East African Holding, one of the biggest manufacturing industry conglomerates in Ethiopia, has been recognized as an Industrialization Champion at the African Hidden Champions (AHC) summit, which is an initiative of the African Development Bank (AfDB), the Africa Foresight Group (AFG) and Deutsche Investitions- und Entwicklungsgesellschaft (DEG), a subsidiary of KfW.
The AHC initiative that was founded in 2020 primarily to promote the growth of African companies and aid their transformation into global champions, held its second summit in Victoria Falls, Zimbabwe late last month which saw the convergence of key African business leaders, AHC partners and supporters who discussed Africa’s private sector at a time of great geo-political uncertainty.
This year’s summit stirred lively debate and surfaced new ideas for African businesses intent on competing with the world’s best companies.
The three day summit included the awards ceremony that saw select AHC members recognized. The awardees included; East African Holding Group from of Ethiopia who were awarded Industrialization Champions.
The other recognized African brands included; South African based innovative fintech company, MFS Africa, as Emerging Global Champions and Kenya’s pan-African payments company, Cellulant, for Resilient Leadership; and East African fruit and drinks giant, Kevian Kenya, as Eco-system Champions.
On his social media post, Buzuayehu Tadele, Founder and Group Chairperson of East Africa Holding, said that his firm had been recognized as the Industrialization Champions at the recently held AHC summit, expressing, “After our nomination by the global steering committee of the AHC initiative, a joint initiative of AfDB, the AFG and DEG, a subsidiary of KFW, one of the world’s largest private-sector development financiers, it’s a pleasure to see we came out on top.”
“It will further strengthen our efforts in achieving our vision of becoming a global champion,” he added.
Speaking at the close of the summit, Abdu Mukhtar, Director of the Industrial and Trade Development department at the AfDB Group said, “I am impressed by the work done by AHC companies and the passion and motivation of their leaders. The summit provided us with a platform to further understand the possibilities of what the AfDB can achieve together with these companies in the future.”
“The companies are working in sectors that are important to the development of the continent, which is something that we are also passionate about and committed to supporting. We believe that we must all contribute to the overall economic wellbeing and progress of the continent and this can be achieved by promoting enterprise development,” Mukhtar added.
Franziska Hollmann, Director Industries and Services Africa and EMECA at DEG, stated, “At DEG, we are committed in our support for African businesses. This includes financing as well as knowledge sharing especially with regard to sustainable and impactful investments. We value this summit as an opportunity to meet business leaders in an enclosed and intimate setting that allows for candid conversations on their experiences.”
On its website, AHC stated that the initiative seeks out and showcases the unique growth stories of exciting African companies that are secretly building up the muscle of global leadership, adding, “The stories are focused on attracting local and international investments and growth support for these companies.”
The under developed property tax bill, one municipality levies is expected to be sent to the Council of Ministers very soon with valuation proclamation set to be evaluated by the Ministry of Justice.
The public consultation meeting on proclamation which was held on Monday October 9 and called by the Ministry of Finance (MoF) surprisingly attracts only a handful of participants.
Even though the number of participants was very few, concrete comments and recommendation have been provided by those who are gurus on the sector and tax structures.
Some of the participants said that the newly coming tax would have impact on the general public and the economy. They claimed that it would not be timely in this inflationary situation and insisted the government to pause it.
On the flipside, some of them also argued that the tax would not have any effect on companies unlike regular property owners. “For companies it will be considered as an expense so it will only cost the public,” two of the participants said.
One of the participants, who identified as lecturer in a related field, argued that the taxable value motioned on the draft proclamation was huge and that it shall reach at full value of the property in four years.
The proclamation indicated that the taxable value was 25 percent of the property, and the levy will be from 0.2 percent to one percent of the land value and from 0.5 percent to one percent for the building.
“Taxable base is very big and should be reconsidered unless otherwise it will have an impact on the public,” the participant said.
Others have also expressed their concern regarding the affordability to pay. “Residential house should be considered as consumption goods unless otherwise the new law may have a general economic effect if it may see all properties as investment goods like companies properties,” one of the sector experts said.
Participants also expressed their concern that the capability to enforce and follow regions for the implementation of the law properly. They also raised some concerns on the implementation period that the tax imposed, and the variation from individual to individual or place to place and the vulnerability to misdemeanor acts.
The proclamation is said to give a right for regions to set the rate and identify those who shall be exempted from the payment.
“In my view the law is open for corruption since the rate or exemption will be determine by individuals or committee,” one of the participants said.
The other point highlighted by various participants is that the government was supposed to test the system on other properties rather than real property, mainly on residential house, and gradually expand its on houses.
“Why don’t you see other properties rather than imposing such burden on the society on this time,” one of the participants asked.
Regarding the size of plots of land that will be exempted from the tax, participants opined that it was totally unacceptable. The proclamation drafted that a 15 meter square plots at the center and 30 other area of a city will be excluded from the tax.
Tax distortion shall be a possible challenge that central government offices should have an instrument to monitor and regulate the rating on lower government bodies.
The valuation issue was heavily brought up at the meeting that participants expressed that the government should be equipped to come up with an acceptable valuation in a professional manner including the implantation of technologies that they claimed is less prepared at relevant government offices.
A system linkage between valuation and tax collector should be developed and similarly the availability of trained professionals on the valuation process has been raised by participants who are familiar for the case.
Some experts on the sector also argued that in the proclamation, various concepts have been packed in a single law, “That should be separated to make clear the possible outcome of the new tax.”
The other recommendation mentioned was piloting the issue in a single city and even in a single sector would be advisable to gauge lessons for the implementation of the law throughout the country and inclusively.
Experts from MoF and Ministry of Urban and Infrastructure (MoUI) on the other hand said that the concerns that were raised by participants have been reflected by relevant regional and central government officials and other stakeholders including on the discussion with higher education professors and different association.
It was said that the government was engaged on the issue for several years before it came up with the final draft of the proclamation.
Zinet Ibrahim, General Manager of Urban Revenue Reform Project Office at MoUI, stated that cities have covered 24 percent of their development expenditure and the rest was a subsidy from regions and central government.
She said that there are several projects being undertaken to improve the revenue of municipalities on the aim to some extent to get some sort of fiscal independence.
“They have to cover their cost by themselves; property tax is one of the sources of income for municipals,” she added.
Massive studies and preparations for years have been carried out besides evaluate the experience of others to come up with this final draft, Zinetsays “we have also rigorously seen the experience of others.”
She indicated that there are several laws that will give life the proclamation, which are under preparation in parallel with the proclamation including the concern in related with valuation issue, “valuation is one of the key issues that will be input for the implementation of the upcoming proclamation.”.
“After taking several opinions and inputs we have developed the law that is already at Ministry of Justice for final evaluation,” she added regarding to the valuation proclamation.
The valuation proclamation that will cover wide scope, is the base for the property and have several issues including who will valuate, how the valuation will be carried and who will approve the valuation.
Regarding professionalism andvaluation experts Zinet said that experts areproduced and being trained on the consideration of the implementation of the new tax.
On her response to concerns on property information Zinet said that at the current stage the government is working on legal cadaster but MoUI is under preparation to commencethe recording of fiscal cadaster, which is vital for the implementation of the proclamation, “even we are developing a system.”
Regarding ability to payZinet said that the project office has carried out the assessment in pilot cities and reached at the conclusion that the society shall afford to be charged for the payment calculated from 25 percent of the property.
Wasihun Abate, tax law guru and former legal department head at MoF who currently serves as the independent legal advisor at the Ministry, said that Tax is not expenses according to income tax regulation for the claim raised by participants that companies will not be affected on the new law since the levy will be deducted as expense.
“As per the income tax, law taxes are not considered as expense,” he said.
He also expressed his hope that the law will be applied on other properties when the inflation calms down.
Regarding public consultation prior to levy the tax and rate, Wasihun said that MoF will draft a model law that regions will use as a bench mark to handle public consultation on the levy rate and annual expenditure of the municipality.
One of the participants from Total Energies said that the implementation of property tax on oil companies will have an impact on regulated oil price, which was accepted by the tax law guru to which he responded that it will be a responsibility for regulatory body to harmonize the possible effect.
There was a complaint from participants regarding the number of participants at the consultation meeting that they claimed the mode of communication to call for the meeting was not ample. MoF called the public consultation meeting via different social media platforms.
However organizers accepted the claim but said that the comments coming from participants were very constructive meanwhile most them have been raised on other several meetings.
Tewodaj Mohamed, Acting Legal Department Head at MoF told Capital that the main reason to call the public consultation was to get input on the draft law that will be sent to Ministry of Justice for final review.
“For that matter when the draft proclamation was sent to the parliament it will also carry out several consultation meetings including public hearing on the draft law,” he said, adding, “Our aim was to call the meeting to make the final draft clearer.”
“We have been conducting similar meetings with experts, universities, professional associations and regions and most of the points on Monday’s meeting have been raised in previous meetings,” he said.
Tewodaj added that the final draft shall be sent to the council of ministers in the coming month.
The Office of the Public Private Partnership Department (PPP D) of the Ministry of Finance (MoF) issues another round of call for requests for the requalification (RFQ) for the Integrated Diagnostic Center (IDC) PPP project owing to the initial issuance not attracting qualified participants.
It is well known that the government has designed PPP schemes as one of the instruments to pave way for the country development to ease the social and economic challenges besides projects that are carried out by the government and private sectors separately.
In order to attain the goals it can be recalled that the relevant office, PPP D, was established under MoF with potential project areas being selected including health and energy infrastructures.
On the expression of interest (EOI) that was issued 14 months ago it was stated that the government had attained remarkable success in the health care system. “However, epidemiologic shift and the growing demand for quality and affordable curative health service have remained elusive in the past; hence government remains committed to its objective of increasing access to quality, cost effective, and timely diagnostic services for all citizens through the exploration of incentive service delivery models like PPP,” the department acknowledged.
The EOI announcement that targeted to check market soundness of IDC PPP project planned to attract private companies or consortiums which were then followed an RFQ which was issued a year ago.
However in the announcement issued on Thursday October 12, PPP D stated that the first RFQ has been annulled because of lack of qualified participants.
“Because of lack of qualified bidders that fulfills the all the requirements of the RFQ in the evaluation process, the PPP-DG had canceled the bid process,” it disclosed, adding, “Now, PPP-D has re-launched this announcement of RFQ for IDC PPP project.”
The PPP project envisions the development of integrated diagnostic center to provide quality and uninterrupted laboratory, pathology, and imaging services in Addis Ababa with some modification of the scope of the project.
The IDC will be based at St. Peter’s Specialized Hospital in Addis Ababa to serve clients in need of diagnostic services.
The announcement stated that PPP-D intends to pre-qualify prospective bidders with the requisite experience, expertise, and financial resources to rapidly deliver the IDC via PPP modality which is the first phase of the procurement (private party selection) process that followed by request for proposal (RFP) for only pre-qualified bidders.
New interested applicants shall get the documents at 5,500 birr, while those who were involved in the previous announcement shall get the documents at 500 birr charge.
The announcement stated that bidders may participate in the prequalification process severally or in consortia, “international bidders are encouraged to participate in consortia with local private partners.”
The RFQ application is expected to be delivered in one month period.
As per the EOI that was issued July last year, the project will be implemented for 10 years and is expected to bring new capacities, technologies, skills and efficiencies.
After massive study and legal document development through MoF, the government enacted the PPP 1076/2018 proclamation, which has been amended last budget year mainly to allow PPP on direct negotiation manner besides competitive bid format, makes it formalized for private sector involvement through public projects for the benefit of both sides. Under the PPP; efficiency on project handling, innovation, and knowledge transfer and using alternative financing to reduce government project financing has been stated as the pillars.
About 20 projects have been identified to be developed under PPP from over 100 proposals, while from the selected project some shall not be executed under PPP as per the recommendation that came from detailed studies. Roads, energy, housing, and health are included on the selected projects.
Except in some special cases, the PPP project threshold is USD 50 million and above. As per the government’s projection, 25 percent of all projects will be covered by PPP. In the ten year development plan the government has targeted to conduct huge projects through PPP.
Recently the government has also passed a decision to give convertibility guarantee for projects carried out by PPP modality. The move is targeted to boost investors’ confidence to engage on huge projects that the country is badly needed.
In the past budget year, four PPP projects were targeted to be floated and so far on a special condition through the government to government (G2G) approach, two energy projects are under negotiations.
The National Bank of Ethiopia (NBE) has made significant changes to the payment instrument issuer directive, including the allowance of full ownership, facilitation of payments on shares, and the establishment of a subsidiary.
The revised directive, which marks the third revision since its initial issuance in April 2020, has eliminated the previous requirement that limited a shareholder at a payment instrument issuer company from holding more than one fifth of the total capital.
In the 2020 directive no. ONPS/01/2020, article 4, sub-article 3.VIII, it was stated that no person, other than the government, could hold more than 20 percent of the shares of a licensed payment instrument issuer. Additionally, sub-article 3.IX stipulated that a non-government enterprise must have a minimum of 10 shareholders.
However, the latest directive, signed by Mamo Esmelealem, Governor of NBE, and effective as of October 6, does not include these articles.
The new directive allows for the formation of a subsidiary that can function as a payment instrument issuer. It specifies that the parent of the subsidiary must be a telecom operator, payment instrument issuer, payment system operator, or a bank.
Directive no. ONPS/09/2023, article 4.5, includes foreign nationals in the requirement to pay the minimum paid-up capital, which is 50 million birr, in foreign currency. Sub-article seven adds that a foreign national applicant must provide evidence of payment for the investment protection fee to the government. The National Bank will determine the amount of the investment protection fee periodically.
Regarding the CEO, the new directive states that the company’s leader should possess proven experience in the areas of digital financial services and products, mobile money operations, digital payments, and digital banking services. For senior executive officer positions in licensed government enterprises, relevant work experience in the field with a minimum of eight years of service is required, which was not mentioned in the previous directive.
The new directive also allows issuers to facilitate users’ investments in government and private securities through electronic money, as well as the facilitation of payments for principal, interest (coupon), dividends, or any other returns derived from the users’ investment activity.
In terms of accounts and limits, the maximum daily electronic account balance has been increased to 10,000 birr, with an aggregate daily transaction limit of 20,000 birr for level accounts. In the 2020 directive, these limits were set at 5,000 birr and 1,000 birr, respectively.
For level two accounts, the limits have been raised to 75,000 birr and 150,000 birr, respectively, compared to the previous directives’ limits of 30,000 birr and 5,000 birr.
NBE has stated that the revised directive aims to promote competition and innovation. It also anticipates that it will enable the expansion of mobile money services and digital payment solutions.
