tesfaye stated that the South African company has already started excavation with the quarry already prepared for crushing to mine the gold.
As Tesfaye explains, stemming from the information of about a year back, the approved reserve that was accepted by global advisor, SRK Consulting, was 52,000 ounces to which the company is set to start production.
The mining firm’s total exploration area is noted to be 182 km2, while the mining license it secured covered 16 km2 at the Segel Deposit.
The General Manager added that the company has got additional huge reserves on the exploration area to which the company is continuing to assess the precious metal, “We will declare the reserve amount as per the process we are undertaking.”
In the past about two years, the Norway based public listed company spent USD 20 million with expected additional investments of up to USD 30 million in the coming two years to expand the production.
He said that to lateralize the operation the region and wereda has provided strong support.
Umod Ujulu, President of Gambella, said that so far in his region artisanal miners are dominating the gold production, while Akobo Minerals is one of the two who are working to produce the metal on large scale.
He said that his regional administration is closely following the progress of the company, “the mining development will help to improve the locality life, the region and the country and in our end, we are providing our support for the company to embark its production.”
Gov’t discards rumors of official birr devaluation
Despite the value of birr depreciating every year by about 25 percent in the past few years, the government reaffirms that official devaluation will not transpire.
One of the hotly debated talks around town has been that government is under preparation to introduce a new round of devaluation on the birr against major hard currencies.
Some experts in the private sector and financial industry had put forth various notions stating that the government may apply a devaluation approach as like in 2010 and 2017 as a result of a push from global partners like the International Monetary Fund (IMF).
A big private manufacturing industry leader, who has vast experience in the financial sector, argues that international partners would provide support in connection with the peace deal agreed upon by the central government and the rebels in Tigray.
“When you get a fund as a nation, the state is also required to fill its macroeconomic position and revenue through different instruments, for instance, by emplacing a suitable fiscal policy. But when the country fails to fill or improve the revenue gap through tax or other instruments it may probably be forced to devalue the birr against international major currencies to keep the value of birr appropriate with hard currencies,” he told Capital.
On the other hand, some other sector actors argued that the government would not follow the previous experience of applying devaluation.
Of the lot believing that government will not take such measures is Eshetu Fantaye, President of Ahadu Bank, who stated that he does not expect the government to devalue the birr.
“I don’t expect government to resort to undertaking official devaluation but definitely crawling depreciation will happen,” Eshetu told Capital a couple weeks ago.
The president of one of the newly formed financial firms also recalled that in the past few years, the government had been following a policy to depreciate birr on a daily basis with gradual approach.
The bank president who demanded anonymity said that on average, the government depreciated the local currency by 25 percent every year. So if the devaluation would happen the change must be very big, he underlined stating, “In my view the government will follow through with the measures that is has been applying for the past three years.”
On his latest tweet, Eyob Tekalegn, State Minister of Finance and Board Member of the National Bank of Ethiopia, stated that there is widespread rumors that devaluation is in the making, “This is just a rumor. Completely unfounded.”
“A sensible macro reform is always our agenda but there should not be any concern about mere devaluation,” he said.
In 2010 and 2017 the government applied a 17 and 15 percent depreciated respectively, whereas when the reformist government came to power in 2018 it introduced the Homegrown Economic Reform Agenda (HERA), a three year economic plan applied from September 2019. The new government said that it will follow the fast depreciation until the exchange market gets to be governed by the free market by the end of the program, which currently has ended with HERA 2 being on the way to be introduced.
Because of the local and international pressure on the economy, the government was unable to apply a market led exchange rate as per the HERA. It is expected that the new exchange rate policy would be applied in the second HERA.
Rift between the rich, poor widens astronomically report reveals
The wealthiest people on the globe who account for only 1 percent of the world population grabbed nearly two-thirds of all new wealth nearly 60 percent of the world’s hungry population reveals a new Oxfam report.
New wealth worth 42 trillion dollars was created to the financial elite since 2020 which in perspective was almost twice as much money as the bottom 99 percent of the world’s population according to the report.
Billionaires have seen extraordinary increases in their wealth. During the pandemic and cost-of-living crisis years since 2020, 26 trillion dollars (63 percent) of all new wealth was captured by the richest 1 percent, while 16 trillion dollar (37 percent) went to the rest of the world put together. During the past decade, the richest 1 percent had captured around half of all new wealth.
A billionaire gained roughly 1.7 million dollar for every 1dollar of new global wealth earned by a person in the bottom 90 percent. Billionaire fortunes have increased by 2.7 billion dollar a day. This comes on top of a decade of historic gains the number and wealth of billionaires having doubled over the last ten years.
The report shows that billionaire wealth surged in 2022 with rapidly rising food and energy profits as 95 food and energy corporations had more than doubled their profits in 2022.
The said corporations made 306 billion dollars in windfall profits, and paid out 257 billion dollars (84 percent) of that to rich shareholders. At the same time, at least 1.7 billion workers now live in countries where inflation is outpacing wages, and over 820 million people roughly one in ten people on Earth are going hungry. Women and girls often eat least and last, and make up nearly 60 percent of the world’s hungry population.
The World Bank revealed that the world is seeing the biggest increase in global inequality and poverty since World War 2. As noted, most countries are facing bankruptcy, with the poorest countries now spending four times more repaying debts to rich creditors than on healthcare. Three-quarters of the world’s governments are planning austerity-driven public sector spending cuts including on healthcare and education by 7.8 trillion dollars over the next five years.
The report shows that taxes on the wealthiest used to be much higher. Over the last forty years, governments across Africa, Asia, Europe, and the Americas have slashed the income tax rates on the richest. At the same time, they have upped taxes on goods and services, which fall disproportionately on the poorest people and exacerbate gender inequality.
“While ordinary people are making daily sacrifices on essentials like food, the super-rich have outdone even their wildest dreams. Just two years in, this decade is shaping up to be the best yet for billionaires a roaring ‘20s boom for the world’s richest,” said Gabriela Bucher, Executive Director of Oxfam International.
Half of the world’s billionaires live in countries with no inheritance tax for direct descendants. They will pass on a 5 trillion dollar tax-free treasure chest to their heirs, more than the GDP of Africa, which will drive a future generation of aristocratic elites. Rich people’s income is mostly unearned, derived from returns on their assets, yet it is taxed on average at 18 percent, just over half as much as the average top tax rate on wages and salaries.
“Taxing the super-rich and big corporations is the door out of today’s overlapping crises. It’s time we demolish the convenient myth that tax cuts for the richest result in their wealth somehow ‘trickling down’ to everyone else. Forty years of tax cuts for the super-rich have shown that a rising tide doesn’t lift all ships just the superyachts,” said the Executive Director, adding, “Taxing the super-rich is the strategic precondition to reducing inequality and resuscitating democracy. We need to do this for innovation, for stronger public services, for happier and healthier societies. And to tackle the climate crisis, by investing in the solutions that counter the insane emissions of the very rich.”
According to new analysis by the Fight Inequality Alliance, Institute for Policy Studies, Oxfam and the Patriotic Millionaires, an annual wealth tax of up to 5 percent on the world’s multi-millionaires and billionaires could raise 1.7 trillion dollar a year, enough to lift 2 billion people out of poverty, fully fund the shortfalls on existing humanitarian appeals, deliver a 10-year plan to end hunger, support poorer countries being ravaged by climate impacts, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries.
Oxfam to this regard calls governments to Introduce one-off solidarity wealth taxes and windfall taxes to end crisis profiteering. Permanently increase taxes on the richest 1 percent, for example to at least 60 percent of their income from labor and capital, with higher rates for multi-millionaires and billionaires. Governments must especially raise taxes on capital gains, which are subject to lower tax rates than other forms of income. Similarly, taxing the wealth of the richest 1 percent at rates high enough to significantly reduce the numbers and wealth of the richest people, and redistribute these resources has been said to be essential. This includes implementing inheritance, property and land taxes, as well as net wealth taxes.
