A task force comprising relevant security bodies and the National Bank of Ethiopia (NBE) gets established to crack a whip on illicit financial activities that have been pricking Ethiopia’s economic market.
Recently, the financial regulatory body, NBE, took stern and proactive measures on those indulging in; illegal remittance, parallel currency market, counterfeit currencies, parallel gold market and other relevant crimes, by inviting and encouraging the public to play a role on tackling the issue.
Recently, NBE announced the implementation of a new directive that provides benefits to those that collaborate with the central bank and authorities on the illegal market actors.
Early October, Yinager Dessie, Governor of NBE, said that as per the new directive, NBE has facilitated reward payouts for those who provide intel on the foul players, citing that rewards will be come from the assets of the illegal actors, once they’re assets are seized.
To this end, on October 19, relevant NBE officials disclosed details on how the informants can safely provide intel on the criminals.
“The public shall provide the information through the platform we facilitated and their privacy is highly protected,” Abate Mitiku, Director, Change Management, Planning and communication Directorate at NBE, said.
He added that the public can also provide the information to law enforcement bodies since; the law enforcement officers are easily accessible to the general public without any hustle.
Abate also disclosed that a task force comprising of financial intelligence, policy and other security apparatuses besides the financial regulatory body has been formed to manage the operation.
Since the parallel market busted exponentially wider to the legal forex market various stringent measures have been put in place to combat the issue and to close the gap on the exchange disparities.
NBE and the Financial Intelligence Services have frozen hundreds of bank accounts of individuals and companies including betting companies who are involved in illegal remittance.
The illegal gold market has also grabbed headlines to which the regulatory body is paying much attention.
The experts have also put forth recommendations for the government to emplace keen focus on the contraband business for both the illegal exchange and gold market.
They highlighted that gold which has been bought illegally is creeping through the country’s boarders and advised the government to be vigilant on controlling the matter.
They pointed out the case from a week ago, where the customs department at Mumbai airport of India sized 16 kilogram of gold that was smuggled from Addis Ababa to India. Experts explained that the smuggling case is one of many which indicate that there is illegal and strong network through the route of Ethiopian borders.
They argue that the same applies to foreign currency collected from the black market. The case is not only for the illegal fleet of Ethiopian treasure but the incoming contraband is also the major challenge for illegal foreign currency market or high value products.
Recently, Yinager also underscored that contraband was a challenge as he explained that relevant government bodies are working round the clock through various activities to contain the issue.
There also has been information that some foreign investors are engaging as a final receiver of the foreign currency that is collected from the black market. Those who closely followed the case said that some Asians and other foreigners are involved on the black market and they pay higher amount against the legal exchange rate to collect the foreign currency smuggling it out from the country. Sources also claimed that these foreigners have become one of the major actors on the illegal remittance.
Similarly information on foreign individuals involved on the gold collection and smuggling have been spoken of.
Taskforce gets established to whip black market cartels
Amendment revisions underway to welcome foreign fintech firms
The national payment system proclamation amendment which will allow foreign investors to play as a payment system operator or instrument issuer has been filed to the relevant standing committee of parliament for further revisit.
The 2011 proclamation that came to life about three years ago following the implementer directives issued by the National Bank of Ethiopia (NBE) is now being revised to include foreign fintechs to invest and play in the financial sector separately or in partnership with local investors.
Unlike the current proclamation No. 718/2011, the draft proclamation has stated the paid up capital issue.
Article 6 sub article 6 of the draft proclamation said that an applicant for payment instrument issuer and payment system operator shall fulfill a minimum paid up capital as may be prescribed by the NBE directive.
Currently, the proclamation which is being used has not mentioned about the paid up capital though the ‘licensing and authorization of payment instrument issuers directive no.ONPS/01/2020’ that was issued in 2020 stated that a minimum paid up capital of 50 million birr shall be contributed in cash for those who want to invest in sector.
Solomon Damtew, Acting Director of Payment and Settlement System Directorate at NBE, said that one of the reason to amend the former directive is to correct and bridge such kind of gaps.
“When business entities enter the market capital, this will be essential and thus the article is included on the draft document,” he told Capital.
The new draft directive opened the sector for foreign actors and article 6.7 indicated that foreign nationals may be allowed to engage in a payment instrument issuer or payment system operator business; or establish a subsidiary which shall be licensed as a payment instrument issuer or payment system operator.
Sub article 8 explains that foreign nationals and Ethiopian organizations fully owned by foreign nationals shall engage in a payment instrument issuer and or payment system operator business through raising capital fully paid in foreign currency.
Sub article 9 also said that if foreigners have partial share on the fintech their capital must be paid in an accepted foreign currency.
Payment in foreign currency for joining protected sector has also been mentioned on sub article 12 of the same article, while the amount will be disclosed by the directive that NBE will issue.
Regarding the capital, experts said that the 50 million birr minimum paid up capital is high compared to the experience of others. So the regulatory body is not expected to change such amounts for foreign investors and thus entrants will need to come up with foreign currency to fulfill the paid up capital.
So far Ethio Telecom’s tele birr and Kacha Digital Financial Services are the two operators who are involved in the business whilst Safaricom Ethiopia is awaiting the ratification of this new proclamation to introduce its popular mobile money service, M-Pesa.
Recently Solomon said that the proclamation amendment will be a game changer since it allows well known and experienced foreign companies to invest on the market.
“Following the amendment of the proclamation, the ecosystem will be opened which means that highly experienced foreign companies will enter into the Ethiopian payment system,” he recently said in an NBE meeting with bank presidents that was held two months ago.
“The move will uplift the success that we have so far achieved on the sector and will foster the use of a cashless economy in addition to ensuring financial inclusion besides strengthening the digital payment ecosystem,” he added.
NBE, a financial sector regulatory body, is developing detailed directives that will allow provision of a license for the incoming operators.
Despite being about a year and half into its operations, telebirr has managed to convert a subscriber base of half of the state owned telecom provider users to mobile money users.
According to the proclamation, national payment system consist sending, receiving and processing of orders of payment or transfers of money in domestic or foreign currencies, and issuance and management of payment instruments and payment, clearing and settlement systems.
The draft document added that payment service providers, including operators, participants, issuers of payment instruments and any third party acting on behalf of them, either as an agent or by way of outsourcing agreements, may entirely or partially operate in the country.
Mines Ministry calls on mobilization of scrap metal
The Ministry of Mines calls upon Afar and Oromia regions and the Addis Ababa city administration to sell old Ethio Djibouti railway metals for provision of input to metal factories following the Finance Ministry’s decision to vend of scrap metals, used vehicles and machineries to steel producers through legal channel.
The Mine’s Ministry announced that government through the Ethiopian Investment Holding is working on profitable options either to merge metal factories in the country or to support them as they are now.
“Factories are working on only 17-19 percent of their capacity. There are many reasons for this, one of which is the shortage of input to which this scheme will help us to provide input. The inputs gathered can sustain the metal industry for up to 2 years and once collected they will be distributed to factories based on their production capacity,” said Takele Uma, Mines Minister during a joint press conference with the federal Public Procurement and Property Authority.
“The metal industry is huge. Factories which we have in our country are lagging behind in their production, capacity and also technology. Unless the government takes on the initiative to lead the industry it is difficult to develop the sector,” emphasized Takele, adding, “Based on the decision made by the Prime Minister, the Ethiopian Investment Holding is conducting assessment of cooperation with the factories and also international consultant.”
Takele’s Ministry has also called on governmental and private institutions for vending of scrap metals, used vehicles and machineries to steel producers through a legal channel.
Government Universities, Ethio telecom, Addis Ababa city administration are said to be examples of those storing scrap metals, used vehicles and machineries including the Ethio-Djibouti railway.
“We are working with the two regions and Addis Ababa city administration to pass the metal/the railway bases on their territory,” said Takele to Capital indicating that it has been six months since this has been started, “It will help factories to get input.”
Ethio-Djibouti railway, a 784 km gauge railway that connected Addis Ababa to the port city of Djibouti, presents a huge resourceful input in scrap metal.
The two agencies called for selling of scrap metals, aging vehicles and machines from private, governmental entities including universities, regions and city administrations to be sold out through a legal way though the Ministry.
Last month, the Ministry of Finance in a circular ordered the direct provision of scrap metal to industries based on allocations from the Ministry of Mines. The Ministry of Mines and the Ministry of Finance as well as the Government Procurement and Property Authority and regional offices in the regions will monitor the implementation of the decision in a hierarchical manner.
In their joint presser, the two institutions announced that the country spends over USD 1 billion in a year to purchase metals whereas local steel industries are underperforming which basically stems from shortage of inputs.
Ethiopia imported 2.5 billion dollars worth of metals and steel inputs in the last two years.
“The temporary measure taken by the government to solve shortage of inputs is legal vending of scrap metals from various entities. The decision is of national significance which will help to control the inflation in the industrial and construction sector which will solve the shortage of resources for the steel producers apart from removing scrap metal,” Takele elaborated.
He said that a task force has been established to oversee and take measures on those institutions, which failed to obey what he dubbed as a “national call”.
Haji Ibsa, Director General of the Public Procurement and Property Authority on his part said that, “Vehicles, machinery and scrap metals, which have been imported under very scare foreign currency have been seen disposed everywhere in addition to them polluting the environment.”
“In a circular signed by Ahmed Shide, Minister of Finance, 160 governmental agencies and 36 developmental enterprises were ordered to sell used vehicles and scrap metals to steel manufacturers,” he said.
He further unveiled that the Authority registered 2700 vehicles owned by governmental agencies, which are out of service, indicating price rate has been set to sell these properties.
Accordingly, a kg of steel scrap will be sold at a price of 64 Birr, scrap vehicle/machinery 51.75 Birr, and used vehicle parts at 51.25 Birr.
There are entities having significant number of properties to be sold out.
Takele explained that the former Metal and Engineering Corporation (METEC), which changed its name to National Industrial Engineering Corporation, accumulated 500 million tons of scrap and used vehicles.
He stressed that, “If we allocate these scrap metals and used vehicles properly to industries we can cover two years demands of steel manufacturers, and a cost of 2.5 million dollars can be saved”.
With a plan to ease the problems in the steel industry, Takele said, “The Ministry is commissioning a survey on the development of steel.”
He further said that his Ministry and Ministry of Justice are jointly crafting a directive on importing steel industries.
Loyal federal tax payers’ bag recognition
Intended to encourage the entire business community to follow the lead in abiding by the law, the third round of federal tax payers’ recognition ceremony was held on Thursday October 20, 2022 at Sheraton Addis hotel in the presence of president Sahle-Work Zewde and other senior government officials.
This year’s program has recognized 400 registered businesses and tax payers that have maintained transparent conduct and paid their taxes in a timely manner.
From this 400 awarded tax payers 40 of them are said to be platinum, 120 gold and 240 silver awardee tax payers, additionally 14 taxpayers were honored by being awarded 3 times with one tax payer being awarded a special prize for exposing corruption.
