The last widespread financial crisis was over a decade and half ago. To be sure, such cyclical crises are the built-in features of the prevailing world system. Be that as it may, the global status quo never really cared about devising a relatively more stable monetary order to help alleviate such recurrent crisis. Instead, every time there is a crisis, entrenched interests, with the help of their paid politicos, pumped money, (phony money that is) into the system as if there is no tomorrow. But tomorrow has now arrived! The excess liquidity pumped into the system (after the 2008 crisis) is going to bring havoc, perhaps with vengeance! In this regard, the newcomer to the system, China, went overboard in its enthusiasm and allowed the massive creation of credit, with a view to bring about stability and continuous growth to the global system!
The humongous credit China crafted to thwart off full-blown global depression is truly without precedence. The trillions that were thus created by the Chinese state, predictably, resulted in massive mal-investment, both locally and abroad. Domestically, the excess credit manifested itself as unnecessary infrastructure, including ghost cities, brand new idle factories, etc. Internationally, it created plenty of cheap consumables and asset bubbles, real estate, etc. As a result, the world is much more in debt today at @ $250 trillion than in 2008 (@ $170 trillion). In 2018, the world is facing similar predicament, but in a highly viral form! Amongst the consequences of easy or unearned money, one can mention wasteful activities/enterprises that continue to abuse non-renewable natural resources. Socially, easy money promotes visible decadence. The banking system creates phony money and unfairly rewards those in close proximity to the money spigot, while the working stiff is left with only crumbs, dispensed by the moneyed as compensation to exerted labor power! By and large, it is not those who actually work, create, etc., that are rewarded by the current system, but rather, it is those who manipulate the system mostly via finance. In late modernity or crony capitalism, it is ‘financialization’ that runs the world!
In the world of unearned money/excessive credit, zombie companies tend to dominate economic activities (Minsky, et al). Sure enough, today, from listed corporations that live by hype, not earnings, (like Tesla etc.) to so-called national champions that leverage the state, to small-scale operators created and encouraged by the various political orders; all belong to the make believe world of ‘Alice in Wonderland”. It seems the world is now facing a generalized ‘Minsky Moment’. The systemically built parasitic economic order operating globally, doesn’t take the global sheeple (human mass) into serious consideration. Obviously, the sheeple is not allowed to have any real say about the workings of the economic system. Even some of the very destructive operations that have become detrimental to life, are not to be questioned by labor/sheeple; as doing so would negatively impact its precarious position. Blinded by greed, oligarchs and politicos are destroying the existing system from within. The so-called emerging markets are also repeating mistakes that have been widely and thoroughly known to be duds. Politicos in emerging markets allowed their cronies/oligarchs to over indulge in debt, mostly accrued from abroad. Both knew beforehand, when the time comes to honor the various commitments they will all be safely gone!
If truth be told, financial crisis are mere symptoms of underlying economic distortions/imbalances. Fractional Reserve Banking (FRB) is what allows banks to create money out of thin air. Without a doubt, FRB is the greatest non-violent crime of the millennium. When the global economy is based on this massive fraud, outcomes cannot be all the way satisfying, to say the least. It is such nonsense that allows the perpetuation of the stupid idea of infinite growth on a finite planet! The global economic system we are all forced to live under is irrational, pure and simple! Its logic is oriented towards the temporal and unsustainable. It gives priority to the frivolous while undermining the irreplaceable, like natural resources. Ecosystem destruction doesn’t bother the prevailing economic system. It is a very dangerous concoction systemically insulated from serious interrogation, enabled by human vice, namely greed. But there will be a price to pay, a dear one at that!
CRISIS IN THE MAKING
BGI ETHIOPIA: A TASTE OF ECSTASY
Over the decades, CASTEL Group has grown to prominence by becoming a trusted and iconic beverage brand not only in Ethiopia through BGI, but also across more than 25 countries in Africa which it operates in. Castel Group started operation in Ethiopia 25 years back under the name of BGI Ethiopia from its green field plant in Kombolcha town.
With its mission to produce, sell and give customers the best quality and most loved brands, BGI Ethiopia has been keen in sustainable development and growth in its structural operation throughout the years.
Currently, BGI is one of the largest brewery in Ethiopia. It boasts of numerous plants, strategically located and holds a large market share. Recently in 2022, it acquired the Meta Abo brewery from Diageo as part of its expansive and industrial master plan.
Business aside, the company is keen on rendering its support to the community. CSR projects to its employees, partners, and the community at large still remain central to the firm’s day-to-day engagements; embodying its values of quality and care.
As the company continues to grow from strength to strength, Capital reached out to BGI Ethiopia’s new CEO, Herve Milhade, for an insider’s view of the company’s operations and ambitions.
The new BGI boss joined Castel Group in 2018 and has worked in the company’s other subsidiaries including SODIBRA in Cote d’Ivoire, SABC in Cameroon and MOCAF in the Central African Republic. Prior to his appointment, he was the head of Castel Malawi, where he presided over the turn-around of the company which was on the verge of closure.
Before the Castel Group, Milhade worked at Danone Group and Suntory Group where he spent more than two decades holding different leadership positions as VP Operations and CEO within their beverages division.
The following are excerpts from the candid interview;
Capital: What views do you have of Ethiopia in terms of business in comparison to the multiple African countries you have worked in before?
Herve Milhade: I have had the pleasure of working in the foods business for more than 25 years, with a majority of those years in foreign countries, primarily African states. One thing that I would like to point out is that Africa is not one country, but it is made up of different countries with diverse cultures with each country being unique.
For me, Africa as a continent has huge potential of growth. Similarly as part of the continent, Ethiopia has a very young population with its own unique and diverse culture and has huge prospects of growth. Thus it is very exciting to do business in Ethiopia.
As part of my role in Ethiopia, I am leveraging all the years of experience to better understand how Ethiopia works and how the company can provide the best products and services to its customers and consumers with a huge ambition. Despite the country’s hurdles in recent times, as you well know, Ethiopia is on a huge stride of growth and the landscape of business is bright right now. This now presents lots of opportunities which as BGI, we are already capitalizing on; for a symbiotic growth, both for us and the country.
Capital: How do you see BGI’s business as the dominant player in the beer business?
Herve Milhade: BGI is of course one of the top tier companies in the country. We are the third highest taxpayer in Ethiopia. As a company we have gone from strength to strength over the years. We also have the drive of growing as a collective and within our own category we have been sharing leadership skills with other companies like our competitors.
BGI with its brands, which are the best brands in Ethiopia including St. George, is one of the oldest brands which resonate with the heart of all Ethiopians. As the market continues to grow, develop and expand, we shall also do the same and continue to serve the customers and the consumers. We also have a strong conviction of giving back to society through our corporate social responsibility conduit and we will continue to do so.
All in all, we are a loyal taxpayer, dream maker, a brand developer, and a happiness provider. Because when you drink a glass of wine or a pint of beer, and create an experience of happiness, we intend to be right there with you, through our brands.
We also see ourselves as a contributor to the economy and we will continue to invest big in the country as well as bring in more employment opportunities.
Capital: What is your market share?
Herve Milhade: It’s quite difficult to talk about the market share here in the country because of the level of diversity. Due to our location and rich history, we are the leader in some areas and our competitors could be leaders in other parts of the country.
I have to say that we are leading this market but we are stronger in some parts than others. We are the leader especially in Addis for instance, but we are not as strong as our competitors in the west and in the eastern parts of the country.
For the case of wine, we are currently head and shoulders above the rest in terms of producing premium wine, which is something to be proud of. We are proud of our two brands, Rift Valley and Acacia, which are real wines produced with real grapes.
In terms of volume, we are selling close to 2 million bottles of wine per year. But there is room for growth in this space, because most people are not well aware of the wine culture, so we need to train people to understand what wine is and how to drink it, and of course the obsession will follow.
Our focus as a company is more on the quality than the quantity; and although we are smaller when compared to our regional competitors, we want to be known for our premium wine.
Capital: These days, the price of your beer has frequently been on the rise. This of course is different from previous experience years back, when the Ministry of Trade had to approve the price changes before going to market. What has brought about the change?
Herve Milhade: It is not our desire to increase the price of our product but it is because the circumstances oblige us to do so. We have to be aware of the huge inflation around us. As a business, the cost of what we used to buy and import has skyrocketed over the last two years. The shortage of foreign exchange in the country has also hampered our business.
Thus for us to continue to do business as well as invest in the country, we have to increase our prices. We try our best to only add a minimal increase so as to make us profitable as well and increase our investment to the country.
Capital: BGI’s factory, Raya beer, in the northern part of Ethiopia, has been affected by the war in recent times. What is the status of the factory today?
Herve Milhade: Of course, the war has affected us heavily. We have two plants there: one being Raya and the other being Kombolcha. We are very glad to say that we have resumed production in both plants, especially at the Raya plant where we reached out to produce the beer some weeks ago and now we are able to sell the product in the Tigray region.
I would also like to commend the community, the people, and technicians there at the Raya and Kombolcha plants who protected the plants and made sure that they are both in good shape at the height of the conflict. We are now in a good position to resume full production.
Capital: How big is the Raya plant?
Herve Milhade: This plant is one of our biggest plants because we produce over 50,000 hectoliters of beer per month. We have around 500 employees and we have huge plans to continue to invest because the north and the Tigray region are one of the most dynamic regions in the country. We have a strong market there and we will probably, very quickly, plan an additional production capacity.
I had the pleasure of visiting Raya and Mekele a week ago and the people’s resilience was amazing to see. Despite the two years of uncertainty and hardship, they are keen to refocus and go back to where they were before. Of course those were dire times, and as BGI, we are happy to go back there and start work to help them rebuild better. We are also thankful for their commitment and loyalty in protecting the plant.
Capital: Recently, BGI announced a 500 million birr investment on the newly acquired Meta Abo factory. What are the primary reasons for the investment?
Herve Milhade: First of all, the Meta acquisition was in alignment with our industrial master plan of having new products and increasing our sales in the market. Meta opened a gateway for us to leverage the new production capacity as well as in getting prime branch areas. So we took over Meta from Diageo which was in a bit of a rough patch.
To rejuvenate Meta Abo, it was evident that we needed to inject some level of investment to jumpstart our production. Of course, the development and growth of a company is synonymous with its staff; thus we reinvested and beefed on our human capital and reshaped the organization structure. Part of the investment went into re-building costs such as the lockers as well as in making the environment work friendly in order to safeguard the interest of our employees and show our commitment to work.
Secondly, we are channeling the investment to upscale the production capacity. Currently, we are able to produce around 30,000 hectoliters of beer per month but our plan is to have ten folds of that production capacity. To get there, we will make the appropriate investments every year to make sure Meta becomes the biggest brewery and plant within the country.
Thirdly, part of the investment is being trickled down to the community through various levels of community engagements through our CSR projects. We want the community to be part of our adventure and to benefit when we are benefiting as well. We want to provide power and be a source of employment to the community around us and that is why we invested into Meta.
Capital: BGI is planning to move its headquarters from Addis Ababa to Meta in Sebeta. Why is that and how soon will it happen?
Herve Milhade: We aren’t moving our HQ rather our plant which is in Addis Ababa. Our Addis Plant presents logistical challenges. Plus looking ahead, it will not be feasible to have such a factory in the middle of the city center. It would be better to have it in a place near the capital and Sebeta makes a perfect sense to do just that. Now, relocation is not an easy task and there is a process to it. We are not going to just leave the city for another location. We are not in a hurry to do so, and such processes can take even years to fully materialize. Part of my role is to anticipate and see through such processes by moving in a direction of what works best for BGI.
Capital: Have you studied the valuation of the asset/facility?
Herve Milhade: I cannot speak on the exact value, but of course we have done some preliminary assessments. Further analyses and valuations will be made in line with the organization’s finances and development ambitions.
Capital: How are you managing the Forex shortage in the country?
Herve Milhade: Forex has been a huge hurdle for not only us but also for importers of goods and services in the country. From our end, we try our level best to internalize and localize our supply but we still have a lot of imports on very specific and technical end materials that can’t be supplied locally. Now, when these needs arise the difficulty in gaining access to forex has become a thorn to the business.
First of all, we can’t get the money easily to buy all our imports and when we do, the cost of the item escalates which is a crazy predicament to be in. Forex is a huge challenge and is somewhat a killer because as you know we need to maintain our facilities, our production equipment, and when you can’t access spare parts it impedes workflow.
This is something that clearly needs to be addressed at the country level, else it will have a huge impact at the greater economic level. For us, being the third highest tax payer, a slowdown in our operations means less revenue and thus lower tax generation, which then ripples to affect the economy.
Globally, the beer market is a growing market and we want to lead in that growth too, but that growth is limited due to the shortage in forex. If that was not the case, we could have probably doubled our investment and seen higher growth in our industry.
Capital: Do you have any plans of acquiring another beverage factory in the near future?
Herve Milhade: As in any business when you want to expand quicker and save time instead of starting from scratch, acquisition is one element of interest. I am not at liberty to discuss such plans, for confidentiality reasons.
Capital: In terms of investment, do you have an idea of how much you’d like to invest in the Meta project?
Herve Milhade: The Meta project will probably see us invest somewhere around 50 million Euros and we will continue to expand our finances as the market grows. For sure, this is not a onetime investment. It is an ongoing investment and we are not going to stop anytime soon since it is well within our ambition to double our business at the brewery.
Capital: What about your wines? Do you have plans of rebranding Castle winery brand?
Herve Milhade: We are not going to rebrand. We are going to refresh and rejuvenate it. And it’s not only castle winery; it’s with all our products.
We need to move with the times, for instance our consumers who used to enjoy St. George 50 or 20 years ago are different from the demographic enjoying the drink today. For the case of wine, we need to have a top-notch premium wine in the market. Our customers deserve only the best from us and we need to keep them happy and proud of our product. So we are currently working not to change the brand but to give it a facelift and to revitalize it.
Capital: In terms of product types, you used to have different types of beer including Bati and Amber and others. Are you going to reintroduce those or remain with Meta?
Herve Milhade: This is more likely to happen in the future. For the time being, we want to capitalize on the brands that we have. Meta brand is now back to the market and we will continue to develop the major brands, which are, St George, Castle and Sen’q; and probably you will see new products or innovations coming in. But I can’t disclose everything.
We have a very strong ambition complimented by dedicated projects. But the first project or one of the most important projects we have is called the simplification project which means we want to harmonize as a company. The company has been built through acquisition. So this means that there are different members of the family which we need to be unified.
The second project is to make our organization and business more efficient. To this end, we are reviewing our industrial master plan. We are reviewing our distribution network and previewing our sales force and adjusting them to become more efficient. This efficiency project across the company is something we consider to be paramount to our success.
The third project focuses on our commitment to the community through our CSR projects. As one of the leading companies in the country, we need to give back to the society and provide visible results. We want to focus on sustainable projects which are really going to contribute to the development of the country. Be it in health, education, environment or humanitarian assistance, we want to be there with the community every step of the way.
Will Ethiopia appease global partners?
All eyes on Ethiopia in Washington
Global partners’ signal eager expectations to see the direction of Ethiopia’s commitment at the 2023 spring meetings of the World Bank Group and the International Monetary Fund (IMF) which is set to take place from April 10 to 16 in Washington, DC.
Recently, government officials led by Prime Minister Abiy Ahmed paid visits to the US, Europe and China to discuss with the relevant countries and global partners to restore the cooperation that was damaged from the ripples of the northern Ethiopia conflict, in order to get further financial support.
International partners including organizations had imposed their pressure on government in connection to the conflict and as part of the follow through had further suspended commitments and expected funds, which affected the government’s target in attaining the first Homegrown Economic Reform (HGER I) and hard currency resources.
Following the recent peace agreement which was signed in November in Pretoria, South Africa between the government and TPLF, the relations with partners, particularly western countries, has been improving.
Efforts are also ongoing from the government’s side to restore expected support to the economy and HGER II reform program which is expected to be introduced in the coming couple of months.
As part of the negotiation, IMF staffs visited Ethiopia as from March 27.
In a statement that IMF issued on Friday April 7, it said that a mission led by Alvaro Piris visited Addis Ababa from March 27 to April 7, 2023, to hold discussions on the authorities’ request for IMF support for their reform program.
The statement quoted by Piris cited, “The IMF team welcomes the authorities’ HGER II, an ambitious reform program that aims to address key macroeconomic vulnerabilities and unleash Ethiopia’s considerable economic potential. We have made progress in discussing the scope for IMF’s support for this reform program.”
It added that discussions will continue in Washington, DC, next week, in the context of the IMF-World Bank Spring Meetings, and in the weeks to come.
According to reliable source, the Ethiopian government is expected to come up with further commitments particularly in political issues so as to get support from the international organizations, which are dominated by western allies.
Sources said that commitments including that stated on the peace deal are part of the expected issues from the government, which desperately needs global support on its side.
Despite the government showing its commitment with regards to servicing its debt, it is demanding debt re-profiling since the debt settlement is growing which in turn has frown to affect the country’s foreign currency resource.
In its latest document, the country’s debt as analyzed by the Ministry of Finance (MoF), stated that discussions with various development partners is underway in response to the November 2020 G20 communique on the Common Framework (CF), which intended to deal with insolvency and protracted liquidity problems of countries; and so far Chad, Ethiopia, and Zambia have made requests for debt relief under the CF.
Recently, Eyob Tekalign, State Minister of MoF, said in an interview with state media, FBC, that countries have been reluctant to see Ethiopia’s case in the past two years because of their direction on the northern conflict. He said that in the latest discussion with partners, consensus has been reached and one of the IMF visit is also part it.
However, the coming week’s discussion that is aligned with the Spring Meeting will be crucial for Ethiopia. According to sources, if some sort of agreement shall not been reached in the coming discussion, the issue shall be pushed on the next joint annual meeting of the World Bank and IMF that will be held in October.
“So the government must show its commitment on the area that partners expected including on the issue that partners demanded from the government in related with the November peace agreement,” sources said.
Experts say that the meeting is not just discussions with the two global organizations, but with those who are behind in support of them.
Gov’t electronic procurement system to synchronize with Tele birr
Public Procurement and Property Authority (PPPA) gets underway to make procurement of tender documents for government-based tenders only through telebirr after integration with its electronic government procurement (eGP). In addition to tender documents, the authority is also planning to make telebirr as the only e-payment instrument for public procurement.
“Previously, revenue generated from bid documents has been high. We aim to promote the eGP and increase the number of registered suppliers and so far, more than 1333 tender documents have been published on the eGP website to which suppliers have free access,” said Abebe Alemu, communication specialist at the eGP project office indicating that the authority estimates about 35,000 suppliers are found in the country, with about 8000 so far being registered within the system, which was introduced about a year and a half ago.
Using Telebirr, the authority aims to increase efficiency, transparency, and accountability in the procurement process in alignment with the government’s goal of promoting a cashless economy as well as in reducing corruption in public procurement.
“Now both the number of suppliers and tenders is increasing, which is an opportune time to make payments. The authority is working with Ethio Telecom to integrate eGP with Telebirr. There were some issues that need to be ironed out and this is expected to be solved soon with integration said to follow,” the communications specialist said whilst highlighting on the status quo of the matter.
As Abebe indicated that the authority is planning to fully apply telebir as its payment instrument in the next budget year and additionally supplier’s registration and renewal will be through telebirr which is now free.
“The authority is doing an assessment to see the overall revenue that the government offices are generating from tender documents,” he explained.
In Ethiopia up to 70 percent of government’s annual budget is allocated to public procurement, while public procurement takes up 14 percent of the GDP. So far, for those included on the new platform, carrying out procurements through eGP is believed on average to reduce 50 percent of the procurement transaction costs.
From the recent related headlines, on the way to modernize the government procurement with eGP, lack of willingness to perform procurement operation via the new platform, lack of commitment from the leadership at public offices and low human resource and infrastructure were noted as challenges besides limited awareness about the system among the business entities.
So far the procurement platform is handling 74 public offices as of April, 2023 and is expected to jump to 125 by the end of the budget year from the total 169 public offices accountable to the central government.
Telebirr which officially commenced operation in the first half of 2021 as a business arm of the state owned telecom giant for its mobile money service has garnered over 30.4 million customers with over 283.2 billion birr in transactions.
On the other hand, the integration with eGP will be a new big lucrative advantage for telebirr business since the major portion of government’s budget is spent on procurement.
Additionally government is also working to make fuel transactions fully electronically through telebirr, from May 9, 2023 andfrom April 24, 2023 for stations in Addis Ababa. Last week, to this end, Ethio Telecom, Ministry of Trade and Regional Integration and Ministry of Transport Logistics held a trail testing in selected gas stations in Addis Ababa.
