It was a recently that Bekalu Zeleke was appointed as president Bank of Abyssinia (BoA). Right after his appointment senior professionals of the Commercial Bank of Ethiopia (CBE) followed their former boss to join BoA.
At the same time when Bacha Gina was appointed to lead CBE about two years ago he called his former colleagues that were working at Awash Bank, which he served as vice president.
The incident was discussed around the sector actors and viewed in different angles.
At one point experts said that the incident indicated that leaders may not be comfortable in a new atmosphere at their new organization. On the other hand experts argued that leaders may not have a capacity to develop a structure as per their interest and work culture or they don’t trust the staff that they joined.
Besides that experts claimed that taking an organization staff to another place is a good indication that the country doesn’t have ample experts in the industry.
“The two incidents may also describe that the banks were not working on the enabling environment and boosting their staff capacity, otherwise there is no reason to change almost all management staff when a new president is assigned,” one of the sector actor said.
Experts said that the situation created disappointment at the banks and some of senior staff left the banks.
“If you establish a business on a given circle and connection you may move with that circle at your new institution but there will be long existing professionals at your new office, while you replace them by your connection. A good example for this is BoA,” one of the banks president who demands anonymity told Capital.
The reason of replacing the existing executive should be seen in detail, the president said.
“Some time it looks like a cabinet reshuffle when new political leader come to power, but it is supposed to be well studied,” he added his view.
Most of the sector actors and experts, who Capital talked, agreed that the sector is facing serious skilled labour shortage that forced banks to fight each other for senior staff.
At the same time the booming of the banking industry is also described as the other new threat for the situation. Currently 18 banks including two stated owned banks operate in the market, while another 17 new banks are in the pipeline to join the financial industry.
“If the sector will not get ample attention the situation will be stiff,” one of the bank leaders described the upcoming situation regarding the human capital in the sector.
Sector actors said that when new banks are opened or when there is a branch expansion financial institutions are collecting professionals including lower level staffs from different banks and on the other side of the coin banks are forced to offer unreasonable pay rise to hold professionals.
“At the middle and lower level, staff move from one to another in relation with one motive, money. But when the management team entirely moves from one to another it indicated that there is no proper succession planning at the institution. If there is a succession plan at the institution there will not be such kind of major incident,” another president of a bank told Capital.
“Every institution has a board and management who lead the operation so if the management is replaced by new team it is demoralizing for the existing staff,” he said and explained the reason for massive reshuffle and changing offices.
According to sector experts, some time the new leader or the board of the bank may table the proposal of moving a team.
“When the leader at CBE was changed, some of the management were abandoned by the new leadership. That may give a chance for the BoA leadership to take them since it knows their capacity,” they said, “but this action may also throw away the existing potential and proven experience.”
One of the bank leaders remind that the problem will continue since some eight banks in the conventional and interest free sector are expected to open their doors in the near future and due to that the trend will continue.
“Definitely these new banks will be looking for talents because they are new and need experienced talents,” he says adding “they will give attractive positions and salary, which will shift your highly skilled experts. Otherwise you have to improve the salary and post to keep the talent.”
Dereje Zebene, President of Zemen Bank, has seen the narrative in wide range. He said that the financial industry growth in the past should be evaluated. “The situation ten years ago before NBE introduced NBE bill in 2011 that forced banks to purchase the 27 percent bond for every loan disbursement and after is different,” Dereje said.
He described the NBE bill was a turning point for the situation in the banking industry. “The economic growth was not similar before the bond and after and at the same time the financial sector growth path was also different in the two conditions,” he said.
“Before the NBE bills the banks growth and branch expansion was very limited. At the time the demand of labour force was not that much high,” Dereje added.
He explained that the situation has changed when the government introduced the bill that followed by the resource scarcity, which forced banks to work aggressively to mobiles deposit, “besides the bill, the economy has seen significant growth, and the public spending and loan demand has also increased, which accelerate the economic activity.”
Since then banks are expanding their branches swiftly and at the same time NBE gave a direction for branch expansion to be undertaken at least by 25 percent every year, which is also an instrument for sudden and high skilled labour demand.
“In this competition you don’t have time to give training for new graduates and assign for job, due to that the option shifted on moving trained staffs from one bank to another with attractive and competitive payment,” he said.
The bank president explained that this new situation changed the banks trend and instead of usual trainings, banks focus on the filling of their immediate demand. However NBE ordered banks in 2015 to allocate their 2 percent of recurrent budget for capacity building.
Most bankers and sector experts have doubt about the effectiveness of the two percent budget. “It is not supported by research and well developed human capital development strategy,” the sector actors said.
Regarding the human capital development Gemechu Waktola, Assistance Professor at College of Business and Economics at Addis Ababa University, said that it is the area the country should focus.
He said that human capital development as a nation is a major challenge. “If you go at the civil service, service sector or the private sector it is a mess. When it comes to the finance sector it is not only in the banking sector but the insurance industry is a disaster,” he described the situation.
“We are talking the banking industry because it is at least supposed to be the best based on their capacity,” Gemechu, founder and CEO of I Capital Africa Institute, a consultancy firm who supports companies including financial institutions on human capital besides organizing several events, told Capital.
“We don’t have a problem with number of people but in actual sense the talent that are engaged on perfect, discipline of time and level is very rare,” he said.
It is widely seen in the finance sector because it is affecting other sectors and it is relatively well structured and strongly regulated, according to the human capital development expert.
“Why professionals migrate from bank to bank and why leaders move with their crew? Basically it has multiple problems,” Gemechu said.
“At the initial point it is related with cultural. In the leadership if someone moves with his or her team there is a problem of trust or social capital issue. He may not believe the existing team and consider others are not capable and may not achieve their vision,” he added.
“On the other hand leaders may think that the existing culture may not accept them, due to that they bring their crew. This is the situation when an institution is not run by professionalism and science, sometimes it may imply that the industry has very few talented players that are moving them from one to other.”
“If it has a few change makers it shows that developing the human capital in the industry is not done properly either at the bankers association or every banks,” he added.
“If you are allowed by the board to come up with your entire crew, the board itself does not believe in its capacity and system or it is not working on talent development and succession that is questioning the board in the corporate governance angle,” he says adding “in general it is the issue of succession planning and a problem of internal system.”
“As per my knowledge; who has strong human capital development as a practice? The answer is zero except very few who are trying to develop it,” Gemechu added.
“Literally as a system there is no understanding of human capital development at banks. But if you asked them they may say they have but it is easy to measure. You have to ask them why they are hiring manger or top management from others, why the service quality is not improved at the required path and other gaps that are observed in the sector,” he asked.
Asfaw Alemu, President of Dashen Bank, said that this issue should be solved as soon as possible.
“In principle there is a perception that banks are using their two percent of recurrent budget to develop talent than taking one from another. Basically it is supposed to be looked to what extent and how banks are using the budget effectively,” Asfaw told Capital.
Forcing by the regulatory body to allocate a budget for training shows that the sector actors by themselves are not engaged in it, which is supposed to be done by them, according to Asfaw, “it shows the readiness of banks and their understanding for talent and skill development.”
“If all are working in this area seriously they will install succession planning and build talents properly when I see the principle in the big picture,” Asfaw said.
“This is not the situation to stop the trend on our SWOT analysis we have considered the talent shift,” he said. He said that it is difficult to halt it fully but you have to have a strategy to minimize the situation.
According to Asfaw, banks have to work on a strategy of succession planning to solve the challenge. Such strategy will give trust for staff and they will see futurity with their institution than migrate to other facilities with some amount of pay rise and position differences.
Dereje of Zemen Bank shared the view of Asfaw. He said that since you are not working on human capital development in your staff it reflects on executives that pushed banks to look for other institutions to hunt skilled professionals.
According to the Dereje trainings for bank executives should be given. “This is a common trend in other countries, for instance bank leaders in Nigeria get special and designed trainings for one or two months by well recognized international universities and consultants, but there is no such kind of practice here.”
The sector actors said business model, lack of creativity and the formation of family owned business culture is also the other gap in the sector, which makes banks to see their competitors.
“If you perform well in one place others will take you with better payment targeting to copy your business, take customers and implement your past culture than creating initiation to create your own business model and market, which is the result of lack of training,” Dereje said.
Gemechu strongly advised investing and hiring fresh graduates in different level to come up with new, competitive and transformative business in the sector than duplicating the usual business.
“If the new coming banks follow the usual trend and grab experts from others they will not come up with new business environment,” he says “at the end these new banks will be the banks that are still existing and only share the resource with others, because they don’t have new brain and perspective.”
Nassir Dino, founder and board chair of ZamZam Bank, accepted the idea of Gemechu about new blood but to some extent some leaders are needed at initial stage as a mentor.
Nassir reminded that about ten years ago in it’s under formation the bank has been also engaged on training for fresh graduates. “Because the sector was new at that time we have been providing training for our future staff by experts including those who come from abroad,” he reminded, before the government blocked the bank.
Now he said that there is skill in the sector and the practice expanded at least as a window, “we may not have similar challenge but we think still on new strategy and vision,” he said.
Gemechu also argued that Ethiopian Bankers’ Association (EBA) should focus on human capital development besides providing policy advice and recommendations for the government.
He said that similar association in other African countries have good experience on producing capable and quality experts in the sector.
Dereje said that the association commenced initiatives to establish training institute. He said that agreement has also been made with KPMG to design curriculums but facility is crucial, which has become difficult. “Access to land has become a challenge to establish the training center,” he said.
He insisted that the association may work for the industry as a whole, but institutions should fill their gaps by themselves.
The board and shareholders should have also long term vision besides amassing profits.
Asfaw said that other African countries have good experience regarding enabling professionals for the industry.
“There is no facility providing training in the banking industry than those graduated in economics, accounting or other similar field. Currently we are spending money for training but the quality is doubtful,” he said.
“To solve it as a nation a facility is supposed to be established,” he added.
Gemechu has also advised that banks should focus on future of work and technologies, “the major and first victim on future work will be the financial industry that seriously consider it now.”
Dereje reminded that when the banking industry boomed about a decade ago institutions have given attention for branch expansion than focus for technology.
“If it is business as usual it will continue as it is. It is only the change on name of banks not operations, but there is a perception of business uniqueness,” Nassir of ZamZam Bank, said.
The past experience will have the only option for the future economic challenge. When you think of the future business challenge is not business as usual.
According to NBE quarterly bulletin that viewed the economy for the second quarter of the 2019/20 fiscal year, the total number of bank branches has reached at 6,136.
Information Capital obtained from EBA indicated that currently about 90,000 employees are engaged in the banking industry, while the labour force annual growth rate is about nine percent.

The Ethiopian Economic Association published its new research on the economic effect of the global pandemic COVID-19, saying that it will likely have a long term effect stretching up to the next ten years.
The working paper entitled ‘The economy wide impact of the COVID-19 in Ethiopia: Policy and Recovery options’ designed its scenarios based on the six-month duration of the pandemic with mild and severe impacts.
Economic impacts resulting from the COVID19 crisis are expected to have differentiated impacts on a wide range of economic and social indicators and major macro indicators remain below when compared with the no covid period.
The paper also states that the COVID-19 pandemic is likely to have significant growth and welfare effects even under an optimistic scenario of mild shock and quick recovery. While GDP growth rate is expected to converge to the no COVID-19 baseline, the GDP losses are not likely to be recovered. The size of the Ethiopian economy would remain well below the no-COVID-19 baseline level.
“Also not all sectors will be equally affected by the crisis but with higher contraction of manufacturing activities followed by agriculture,” the paper states.
The research estimates that GDP would be lower than in the no COVID-19 scenario by 127 billion birr in 2019/20 and between 159 and 310 billion ETB in 2020/21. On this basis, the economy would grow by 2.6 percent in 2019/20. Under an amplified (or severe) pandemic scenario, GDP growth would only reach 0.6 percent in 2020/21 fiscal year.
According to the research the pandemic is expected to reduce the foreign direct investment to the country ranging from 24 to 70 percent compared to the pre pandemic period. A lower remittance inflow is also predicted with a 25 percent reduction and large reduction of 70 percent. The research sets the global shrink in the oil price as a positive impact.
The research suggests the current government intervention is not enough to put the economy on a higher growth path if it does not go beyond 2020/21 fiscal year.
The effect of the COVID-19 crisis is likely to remain negative in the coming years if a progressive recovery of the shock variables (transmission channels) does not take place. The government’s COVID-19 response plan is around 3.4 billion USD. While 1.6 billion USD is planned for emergency response, 1.8 billion USD is for macroeconomic interventions.
Moreover, a progressive recovery is not likely to allow the economy to reach its preCOVID-19 size. GDP would be lower by 106 billion birr than the baseline in the mild case in 2029/30 and by 610 billion birr lower in the severe case. By the end of the time horizon of our model, 2029/30, and without recovery, GDP would be lower than that of the baseline (no-COVID-19) by 489 billion birr in the mild case and by 1,259 billion birr in the severe case. This poor GDP performance is reflected in the drop in exports, investment and final consumption.
The analysis accounts for the main channels through which the COVID-19 affects the economy. The domestic transmission channels include reduced labor market participation, lower productivity, and rising domestic trade costs. External channels include higher international trade costs, a drop in export demand, lower import supply, a reduction in foreign direct investment, reduction in remittances, and lower import price of oil.
“Employment is likely to be hit hardest. The employment level is between 8.6 percent and 16.5 percent lower than the baseline. Job losses would be severe in all the export-oriented sectors. Rural employment is slightly more affected than,” the paper further stated.
The negative impact of the crisis on household welfare would be severe as the research asses. Real consumption expenditure could be between 4.6 and 12 percent lower than in the reference scenario in the short term. In the absence of appropriate measures, the most vulnerable populations are likely to be more severely impacted. The welfare loss of the bottom 20 percent is between 1.6 and 2.5 times higher than the top 20 percent without any in-kind and/or cash transfers. Household welfare at the national level would be 1.9 percent and 10.7 percent lower than the no-COVID-19 scenario in the mild and severe cases, respectively.
“Even if the transmission channels of the COVID-19 to the Ethiopian economy partly regain their pre-crisis level, households in the lowest income categories will have higher welfare reduction than households in the highest quintile,” the paper states.
“The COVID-19 pandemic is likely to have a substantial effect on public finance. Fiscal deficit is likely to widen in absolute terms and in percentage of GDP. Government revenue would decline, at the same time, expenditure would increase to deliver emergency health care services and food assistance, and increase containment efforts, all of which will widen fiscal deficit. Without the assistance of development partners, deficit financing could result in severe deterioration of the fiscal framework with the risk of jeopardizing macroeconomic stability and debt sustainability,” the paper indicates.
“Government response plan is of paramount importance for the medium- and long term perspectives, especially if the impact of the pandemic is to be more severe. The adverse impact of the pandemic on investment would be even larger without government intervention. Household welfare falls more sharply without relief and recovery measures.”
“There is uncertainty on the duration of the pandemic in Ethiopia and worldwide. This implies that recovery may not come as quickly as would be anticipated putting the Ethiopian economy closer to the severe scenario rather than the mild case. Government support is much needed not only by increasing its spending under the COVID-19 response plan, but by creating an enabling environment that would allow social safety nets to share the burden,” the paper further states.
“Given the multi faced nature of COVID-19 induced challenges facing the country, a recovery and response plan is urgently needed to achieve dual objectives of mitigating further economic contraction and of stimulating the economy. The recovery and response plan shall target and safeguard sectors essential for food security, job creation and sustainable and inclusive growth.”
“Both fiscal and monetary policy instruments that have been introduced by the government to fight the pandemic shall be continued, enforced and monitored, in a coordinated way, to support the effectiveness of interventions until the economy recovers,” the paper recommends.
“The recovery and response plan requires rapid and predictable financing which shall come from two sources. It is important that the international community provides quick and coordinated support. Given the uncertainty of external finance in terms of delivery and amount, it is necessary to design a strategy for mobilizing domestic sources of finance which has increasingly become a dependable source of development finance,” reads the paper.
The macroeconomic closure imposes that the government budget balance is endogenous while government expenditure (recurrent and capital) is exogenous and calibrated in the baseline to reflect past performances.
On the much uncertainty on the future of economic activity in the post-COVID19 years the association assesses the medium to long term effects based on four assumptions; no government intervention, relief measures combined with lower import prices of oil financed via higher deficit, relief measure with the above mix of financing sources and progressive recovery of the economy within a period of three years starting from 2021/22.

Agriculture commodities have generated the highest export earning to the nation in the current budget year 2019/20. According to the Ministry of Trade and Industry report coffee, flower, oil seeds, khat and pulse has generated 73 percent revenue of the overall exported commodities.
The Ministry said that 3.029 billion dollars was generated from total export in the recently closed fiscal year 2019/20. The bulk of the revenue was secured from the agriculture sector which is said to be 88 percent of the total export target.
As stated by the Ministry, in the budget year the country exported 1.1 million tons of agricultural products to the world.
Scarcity on supplying of products, quality of products, weak local market system, small market range, finance and incentive, lack of information system, limited logistic service, illegal trading and contraband has been identified as challenges for not meeting the target.
To tackle the challenge related with illegal trading and contraband the Ministry has issued the ‘export contract registration and administration directive with the goal of controlling the export of agricultural products mainly traded at the Ethiopian Commodity Exchange (ECX).
“The measures have positive impact on reducing the challenges and improving the sector,” said Misganaw Arega, State Ministry of Trade and Industry, “to control the illegal movement and price increment the ministry is strengthening its capacity with different governmental offices and stake holders.” According to him the ministry has taken different measures on 59 exporters out of which export licenses of 10 were fully revoked.
The manufacturing sector only generates 406 million dollars which is only 51 percent of the target. The mining sector contributes 208 million dollars which contributes only 7 percent to the overall export sector. Other different service export items generated 73 million dollar. The mineral export earning has shown a staggering growth of over 400 percent compared to last year. In the 2018-2019 the country earned only 49 million dollars from mineral export.
The major export items of Ethiopia include coffee, textiles, flower, Khat, cereals, fruits vegetables, meat, cattle, leather and leather products, gold, tantalum, chemical and construction input and electricity.
In the face of declining global trade caused by disruption in the supply chain caused by COVID-19 outbreak, the export performance of the country is encouraging. It is stated that the country’s target for leather and leather products and live animals export attained less than 50 percent of the target.
Considering the severe challenge and unprecedented adverse complications occurred during the Corona virus, the government needs to bailout some sectors by issuing intervention areas which needed immediate action.
The horticulture sector which is the second biggest export commodity after coffee has show an increment in volume and price in recent weeks. It generated 440 million dollars in the fiscal year.