AGRA has provided three documents to officials of Ethiopia that emerged from joint programs in Ethiopia. The documents support the Government of Ethiopia in investment prioritization and implementation of three flagship programs. These programs are designed to promote local production, marketing and consumption of four critical agricultural items; wheat, rice, oil seeds and animal feed. The flagship programs were designed through a consultative process spearheaded by AGRA and the Ethiopian Government and involved private sector, civil society, and development partners.
The flagship documents have been designed in accordance with the governments’ policies to reduce the import of commodities by enhancing local production, which is one of the focus areas of the Government of Ethiopia.
The three flagship documents titled – the National Wheat Flagship program (NWFP), the National Rice Flagship Program (NRFP), and the Oil Seeds and Animal Feed Production Flagship Program (OSAP) will support investment and implementation of the country’s vision leading towards food sovereignty and security.
AGRA supporting Ethiopia to design approaches for attracting investments
Emirates to suspend Nigeria flights from September over trapped funds
Dubai’s Emirates will suspend flights to Nigeria from next month over an inability to repatriate funds from Africa’s most populous nation, the airline said on Thursday.
The decision highlights the difficulties faced by international carriers that fly to Nigeria, which is one of the biggest markets in Africa for several of them.
The country has restricted access to foreign currency for imports and for investors seeking to repatriate their profits due to a shortage of dollars. Nigeria gets about 90% of its foreign exchange from oil, but is struggling to produce due to pipeline theft and years of under-investment.
The International Air Transport Association said in June Nigeria was withholding $450 million in revenue that international carriers operating in the country had earned.
Kamil Alawadhi, IATA’s Regional Vice President for Africa and the Middle East in a statement said “IATA is disappointed that the amount of airline money blocked from repatriation by the Nigerian government grew to $464 million in July. This is airline money and its repatriation is protected by international agreements in which Nigeria participates.”
FUELING ETHIOPIA
Ethiopia as a country in the last decade has been on a rise, both from an economic stand point and a population stand point. As a result, Africa’s second most populous country has cemented its status as the continent’s fastest growing economy.
Moving parallel to this is the demand for fuel, and as a result oil infrastructure including terminals, storage tank farms, pipelines and other related logistics are undergoing expansion and construction out of necessity.
A nationally registered public enterprise that is the sole importer and distributor of sustainable refined petroleum products to the country, Ethiopian Petroleum Supply Enterprise (EPSE), has been responsible for facilitating a significant spike in usage that has arisen in recent times.
Owing to the recent challenges in shortages in petroleum products on the market, Capital reached out to Tadesse Hailemariam, Chief Executive Officer of EPSE, and an experienced individual with a demonstrated history of working in the oil and energy industry, for insights on what it takes to fuel Ethiopia as the economy continues to evolve. Excerpts;
Capital: What are your views on the recent shortage of petrol in the market?
Tadesse Hailemariam: Petroleum shortage in the market is manmade which technically is an evil and totally an acceptable approach, in terms of business acumen. There is no convincing reason to explain the shortage, apart from it being manmade. It is a manmade problem created by stations and sellers.
It is shameful and a wrong act which is creating misery on people’s day to day life. Of course we all have various means of obtaining money; however, this mischievous act is not fair.
The government is importing fuel properly with no stated decrease on the amount; however, the main problem comes after it is shipped from Djibouti with trucks, which are not arriving to its allocated destination. And it is a known fact that it has a huge rippling impact on the daily life of people.
Capital: What is your assessment on the control mechanism being taken? How are you as an enterprise working with other stakeholders with regards to truck monitoring?
Tadesse Hailemariam: To some extent there is lack of proper follow up of owners on trucks carrying petroleum. On our side, we send all the required information to different stakeholders on each and every truck as soon as they start their journey to their destination from Djibouti. For example, a truck could take up to a maximum of 4 days to reach Addis Ababa; and for us, we send information about the truck when it starts its journey to the trade office and if that truck doesn’t reach its destination on time, the trade office may inquire the oil company at any given time.
However, most of them (trade bureaus) fail to do this. This may be because they are connected with the traders which benefit them or its negligence to serve the community on their part.
The government is importing oil with its limited foreign currency with this chaotic global situation. Lots of countries’ governments are stopping subsiding gas and reducing their import proportion, thus I believe stringent measures ought to be put in place.
Capital: How can it be solved?
Tadesse Hailemariam: In my opinion, government should work more on creating awareness. The relationship between the government and the public should not be limited to social media. I believe awareness creation is integral to finding solutions to the issue.
If we conducted an economic analysis even on the recent shortage in the market, you will note that there was no interruption in the supply rather by a situation created by greedy traders to which the country losses significant amount of money to. There were situations where the public faced difficult to move, factories had been interrupted and so on; however, the public didn’t know the fact on the side of the government. This has to change. The public has to ask oil companies, transporters and stations too not only the government. Thus there is need for awareness creation and information provision to this regard.
Capital: Where does the country source its oil?
Tadesse Hailemariam: We have 2 procurement modalities. The first one is by Bid from the Saudi government refineries which is 50 percent of gasoline and petroleum and the other one is from the Kuwait government oil companies (corporations).
Capital: How has the Russia-Ukraine war affected the supply?
Tadesse Hailemariam: The war doesn’t directly have impacts on supply rather it has affected us on pricing as the price of oil has increased since the war occurred.
On our side, so far we have a good supply amount. However, the price of crude oil has highly increased after the outbreak of the war. One reason for this is that before the war, European countries used to get oil from Russia; however after the war most of the European countries have turned to the Middle East. Thus this creates a shift in the supply demand curve and as a result the price points become higher. Europeans countries always have a change in strategy to get out from a sticky situation. We could similarly have strategies as well for our own sustainability.
Capital: What are the possible solutions for sustainability?
Tadesse Hailemariam: The public should understand that this situation is worldwide and should be calm. We should take strides to understand and analyze the situation from both the government and the private companies’ side. We are working to stabilize the supply and we have enough supply until next year.
Nonetheless, the public should have proper usage of the oil as the world is suffering with supply shortage.
Capital: Do you think removing the subsidy could decrease illegal smuggling of oil?
Tadesse Hailemariam: Of course, it will decrease as it will equalize the price with neighboring countries. If the government removes the subsidy fully, diesel could reach up to 80 birr while petrol to more than 75 birr. However the government is not planning to do it, considering the current economy and inflation.
Capital: For comparison, the 2020/21 versus the 2019/20 shows that the import volume was lower but the price was higher, why is that?
Tadesse Hailemariam: Compared to the previous year, the annual petroleum import bill of the Government has increased by close to 19 percent during the last budget year, 2020/21, reaching an all-time high of 72.60 billion birr. In the previous budget year (2019/20) ended July 7, 2020; Ethiopia spent a total of 62.05 billion birr to purchase close to 3.87 billion metric tons of petroleum.
The decrease in volume is because of the war in the northern part of the country. We didn’t send a single liter of oil to Tigray region and this has decreased the volume we imported. Additionally, the increase in price is because of the increasing price of gas in the world.
Capital: EPSE is now one of the 27 companies under the Ethiopian Investment Holding (EIH), could this make changes to your operation?
Tadesse Hailemariam: The investment holding was established to administer the national wealth in an organized way, in order to help support government development agencies to strength their weakness in financing development projects; in addition to creating wealth for the current and future generation of Ethiopia.
Being under the EIH umbrella will help us to solve certain challenges, such as the shortage of depots, which we face. We have been planning to build a depot at Dukem at a cost of 150 million dollars. However, it was difficult to get financing and EIH will be instrumental in achieving this and in also revising our plan to build governmental gas stations under its management. Having governmental gas stations will stabilize the market as it creates competition between the government and the private sector, especially at a time where man made shortages have bewildered the market, while underlining the merits of the governmental gas stations.
In 2015, we had been planning on joining the fuel distribution markets in the country and had identified 60 of the 130 locations in which we planned to establish the gas stations across the country. It was the hiatus of the Addis Ababa city administration which refused to give land for the construction.
Capital: How is the enterprise working to solve challenges related with Depots?
Tadesse Hailemariam: Currently, we are using the horizon port to import fuel and oil depot at the port is not at the capacity to handle our increasing supply.
Recently, Ethiopia and Djibouti signed a Memorandum of Understanding (MoU) to explore joint opportunities for the development of an oil storage facility in Djibouti’s Damerjog Industrial Park which is a joint development of oil storage terminals in Djibouti which will ultimately increase our storage capacity. Potentially, there is the Ethio Djibouti Railway SC (EDR) though not connected with Awash Depot it has 110 tankers and can provide storage if we connect the line with Awash. When connected, we shall easily transport fuel to the country from the fuel port in Djibouti, which is called the Horizon Djibouti Terminal and at the same time our daily fleet to Djibouti would be increased by threefold if the oil cargo transport was commenced. Hopefully this will be done in the coming 18 months. Additional to the existing tankers, we need 300 tankers.
Moreover, we are planning to build Depots in Dukem and Diredewa and also in Weldiya using the Awash-Haragebeya railway. Additionally, we are working to diversify our ports as we have plans to use Port Sudan to import oil and to store in Gonder using an oil-pipe. Considering that all our plans are under EIH, this will help us to smoothly succeed in our plans.
As demand is increasing supply has to increase inline.
Capital: Is there anything you want to add?
Tadesse Hailemariam: One thing I would like to reiterate and sensitize is that human interference and artificial problems are highly disturbing the market. Both government stakeholders and the public should know this and strengthen the control over illegal and greedy traders.
SMSE and ECommerce
Recent socioeconomic progress in Africa has occurred in the context of ubiquitous information and communications technologies (ICTs). According to the International Telecommunication Union 2021 data, 67 percent of African population, estimated to be about 1.13 billion, now has mobile phones and 26.5 percent are now using the Internet. Policymakers and African development partners foresee a lot of possibilities in the opportunities made available by ICTs in the continent’s effort to stem widespread poverty and in the role of small and medium-sized enterprises (SMEs) in that effort. In this context, over the last decade, African countries placed high priority on the development and implementation of national ICT policies and plans.
According to the United Nations Conference on Trade and Development (UNCTAD), SMEs account for 60 to 70 per cent of all employment in developing countries, and hence contribute to poverty reduction. In this regard, many countries in Africa have given high priority to the growth of SMEs. Kenya, for instance, released a major strategic plan, known as Vision 2030, in which ICTs and SMEs have been identified as major driving forces for its realisation. Similarly, Ethiopia, in its Growth and Transformation Plan has given top priority to micro and small enterprises, targeting to create employment opportunities for more than three million people and aiming to boost access to ICTs.
In recent years, the role of SMEs in economic development has grown in importance in Africa as the continent’s economic transformation gained momentum. Many countries are directing their strategic development towards industrialization through the growth of the local SME sector. The importance of SMEs in development and poverty reduction cannot be over emphasised.
According to UNCTAD recent data, these enterprises represent 99 per cent of all firms in developing countries, as well as play a significant role in creating employment opportunities. Another key factor supporting the need to focus on SMEs is that they tend to adapt more easily to technology compared to large enterprises. The adaption process in large enterprises is often slowed by a bureaucracy and a stricter hierarchy involved in making decisions. When SMEs are able to see the added benefits of using ICTs, they are more willing to adapt their businesses strategies.
The results of two e-commerce readiness assessments carried out in the Gambia and in Ethiopia under the Economic Commission of Africa (ECA) strengthen this proposition. Both studies suggest that there is general awareness of the potential in using the Internet for commerce among SMEs. Furthermore, due to widespread coverage and use of mobile phones, mobile commerce now provides more opportunities for SMEs, especially in rural areas.
For example, a study found that after remote communities in Uganda were provided with access to a mobile network, the share of bananas sold rose from 50 to 69 per cent of the crop. Established by TradeNet, Esoko, a company in Ghana, provides a mobile and web-enabled repository of current market prices and a platform to enable buyers and sellers to make offers and connect to one another. The World Bank report revealed that in this regard, a recent study of farmers with small landholdings in northern Ghana found that farmers had experienced a 10 per cent increase in revenue after they began receiving market prices from Esoko in the form of a short message service (SMS).
Goldman Sachs reported that globally, e-commerce sales are growing more than 19 per cent a year. Compared to large enterprises, SMEs have a low share of the global e-commerce market, however, they are increasingly adapting to the growing technological revolution and benefiting from the global online market.
E-commerce involves the sale or purchase of goods and services by businesses (business to business), individuals (business to consumer), governments (business to government) or other organizations, and is conducted over computer networks. It builds on traditional commerce by adding the flexibility and speed offered by electronic communications. This can facilitate efforts to enhance operations that lead to substantial cost savings, as well as increased competitiveness and efficiency through the redesign of traditional business methods.
Different studies indicated that both SMEs and large businesses have benefited from the adoption of e-commerce. Such benefits, inter alia, includes lower transaction costs; reduction in advertising and promotion costs; rapid communication between buyers and sellers; ability to reach new customers; shortening the traditional supply chains, including minimising transport obstacles and reducing delivery costs; and eliminating physical limitation of time and space. Empirical research shows that small enterprises that adopt e-commerce perform better than those that do not adopt it due to e-commerce’s catalytic effect on business performances.
There are several explanations for the slow diffusion of e-commerce in developing countries, in general, and in Africa, in particular. Economic Commission of Africa (ECA)-supported e-commerce readiness studies conducted in Ethiopia and in the Gambia, as well as other studies undertaken across the continent, broadly identify similar challenges pertaining to growth of e-commerce in Africa.
Affordable ICT infrastructure, particularly the Internet and broadband, is one of the key factors affecting the growth of e-commerce. Digital literacy among consumers and businesses in terms of computer literacy, language barriers, awareness of e-commerce benefits, lack of confidence and security in online transactions, including lack of a skilled workforce in e-commerce enterprises, are common in many countries. Limited delivery and distribution networks (physical transportation), in both Ethiopia and the Gambia, and the absence of proper street addressing and naming were raised as areas of concern in delivery.
Systems related to electronic payment, branding/recognition, and the issue of tracking, monitoring and taxation systems are also some of the challenges that affect the online transaction process. Legal frameworks to build security and trust are common issues that both consumers and businesses find difficult in adapting e-commerce as their business strategic tool. Ensuring legal and regulatory environments are critical for the complete functioning of e-commerce in a country.
Many SMEs have benefited from ICTs in their day-to-day business activities, including experiencing gains in enhanced productivity. However, due to lack and cost of access to Internet connectivity, many SMEs are not always tapping the full potential of the Internet. Furthermore, high-quality and reliable e-commerce requires advanced telecom services, such as broadband and mobile broadband services, at affordable prices to consumers.
Thus, governments and other partners need to take advantage of the opportunities that are emerging in the use of the new ICT landscape, particularly in innovations in mobile applications. Governments need to ensure that SMEs benefit not only from being connected to the Internet but also from any technological evolution that can increase the speed of data flows and can help reduce costs to consumers. Furthermore, much of the support to e-commerce depends on putting in place the right infrastructure, regulations and policies for e-commerce to thrive. In this regard, the role of government and the private sector is of paramount importance in realising this. Finally, a critical mass of workers with ICT skills is crucial for the further development of e-commerce and mobile applications. In this regard, governments can play an important role in ensuring that the education systems provide training of the necessary skills for building a viable digital economy.
