Ethiopia plans to boost trade by introducing the modern trading platform, eWTP (electronic World Trade Platform).
In relation to his second visit to Ethiopia the Alibaba Group co-founder, Jack Ma witnessed with PM Abiy Ahmed the signing of three memorandum of understandings to establish an eWTP Hub in Ethiopia, which is second in Africa after Rwanda.
The agreement includes developing the hub, training and inclusive digital trade.
The first major initiative for the eWTP partnership in Ethiopia will be the development of a multifunction digital trade hub to serve as a gateway for Ethiopian products to China, a center for cross-border e-commerce, trade within Africa, and a training center.
China Commodities City International (CCCI) will partner with Alibaba in the development of the eWTP Hub. The Alibaba Business School will implement the capacity building and training portion of the partnership which consists of a number of programs, including specialized programs for Ethiopian entrepreneurs, business leaders and university lecturers.
The hub that would create opportunity for businesses including small sized ones to entertain the trading is expected to increase commerce, the service industry and tourism.
The government has given more attention to the digital economy which was also part of their job creation strategy introduced recently.
Eric Jing, Ant Financial Services Group Chairman and CEO and Alibaba Group Director, said; “we will continue to support the creation of a more inclusive, digitally-enabled global economy, where small businesses can participate in global trade. We look forward to working together with entrepreneurs and SMEs from Ethiopia and other African nations to seize the opportunities provided by the digital era.”
In the inauguration ceremony the Chinese e-commerce billionaire said that this is the beginning that Africa can compete with Europe and America. “In the past, the world was divided into developed and developing nations; in the future, this will change to whether you are e-country or not e-country,” he added.
He said the platform motivates small and medium businesses.
The eWTP Hub is intended to enable cross-border trade, provide smart logistics and fulfillment services, assist Ethiopian small and medium-sized enterprises (SMEs) to reach China and other markets, and provide talent training.
Getahun Mekuria, Minister for Innovation and Technology, said “Monday’s signing of the Ethiopia eWTP Hub is an important step in the development of a digital economy in Ethiopia. This engagement will greatly contribute to trade facilitation and open markets to SMEs not only in Ethiopia but in the wider region. We look forward to continue working with Alibaba Group and CCCI to realize the objectives of the platform which has the potential to transform the lives of many.”
The vision of eWTP is to develop new partnerships, technology and policies to enable more inclusive global trade. The eWTP initiative was accepted as a major policy recommendation of the Business 20 (B20) and officially included in the 2016 G20 Summit Leaders’ Communique.
Chinese investor establishes e-trading in Ethiopia
Huge role for new sugar board
With the goal of allowing private investors to play in the sugar business the government has drafted new rules including creating a board to manage the sector.
Agencies like the Ministry of Finance (MoF) and Sugar Corporation facilitated a consultation on reforming the Ethiopian sugar industry at Sheraton Addis on Wednesday November 27 to talk about upcoming changes to sugar policy.
The country will soon privatize its sugar factories. MoF has already shortlisted ten companies including Ethio Sugar Manufacturing Share Company.
The draft ‘Sugar Industry Administration Proclamation’ that is expected to be ratified before the some sugar factories privatize, magnifies the establishment of the Ethiopian Sugar Board and its operation.
The board will have nine members; three from sugar millers or the Millers’ Association, and one each from growers, out-growers or the Out-growers Associations, Ministry of Trade and Industry, Ministry of Agriculture, Ministry of Finance, National Bank of Ethiopia, and Chamber of Commerce and Sectorial Association.
Experts said the transitional board should be formed first, made up of state organizations. “At the current point the members of the board by default will be government representatives since all sugar production is under government control, there will be a mechanism managing the transitional period,” Bitew Alemu, General Manager of Ethio Sugar Manufacturing Share Company, commented at the consultative meeting.
Some other action steps under consideration are to adjust the excise tax to make domestic sugar production more competitive. The current excise tax is 33 percent. Several participants expressed enthusiasm with this move.
Currently, MoF is revising the excise tax proclamation. Some products will see an increase while others will see a reduction, sugar producers are hoping their taxes will be reduced.
Some experts pointed out to missing issues in the new rules. They wanted incentives for agricultural input products and sugar investors to be included in imports like edible oil investors.
“The policy should emphasize the development issue which may improve production,” Bitew told Capital.
They also noted that the policy focuses on sugar and byproducts but the sugar industry potentially could create about 33 production chains. The draft policy states that the Sugar Board of Ethiopia is empowered and will determine the minimum and maximum industrial price for sugar and sugar products.
“It is acceptable to set the price of sugar or sugar cane since the sector is a political commodity,” Bitew said.
However, he argued that the draft document has extended the role of the board allowing it to set prices for molasses or other byproducts, which is unfair. “In some cases, the millers would get a profit from byproducts since the price of sugar will be set by the board,” the General Manager at Ethio Sugar Manufacturing added.
“Rules like this discourage potential investors,” someone interested in getting into the sector said.
Participants also asked about affirmative action for local investors noting that the policy doesn’t address them.
In his response Brook Taye, Senior Advisor at Ministry of Finance, said that when the Prime Minister announced this policy the task was given to MoF to look into multiple modalities and encourage domestic participants in sugar and other types of business.
“There are local outfits currently working on mobilizing resources to take part in the transition, so I would encourage that kind of activity to continue but in terms of our role we are [working on encouraging local investors and communicating that properly],” the Senior Advisor at MoF, who is also at the forefront of the mega privatization process, explained.
“So, it’s not by policy, we have some responsibility to make sure that there is full participation of everybody including the locals,” Brook said. 
Beyene Gebremeskel, Director General of Public Enterprises Holding and Administration Agency, also stated: “we should be looking into it again and make some concessions.”
The policy stated that the Sugar Board will regulate the industry, administer licensing and registration, promote the industry, prescribe a minimum and maximum industrial price for sugar products, participate in the formulation of policies, plans and programs of the industry, facilitate equitable access to the benefits and resources of the sugar industry, facilitate administration and settlement of disputes, and perform such other functions that are necessary to discharge its functions.
Government representatives said they would listen to suggestions made at the meeting and would implement some of them during the drafting process. There will also be more opportunities for this in the future.
Some factories will be privatized by the fourth quarter of this fiscal year.
Awash responds to NBE move by lowering interest rates
Awash Bank welcomes the Central Bank’s decision to cease the NBE Bill and announced the slashing of interest rates worth half a billion birr in bank revenue.
A week ago the National Bank of Ethiopia (NBE) with its latest directive MFA/NBEBILLS/004/2019, has repealed MFA/NBEBILLS/003/2018 directive forced banks to buy 27 percent of bonds on every fresh loan and advance.
It was a debated issue between the government and the private sector including the business community and international partners based on the claim the private sector would be affected with access to finance and banks would retreat to provide loans due to the directive.
They also stated that the NBE Bill hiked the cost of funds boosted the loan interest rate which contributed to inflation.
Banks have long complained the NBE bills shrink their liquidity and smash their capacity to provide loans for clients. They have also argued the 3 percent interest rate, which was attributed when the directive was issued and later increased to 5 percent in October 2017, was far below what banks pay as interest for the deposit. When the directive, ‘MFA/NBEBILLS/001/2011’, became effective, the minimum interest rate was 5 percent and then increased to 7 percent a year ago when the birr was devalued by 15 percent.
During its latest press conference Awash Bank stated that due to lifting of the NBE Bill it was encouraged to reduce interest rates in all sectors from 0.5 to 4.5 percent.
Desalegn Tolera, Credit Analysis and Portfolio Management Deputy Chief at Awash Bank, said the bank was undertaking a study on loan provisions and how to accelerate the business which had observed a slowdown. “In the meantime, the decision of NBE to lift the 27 percent bond purchase bill encourages us to improve our loan interest rate in favor of borrowers,” Desalegn said at the press conference held on Thursday November 28 at the headquarters.
Since NBE introduced the NBE Bill Awash bought 17.1-billion-birr worth of bonds and currently the amount NBE holds is 12.1 billion birr, while the balance was paid on their maturity started in 2016.
Awash is the second biggest NBE Bill bond buyer after Dashen Bank, both of them are competing for the highest profit, currently Awash appears to be slightly leading.
Desalegn said due to the lifting of NBE Bill the cost of funds has declined. High interest reduction mainly applies to agricultural processing and manufacturing.
According to Desalegn, the service industry like hotels and tourism which contributes a lot of foreign currency will receive preferential treatment in the current loan interest rate reduction. The other priorities are health, education and agricultural.
“Based on our study the bank shall lose 500-million-birr worth of revenue from loan interest by reducing the interest rate,” Desalegn said.
Tomas Fikadu, Commercial Credit Appraisal Department head, said Awash Bank’s interest rate was ranging from 8.5 percent to 17.75 percent and now the maximum range has declined to 15.75 percent.
“The current reduction depends on the sector for instance one received a reduction of 4.5 percent but another three percent,” he added.
According to bank officials, the interest decrease means inflation will go down because it helps borrowers access credit at a lower cost.
Since the introduction of the NBE Bill banks have increased their interest rate to accommodate their cost of funds. Experts argued the interest rate had escalated up to 20 percent in the past few years. Desalegn said banks were forced to transfer the lower interest rate of the NBE Bill to customers.
Cepheus Capital invests in Tabor ceramics
Cepheus Growth Capital Partners announced an investment into Tabor Ceramics Products Share Company, Ethiopia’s leading domestic producer of ceramic products.
With this investment, Cepheus Capital will hold a significant minority ownership stake and provide strategic, managerial, and operational support to the company. Tabor Ceramics, based in Hawassa, is in the midst of a major expansion to increase all four of its main product offerings, which include tiles, sanitaryware, tableware and ceramic insulators used in electricity distribution lines.
The equity investment by Cepheus Capital will support the company’s planned expansion and also help launch the production of new higher quality and higher value product line being manufactured in Ethiopia for the first time.
Teshome Belamo, whose family owns Tabor Ceramics, said they are excited with the partnership with Cepheus. “We are excited to partner with Cepheus Capital as we are at the beginning of a major factory expansion and are also aiming to improve our management systems and internal operations to be in line with international standards. We have a very close alignment with the team at Cepheus Capital and look forward to working with them in the years ahead.”
Cepheus Capital’s Managing Partner Berhane Demissie also said that they invested in the company because of the bright future. “We see Tabor Ceramics as a promising investment opportunity that is very much aligned with the growth trends and trajectory of the Ethiopian economy—including urbanization, infrastructure expansion, and the rising numbers of middle-class consumers. The company has seen growing demand for its products in recent years, and we anticipate this will continue over the coming years, reflecting large on-going housing developments as well as the expansion of the country’s electricity network. The mix of products manufactured by the company—covering retail, residential, commercial and industrial customers—also offers multiple growth and diversification opportunities.”
Tabor Ceramics is a well-positioned import-substituting business that can replace a range of ceramic-made products currently supplied almost exclusively via imports.
Cepheus Capital is a private equity firm that invests in Ethiopia’s most promising businesses and entrepreneurs. Besides providing capital, the firm also delivers management and operational expertise to its portfolio companies, and assists them in the adoption of strong environmental, social and governance standards. Cepheus Capital is finalizing the fund-raising for its first USD 100 million fund that will be deployed across the manufacturing, agro-processing and service sectors.
