The National Bank of Ethiopia (NBE) issued another controversial directive that would allow foreign investors to access foreign currency on credit for importing capital goods, again frustrating local investors. The ‘Directive for Regulation of External Loan in Kind No. FXD /61/2019, which was issued last week and signed by Tebebe Hailegiorgis, Deputy Director of Foreign Exchange Monitoring and Reserve Management Directorate of NBE, and allowed foreign investors even though they are not exporters to access a long term foreign currency loan to import capital goods.
However the directive has given the green light for exporters regardless of, if they are local or foreign to access similar extraordinary incentives for their business here.
In the past foreign investors were expected to move capital here and use that for their investment, while the current directive has given them the means to access capital locally, according to experts closely following investment.
The directive has been strongly criticized by local investors who claim it goes against the country’s investment law and continues discriminating them.
Finance sector experts say the directive is another pressure for the country’s foreign debt arena. “Currently the country is paying the foreign debt for the unfinished projects like sugar factories and others, while this and the previous directive that is the supplier’s credit directive issued in September 2017 places the country in a further debt burden,” they argued. “On the supplier’s credit scheme the government gives a guarantee for foreign investors to import raw materials and when the current law is added it supports them in importing capital goods with a payment from a public source,” they added.
“In short the central bank said it is responsible for foreign companies’ activities and put itself for the commitment of payment via commercial banks of the country. It is also another burden for the country in its limited hard currency reserves or earnings,” they told Capital.
“If the foreign investors are engaged in export businesses even partly it would be ok but the directive gives a right for all foreign investors to access the capital goods loan even they are not contributing to the hard currency earnings,” they finance sector expert explained.
On the other hand local investors that Capital interviewed said that they were expecting a solution from the supplier’s credit directive, but NBE has added another discriminating rule at their cost. “These directives are issued without balance for local investors, who are also engaged in the same investment that foreign investors are engaged,” said the local investors.
The external loan in kind directive article 4 sub article 4.1 stated that an exporter is eligible to acquire capital goods through an external loan in kind arrangement; provided that the capital good is going to be utilized in an export oriented investment that generates foreign currency. This sub article added local investors but exporters allowed accessing the external loan in kind.
The directive sub article 4.2 also stated that a foreign investor is also eligible to use the external loan in kind arrangement to acquire capital goods when it fulfills all requirements for article 4.2.3 of this directive. Article 4.2.3 lists the requirements: an application letter, valid investment or business license, foreign capital registration certificate, the draft loan agreement with detailed terms showing the type of agreement, interest rates and applicable charges, repayment method and schedule, borrower-lender relationship, purpose of the loan and others that NBE may be deemed.
Article 4.2.2 indicated that the debt to equity ratio may not exceed 60:40 of the foreign capital. The directive stated that the NBE shall issue approval letter for external loan in kind if all the requirements are fulfilled.
Bankers and finance experts that Capital spoke stated that the directive puts more pressure like the supplier’s credit directive, on the local private sectors to be competitive in the market and creates big challenges in the settlement of their credit at banks, but the view of Dereje Zebene, President of Zemen Bank, is more than that.
He expressed that the directive would not have any clear price indication for the capital goods. The definition of the directive for ‘capital goods’ only stated as ‘any equipment or machine that may be used to produce products or to provide services and includes accessories. “The definition did not mention about the price of the goods or accessories. This makes the directive vague and easy to be abused by investors, who may under or over invoice to import goods,” Dereje said.
He added that it is not clear if machines have to be new or used. “It requires a clear arrangement regarding to these two points otherwise the directive shall be misused by illegal actors and put the country in a burden,” the banker told Capital.
Some of the investors may import refurbished equipment or accessories previously used in other places but call them new, so this must be reevaluated, according to Dereje “and the central bank should have specific price rate for every good.”
However he stated that the directive may improve investment but would affect locally based investors.
The all in cost ceilings for external loans shall be on within three different maturity periods and six month LIBOR (London Interbank Offered Rate) or equivalent EURIBOR (Euro Interbank Offer Rate) plus 2, 3 or 5 percent interest rates based on the period that are up to 3 years, from 3 to five years and more than five years.
LIBOR and EURIBOR are benchmark interest rates at which major global banks lend to one another in the international interbank market for loans.
Some government officials like Fetlework Gebregziabher, Minister of Trade and Industry, criticized the supplier’s credit directive saying that it should include local investors.
Forex available for loan to foreign investors as local businesses cry foul
DEVALORIZING POLITICOS
The complexity of modernity has systemically undermined the importance of an individual politico, at least in the realm of national politics. Nonetheless, the old institutions of governance and their staunch supporters still want to retain the archaic and absolutely nonsensical notion of leadership by a strong wo(man). To start with, the human individual is a very delicate creature, i.e., is susceptible to all kinds of afflictions, including diseases of the mind. By and large, the typical politico seeking the highest offices tends to be egoistic psychopath, with a very low level of integrity. To let such weaklings loose on society is not an advisable proposition, but that is exactly what is happening all over the world. The one-man show came into being when human societies only had rudimentary functions, institutions and objectives. In those days modern medicine was also not advanced enough to vet psychologically ill equipped individuals for high offices!
‘Ponerology’, the study of evil, is now shading light as to why collective existence should not rely on some megalomaniac to head major institutions/activities. Checks and balances as outlined in the constitutions of countries have become painfully outdated. Various technics in social organizations have gradually diluted individual responsibilities. Important decisions are streamlined so that numbed bureaucracy can deal with them mechanically. By only twitching the bureaucratic processes, major decisions like wars can be declared in a number of countries. So much for checks and balances! In late modernity, idiocracy is the rule of the game and the essence of good governance is completely undermined by the likes of the ‘deep state’. Again our definition of the deep state: the deep state is the military-intelligence-industrial-banking-media-complex of the advanced industrial countries. In such a highly organized manipulative environment of political contestation, to think that an individual can single handedly win elections and run countries is at best ludicrous. A single individual cannot (on her own) beneficially manage the affairs of societies comprising millions, sometimes billions of people. Besides being unrealistic, the whole cockamamie scheme costs millions/billions, to say nothing about the waste of precious time. Why does the highly rational system of global production/distribution still swears by this old system? The answer is quite obvious to the perceptive. It is to hoodwink the sheeple (human mass) into thinking that the whole exercise is the epitome of democracy and serves the sheeple’s interests better than any other. We say baloney!
This whole thing is intentionally encouraged so that those who control the global phony money can control politics! Clowns running around the whole country, spending money and making fools of themselves (sorry for the redundancy) is a sight that is becoming appallingly stupid! Secretary of State of the US openly remarked that he wants to ‘push back’ against Jeremy Corbyn, the leader of the UK Labor Party! The secretary’s remark is to ‘push back’ against Corbyn the individual, and not directly the Labor Party. If that is the intention, then the utterance is more sinister and can be construed as a bona fide interference/meddling in the affair of a sovereign nation. Why should the UK’s conservative party, which has only 100, 000 members decide on behalf of over sixty million people? In the UK, all the political parties combined have total membership of less than a million. By the same token, only 18% of the US population is represented by the two dominant parties, while the rest, i.e., 82% of the population has to go along with decisions made by the political honchos of these two ideologically identical entities. The priority of these politicos, as was demonstrated repeatedly by various studies, is to make sure corporations get what they want, despite the negative impacts such regulations/laws, etc. have on the unsuspecting sheeple. There is a name for such a system of political governance. The USA, as the former President of the US (Jimmy Carter) put it: is not a democracy but a plutocracy! A government of money, for money and by money, and nothing else! To protect the interest of capital such governments will go to war against everyone everywhere. This includes Mother Nature. After all, what does national interest actually means? Civilized society has to go beyond such stupid and idiotic system of governance. Life is not only money. Nature should be sacrosanct compared to other artifacts. But the current system doesn’t have such sensibilities! It is time humanity starts dismantling the greed system in its totality. This system is bent on destroying life and all the life support system of the planet. This has been proven time and again!
Theoretically, the party system is by far better that the so-called the presidential system, but there is a catch. Without genuine verifiable transparency, the party will end up becoming just another tool to satisfy the egos of the cravenly wicked politicos and their paying masters! Because of this obvious shortcoming, many a sheeple think the presidential system is to be preferred. But that is like throwing the baby with the water! In the UK and in many other European countries the dominant parties are being kicked out, because the sheeple is no more interested in palliatives and useless rhetoric. People can also see through the wickedness of the manipulative politicos whose interests are not always in tune with that of the people. Unfortunately, when the party system fails, it is not the task of the individual to save it; but rather the sheeple’s. Widespread civil disobedience, the likes of which is happening in the Sudan, is one proven method of challenging a rotten system. The ‘Yellow Vests’ are experimenting with an illusive strategy that is not only frightening the status quo, but is showing the way forward. Thanks to modern informatics, direct democracy is no more a pipedream. Obviously these developments scare the traditional global politicos. Another shortcoming of a presidential system is; an individual can always be coerced to toe the line by the power that be. One phone call from the deep state and the so-called leader (usually of the periphery) will reverse policy, fire undesirable individuals or even dismiss the whole cabinet, enact laws to undermine the interests of the nation in favor of transnational capital, etc., etc.! That is why the archaic system is very much desired by the paid lackeys and demented goons as well as the extremely gullible component of the global sheeple! See the articles next column, on page 36 & 38.
The sickeningly entrenched global project of commodifying all and sundry is the main source of human alienation. This process robs humanity its very conscience. The senile system (Samir Amin) has lost the capacity to differentiate good from evil and is leading the global sheeple astray. Beware: “a really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude.” – Aldous Huxley (Brave New World). Good Day!
Interesting questions!
By Kebour Ghenna
In our age there is no such thing as “keeping out of politics.” All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia. – George Orwell
Democratic mechanism, as we know it today, is not delivering the changes citizens demand. This is not to say that democracy has no place in the current political space, but electoral democracy – multi party system, election, rule of law etc. – is struggling to respond adequately to citizens aspirations. This is increasingly a worldwide phenomenon, but in Ethiopia it has long become the norm. Our representatives (can we still use the term?) don’t actually speak their minds, don’t consider real arguments or present genuine plans. They bask in mindless sports-fan behavior, without ideas and principles. I think the new crop of leaders should bring in new zest into the political space of the country, encourage courageous voices, promote ideas and programs that can be delivered, ensure accountability and transparency. Dr. Abye is doing a fine job in this area. Let’s get together and make sure he will not deviate from his broad based freer and peaceful governance style, but also that he will continue reforming to improve accountability and inclusiveness.
Our subject today is not how the future of democracy will play out… but how we get things done (or undone) in Ethiopia. Consider our political environment: Both the ruling and the opposition parties (mostly in dysfunctional state) are jockeying to compete in the 2020 elections amidst the breakdown of Axumite civilization.
So what’s our government doing? Yes, dear reader preparing for elections!
And what will this election be all about? Will it be to address the impending showdown between regions that is arriving in the news every day? Will it be to deal with citizens’ insecurity, or the lack of political will to commit for reconciliation and peaceful coexistence between the people in, and among the different regions of federal Ethiopia? Will it just be to meet elections deadline? Will it focus on jobs, the economy, and the environment? This blind faith in the ballot box doesn’t make any sense, particularly when the federal and regional governments haven’t seen eye to eye for some time. Some practically no longer talk to each other!
We never expected all political parties to go silent on these issues, and yet politics demands basic plots… ones the masses can follow. Good guys (say, the opposition) versus bad guys (the ruling party). Us versus them. Unfortunately, both, opposition and ruling parties have not offered any new (or old) ideas to voters to be comforted with, nothing to resolve the main crisis between ethnic groups and regional republics. I believe they’re betting things will get better on their own (sort of Laissez faire). They may be right. Nothing, not even government (see old EPRDF), keeps getting worse forever!
One thing the new administration has done was to throw some ideas on reforming the economy. Perhaps as a way to indirectly calm down the excitement and fervor of ethnic activists and all those that are doing something wrong… I don’t know. Dr. Abye said he will bring liberalism to the country, go all the way and open up the economy, sell public assets, liberalize the economy, bring in foreign banks, redecorate the palace, beautify Addis Abeba. He seems confident there will be no state collapse, so he feels there is no need to spend time on a non-issue.
The PM is relatively young, so he wants to take chances. He is greedy for new things… new experiences… new economy. He can afford to make mistakes (not big ones). On this issue, the oppositions alas, were happy not to take chances, couldn’t decide where to go. Right? Left? So, they went nowhere. They went along with Dr. Abye. It’s amazing how opposition and ruling have grown closer, they may as well agree to form one unique salvation party and move on – imagine that.
While at it, let me ramble on PM Abye’s proposal to liberalize, which may be losing its juice these days. But liberalize under which model: a Chinese “capitalist socialism”, or America’s “capitalist liberalism”, or the Singaporean “capitalism with Asian values” (Which, of course, have nothing to do with Asia and all to do with authoritarian capitalism. By the way, in Singapore (I hear many good things about it these days) the state owns a huge amount of the means of production. In fact, depending on how you count it, the Singaporean government probably owns more capital than any other developed country in the world after Norway. In Singapore 90% of land is government owned, 85% of housing provided by government owned housing corporation, and 22% of national output by State Owned Enterprises (SOE), including the famous Singapore Airlines!
So the new PM’s philosophy (if I got it right) is to do away with his party’s old mantra that government can make us all smarter, healthier, condo owners, and replace it with a new vision of smaller government that’s happy to let the market build all the condos, business to innovate on its own, banks to create tree nurseries. One philosophy is not necessarily an improvement on the other, but we’ve seen enough to judge.
No one knows if there will still be elections in 2020… but even if there is one, it’s not going to get worse!
Trade Bureau to sell discounted teff
Due to concerns about the high cost of basic food, the Addis Ababa Trade and Industry Bureau, has begun selling teff through consumer’s association shops in every sub city of Addis Ababa.
The bureau applied and was permitted to sell 100,000 quintals from the Ethiopian Grain Trade Enterprise after finding that hoarding had been taking place at some private stores.
Currently the associations sell subsidized sugar and palm oil and other non-subsidized products purchased from regional unions.
The price of teff has been skyrocketing recently but the consumer association is selling with a minimum price. One quintal of sergregna teff sells for 2,250 birr while red teff sells for 1,900. The association also sells maize and other cereals at a discount though not in massive volumes like teff.
Kasahun Aberra, Trade Regulation and Inspection Head told Capital that the goal of selling the 100,000 quintals of teff is to lower the exaggerated price on the market.
“As a trade bureau we are responsible for creating a normal market environment, we are selling teff at a lower price and there has been a positive impact as the price has gone down,” Kasahun said.
“We want to clarify that this will not be a regular thing, we bought the teff to stabilize the market, it is cooperative agencies that will normally handle this,” he added.
Over the past seven weeks prices of meat, milk, Teff, onion, potatoes and tomatoes have increased dramatically.
A half liter of milk previously sold for 14 birr a few weeks ago jumped to 20 birr. Teff prices have skyrocketed to 4,000 birr per quintal from 2,600 birr before Easter.
Currently the Bureau and the Trade Practices and Consumer Protection Authority have formed a committee to investigate the surprising price rise in basic consumer goods.
