New study recommends the government to control its squandering spending as part of mitigating the inflationary behavior whilst reviewing the levy on import commodities is hinted as an additional input to price stabilization.
The study conducted by the Ethiopian Economics Association (EEA) under the title: ‘The Ethiopian Economy: Structural Constraints, Inflation, and Policy Options’ highlighted the current challenge in the market with possible way forwards to ease the circumstance.
The study that uses resources from government offices and international organizations said that the slowdown and drop down in some pillar economic sectors have been observed for the past close to a decade from the growth trajectory in the first ten years of the millennia.
The EEA, through its study flashback, showed that the agricultural sector has fizzled by half from 60 percent contribution to the GDP in 1990, while the industry sector has shown ups of two folds to about 30 percent as that of the service sector, which stands at the top, takes 40 percent of the GDP contribution, up from 30 percent in the past.
“The growing trend on the services sector for the share on the GDP is an indication that the economy in general is in structural challenges,” the statement that EEA issued by referring to the study outcome said.
Production volatility and sharp reduction in some agricultural products’ productivity was also revealed on the document. This is also similar to industrial production increments up until 2010, which then started reducing from 2016.
The reduction on the supply side whether locally produced or imported items has contributed to the inflation.
It said that different researches indicated that the growth of industry and service sectors in Ethiopia is contributing to the price hikes, while the growth of agricultural sector productivity with additional factors played a key role to stabilize the market.
The drop of birr’s purchasing power against international currencies and devaluation was also stated as one of the factors to ballooning the inflation.
The study revealed that Ethiopia was one of the top ten African countries which amass significant revenue from import-export taxes and it seats at the fourth level by imposing huge customs duties.
As per the study, imposing a massive levy on import items and expanding tax revenue yield higher chances in contributing to inflation.
EEA’s research also identified that the growth of export trade might fuel the price hike, “due to that it explained that proper policy thinking and direction is crucial to balance it.”
Of the top ten countries in Africa that have poor export performance, Ethiopia stands at the third level.
Regulating the money supply and monetary policy based on the market was recommended as a basic principle for the issue.
However, in its recommendations, the study said that reckless spending from the government and society, in general, should be corrected as an alternative to keep the galloping inflation. While it gives priority to agricultural productivity by emplacing proper support for smallholder farmers, which are the major source of agricultural products in Ethiopia. Improving power usage was also among the suggestions put forth.
Even though the government is a crucial body in introducing and applying different policy instruments to tackle the challenge, external support has also been stated as essential.
It study suggested that even though the government remains the major player on the issue, the formation of supporting an independent body is vital to curb the challenge.
It recommended for the formation of a board, supply and price stabilization board, as an independent body to support the government.
EEA study added that the role of the board will be providing support for trade balance administration, providing policy recommendations as per a detailed evaluation of the circumstance, and coordinating different relevant bodies.
Playing a role to stabilize the market or at least setting maximum inflationary points if curbing the inflation is not fruitful was also stated as an area where the board can contribute.
Gov’t, society’s reckless spending heaps inflation, EEA study reveals
Dube Pay from Dashen
Dashen Bank, one of the long-established and most profitable private financial firms in the country introduces easy way for access to finance for those who are neglected.
The new scheme that introduced in collaboration with EagleLion System Technology, a ‘Dube Pay’ platform developer would allow customers to use the app and acc credit services for goods that they shall not possess with in a single payment.
As per the short term loan scheme customers who are backed by different guarantees like salary or other collaterals shall own goods or services they wanted and settle their arrear gradually.
The bank that is pioneer on introducing financial technologies in the country said that it will continue providing modern and suitable financial products for the market.
Experts stated that the new scheme will allow expanding access to finance in the country that is one of the poorest among peer countries in Africa.
Frezer Ayalew, Director for Banking Supervision Directorate of National Bank of Ethiopia, recently said that there is about 350,000 credit accounts in the country which is a drop in the ocean when compared with the 72.3 million deposit accounts registered in the various financial firms.
Of the stated credit accounts, 44 percent of the borrowers are duplicating borrowers of the entire banking sector credit.
When it comes to the number from the borrowers 0.6 percent only takes the great chunk of portfolio.
Through the new scheme trading houses shall promote their products and services for potential customers on the ‘Dube Pay’ platform, while customers who want to possess the commodities or services shall access it on credit scheme.
Ambassador mall nears inauguration
An incredible mall with a full capacity to offer shopping, dining and entertainment experiences for residents and tourists alike, all under one roof, is said to be inaugurated soon.
The Ambassador mall, which was built by Ambassador Garment and Trade Plc will bring life to the locality of Arada sub-city through its several department stores, fine dining areas and entertainment spots.
The mall is expected to be inaugurated soon with the presence of higher governmental officials.
The complex took half a billion birr to construct and has two basements with a G+4 height. The mall is conveniently situated at the woreda 09, of Arada sub-city in front of the parliament building and houses an ample parking space that can accommodate more than 120 vehicles at once, a haven of shopping facilities for adults and kids with clothing items and modern sports equipment, cafes, restaurants, banks, food courts and game zones.
Seid Mohamed Berhan, CEO of Ambassador garment, Samira Seid, General Manager of Ambassador Mall and Nega Asfha in their press brief on Thursday, April 28, 2022, whilst citing the whole operation of the mall, explained that during its phase of construction, the structure created more than 500 temporary jobs and had further created more than 200 permanent jobs after its completion.
Ambassador Garment and Trade Plc was started 40 years ago by Seid Mohammed Berhan, who started his work in a sewing machine business in 1982. The company now is engaged in the garment, real estate and hotel business, in addition to their newest project, the Ambassador mall.
New factory shows promise of being “the building block” of construction
A mass-producing block factory that is inching closer to operation is opined by experts to have a huge prospect in modernizing the construction sector business stemming from its low-cost production of construction materials
The factory which was established by Builders Up Construction Material Manufacturing Plc looks to have a capacity to produce 18 blocks per 20 seconds. The factory is also said to cut the drying time of the blocks to within the space of less than a day whilst that of the current market takes a week.
Ablante Wondwossen, General Manager of Builders up Construction Material Manufacturing explained that the company decided to conduct a huge investment in the sector so as to transform the construction industry and bridge the gap that is observed in the space.
“Currently, the country is going through massive construction with projects being seen on the rise. This presents huge opportunities for such facilities like ours, which help to support the construction boom,” he added.
The manager whilst underlining the need for swift response in modernizing the sector also recalled how a major portion of the country when it comes to residential houses is built of substandard material.
According to figures from the Ministry of Urban Development and Infrastructure, currently, there are over four million houses in the country, but 30 percent are sub-standard while 74 percent of the same require crucial renovation.
Officials of the company stated that the sophisticated and latest technology machines that are manufactured in Türkiye, have already arrived at the Djibouti Port.
The industry will be set up on a 10,000- square meters of space secured at Dukem in the eastern outskirts of Addis Ababa in the Oromia region.
The facility will have a production line, laboratory, curing room and logistics center at Dukem. In addition, the company has also secured a mining facility covering 63,000 square meters from the Oromia Mining and Energy Bureau at Aleltu, about 50 km northeast of Addis Ababa in the Oromia region.
At the mining facility, a crashing plant will be installed which will produce the required materials like mechanical sand (m sand) as input for standard block production.
“In a single shift alone, we shall produce over 27,000 blocks with dimensions 40mm x 200mm x 200mm. As per our initial plan, we will use two shifts,” Ablante explained.
He said that the daily production volume has a very huge gap compared with the current block production in the country that will allow providing the product at a competitive rate. He added that such kind of mass production also contributes to market stability and cuts artificial price hikes which is observed across the country.
The production facility has also planned to produce 2,500-meter square paver blocks per 8 hours or single shift with 60mm, 80mm and 100mm thickness as per the demand. For instance, the 100mm paver block built will be able to sustain a load of a heavy-duty truck while that of the 60mm products with international standards shall be built for walkways.
So far in Ethiopia, the traditional paver block thickness stands at not more than 40mm.
The company said that in the second phase of the plan the facility will commence the production and supply of standard pipe manhole, manhole base and concert manhole cover that are key for infrastructure development and help to create a visible difference to accelerate projects compared with the current practice.
Officials of the company told Capital that other production lines like other precast-producing hubs will be installed.
As per the plan the company targets to provide palletized door-to-door bulk product delivery with imported modern tracks that were purposely designed and manufactured for the same purpose.
“The delivery and bulk cement providing trucks have been procured from China,” officials explained. As per the current level, the company stands to create 150 jobs and requires about 100 tons of cement in two days for it to run production.
The factory is expected to commence production at the beginning of the coming budget year.
So far, the initial investment is estimated to tally to about 392 million birr, including 102 million birr for machinery procurement.
Last year the government had disclosed its plan to double the number of residential houses in the coming 10 years from the current about four million in all the type of houses.
Experts said that mass production will also allow the construction of affordable houses besides swift accomplishment.
As per the study conducted last budget year, there are one million residential houses demanded in the capital.
As per the projection, every year 471,000 houses are supposed to be constructed including that in rural areas. The number of newly constructed houses in the second five years would be 486,000 every year.
The construction will be carried out by all partners including individual residents, developers, or the government.
In the coming ten years, the Ministry of Urban Development and Infrastructure targets to see the construction of 4.4 million houses across the country which will double the current figure.
Ethiopia is the second-most populous and the fifth least urbanized country in Africa. At present, 21 percent of Ethiopia’s 112 million residents live in urban areas (23.5 million people), according to the national definition, this is significantly below the Sub-Saharan average of 40.4 percent. There are over 950 towns and cities in the country.
