As expected, the ‘Africa Rising’ meme didn’t last long. It fizzled out like the morning dew. The flimsy euphoria fanned by the gullible natives and their foreign instructors lasted only a decade and half! Even though its unsustainability was predictable from the outset, our elites under the influence (of neoliberalism, developmentalism, etc.) were not willing to face the bitter truth about the complexity of development. Unfortunately and for the most part, the aim of politicos is temporary appeasement, to secure a few rounds of elections. A splurge of mostly useless/wasteful investment (plenty of white elephants) propelled by massive debt and cyclical commodity boom is not a sign of vigorously developing economies!
Indebtedness is/was bound to impose on the debtor all kinds of demands. Privatization, deregulation, liberalization and austerity remain the main impositions of creditors, mostly of the core countries. The overall effect of these programs is to undermine effective sovereignty. Our half-baked intellectuals are/were not capable of deciphering the intentions behind the ‘Africa Rising’ clamoring! After being liberated from the substantive elements of critical thoughts, our postcolonial elites succumbed to the systemic humdrum analysis unleashed by the well versed (upon us). Always praising the superficial reality of Africa’s phony progress, entrenched interests managed to derail non-conventional approaches to genuine and sustainable development. Making money from nothing, like the speculative appreciation of stock prices, (without adding value) is how the globally connected are making a killing in our financialized world. Ultimately, it is the likes of us who end up being victims of such financial manipulation, directly through elite promoted FIRE or indirectly through the various unequal exchanges of lopsided globalization.
In fact, many of our elites became the quintessential rent seekers, trailblazing FIRE (Finance, Insurance, Real Estate), as if there is no tomorrow. To help the whole scheme, credential-ism was made king. The difficult vocation of criticality was systemically neglected to make room for the prevalent dominant mediocrity. Meritocracy is/was detested by all and sundry and had to exit from the scene. The vacuous opportunists, including the politicos of limited vision and temporal objective have taken charge! The rent seeking elites still want to pursue comprehensive dependence, though it is preached as ‘arrival’, to the world of globalization. Neoliberalism’s financialization, which is facing serious challenges within the core countries, is still a sought after objective of our parasitic elites, who are comfortably settling in their domicile of FIRE! It seems Africa’s situation is akin to that of Yeltsin’s Russia, when there were no committed activists to challenge the daylight robbery of the Russian Motherland and its state.
The powerful global institutions of neoliberalism encouraged Africa’s latest immersion in massive debts with gusto! After all, in this highly financialized world of late modernity, the so-called development, geared by the logic of neoliberalism, can only lead to debt enslavement. Given this complex reality, wise leadership, not given to the usual establishment trappings, (like ‘Africa Rising’ bullock) is urgently needed. Committed and capable leadership festooned with scholarship and deep/diverse experience is a sine qua non to extricating African countries from their dead-end trajectories. Admittedly, such a high caliber leadership, somewhat similar to those leaders of liberation, is a very rare commodity, despite the proliferation of institutions of higher learning! In Africa, learned elites are a dime a dozen, but they can hardly articulate original policies on diverse issues concerning the continent. It is a clear and demonstrated absence of critical thinking that earns them their credentials and their salaries! One thing is for sure; our learned idiots are good at mimicking frivolous stuff. Unfortunately they import these junks, material or otherwise, to our relatively virgin continent. There will be a price to pay. Hyper inflationary consequences are surfacing all over the continent, without the leadership capacity to manage it (Zimbabwe, etc.)!
By undermining committed souls and their semi-organized activities, the compromised elites at the service of globally entrenched interests have fostered a robustly wholesome extremist tendency across the continent. Such unhealthy socio-economic reality is bound to be destabilizing and chaotic. Because of these and other aproblems, many countries in Africa have become increasingly fragile. The regions of the ‘Sahel’ and the ‘Horn’, countries like Nigeria, Congo, Zimbabwe or even South Africa, are encountering determined extremists with hardly much room for compromise. Continuous criminal accumulation of the elite, at the expense of the working stiff, is the root cause of the grievances fuelling unrest in places like Nigeria, Congo, Sudan and South Africa. Here is a lesson we can draw from the above experiences. Inequitable development, however glamorized by those who do not wish us well, is a short term parochial strategy bound to explode in insurgency, insurrection, disintegration, etc.!
This editorial was first published in 2019
AFRICA UNDER THE INFLUENCE
NBE to crack down black market cartels through incentives
The National Bank of Ethiopia (NBE) makes strides in cracking the whip on the parallel market as it rolls out a new incentivized scheme for those who provide intel on illegal actors.
The central bank believes that taking this step will be an additional instrument to stabilizing financial criminal activity that has plagued the country in recent weeks. Moreover, as the regulatory body continues to iron out the issue, it has called upon for source citation on the foreign currency sources for those involved on getting permits of import on the selected basic commodities accessed through the franco valuta scheme.
NBE has also stated that it has frozen 391 bank accounts in connection to involvement with the parallel market and illegal money transfer.
On Friday October 7, Yinager Dessie, Governor of NBE, along with his vices gave a briefing on the latest situation that the central bank has taken on the foul players of the illegal market, the contraband and tactics used by various cartels in money transfer.
The governor explained that they have been tracking, investigating and evaluating the illegal actors through their storm of activities on the black market in addition to their illicit financial flows and illegal remittance.
“The government has given a license for money transfer to companies which carry out their business smoothly through financial institutions. However, there are also licensed companies who are involved in the illegal remittance. There are also individuals who are working with other collaborators abroad engaging in illegal money transfer,” the Governor pointed out, adding, “As per the detailed study and investigations, as of Thursday October 6, we have suspended 391 accounts which have abuse the government system.”
He added that further legal measures through legal cases have been filed to the Ministry of Justice. According to Yinager, the collaborators of these illegal activities at the various banks will also be held accountable.
He also underlined that the government is taking several measures to stabilize the illegal activities.
One of the new instruments is the implementation of a new directive that provides privilege for collaborators who inform illegal actors to the regulatory body.
The Governor said that as per the new directive, NBE has facilitated reward payouts for those who provide intel on the foul players, citing that rewards will be got off the property of the illegal actors.
Yinager called on the public to provide intel on those seen depositing birr or foreign currency against the rule of the NBE and for those known for the malicious activity in illegal money transfer and parallel market involvement, and on those who accumulate gold illegally.
The other measure NBE has emplaced is the reinstatement of the franco valuta condition that was lifted on April 8 by Ministry of Finance.
As per the new decision individuals who want to import Edible oil, wheat, sugar, instant milk for infants, and rice should come up with the bank statements or source of the foreign currency.
The parallel market that has been on fire in recent weeks has sharply dropped for about a week plus now. Sources from Togo Wajale, a border town at Somali region, which is the major hub for hard currency fleet, said that the black market exchange rate shows a sharp reduction every day and it is now at about 78 birr per dollar.
Gov’t gives M-Pesa the nod as preconditions materialize
Government announces that it has granted Safaricom Ethiopia a license to operate its mobile money platform M-Pesa in Ethiopia after reaching agreements with the government of Kenya.
As sources disclosed, the two governments (Ethiopia and Kenya) were in discussions to grant the telecom company access to the mobile money market in the country. As indicated, the preconditions set by the two countries have been finalized on Thursday, October 6, 2022.
Likewise, Kenya’s newly elected President William Ruto paid a one day visit to Ethiopia and was in attendance at the Safaricom national launch.
Sources close to the issue indicated that up until the announcement of the go ahead by the Finance Minister, Ahmed Shide, the National Bank of Ethiopia was unaware of the decision.
Sources have declined to give details on the set of conditions and likewise the Finance Minister did not disclose them either.
“When I left Kenya for Ethiopia, I carried with me the assignment from my people, to come back with a Safaricom license. Thank you, PM Abiy for making this possible since I will now go back home having accomplished the assignment sent forth by the people of Kenya,” remarked President Ruto.
“A deal has been reached between the governments of Ethiopia and Kenya with regards to Safaricom being granted a license for mobile money services in the country,” said Ahmed Shide, whilst speaking at the national launching ceremony of Safaricom Ethiopia with the attendance of PM Abiy Ahmed, president William Ruto and higher officials from the two countries.
“You are now open to deploy your capacities on this very important service,” the finance minister stated.
Earlier this week, Anwar Soussa CEO of Safaricom Ethiopia, told capital that the shareholders are in discussion with the government.
“We are now working together with the central bank and the shareholders are negotiating with government on common grounds of understanding. We feel that we are edging close to finalizing the regulation,” said Anwar prior to the M-Pesa go ahead announcement.
Safaricom Ethiopia had earlier stated that it was participating in the consultation process with the national bank in amending the financial proclamation.
A few months back, the new telecommunications entrant announced that it has started to purchase equipment to operate M-pesa in Ethiopia, and owing to the fact of the country’s financial law not allowing foreign companies to participate in the financial sector, the company was awaiting for the national bank to amend the existing law.
The amendment of the proclamation was under pipeline and was expected to be ratified by the parliament soon since current working law doesn’t warrant foreigners to be involved in the financial sector.
Safaricom Ethiopia has now switched on its network and services in Addis Ababa and has rolled out a national launch ceremony following its network pilot success in 10 cities across Ethiopia.
Safaricom is the largest telecommunications service provider in Kenya with a market share of 64.6% and shareholders comprise the government of Kenya (35%), Vodacom (35%), Vodafone (5%) and free float (25%).
Currently, Safaricom- Ethiopia has registered 200k customers but the number will soon rise astronomically as it gears for a national customer base.
The upcoming Ethiopian Capital Market and the changing role of the Chief Finance Officer – high time to keep the house in order!
The Ethiopian Government passed a law to set up a local capital market with a clearly said aim of developing the national economy through mobilizing capital, promoting financial innovation, and sharing of investment risks. The Government has also setup a project team which has been working to draft proper directives for approval by the Board of Directors of the Capital Market Authority to supply detailed guidance and requirements to enable the effective implementation of the Capital Market Proclamation. Adhering to the capital market laws and the Board’s directives will primarily rest on those who seek the services of the capital market.
The Board of Directors of companies and CEOs aspiring to get their companies listed on the stock exchange, need to be initiative-taking in keeping their house in order so that the companies they list at the stock exchange can be sought-after companies for investment. Doing a good homework will also aid companies to get proper valuation of their shares during Initial Public Offerings (IPOs). Appropriate valuation of floated shares significantly benefits shareholders.
Once listed, companies need to regularly supply all required information to the market. Although there are diverse types of market intermediaries that work on public information and conduct their own due diligence, the existence of these intermediaries does not absolve the companies from their responsibility to provide timely, accurate and reliable information to the capital market. This will remain a continuous job of companies planning to do business in the market.
The size and importance of the task requires the assignment of the responsibility to a senior leader of management who is conversant with financial matters and can effectively function as the face of the company in the market. In many public companies, this role is filled by the Chief Finance Officer, Finance Director or sometimes Head of Finance. For this Article, I refer to this person as Chief Finance Officer.
To date the role of the Chief Finance Officer (CFO) or its equivalent in Ethiopia is limited to keeping and recording daily financial transactions, being a custodian of cash, paying taxes, dealing with the providers of finance, particularly with banks, preparing budgets, preparing internal and external financial reports and, to limited extent, keeping the financial health of the company through management of liquidity and solvency. However, in the rest of the world, the role of the CFO has significantly evolved over the last four decades and CFOs have become the most powerful executives next to the CEO often overtaking chief operation officers of many giant global companies.
When Ethiopian companies enter the new game and companies start getting listed in the stock exchange, the role of CFOs which have so far been limited to back-office functions need to be significantly enhanced with added and critical roles that are expected by the capital market. In this new setting, there should be little routine in the day-to-day duties of a CFO. CFOs need to streamline the systems and delegate the functions that perform standardized, high-volume processes, and shift their attention to high-level strategic issues that add value and competitive position of their companies. Among other things, this will require engaging with system experts and consulting firms to redesign the routine transactional processes which have been consuming the time of CFOs so far. Once this is done, CFOs will get time for high level work of planning, investment analysis, merger and acquisition, (which most local CFOs have none or limited experience), etc.
In relation to capital market, the CFO is responsible to submit quarterly and annual reports to the market on time. As described above, existing processes need to be streamlined and automated so that the CFO can quickly review and submits the quarterly report. In addition, unlike internal management reports which do not have a governing standard, external financial reports to be submitted to the market need to comply with acceptable financial reporting standards.
In Ethiopia, the International Financial Reporting Standards (IFRS) are adopted by the Proclamation issued in 2014 to become the national financial reporting standard to be complied by all public interest entities. Although the definition of a “public sector interest entity” as presented in the directive issued by the regulator – the Accounting and Auditing Board of Ethiopia – goes beyond listed companies in the stock market, listed companies will be specifically required to apply IFRS. So far, some of the public interest entities including financial institutions have converted their financial reporting framework to IFRS with the support of consultants. From now on, however, keeping abreast with the Standards and ensuring that financial reports are prepared accordingly and regularly need to be the key duties of CFOs. It should be noted that, compliance with IFRS is beyond the usual routine tasks that dominate many finance functions in the country now. CFOs need to ensure that a fully qualified accountant such as ACCA is placed within the Finance function. In the short and medium term, however, CFOs can get this support from reputable and knowledgeable audit/accounting firms which will significantly ease their burden of effective compliance with IFRS.
One of the criticisms leveled against capital markets is that they create a conducive environment for some actors to pursue short term-objectives at the expense of long-term growth and sustainability. Capital markets expectation from listed companies is a consistent increase in share price and pay-outs to investors. This is a battle to be fought by listed companies all the time. The CFOs need to balance the long-term interests of their companies against the temptation of satisfying the short-term whims of the market. In addition, CFOs should also protect their companies from hostile takeover.
In modern capital markets, it is not the CEO but the CFO who acts as a spokesperson to the markets on investors conference calls, at public presentations and in the media. Hence, CFOs are expected to be excellent communicators. Considering the backgrounds of many CFOs in Ethiopia, it is high time to ensure that companies that plan to list in the upcoming capital market arrange extensive media training to their CFOs.
Many companies in the country do not have a specialized function such as the Office of Strategy Management that leads the company’s strategy design and follow up for effective implementation. In the absence of this function, it can be argued that CFOs are best placed to steer a company strategy because of the significant useful information at their disposal and their training which emphasizes a data-driven approach to decision making. To raise themselves to the occasion and meet their big picture role, however, CFOs need to fight the old stereotypes surrounding the function which include number obsessed, penny-pinching, control freaks, bean counters and prove themselves that they can indeed think and act strategically beyond numbers and supply evidence based strategic insight. CFOs need to balance the tension between conservatism and control on the one hand and driving the business by partnering with operation leaders on the other hand, to promote growth of the companies they serve.
In conclusion, the maturity level of the finance function of most companies in the country, including that of many financial institutions, has a long way to go before it can achieve a world class status. In my view, companies that aspire to list in the upcoming capital market need to revisit their traditional finance function and embrace the changing roles of the CFOs in a capital market setting now rather than later. Following a deep due diligence on current practices of companies, it is possible to re-organize a world class finance function that reflect best practices within three to five years.
Solomon Gizaw is Chairman and CEO, HST. The views expressed in this Article are his personal views and do not represent the views of HST and its partners and directors.
