All empires decline in time. There is no exception to this law of social entropy. Amongst the widely known and extensive empires of the last two millennia, we can mention the Roman Empire, the United Provinces (Netherlands), the British Empire and the currently reigning one-the USA. The decline of Empires tends to accelerate in their twilight. Pronounced irrational policies employed to stop inevitable changes are the main reasons for Empires’ swift disintegration. Change is inevitable and all that can be done is ameliorate consequences. Instead of trying to adopt and ease their way into the new unfolding world system, empires tend to double down on their mistakes. The current one is no exception. One such repetitive mistake (of empires) is their cravings for wars. Declining empires push their luck by engaging in multiple unwinnable warfare, assuming they still have what it takes to prevail over all of them, no matter whom they are fighting against!
Hegemony is one of the defining characteristics of an empire. When this supremacy is shaken because of emerging reality, it would be wise to rethink old positions. Developing a more agile and accommodating posture could make the inescapable transition manageable. On the other hand, the refusal to adapt to changing realities; whether they are brought about by intensified and unexpected social reordering from within or by a more competitive emerging political economy on a global scale or by creative destructions that render the overall economic status quo unfitting or even by the new phenomenon of collapsing ecosystems; will only lead to chaotic collapse! Just like the empires of yesteryears, the US Empire, willy-nilly supported by the vassal states of Europe is fracturing; economically, socially, politically, culturally, etc.
Maintaining dominance only by leveraging hard power, i.e., military power might give the impression of hegemony, but it is not the case at all. In fact, it might well be a sign of creeping weakness. When legitimacy is lost and every issue seems to require the use of raw power to settle it, then we cannot talk about hegemony. Once an Empire starts to lose legitimacy, integrity and truth are the first ones to be thrown out of the window, so to speak! Just before the collapse of the Roman Empire the values that created the empire were significantly diluted and were gradually replaced by mediocrity and corruption. Fictitious/mercenary soldiers, manipulated specie/currency, (to the extent of diluting the composition of the specie, gold & silver coins), psychopathic tendencies dominating governance, all rounded cultural decay, etc., etc., took over the Roman Empire in its dying days. We can easily say ‘ditto’ to all the above in regards to the current reigning empire. Understanding and accepting what prevails on the ground is very difficult to those who are used to having their ways. Unfortunately, even mere discussions along these lines invite criticism if not more!
During the accelerating phase of decline, it is usually unenlightened entrenched interests that influence policies and sway state power, to the detriment of all and sundry. These characters tend to be very deficient in integrity and honesty. They are, by any measure, closed to new ideas reflecting the changing reality on the ground! Don’t forget; politicos, at the service of dominant interests, are always for stasis, not change! What lying politicos will do and are good at is give the sheeple in the crumbling empire a false hope of potential renewal, which for all practical purposes, will not be forthcoming. It is mostly the doubling down of one dumb policy/idea after another that will finally do empires in. Once again, amongst these misguided policies, continuous wars feature prominently. The sheeple, as usual will end up becoming the proverbial cannon fodder!
Unlocking debt to realize potential: LAMC settles 27.3 billion birr in arrears
Liability Asset Management Corporation (LAMC) which was formed to manage the consolidation and servicing of a portion of the country’s state-owned enterprises (SOE) debt, has serviced a total of 27.3 billion birr for the loan taken by two pubic enterprises.
Habtamu Hailemichael, Director General of Public Enterprises Holding and Administration (PEHA), stated in the first half of the budget year that LAMC has settled the arrears owed by Ethiopian Sugar Corporation and Chemical Industry Corporation to the creditor and state-owned financial giant, Commercial Bank of Ethiopia (CBE).
The asset management corporation that was formed early last year, was set up to ensure that SOEs, do not continue to amass unsustainable debt with no expectation of future bailouts.
LAMC has soaked up and administered the debt of selected highly indebted public enterprises like the two, Sugar and Chemical Industry corps.
As per its mission, in the first half of the current budget year, LAMC has settled 13.98 billion birr for the Sugar Corp and 13.3 billion birr for the Chemical Industry Corp.
Looking back, in the past, the sugar corporation received billions of birr in loans from local and external sources for the new sugar mill projects that are being constructed in different parts of the country. However, the project accomplishment has been significantly lagging which places the corporation in a hot seat in terms of loan repayment.
Similarly, the current settlement for Chemical Corp is related to the project that has seen a high delay in a fertilizer complex that is yet to start operation.
PEHA said that the debt settlement that LAMC has settled on behalf of Chemical Corp is related to Yayu Multi-Complex Industries project.
PEHA’s Director-General on the other hand said that in the first half of the budget year public enterprises have settled the debt for external loans as per their plan.
“External debt of USD 54.7 million for Sugar and Chemical corporations has been settled as per the projection,” he said.
The comprehensive SOE reform agenda which is carried out by the government has targeted SOEs to run to a healthier asset and liability position.
On the asset side, the primary source of finance for the LAMC, which was formed as a business entity with a capital of 570 billion birr, will be the privatization proceeds and SOEs’ dividends. Recently, the Ministry of Finance (MoF), which is the regulatory body of LAMC, stated that the telecommunication sector transactions and the privatization of the Sugar Corp will generate proceeds to finance the LAMC’s liabilities in the short term.
Capital’s secured information from relevant sources indicated that the government is finalizing to hire consultants for the privatization of sugar millers to which five of them are established as an independent legal industry by the latest Council of Ministers’ regulation. The council has also approved a regulation to form the Ethiopian Sugar Industry Group that may reform the current corp.
LAMC will also engage in additional revenue-generating activities.
“For instance, it can invest the privatization proceeds and underutilized public assets to generate additional revenue. This approach will ensure that debt service on the SOE stays on track without burdening the central government’s annual budget,” MoF recently stated.
Ethiopian Electric Power, Ethiopian Electric Utility, Ethiopian Railway Corporation, Ethio-Engineering Group, Chemical Industry Corporation, Construction Works Corporation, and the Sugar Corp are at high risk of debt distress.
PEHA administers 36 public enterprises, while 15 of them are included recently to be regulated under the administration.
NBE faces backlash over Sinqe Bank’s new president
The National Bank of Ethiopia’s (NBE) recent approval of Sinqe Bank’s president has been put under backlash by sector experts who have gone further to state that the new appointment is a sign of double standards from the central bank. On the flip side, the leadership at Singe has refuted the said claims and has argued that NBE has played by the book, in terms of approval.
In the letter that NBE wrote on March 18 which was signed by Frezer Ayalew, Director for Banking Supervision Directorate, it stated that the regulatory body accepted the request of Sinqe, which filed its request on March 1, for the approval of Neway Megersa as president of the bank.
The brief approval letter of NBE added that the assignment acceptance is given on the consideration of special treatment.
This decision of NBE has raised concern from the sector experts who claim that the central bank’s appointment has crossed the relevant directive for the appointment of the seat. They said that such kinds of decisions would erode the strong stance of the regulatory body, which is well known for its highly strict regulation stand.
NBE’s ‘requirement for persons with significant influence in a bank directive number SBB/70/2019’ article 5.1.2 states that a chief executive office (CEO/president) shall have a minimum of 12 years experience in banking, of which, at least five years shall be as senior executive officer.
Neway to this end presents 13 years of experience in the banking industry, serving Nib International Bank for 5 years as planning and research officers and 8 years of service at several positions in Oromia Bank.
Moreover, Neway was working as board chairperson of the Sinqe Bank, while he was at the top of Kegna Beverages, a parastatal of Oromia region, before he proceeded to become president of Sinqe.
Neway has also stated that he was confused by the term used by NBE, which stated that the approval was given on a special case. He however argues that he has relevant requirements for the post.
“For Sinqe’s approval request the response of the regulatory body was supposed to be as simple as yes or no,” he says, adding, “I am confused why they put the term ‘special treatment’ on their approval letter.”
He told Capital that as far as his knowledge is concerned, the requirement mentioned on the directive is all about experience as well as age, which he fulfills.
The 2006 directive of NBE specifically stated that the CEO of a bank shall be at least 30 years old, which is not mentioned on the directives which were issued on the 2012 or 2019 amendments.
However, experts said that referring to a minimum age for the CEO or president in the directive is not relevant, since the work experience requirements by default push the president’s age to be above 30.
Neway said that he has 13 years of experience in the banking industry of which 7 years was as a member of the executive management.
Capital’s effort to get information from Yinager Dessie, Governor of NBE, and Frezer was unsuccessful.
However, sources at NBE said that the latest special approval is to be seen as a policy decision given by the Governor.
Sinqe is the upgraded financial firm of the former Oromia Credit and Saving Share Company (OCSSCO).
Public enterprises’ resilience generates double revenue
In the first half of the budget year, the gross profit of public enterprises has shot up by almost double when compared to similar periods of last year. In similar fashion, profits surpass the set projections.
During the press conference held on Wednesday March 23 at PEHA headquarters, Habtamu Hailemichael, Director General of Public Enterprises Holding and Administration (PEHA), indicated that in the half year that closed early January 2022, the public enterprises have been able to generate 271.4 billion birr in revenue which was three percent higher than the projection to be attained in the stated period.
In the first half year of the budget year, PEHA had targeted to generate close to 264 billion birr revenue.
Habtamu reminded that the period that passed in the first half of the budget year was very difficult in light of the law enforcement operation in the northern part of the country, “while in this difficult period public enterprises’ performance has catapulted.”
The performance has not only surpassed the projection but it has also shown a wide increment compared with the same period of last year’s budget.
In the first half of 2020/21, the revenue generated from public enterprises was about 170 billion birr which is 60 percent lower than the first half 2021/22 budget year.
Similarly, in the stated period, the profit before tax has also outperformed the projection and last year’s same-period performance.
In the stated period, the public enterprises were expected to earn 36.7 billion birr as profit before tax, while the actual performance reeled in almost 52 billion birr or 42 percent higher than the projection. The gross profit has also spiked by 97 percent compared with the same period of last budget year.
According to Habtamu, enterprises in transport and logistics, communication, and finance sector are the major contributors to the revenue and profit.
From the total 36 public enterprises that PEHA oversaw, four enterprises including the Ethiopian Railway Corporation and Ethio Engineering Group have registered losses.
In the stated period, the public enterprises in general generated USD 3.83 billion that is 96 percent of the target. The foreign currency generation has also increased by USD 540 million or 16 percent compared with similar periods of last year. Ethiopian Airlines Group and Commercial Bank of Ethiopia took the 94.7 percent of hard currency generation, while the remaining 5.3 percent hard currency generation was secured through Ethio Telecom, Development Bank of Ethiopia and Ethiopian Electric Power.
