The new investment incentive directive gives no tax exemption for education, training, printing industry and health services investments while on the contrary, it has given tax relief to alcohol related investments.
In its 8th ordinary summit, the Council of Ministers approved the new directive for investment incentives. The bill gives the Ministry of Finance (MoF) power to decide on incentive packages which was the mandate of the investment board.
The purpose of revising the incentive is said to encourage investors in accordance with the new investment proclamation approved in January 2020.
The directive authorized MoF to grant tax incentives to investments eligible under the regulation which entitles them to tax or give duty relief; and monitor on a regular basis the performance of each regulatory institution with respect to ensuring that tax incentives are used for designated purposes.
On the old incentive directive more than seven governmental offices had the power to decide; including the National Bank, main Department of Immigration and National Affairs, Ministry of Trade and Industry, Ministry of Foreign Affairs, Ethiopian Customs Commission, Ethiopian Investment Commission, Industrial Park Development Corporation, and regional administration on the incentive package under the Ethiopian investment board chaired by the Prime Minister on the 2012 incentive regulation.
Under the 2012 regulation, the investment board had been given authority to forward recommendations for approval to the Council of Ministers on incentive related amendments including granting new or additional incentives than what is provided under the regulation.
As experts suggest, the change to authorize MoF to decide on the package may create confusion since most of the investment related works are done by the Ethiopian Investment Commission, Ministry of Mines, Regional Governments and Addis Ababa and Dire Dawa City administrations Investment Organs, Ministry of Trade and Regional Integration, Ministry of Revenue and other Institutions who are mandated to regulate the implementation of tax incentives.
The new directive offers a comprehensive set of incentives on income tax and duty incentives granted to encourage investment in sectors eligible for incentives. Particularly for priority sectors, such as: Customs duty payment exemption on capital goods and construction materials, exporting investors located within industrial parks and industrial park developers.
Textile and Textile Products Industry, Leather and Leather Products Industry, Food Industry, Chemical and Chemical Products Industry are also areas which have obtained tax relief.
Under the beverage industry, manufacture of alcoholic beverages has got exemption from income tax for 1 to 2 years based on the investment area while manufacture of wines has got an exemption from income tax for 3 to 4 years. Likewise, manufacture of beer and/or beer malt has got 2 or 3 years of exemption.
Also according to the draft, in the health sector investment, only provision of tertiary specialized hospital service could have exemption from income tax for 2 year while exemption from income tax for 3 years is to be determined by a Directive of the Ministry, while new investments on provision of hospital service, provision of diagnostic service, provision of clinical service has no tax exemptions.
However the bill doesn’t give tax or duty exemption for investments such as hotel and tourism sectors, construction contracting and printing industry making it similar to the old directive. This is inclusive of information technology service and other services rendered using information technology as an enabler.
Alcohol given tax exemption over education
Investors eyeball Ethiopia’s mining sector
Investors are showing interest to get into the mining sector, emphasizes the ministry of mines on its nine month report to the House of Peoples Representative.
In the past nine months, the ministry has given 55 new licenses of which 39 of them are engaged on mining investigation while the other 16 investors are on production.
“Interests to engage in the mining industry are increasing from time to time,” said Takele Uma, Minister of Mines on his report, adding that the increasing investment on the sector could help to decrease the traditional mining production and increase benefit of the country from the sector.
Over the past nine months, the ministry has been focusing on boosting exports, replacing imports with domestic products and expanding job creation for citizens, according to the report. The minister indicates tangible results have been seen on natural resources of fertilizer, coal and steel.
Through the mining sector is expected to achieve Ethiopia’s prosperity it is known that the country did not benefit from mining resources due to its complex challenges.
As indicated on the report, instability in different parts of the country has been the biggest challenge of the sector. As the minister in his report indicated to minimize the effect the ministry is working with different stakeholders, as part of this a memorandum of understanding (MoU) has been signed with the Ministry of Defense, the Federal Police, the Information Security Agency and the Artificial Intelligence Agency to address security concerns in 14 different mines.
Beside the insecurity low performance of companies has also been set as a challenge for the performance. As indicated on the report based on the assessment, the ministry on the performance of mining companies has given a last warning for poly CGL to submit its finance and technical limitations until the end of the budget year. Similarly, Tulu Kapi has been requested to submit its financial reliability. In addition, the ministry has requested the house to support 3 companies in Afar region engaged in producing potash.
Regarding cement, lack of skill and management in factories has been set as challenges additional to other external factors in which only 58 percent of the production plan has been achieved which is 4.8 million tons from the planned 8.2 million tons.
The House stressed the need for significant change in Ethiopia’s mining sector and the need to intensify efforts to replace imported minerals with domestic products. The house stressed that the sale of mining, including gold, should comply with international trade standards and that the quality of the products should be maintained, the need to ensure that companies are operating in line with the requirements of continuous monitoring, development strategy and licensing and renewal of companies.
Over the past nine months, 6,947 kilograms of gold has been produced, 7,363 industry minerals, 79 tons of tantalum, and 2,000 tons of sodium has been exported.
Despite the Ministry of Mines plans of earning a total of 996 million USD from the sale of minerals and natural gas in the past nine months, only 458 million dollars or 46 percent of the target was achieved due to the slowdown in natural gas production.
Fishing better policy to upscale industry
The country fish production should at least triple to narrow the per capita consumption with regional standard.
Currently, the country has a potential to produce 94,000 tones of fish from major fish sources like lakes and dams, while the consumption per person is about half a kilogram which is far behind when compared with regional figures.
According to Hussein Abegaz, Fishery Development Directorate Director, to narrow the differential the country ought to up production by at least three times.
He said that market linkage and lack of modern production process is a challenge for the sector. He added that the fishing, processing and provision to the market need a proper streamlined chain which the country does not have, as of yet.
Hussein explained that in order to improve this, the fishery quality control regulation which is on its draft stage shall guide to serve as a solution for the sector development and marketing.
“Currently traders do not have processing centers like other countries. They are taking the processed fish meat from fishers, thus the process hinders the country from utilizing its resources properly,” he added.
Hussein told Capital that the sector receives little attention by government bodies particularly in regions, “at the central government level, there is a structure but it is not seen in the regions which is one of the challenges for the sector development.”
He said that if the country for instance targets to expand the per person consumption to be two kgs, the production shall also be upped “we have to produce at least 300,000 tons that shall be attained while the current potential is at 94,000 tons. Because the country has huge and suitable potential for the sector development; so to meet the demand we shall develop the fishery sector with new and modern schemes like aquaculture like how other countries did on the aim fill their demand.”
Experts said that expanding fishery is crucial for food sufficiency and diets that the country targets to attain besides job and economic contribution.
The production at natural water resources like lake potentials has reduced due to man made pressures, but the sector is promising due to the come up of new dams.
There are 200 species in the country of that 11 are exotic and 40 endemic.
Aschalew Lakew, Director of National Fisheries and Aquatic Life Research Center at Ethiopian Institute of Agricultural Research, said that of the total, six of the species are commercially important but it is not meaning that some others are not marketable. For instance in Gambella over 20 types of fishes are demanded by the consumer.
Ethiopia is producing 60,000 tons of fish every year, while the potential is 94,000 but this is not inclusive of the latest dams that are constructed for different purposes. In overview, the country has allocated at least 77 million birr for fish products import.
According to Hussein, up to 85 percent of the total production comes from the rift valley lakes and Lake Tana.
Aschalew, who is also a senior researcher, said that Ethiopia is suitable for fishery.
Researches indicated that the fish per capita consumption in Ethiopia is about 0.5 kg whereas the East African region is 9.9 kg.
Lack of coordination for the sector development including the development of new dam projects is stated as a problem for the sector’s poor development.
Formal rules and regulation in fishery, lack of experts, feeding, and technology and financing are also stated as a gap that are seen in the sector.
Vitalizing existing lakes, adequate dam development, and aquaculture development in different aspects including producing skilled labour and private sector intervention, and market chain and standard production have been designed in the ten year development plan.
Yared Mulat, Engineer at Ethiopian Construction Design and Supervision Works Corporation, said that the new water projects like dams should have included the fishery development in their design stage and actual developments.
UNDESERVED WEALTH
Financial wealth has become all the rage in the nation states of the world system. Not long ago, it was the real sector of the economy, production of goods and delivery of services that formed the foundation of what was then called progress. In those days finance was only an intermediary serving the needs of the real sector of the economy. Today finance is the final arbiter of all economic activities and dominates every aspect of modern life. What is even worse; the modern world’s financial system is based on pure fraud. The compounded consequences of modern banking are showing up in all sorts of places, including the peripheries!
Even in the weak African economies the dominance of predatorial finance has become quite visible. The undeserved prominence of finance has led these countries to concentrate on frivolous projects while neglecting the critical sectors of their economies. Like many things, manufacturing and agriculture have become subservient to finance. This is understandable given the following. For instance, investment in commercial banks (mostly private) fetch returns that are not easily found in any legal economic activity. A low of 10% going all the way up to 50% per annum, is a customary dividend that awaits a national investor in our part of the world. Of course, this is a Ponzi scheme, though the sheeple might not know it yet. Nonetheless, since banking is still a highly regulated and protected area, the impression an investor gets is; the whole business of banking in our region is kosher. We beg to differ! In any business sector, a return of 50% per year is to die for, so to speak, unless of course it is illegal. Granted, certain niche markets, mostly associated with innovations, can give such returns, but those are not widespread as our run-of-the-mill banking. Thanks to the neoliberalization of African economies private commercial banks in the region are now fully engaged in this ludicrous rentier schemes. For example, Kenya and Ethiopia have numerous private banks fully committed to these Ponzi schemes. It seems the central banks of these countries have lost their wherewithal to control and regulate such nationally damaging banking activities. Why should anyone with a right mind engage in the productive/service sectors of the economy when buying into a bank can guarantee (relatively) ‘risk free’ astronomical returns?
Don’t listen to the nonsense spewed by global establishment, bank money is created out of thin air, period! By bank money, it is meant all forms of money that do not include the printing of notes and the minting of coins. But these two account only to less than 5% of the money in circulation, at least in the financialized economies of the advanced industrial countries. By and large, the money that exists in an economy (over 95%) is created by commercial banks, most of which are private. Deposits or no deposits, if commercial banks want to create money they can do so without much qualm, as long as there is no clear restriction/limitation imposed by the central banks. Therefore, and increasingly, it is by negative intervention, i.e., through regulation, central banks play a role in any given economy. Commercial banks create money by lending it into the economy. If they do not lend, supply of money in the economy will be restrained and economic activities will become subdued. In the logic of modern economic thought this might instigate an economic recession if not depression. On top of that, unless banks create money in abundance, i.e., spew out debts; they will also have problems surviving. Most importantly, this banking regime almost always leads to mal-investments (white elephants) that tend to cause harm to stable economies as well as to the wider bio/ecosphere of the planet.
On the other hand, creating money out of thin air and in abundance fuels inflation, and inflation affects the poor and the working stiff more than anyone else. Don’t forget the money created by the banks, unlike the hard earned money of the working class, entrepreneurs, etc. is actually fictitious, i.e., phony! The money spigot is almost exclusively funneled to those closely associated to officials of the banks as well as to the powerful politicos of a country. In many of these criminal schemes, the viability of projects or actual commercial needs of entities are used only as pretexts to milk the system. As always, when the time comes for repayment of the massive debts, the policy of ‘extend and pretend’ is promptly enacted to save the connected crooks. Small businesses facing difficulties are usually foreclosed and sold, often to the same insolvent companies of the oligarchs. Ultimately and invariably, it is always the sheeple that ends up paying for the whole mess through various measures; austerity, bailouts, taxation, inflation, etc. The massive bank credit created, not only brings unbearable inflation to the majority, but also solidifies polarization within society. The Ethiopia of recent years is a good example of these above phenomena. During the last two decades the country managed to create plenty of parasitic oligarchs that have no clue as to what productive work is. By and large, these empty suits were allowed to command and control the country’s resources, either directly or through entities (some foreign) associated with the power that be. The gullible sheeple is systemically goaded to worship such criminals as if they were the epitome of entrepreneurship. Pathetic! The ‘Mafiosi State’, the informal state operating behind the formal state leveraging all institutions of political governance, the market and civil society, is the main culprit behind the whole scheme of grand corruption, unheard and unseen in the country’s recent history! Such vicious crimes must be punished to avoid repeats!
The result of a highly polarized existence within as well as between countries is mostly due to this phony money creation. When it comes to chronic polarization even the rich countries are not spared. The instability of the financialized global economy is another of the symptoms of the fast decaying globalization of late modernity.
