President Sahle-Work Zewde and Fitsum Assefa Commissioner of Plan and Development Commission chat during a briefing to resident Ambassadors and members of the diplomatic community about the ten year perspective plan at the United Nations Conference Center on Thursday, January 28. President Sahle-Work during the briefing said that Ethiopia’s ten year perspective plan is instrumental in achieving national goals set ahead and will play a significant role in achieving regional economic integration.
The Ethiopian Electric Utility (EEU) has announced the implementation of the highly delayed electric tariff adjustment that supports its financial stability and access to finance for projects to improve its services.
The tariff adjustment that was studied and put on shelves for over a decade had begun application about two years ago with different implementation phases until December 2021.
Shiferaw Telila, CEO of EEU, said that the revenue increment creates the confidence of lenders, who provide finance for projects including rehabilitation work.
“Previously we were not on prudent financial situations to access loan from banks. Banks demand the financial statement and if it is not sound no bank is interested to provide money. This has however now improved and has become promising because of the tariff change,” he told Capital.
“For instance we are undertaking 8 billion birr worth of rehabilitation works in Addis Ababa, which is financed by loan,” he added. 
Since the tariff adjustment came into force some extra amount of revenue has been earned that could allow EEU to some extent fulfill required equipment and logistics.
The CEO reminded that previously the tariff was very small and could not enable the undertaking of other expansion and network rehabilitation works excluding covering operation cost, “Due to that most of the city networks including Addis Ababa were not having the capacity of the current power demand and also the network was outdated that led for frequent power interruptions and poor operation.”
“The extra amount may not allow for the undertaking of all projects at a time because it is limited, but under our budget we allocate money for rehabilitation of network improvement and capacity build up. We have further replaced the old system with a new system that helped to reduce the interruption,” he explained.
“For instance for the year we have allocated 700 million birr for rehabilitation work, which allows to add new customers,” Shiferaw says ,“Due to the tariff revision, it has played a key role for quality service and included new customers.”
“We see tangible change on improvement of power service and reduced interruption at the process will be a standard as a service,” he explained.
He added that the capital city power system has significantly changed mainly in the eastern and central Addis Ababa because of the rehabilitation in the coming three years. The service has massively shown changes in the city because of the new project.
He underlined that the public should understand that the adjustment is repaid for the public via investment with quality service and access to electricity for the society and economic pillars like industries.
Shiferaw said that because of the Utility financial soundness, EEU has enabled to access finance for rehabilitation work in the so called six towns; Harar, Shashemene, Adigrat, Wolayta, Gonder and Debre Marqos.
EEU that is the customer of Ethiopian Electric Power (EEP) is providing electricity for the public that it buys from EEP under the power purchase agreement (PPA).
Shiferaw reminded that since the beginning of the budget year it has commenced access power from EEP under PPA by replacing the previous arrangement, which was sharing the revenue on percentage between the two public enterprises.
“There are some areas that are not still installed on meter on power purchase borders. These areas mainly different regions will be included under PPA when the meter installation is accomplished,” he said.
EEP is responsible for power generation, and administer electric export, substations and electric networks above 132kv.
Utility announced a revised electricity tariff enforceable since December 2018 scraping the old one.
At the time EEU mentioned the reason for adjustment that the electricity revision was made based on the outcome of a study that hints the need to rehabilitate the electricity infrastructure, boost rural electric access coverage and improve service delivery supported by technology and taking in to account the current electricity price hike on regional and global levels as the utility could not be able to meet the societies’ energy demand with the current tariff it charges to consumers.
Meeting with standing committee
On the discussion held with Natural Resource, Irrigation and Energy Standing Committee, Shiferaw and his deputies disclosed that the operation that EEU and its regional branches concluded in the first six months of the budget year.
Service charge settlement has shown improvements by including a bank bill payment system that is now operational via Commercial Bank of Ethiopia and will continue on others banks. They also disclosed that the prepaid service that is now 16 percent share from total customers is expected to be expanded, while the bank system is 27 percent and the balance 57 percent bill set to be settled at EEU branches.
Solomon Tassew, Deputy CEO of EEU and head of Amhara Utility said, “The prepaid service was focused on major towns and is now ready to expand in all EEU’s 560 branches.”
EEU is on the process to commence POS service at branches, different public and private kiosks and mobile app service.
The central bank has accused some banks on the tendency to work with shell banks.
The investigation of National Bank of Ethiopia (NBE), which recently imposed restriction on money transfer from account to account to only five individuals or entities in a week, shows that massive transfer occurred within a very short period.
NBE, the financial sector regulatory body, has also ordered banks to terminate their business relation with 64 individuals and an institution.
The investigation of the central bank shows that an individual has conducted thousands of suspected transactions.
It has also identified millions of birr frequently credited or debited from individuals account.
For instance an account holder at Togochale Branch of unstated bank transaction frequency was 1,048 times and the debited amount was over 139.4 million birr within a short period of time.
Meanwhile, some of the investigation document does not quite mention the exact period since most of the investigation covers the first three months of the financial year that started on July 2020.
Similar frequent transaction with the debited of tens of millions birr was mentioned of the investigation that complied different annexes.
Under the information on saving account holders, undertaking multiple account to account transfer transaction started on July 1 to September 30, 2020. The NBE stated the maximum transaction an individual conducted was 4,947, while in the stated period a maximum of 482 daily transactions conducted by a single individual. Similar massive individuals’ transaction has been mentioned on the annex and tables that NBE filed to the investigation for Federal Police Commission.
Most of the accounts and bank branches included in the investigation is the eastern part of Ethiopia, which is the major contraband and illegal money transaction hub and Addis Ababa.
The central bank has also ordered banks to terminate their business relations with the individuals that are suspected on money laundry and or contraband.
The circular that was signed by Solomon Desta, Vice Governor of Financial Institutions Supervision, and issued on January 22 stated that NBE is entrusted with the mandate of supervising compliance of financial institutions with provisions of the proclamation (Prevention and Suppression of Money Laundering and Financing of Terrorism Proclamation No. 780/2013) and the directive (Financial Anti-Money Laundering and Countering the Financing of Terrorism Compliance Directive No. 01/2014) and imposed appropriate measures and sanctions.
“The national bank has come to learn, from its normal supervising and monitoring activities that some banks are not strictly complying with the requirements of the proclamation and the directive in terms of conducting customers due diligence. Moreover, there has been a tendency by some banks to work with shell banks (entities with no license that do financial services in Ethiopia),” the circular reads.
It warned that these flaws, if not rectified swiftly, will have direct consequences on the safety and soundness of the financial institutions so to speak, and thus need to be addressed in no time.
It added that accordingly notwithstanding other legal actions that may be taken by law enforcement organs under the proclamation article 22 and 37 of the directive it has instructed banks immediately terminated the business relation with the customers that it attached and notify other customers, who are reasonably suspected of engaging in suspicious transaction.
Since the beginning of demonetization, mid-September 2020, the central bank has imposed a total of restriction on depositing money on behalf of another account.
However, transferring from account to account that can be undertaken directly by visiting bank branches or technology based was not restricted until this Friday.
On December 8, NBE has issued a circular to all banks under the subject ‘limits on one to multiple accounts transfer.’
Ministry of Trade and Industry (MoTI) is set to change the arrangement of petroleum sales for the oil companies onto cash bases.
At the current situation, Ethiopian Petroleum Supply Enterprise (EPSE) supplies the product on one month credit for the oil distributing companies.
However, it has been a challenge for the sole petroleum supplier public enterprise with regards to its cash flow and some of the distributors continue to delay their installment which ought to be paid on time.
According to the information Capital obtained, the government has decided to change the distribution arrangement for different reasons. The new approach has been also discussed with oil companies a week ago, and is set to take effect in the second quarter of 2021.
On the new arrangement, companies should pay in advance to access the fuel. Thus the new arrangement will be a relief for the public enterprise company. However, newly joining distributors may face the financial constraint to pay for the product in advance.
According to the new scheme sources told Capital, at the initial stage companies must come up with ten percent cash and the balance with a bank guarantee bond. “The percentage of cash will grow in process and fully cover the total expense of the purchase within a year,” a source explained.
Tadesse Hailemariam, CEO of EPSE, said that his enterprise does not have the mandate on the new arrangement since it has a tariff issue.
“Regarding the petroleum pricing and impact of tariff the mandate is for MoTI,” Tadesse added.
He clarified that the upcoming arrangement will implicate a tariff change since companies are supposed to come up with cash that they amass in different instruments including bank overdraft or loan with interest rate that will be additional cost for companies, “Due to that it is the mandate of the Ministry to emplace such decision.”
Sources said that the bank guarantee will also have service charges that may vary on interest rate from bank to bank and between customers.
However, Tadesse confidently said that the new arrangement will improve the enterprise’s cash flow and working capital.
“It will also cut the hassle that occurs when companies default to settle their payment on time,” he added.
The petroleum is now being supplied in a month credit but companies’ mainly new entrants abused the system, which forced EPSE to manage the case on legal battle.
The CEO said that the companies that recently joined the market are focused on the credit scheme than operating prudently. “The long existed companies and dominant market players on the sector are loyal and efficient compared with the new comers,” The CEO stated.
Currently 36 companies are engaged in the distribution of petroleum products in Ethiopia, while it has been stated that only one third of them are loyal to settle the credit on time.
Ethiopia, at the moment, is a net importer of petroleum products. White and black petroleum products are imported directly by EPSE through third party suppliers. Upon receipt from third party suppliers, EPSE stores the products at Horizon Terminal in Djibouti and then distributes the different grades mainly Gasoline (Benzene), Gas Oil (Naphta), Kerosene, Light fuel oil, Heavy fuel oil and Jet fuel to oil companies through a fixed margin structure set by the government that revised the rate about two years ago.
In addition, EPSE imports Gasoline (Benzene) from Sudan. On average the country petroleum demand grew by ten percent every year like the economic growth and consumed about USD 3 billion, which is equivalent with Ethiopia’s commodity export. “Due to the COVID 19 effect the import has slow at the current stage,” Tadesse said.
Fuels pricing and revisions are made by MoTI on a monthly basis. Lubricants and greases, however, are being directly imported by the oil companies with less margin control unlike petroleum.
Capital is the longest-established private English newspaper in Ethiopia
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