Government halts the partial privatization of Ethio telecom for an unspecified time.
The postponement comes in the wake of recent developments and fast moving micro economic changes both globally and from country’s perspective as analyzed by the statements of the Ministry of Finance and Public Enterprises Holding Administration Agency.
“The government of Ethiopia believes that taking time to accommodate the improved macroeconomic situations as well as continually improving financial performance of Ethio telecom will result in better value for all the parties involved and in particular the citizens of Ethiopia,” reads the statement.
It is to be recalled that as part of the home grown economic reform programs the government had laid out a frame work for the privatization of public enterprises under the public enterprise proclamation no 1206/2020 in order to broaden the role of the private sector in Ethiopia’s economy. In line with the program, the government proposed a partial privatization of Ethio telecom by selling 40 percent of the equity share capital of the company and to that regard September 14, 2021 saw the Ministry of Finance (MoF) requesting eligible bidders to submit their proposal.
The Ministry of Finance which is responsible for the follow up process alongside the Public Enterprises Holding Administration Agency then issued the expression of interest on mid-June last year which closed after a month. The process was then met by the issuance of a request for proposal on September inviting interested parties who can add value to the company by bringing in best practices in terms of operations, infrastructure management, and next-generation technological capabilities.
“The government of Ethiopia remains committed to finalize the privatization process and looks forward to re-engaged in due courses with existing and additional parties that have expressed interest in the privatization,” noted the finance ministry and the administration agency.
As part of breaking up its monopoly hold over the sector, Ethiopia last year also issued a tender to award two licenses to private telecommunication operators.
In late last May, one license was awarded to a consortium led by Kenya’s Safaricom, which offered $850 million and promised to invest $8.5 billion over 10 years.
In related news, on December, Ethiopian Communications Authority (ECA) also announced that the process of selecting the second telecom operator had been postponed. ECA stated that the bidding process has temporarily been relinquished as per the request of bidders.
Gov’t puts Tele’s partial privatization on hold
Procured trucks to hit the ground running by loading fertilizer
Ethiopian Shipping and Logistics Service Enterprise’s (ESLSE) brand new trucks arrive at Djibouti with their entry to Ethiopia with the first batch of fertilizer cargos being expected to start as early as this coming week.
It is to be recalled that the sea and land logistics giant procured 38 trucks directly as per the country procurement rule from the former supplier, Jinan Sinotruck Co, which won the bid for the procurement of 150 Sino trucks about a year and half ago.
The country’s law allowed the enterprise to procure up to 25 percent additional product or service directly besides the original biding volume or amount.
As a result, the Chinese prominent truck manufacturer agreed to supply additional 38 trucks on the same winning unit price, which was given for the 150 trucks last year.
ESLSE has stated that the latest procurement consumed 194 million birr. The trucks that arrived in Djibouti this week will be assembled at the same there, and will start their operation by transporting fertilizer cargo which was imported for the upcoming agriculture season.
Wondimu Denbu, Deputy CEO for Corporate Service at ESLSE, told Capital on Friday March 18 that the trucks have already been assembled. He said that relevant officers from the transport authority and Customs Commission will travel to Djibouti on Saturday to provide relevant documentation and plate numbers for the trucks.
“We hope that starting from Tuesday, the new trucks shall commence their voyage to Ethiopia with fertilizer cargos,” he expressed his expectation.
Currently, ESLSE has 450 operation heavy-duty trucks and to which the 38 trucks will beef the number to 488.
About five years ago, 215 trucks were purchased from the French automotive company, Renault Trucks. As the norm of ESLSE, the new fleet will allow the enterprise to exclude the long-serving and economically inefficient trucks from its cross-border operation.
Jinan Sinotruck Co, which is known for its heavy-duty trucks, Sinotrucks, was the company that won last budget year’s bid to supply 150 Sinotruck vehicles at the cost of 11 USD million.
ESLSE is also under preparation to procure additional 150 heavy duty trucks through international bid. It is to be recalled that few weeks ago, the multimodal monopoly annulled the first biding due to lower interest of biding companies. The bid document is said to be revised and refloated.
According to Wondimu, the bid has already been refloated and interested bidders have been buying the document, and the bid is expected to be opened in the coming month.
New box
The logistics giant has also concluded the procurement of additional 5,000 containers on international bid from the Chinese company CCCC. According to the Deputy CEO, ESLSE’s owned containers have clocked to more than 13,909 TEUs.
At the beginning of the budget year, ESLSE had announced that it was working to manage the containerized consignment challenges under short and mid term plans. The global phenomenon stemming from the COVID 19 pandemic however created cargo boxes shortage not only for ESLSE but also for the sector in general, globally.
Government expenditure surges direct advances
The direct advance channeled to the central government at the first quarter of the fiscal year surges by two and half folds.
The first quarter report of the National Bank of Ethiopia (NBE) which analyzed the economy in detail indicated that at the first quarter of the 2021/22 fiscal year that included months from July to September shows NBE’s gross claims on the central government bulging by 36.0 percent to 311.9 billion birr.
From the stated amount, the government bonds accounted for 63.6 percent while direct advances took 36.4 percent.
“Direct advance to the central government rose sharply by 266.1 percent compared to last year same period due to huge government expenditure demand,” NBE explained.
The national bank noted however that the deposit of financial institutions at the NBE contracted by 12.5 percent on annual terms despite 19.1 percent quarterly increase.
The quarterly report shows that the direct advance on the stated period stood at 113.5 billion birr that was 31 billion birr in the same period of last year and 83.5 billion birr at the fourth quarter of last fiscal year, which is the preceding quarter from the reported three months.
It was recalled that through introducing different instruments the government had enabled to successfully reduce the direct advance sharply in the preceding quarters, though it showed slight increment in the past few periods.
Unforeseen events like the conflict in the northern part of the country in addition to rehabilitation and aid, and drought was stated to have forced government to access finance through direct advance from the central bank. Experts however, recommended government to reduce its direct advance as much as possible since it’s consequential on the economy.
Therefore other instruments like treasury bills (T-bills) were recommended to be used for the budget deficit.
According to the NBE quarterly report, during the first quarter of 2021/22, the amount of T-bills supplied to the biweekly auction market was 226 billion birr, showing 581.3 percent annual increment.
Similarly, the demand for T-bills was increased by 156.5 percent to 136.6 billion birr while the total amount of T-bills sold reached 130.6 billion birr, showing a 291.6 percent surge over similar periods of last quarter.
Banks bought T-bills worth 93.5 billion birr while the remaining T-bills valued at 37.1 billion birr were sold to non-bank institutions.
“As a result, 40.8 billion birr (net of redemption) was mobilized for government budget financing. The total outstanding T-bills at the end of the quarter reached 161.5 billion birr, reflecting a 316.6 percent increase over last year same period,” the report elaborated.
The average weighted T-bills yield was 9.18 percent, about 46.2 percentage points higher than a year earlier that was 6.3 percent mainly due to the policy change on issuance of T-bill through auction market.
At the end of first quarter of 2021/22, broad money supply (M2) reached 1.4 trillion birr exhibiting a 28.4 percent annual growth, owing to 29.6 percent expansion in domestic credit and 17.0 percent in other items.
Similarly, the reserve money reached 287.1, billion birr showing 9.8 percent annual expansion while excess reserve of commercial banks depicted 54.8 percent, annual contraction.
During the review quarter, banks disbursed 65.3 billion birr in fresh loans, indicating 18.7 percent annual increase. Of the total new loans, the share of state owned banks was 56.1 percent and that of private banks 43.9 percent.
In the first quarter of 2020/21, the share of state owned banks as fresh loan was 30.3 percent and that of private banks was 69.7 percent.
NBE gives green light for new Sinqe Bank president
The National Bank of Ethiopia (NBE) has approved the appointment of Neway Megersa Lenjiso, as the first president of Sinqe Bank.
Neway brings to the table about 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. Similarly, the new president presents high level managerial expertise as he has led Kegna Beverages as Managing Director as from 2018. Moreover, for the past year, Neway was working as board chairperson of the bank.
The company has also appointed Zewdie Tefera, who has been working as acting president of the bank as the Chief Operating Officer.
Sinqe on February 16, 2022 officially received its license from the National Bank of Ethiopia (NBE) to start operations with a subscribed capital of 15 billion birr and a paid up capital of 7 billion birr following its transformation from Oromia Credit and Saving Share Company staring from May 2021.
Following the issuance of proclamation no.40/1996 proclamation that determines the licensing and supervision of micro finance institutions, Oromia Credit and Saving Share Company was established in August 1997 to give micro finance service obtaining operational license from NBE and trading license from the federal Ministry of Trade and Industry.
The change came through the proclamation no 626/2009 and NBE directive no SBB/74/2020, which allows microfinance institutions to evolve into commercial banks with a two-year transition period, to which the executives of the microfinance made the transformation from microfinance to banking services. The company was thus renamed to Sinqe bank, which is sourced from the cultural institution of Oromo women.
“The primary goal of the relicensing is to realize inclusive services to all withstanding the microfinance service targeting job creation and financing to the poor whilst incorporating larger financial seekers as well,” said the bank’s board during the transition.
Currently, the company has more than 400 full-fledged branches. When it becomes operational, the bank will start giving its services with these branches.
