The National Bank of Ethiopia (NBE) revises the external loan and supplier’s credit directive for the third time in less than 15 months. The agricultural development sector in line to benefit from the credit based import.
In June last year, the regulatory body had reviewed the 2017 directive on the aim to include the manufacturing industry in gaining access to credit for their import. However as per the 2017 directive, foreign investors were included on the scheme to which the preceding similar directive was only exploited by businesses which were engaged on export earnings sector.
The newly amended directive that became effective on September 7, ‘external loan and supplier’s credit directive no FXD/82/2022’ has included the agriculture sector to be part of the scheme.
The newly included article 4.4 indicated that agricultural machines/inputs imports shall benefit from the credit import that will be settled by local banks in the future.
Besides the agriculture sector, the LGP gas import has also been backed by the new directive to access supplier’s credit scheme.
Unlike FDI and manufacturing sectors which were included on the directive, the newly added sectors only need pro-forma invoice with a minimum one year credit period.
While to access the scheme for the manufacturing sector it required a pro-forma invoice with a minimum one year credit and a minimum of one year for external loan repayment. However, the pro-forma invoice for the FDI was 180 days, which angered the manufacturing sector who claimed that the central bank just revised and included the manufacturing industry in order to say it has benefited from the scheme.
“In real terms, it is difficult to come up with potential suppliers on pro-forma invoice with a minimum of one year,” manufacturers expressed their anger towards NBE.
Some experts stated that the current move of the government to include the agricultural machines /inputs import on the credit import is part of the initiative that was embarked by the government to improve production and productivity.
It had been stated that the agriculture sector was neglected from access to finance, tax incentive and hard currency, despite being the major source for the economy and hard currency earnings.
About three years ago, the government changed its course and allowed every toll starting from small pumps and relevant agricultural inputs to be imported on a duty free scheme.
It has also fully supported the agricultural mechanization to expand the agricultural output with modern farming that is showing change.
NBE revises credit directive, agriculture sector to reap benefits
Tele knits strategy to set pace as digital solutions provider
75 billion birr in revenue projected in 2022/23
Ethio Telecom rolls out a new three year development strategy called LEAD, which is said to enable a thriving competitive market as the firm seeks to be a leader in digital solutions.
The development strategy, LEAD, is divided in three fiscal years from 2022-25. The first fiscal year 2022/23 has already seen implementations begin as from last month.
The development strategy dubbed “LEAD” is believed to transform the state-owned telecom company into a competitive company.
“LEAD provides reliable communication and digital financial services to simplify life and accelerate digital transformation of Ethiopia,” read the Company’s new mission.
“Strategies are made to ensure competitiveness and sustainable growth of the company, the strategy has been developed by considering and reviewing new business streams and shifting revenue source from traditional to value which is expected by the company,” said sources that Capital spoke to.
“The company has been using the BRIDGE strategy for the last three years which has been successful in transforming the company. However, it has now needed to change its strategy to LEAD, so as to continue its developments as a leading telecoms provider,” read the document sent to Capital, adding, ”The company has restructured its mission vision, values and strategic themes to go with the current telecom market.”
The three-year development strategy focuses on; being a leading brand, increasing it customers, excellence in operation, increasing accessibility and ensuring customer experience, deploying innovative and new products and services, and insuring the company’s successful operation.
In the first fiscal year 2022/23, Ethio Telecom plans to generate 75.05 billion birr in revenue which is 13.7 billion birr or 22.4 percent greater than 2021/22. The company plans to increase the total number of subscribers from 66.59 million to 73.47 million in 2022/23.
Consequently, the company aims to boost mobile penetration from 61.3 percent to 65.9 percent and the company hopes to increase its revenue from international business from 146.58 million dollars to 151.3 million dollars.
In addition to the telecom service, Ethio telecom has planned to strengthen its telebirr share in the market by targeting to reach a customer base of 32 .6 million in 2022/23 from 20.9million and also plans to gain 180.8 million birr in revenue from telebirr.
Ethio telecom has been implementing its BRIDGE strategy for the last three years starting from 2019-2022. At the time, Ethio telecom had around 43 million subscribers.
In July 2018, the board of directors of Ethiopia’s lone telecom company, Ethio Telecom, appointed, Frehiwot Tamru as CEO replacing Andualem Admassie (PhD). At the time, the company replaced 40 individuals who were working in different positions of the company. “Since then the company has been making certain changes continuously, yet this one is the biggest,” sources explained.
In the already ended 2021/22 fiscal year, Ethio telecom has garnered 61.3 billion birr in revenue, which is 87.6 percent of the target and 8.5 percent increment from the previous budget year.
“Given the current challenging environment in our country, this achievement can be considered as remarkable,” said the CEO. The main factor for Ethio Telecom’s under-performance is the continuing civil war in the Tigray region. Out of 3,473 base stations, 45 percent from the total were out of operation and 1,144 of those sites are still out of operation.
Currently, the total subscribers of Ethio telecom have reached 66.59 million, achieving 104% of the subscriber base target and an increase of 18.4% from the previous budget year similar period. Mobile voice subscribers reached 64.5 million, Data and Internet users 26.1 million, Fixed Services 885.3K and Fixed Broadband subscribers reached 506.8K. The telecom density has also peaked at 63.3%.
Ethio Telecom is currently engaged in various network expansion and telecom infrastructure capacity enhancement projects. The rollout of 4G/LTE has been completed in 136 cities and pre-commercial 5G services have been launched in Addis Ababa.
Government has recently also liberalized Ethiopia’s telecommunications sector as part of the country’s ongoing reforms to promote social, political and economic development and on May, 2021 a new telecommunications license had been awarded to the Global Partnership for Ethiopia. The company Safaricom Ethiopia Telecomnication PLC has roped out its service two weeks ago on August 29, 2022 after serious delay of its operation. The company has now started its operation in three towns. Regardless of its current initiation and notable performance in expanding digital service for various sectors and high achievement in revenue earning, Ethio telecom is working to increase its capacity to every corner of the country and serve the people in good quality.
Ethiopia ranks 175 out of 191 countries on the Human Development Index
Ethiopia ranked 175th out of 191 countries on the Human Development Index (HDI) 2021/22, placing it in a low human development category.
The HDI which is a composite index measuring average achievement in three basic dimensions of human development, that is, a long and healthy life, knowledge and a decent standard of living, ranked Ethiopia 175th overall.
According to the report published this week, in 2021 the average value that Ethiopia had on the human development index was 0.498. Furthermore, Ethiopia had 65 years of life expectancy at birth on average while 9.7 was the expected years of schooling or 3.2 mean years of schooling. In 2021, the country’s gross national income per capital was set on 2,361.
According to the report, the human development measured the nation’s health, education, and average income which had declined for two years in a row, from 2020 to 2021, reversing five years of progress. This is in line with the global decline, indicated that human development across the world had stalled for the first time in 32 years.
Recent declines on the HDI are widespread, with over 90 percent of countries enduring a decline in 2020 or 2021.
Almost all countries saw reversals in human development in the first year of the Covid-19 pandemic, and most low, medium and high HDI countries saw continued declines in the second year.
The last two years have had a devastating impact on billions of people worldwide when crises like COVID-19 and the war in Ukraine hit back-to-back and interacted with sweeping social and economic shifts and dangerous planetary changes. The latest Human Development Report – Uncertain Times, Unsettled Lives: Shaping our Future in a Transforming World – which was launched by UNDP argues that layers of uncertainty are stacking up and interacting to unsettle life in unprecedented ways.
The COVID-19 pandemic, beyond its damage to people’s health and mental well-being, has also devastated economies and exacerbated gender inequality. For instance, gender inequality witnessed a near-global rise – to which the world suffered a 6.7 percent increase. South Asian economies like Bangladesh and Bhutan bucked the trend and registered an improvement. The report also suggests that stress, sadness, anger, and worry have been increasing over the last decade, now reaching record levels. On average, countries spend less than 2 percent of their healthcare budgets on mental health, which limits access to mental health services for citizens globally. Uncertainty, inequality, and insecurity go hand in hand with polarization and lack of trust. Polarization and mistrust t shrink our capacity for social dialogue and stifle collective action, the report read.
Globally, less than 30 percent of people think most people can be trusted, which is the lowest recorded value. The world as seen is not transitioning to a post-Covid-19 build-back-better scenario. On the contrary, developing countries in every region are entering a sharply divergent social, political, and economic period with especially sharp downside risks for the most vulnerable and regression in gender equality.
“The world is scrambling to respond to back-to-back crises. We have seen with the cost of living and energy crises that, while it is tempting to focus on quick fixes like subsidizing fossil fuels, immediate relief tactics are delaying the long-term systemic changes we must make,” said Achim Steiner, UNDP Administrator, adding, “We are collectively paralyzed in making these changes. In a world defined by uncertainty, we need a renewed sense of global solidarity to tackle our interconnected, common challenges.”
MFIs transition to banks triggers financial sector dips
The evolution of some dominant microfinance institutions (MFIs) to banks fizzle the number of MFIs in the sector.
Following the green light from the National Bank of Ethiopia (NBE), financial sector supervisory body, for MFIs to graduate to banks, the financial institutions are now changing their structure to provide fulfilled financial services.
So far Oromia Credit and Savings Institution, Amhara Credit and Savings Institution and Somali Microfinance Institutionhave been transformed to banks in the form ofSiinqee, TsedeyandShabelle banks; of which Shabelle is an interest free bank.
These three former MFIs had significant contributions in the sector, while as per the NBE rule they have to continue to provide financial service for the greater mass.
According to the NBE latest economic evaluation document that was reviewed in the third quarter of the 2021/22 fiscal year, following the transition of three MFIsto banks, the number of MFIs has declined to 37 in the reporting quarter.
Hence, their savings deposit declined by 44.6 percent to 26.3 billion birr compared with the previous quarter. Similarly, their total outstanding credit shrank by 40.1 percent to 35.2 billion birr while total asset dipped to 52.8 billion birr, showing a 43.1 percent quarterly decline.
Their total capital shrank by 47.4 percent to 11.6 billion birr compared to the preceding second quarter of 22 billion birr.
As of June 30, 2021 the five largest MFIs; Amhara, Dedebit, Oromia, Omo and Addis Credit and Savings Institutions accounted for 84.8 percent of the total capital, 88.8 percent of total deposit, 82.7 percent of total credit and 84.3 percent of total assets of MFIs.
In related developments, in the third quarter of the past fiscal year NBE’s deposit liabilities has surged by 42.6 percent compared to same quarter of last year due to a change in the Bank’s monetary policy to increase reserve requirement ratio from 5 percent to 10 percent, which was applied at the first quarter of the 2021/22 budget year and was effective with a three months transitional period.
However in the second week of June, 2022 the reserve requirements of banks were revised to be reduced to 7 percent, which is a new rate when compared to the preceding experience.
According to the NBE report that was issued last week, the expansion of the reserve requirement reached 149.8 billion birr which is an incline of39.9 percent compared with 107.09 billion birr of March 2021.
