Ethiopia’s business network gears to bounce back from the fall out of AGOA, a partnership that lasted for the past 20 years, courtesy of the “African Sourcing and Fashion Week” which is said to be of great importance to the industry.
It can be recalled that the United States in January 2022 terminated Ethiopia, Mali and Guinea from the AGOA trade preference program due to actions taken by each of the governments in violation of the AGOA Statute.
This event, which involves more than 300 exporters representing more than 25 countries, is expected to be attended by more than 6,000 industrial raw material supplier experts and an international audience.
Goshu Negash, president of the Ethiopian Textile and Garment Manufacturers Association, in an exclusive with Capital regarding the importance of African Sourcing and Fashion Week (ASFW) to the African Growth and Opportunity Act (AGOA), said, “Even though we tried to continue with AGOA, it failed. The ban has allowed them to use other domestic proxy products as well as European market options.”
The event is said to provide an opportunity for more than 30 African designers and international buyers with Ethiopia in the mix to strengthen its network and brand.
The 75th anniversary of the Universal Declaration of Human Rights was celebrated in Ethiopia through a double theme, “Reinvigorating Civic Space and the Media Landscape Space in Ethiopia Post-2018” and “Accountability for Violations of Human Rights and Humanitarian Law.”
As Albab Tesfaye, Director, Office of the Chief Commissioner EHRC, informed Capital in an exclusive, “This year’s conference is different because the representatives of the Ethiopian government will present commitments on the 75th International Declaration of Human Rights, which is scheduled to be held in Geneva on December 11 and 12, 2023.”
Human Rights Day is celebrated worldwide every year on December 10, 2023, marking the 75th anniversary of the Declaration.
Human Rights Day captures all the moments from this year’s commemoration and seeks to raise awareness of the universal and inalienable nature of human rights, especially among young people, to inspire people to create a collective humanitarian movement that will allow them to fight for and take their rights.
Industry analysts alert that unlawful import activities are costing the nation billions of birr in customs duties. Stakeholders on their end back the claim and are in outcry over the illegally imported rebar which is punching down on the country’s economy in addition to pushing local manufacturers out of business.
As local manufacturers alarmed during the emergency meeting of the Ethiopian Association of Metal and Engineering Industries (EABMEI) on Friday, November 3, their businesses are being negatively impacted by rebar that is being illegally imported.
Some of the attendees at the conference, according to sources close to Capital cited their involvement in the manufacturing of rebar and galvanized iron sheets with over 50,000 employees. At the meeting, they voiced their outrage at the illicit behavior that is now the subject of legal proceedings.
They claimed that a number of people are importing large quantities of the specified metal goods while only paying little customs duties.
Some of the participants, citing sources, declared, “We are going to shut down our factories,” while others, including international investors, lamented, “We are unable to fulfill our obligations under bank loans.”
According to experts, a sizable quantity of rebar, primarily from Iran, Oman, and Egypt, is now available in Djibouti. “These consignments imported through franco valuta are documented with very small amount of invoice, while the majority of rebar with the cover of customs document are being imported in a huge amount but are produced in the stated countries,” they added.
As experts depicted, “Even in cases where the invoice is extremely small, the Ethiopian Customs Commission typically determines the duty based on international price, a benchmark that the commission subscribes to calculate goods real value.”
Industry experts told Capital, “However, based on our most recent observations, some people are importing enormous amounts of rebar and other metals, but the levy imposed on the good is almost zero, which contributes to craze the market and pressure manufacturers and legal importers.”
“The declaration is only helping the cargo to seem legally imported,” they pin pointed.
For example, according to the declaration submitted for the import of 120,000,000 kg, or 120,000 tons, of rebar, the total duty is 745 birr per ton, or 89.4 million birr.
The 120,000 metric ton of rebar, according to the declaration copy that Capital received and issued for the consignee Bekri Abdi Reshid, is worth little more than USD 1.9 million in total, but specialists claim that there is no rebar pricing of this scale anywhere in the world.
However, according to experts, the customs commission should compute the duty in accordance with the international rate that it charges others. They said, “The importer is supposed to pay over 4.1 billion birr if the duty is properly paid.”
According to one of the several customs declarations that Capital was able to get showed an importer called Ezedin Mahmoud Hassen who imported 300,000 metric tons of rebar with a single statement for only USD six million, but it was actually worth over USD 261 million.
According to the customs record, the importer was required to pay a customs charge of 276 million birr, or 920 birr for every ton of rebar. Experts contended that the importer, who is not well-known as a businessman in Ethiopia, should really pay a charge exceeding 10 billion birr.
According to Ezedin Mahmoud’s business license paperwork, he is an Australian, and holds a license with a capital of two million birr, obtained around a month before the shipment was purchased. Industry analysts noted that in addition to this significant import, businessmen need to be well-known throughout the nation, as he presents a fresh image in the industry and “creates suspicion there is some huge power in the underground besides this illegal activity.”
On the other hand, Capital has also seen a customs declaration that was filed for a well-known import and export company. The paper states that the company paid customs duty of 34,576 birr per ton of rebar.
One of the rebar industry pundits said, “This figure shows how the illegal imported rebar is affecting the country revenue, manufacturers, and those who are doing their business properly.” According to the document’s observation, Capital acquired a firm that claimed to have lawfully imported a shipment of around 343 metric tons of rebar for a total customs charge of almost 12 million birr.
An importer told Capital, “The illegal business is damaging not only the industry or the government revenue but other importers who are trading properly.”
Two million metric tons of all kinds of metal goods are needed annually in the nation; the share of rebar is one million ton. Experts claim that the number of illicit imports is so great that it will completely eliminate the business of local producers.
The recently set up fund, the Ethiopian Deposit Insurance Fund (EDIF), which ensures the safety, soundness, and stability of the Ethiopian financial system, announces that it will reimburse foreign currency depositors through birr.
The fund which became operational in April 7, 2023, pointed out that in the event that it has to reclaim its investment in the central bank’s Treasury bills (Tbills); it has been raising the issue with the National Bank of Ethiopia (NBE) on a repurchase agreement (repo).
According to a statement disclosed on October 2 by Solomon Desta, the vice governor for financial institutions supervision at NBE and head of the EDIF board, the fund has officially begun to function in order to safeguard the public’s deposits held in financial organizations, particularly banks and micro financing institutions (MFIs).
He declared that the fund will cover any kind of deposit up to 100,000 birr. According to NBE data, as of the end of March 2023, the total amount of deposits mobilized by MFIs and the banking system was above 2.12 trillion birr.
NBE said on Tuesday that there were 129.52 million deposit accounts as of June 2023, up from 98.59 million in June 2022. It’s unclear, though, if this data includes savings accounts at MFIs or not.
Solomon contended that although the majority of the public will be covered by the coverage amount, over 95 percent of depositors have savings of less than 100,000 birr. Other arrears could be covered by the financial institution’s dissolution revenues, according to EDIF’s founding CEO Merga Wakweya.
Solomon and the CEO both stated, “The coverage shall be growing likewise, gradually, when the fund capacity expands.”
Banks, including the government-owned Commercial Bank of Ethiopia (CBE), are required by law to pay the first 0.04 percent premium payment. Additionally, MFIs are required to pay an initial fee of 30,000 birr.
On the other hand, financial institutions must provide a yearly premium equal to 0.3 percent of deposits. Through the EDIF, which was established in March, with operations kick starting on April, 1.6 billion birr was mobilized in the first quarter of the 2023–2024 fiscal year.
“We have targeted to mobilize a six billion birr premium from financial firms for the current financial year which will be closed on June 30, 2024,” Merga added.
Of the total amount raised, the fund has invested 1.5 billion birr in Tbills; the remaining funds have been placed into the interest-free Mudarabah investment account at CBE.
The fund stated that Tbills will be its main focus for resource investment. The CEO stated, “At this point, it’s a good place to invest our resources; and future operations will entail research.” According to Merga, 1.5 billion birr are now being invested on 184 maturity days at Tbills, which are issued by NBE every two weeks, with a market-based yield. He said, “We chose the 184 because we received an attractive yield on the Tbills auction.”
The fund is now in negotiations with NBE, the fund’s higher authority, to establish a repo agreement in case of emergency. “We will access the money we invested in Tbills prior to the maturity date, but without interest, if we suddenly need it.” But in accordance with the World Bank’s advice, which guided the scheme’s creation, we are in talks with NBE to obtain funding through a repo arrangement,” Merga clarified.
In a repo arrangement, wherein the borrower temporarily lends an investment to the lender for cash with an agreement to buy it back later at a predetermined price, investors will be able to receive income from their investments as long as they withdraw them prior to the maturity date.
Ethiopia hasn’t, however, yet put this kind of scheme into action.
The CEO informed Capital that in the meantime, savings and accounts in foreign currencies exist, and in the event of coverage, the fund will settle the payment in local currency.
“There is a similar trend in other countries,” he explained.
The fund said that foreign banks that will come to the country will be part of the new insurance scheme.
The fund stated, “They will pay the premium on birr since they are investing in the country and mobilizing savings in local currency,” as the government gets ready to allow international institutions into the banking industry.
NBE statistics indicates that in the third quarter of the 2022–2023 fiscal year, there were 46 MFIs, mobilizing approximately 24 billion birr in savings deposits, indicating an annual growth rate of 16.9 percent. During the same time frame, the banking system’s total deposit liabilities reached 2.1 trillion birr, representing a 29.3 percent annual rise. 200 million birr are used as the capital to create the EDIF.
The World Bank and IMF, among other foreign partners, have advised the government to implement the plan for a number of years in order to establish the fund. The regulation that the council of ministers passed in 2021 was followed by the creation of the fund. The fund located at the headquarters of Zemen Bank now employs four people, but that number is anticipated to rise to twenty.
According to the CEO, the fund could require highly trained workers, but it won’t need to hire any more staff. Instead, “We may assign agencies the same way other funds are doing in other countries in case resolution issues happened. If resolution authority is available, we can collaborate with them; otherwise, a large team is not necessary,” Merga expounded.
