The Ethio Djibouti Railway SC (EDR) says it is low on working capital because one of its two shareholders, Djibouti, did not settle its portion when they formed the company.
The railway line which replaced the century old, Emperor Minilik II system was officially inaugurated in 2017 and as of early 2018 began transporting cargo from the central part of Ethiopia to Djibouti ports.
Even though the train began running, it faced several challenges including power outages and security issues. At the Logistics Conference on ‘Challenges and Prospects of Ethiopia’s Logistics Industry’ held on Monday October 28 Tilahun Sarka, Director General of EDR, said that shortage of working capital is one of the challenges that the company faces. He called participants, who attended the conference from Djibouti, to inform relevant bodies in their country to settle the payment expected from the Djibouti side.
The share company is formed by the ownership of Ethiopia and Djibouti, which has a quarter share in the company. In its formation process the initial capital was USD 500 million, of which USD 280 million was secured in kind and the balance was expected from the shareholders.
“The Ethiopian side has paid its portion and Djibouti said it would settle in the future,” Tilahun told Capital.
He said when he presented at the conference he raised this issue. The delay in the share payment is the reason for the working capital shortage.
The Djibouti side is expected to pay USD 125 million, which is one fourth of the share.
“The Ethiopian government has supported us strongly that is why we are continuing our operation,” he added.
The railway can accommodate 40 percent of the total cargo Ethiopia transports to and from Djibouti.
Currently the line inside Djibouti has been connected with two ports; Doraleh Multipurpose Port and container terminal located at Doraleh and also known as SGTD besides the main station at Nagad. The connection with the two ports shall shorten the time to transport cargo from the port to central Ethiopia.
The electric standard gauge railway system targets to boost the country cargo operation and modernize the logistics system but the railway has not yet begun transporting many bulk products like wheat, which is one of the major products the country imports every year.
The 760km railway line costs about USD 4 billion. The line was constructed by two Chinese construction giants, China Railway Engineering Corporation and China Civil Engineering Construction Company.
Based on the bilateral agreement signed on December 16, 2016 the railway share company was formed on January 11, 2017 and one year later, on January 1 the first day of operation started.
Railway waits on Djibouti’s payment
Job program looks to improve startup environment
Ethiopia’s Job Creation Commission (JCC) is trying to use examples from Silicon Valley, particularly regulatory sandboxes to speed up innovation. Hopes are that this will encourage creative businesses and develop more jobs.
A regulatory sandbox (RS) usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited purpose of the testing. Loosely defined, a sandbox approach means experimenting and learning before finally adopting a technology or system. This approach helps in containing the impact of failures. 
In other parts of the world, the sandbox approach has been allowed new innovative companies to test their products and then eventually turn into multibillion USD technological businesses.
Technological innovation in Ethiopia is considered a new opportunity for the young generation to expand and create jobs. It is one of 11 pillars of job creation in an ambitious plan announced on Thursday October 31 at Sheraton Addis.
In his presentation, Ephrem Tekle, Commissioner of JCC, said that regulatory sandboxes are vital to get innovators involved in business.
“In our business environment we do not do enough to encourage new ideas and innovations,” Ephrem said, adding that this needs to change.
In the current stage if innovations try to start their test the government system does not allow them since there is no regulation or rule to manage the new idea. “We force them to stop until the regulatory body evaluates and understands the system and ratifies regulation. This must be stopped,” he said. He gave Ride Transport as example that came with a new, useful idea but experienced challenges because the regulatory body did not have a rule that manages such business meanwhile it has created massive jobs and modern services.
He said that the implantation of a regulatory sandbox will allow innovators to start their operation and at the same time improve government interaction with their business. The scheme is applied in the developed world in Silicon Valley.
Despite variations, most sandboxes adhere to its established, simple format in carving out exceptions for regulatory non-compliant, yet operational firms: application, selection, testing and exit. Eligibility, instead, is less standardized and more scattered. Some sandboxes favor incumbents, others start-ups. How segregated sandbox participants remain from the general public (usually in the form of customer caps), or whether or not a compensation fund is a precondition in the event of a breakdown, are idiosyncratic to each sandbox.
Niat Tsegaye, Program Analyst at JCC, told Capital that the regulatory sandboxes idea was proposed to the Ministry of Trade and Industry, Ministry of Revenue and National Bank of Ethiopia that they form an IT unit to encourage individual innovators and enable them to continue in their business until a relevant rule is adopted.
Startups with visionary entrepreneurs have emerged in the past over decade and changed the world with their new business idea and simplify life. To handle their creativity and continue on their business governments regulatory bodies gave them tolerance against the formal regulatory manner.
Even though it started in the developed world regulatory sandboxes have also expanded in developing countries including countries in Africa.
The Ethiopian government has launched the 20 million job creation initiative until 2030 and sectors that target to accommodate new jobs are modern agriculture like horticulture, poultry, mining, industry, service sector including creative arts and tourism. The technology sector is also one of the priority areas that the government want to see to become big.
At the launching program Demeke Mekonnen, Deputy Prime Minister, said that job creation is the centerpiece of major economic reform programs including Home Grown Economic Reform and the improving of the Ease of Doing Business. He called the youth to give attention for its growth than being tackled by a political agenda.
For the year the government has targeted to create 3 million jobs and within ten years 20 million.
In a related development at the press conference held on Wednesday 30 at Radisson Blu Mastercard Foundation launched a job creation program for over 10 million young people by 2030.
This follows the launch of an initiative, Young Africa Works in Ethiopia, by Mastercard Foundation that will seek to create employment opportunities for the youth in partnership with Ethiopia’s JCC. Mastercard Foundation has committed an initial USD 300 million to the initiative.
Young Africa Works in Ethiopia is aligned with the Ethiopian government’s plan to create new jobs to spur economic growth and was designed in partnership with the government, the private sector, academic institutions, and young people. 
Mastercard Foundation will work with JCC to create programs to catalyze growth in the tourism, agriculture, manufacturing, and ICT sectors. Programs will support entrepreneurs and small and medium-sized businesses to achieve greater productivity and expand income-generating opportunities.
The Foundation announced its first phase of implementing partners, including the International Centre for Insect Physiology and Ecology (icipe), Kifiya Financial Technology, First Consult PLC and DAI Europe, Dalberg, Ministry of Innovation and Technology, and SNV. The cumulative value of the first phase of partnerships is over USD119 million and will see more than 1.4 million direct work opportunities contributing to Young Africa Works in Ethiopia’s goal of 10 million work opportunities by 2030.
“Through my travel across Ethiopia, I’m inspired by the creativity and dynamism of young entrepreneurs and how their innovations are bringing about meaningful change in their communities,” says Reeta Roy, Mastercard Foundation President and CEO. “Young Africa Works will support them by providing access to finance, business development support and skills development so they can further scale their businesses to create more jobs for young Ethiopians.”
GUEST EDITORIAL
Today we will leave it to those who are placed in a far better position than us to comment about the dangerously spiraling global financial system. Here is Bill Bonner of ‘Daily Reckoning.’
This Year’s Winners of the Nobel Prize in Economics Didn’t Deserve It
“If I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it. One reason was that I feared that such a prize […] would tend to accentuate the swings of scientific fashion. […] My second cause of apprehension […] is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess.”
– Friedrich Hayek, upon receiving a Nobel Prize in economics
Last week, the Nobel Committee announced its winners for the prize in economics.
It gave the prize to three professors, including a pair of numbskulls. One from France… one from India… now both at MIT in the U.S., married, and alas, reproducing.
But let us turn to the world of finance first. Then we will return to benighted academia…
Investors are generally optimistic. The trade deal with China is “coming along very well,” their president told them. Larry Kudlow, his advisor, also gave out word that the December tariffs might be delayed if the talks are still on track.
But the real reason for investor optimism is that they know the fix is in. FX Empire reports:
More than 30 central banks around the world have cut interest rates this year amid trade wars and slowing economic growth and subdued inflation. The Fed cut the federal funds rate twice this year, each time by 25 basis point[s].
We caution our Dear Readers, however. You don’t get to Heaven without dying. Markets go up and down.
After 10 years of up… Mr. Market is probably getting bored. He’s more likely to turn around than to continue his upward hike much longer.
And the great and glorious Valhalla in which stock prices rise from here to kingdom come is never going to come at all.
So let us return to the dark heart of academia… the economics department.
There, the professors are bound and determined to stop the natural ebb and flow of markets and economies.
For them, a market sell-off is a problem to be avoided by adroit government policies.
As for a recession… they have a solution. And when that one causes further, graver problems… they’ll come up with another solution.
Quantitative easing? Negative rates? Fake money? Repo liquidity? Fiscal policy… monetary policy? Hey, there’s a lot more where that came from…
Paris Match reported that one of the recent Nobel Prize winners, Esther Duflo, urged economists to think of themselves as “plumbers.” To her, the world’s economy is merely a system of pipes.
“The poor will always be with us,” said Jesus. But not if Professors Duflo and her husband, Abhijit Banerjee, can help it. They’ll call in Roto-Rooter!
Like Paul Samuelson, who won his Nobel for bringing pseudoscientific rigor to the profession, the two most recent winners aim not just to opine on the causes of poverty, but to study them – as if they were a sewer system – and help governments put in bigger drains.
Our son Henry, based in Paris, was on the case:
One of the studies most frequently cited in connection with Duflo only showed what we already knew, that people – even professors – respond to cash incentives.
She convinced a school district in a rural area of India to run a test. The idea was to pay an extra bonus to teachers for every day they taught in excess of 20 days per month. And if they didn’t show up, they would be penalized a like amount.
Teachers proved that they had come to work by taking a photo of themselves with their students daily, with a special camera that stamped the date and hour.
Surprise! Once the system was put in place, the rate of absenteeism on the part of teachers fell and the performance of students improved.
Henry goes on to remark that financial incentives are not exactly a revolutionary new idea.
“You get what you pay for,” as Milton Friedman used to say.
But the duo didn’t stop there. They also did a study that showed that villagers would be more receptive to a taped speech by a woman if the village had previously had a woman leader.
Hmmm…
They’ve conducted 80 of these “experiments.”
Another of them discovered that special tutoring could help schoolchildren who were falling behind. And another discovery was that the poor didn’t necessarily spend extra money on more or better food; they had other desires too – such as TVs and radios.
In addition to these staggering insights, Mr. Banerjee also has a solution for the slowdown in the world economy: Raise taxes!
Yes, by letting the rich hold on to their dough, “you are giving incentives to the rich who are already sitting on tons of cash.”
What is he thinking? The rich are not chickens, sitting on their cash like setting hens.
Instead, the money is put in banks and T-bills… and lent out to governments to do the very good things that governments allegedly do. Or, it is invested in the corporate world, where businesses hire people, build factories, increase productivity, and create more wealth.
At least, that is the idea. What really happens is far too complex for economists to comprehend… and far too nuanced to imagine for their pipe dreams.
But it must be a delight to be so simpleminded. And so vain.
You think the troubles of the human species – real and imagined – can be solved with a wrench. And you just happen to have one in your hand.
Regards,
Bill
P.S. Fortunately for Europe and America, modern economists didn’t come along until the great growth spurt that took us from scarcity to obesity was largely over. Paul Samuelson didn’t win the Nobel Prize until 1970. Paul Krugman won it in 2008. And now Duflo and Banerjee have it on their wall.
We’ve seen that the plumber economists didn’t create prosperity. What we will see next is how much of it they can destroy.
African Development Bank shareholders approve $115 billion capital increase
At an extraordinary shareholders’ meeting on Friday November 1, in Abidjan, Governors of the African Development Bank (AfDB), representing shareholders from 80 countries, approved a landmark USD 115 billion increase in capital for the continent’s foremost financial institution.
“The capital increase, the largest in the history of the African Development Bank since its establishment in 1964 is a remarkable show of confidence by shareholders” according to a statement from AfDB.
With the approved increase, the capital of the Bank will more than double from USD 93 billion to USD 208 billion.
The statement further said that the boost in capital ensures that the Bank will continue to maintain a sterling AAA rating, all stable, from the top rating agencies.
The African Development Bank launched discussions on the request for a general capital increase two years ago, to help fast track the delivery of its High 5 development strategies, the sustainable development goals and the Africa Union’s Agenda 2063.
Speaking at the opening ceremony, the President of Ivory Coast, Alassane Ouattara said “the integration of the continent’s priorities into the High 5s indicates that the African Development Bank group is a strategic partner for African governments.”
In the past four years, the Bank’s High 5 priorities have delivered impressive results on the ground, including helping to connect 16 million people to electricity, 70 million people provided with agricultural technologies to boost food security; 9 million people given access to finance through private sector investee companies; 55 million people provided improved access to transport services; and 31 million people with access to water and sanitation.
According to African Development Bank President, Akinwumi Adesina “We have achieved a lot, yet there is still a long way to go. Our responsibility is to very quickly help improve the quality of life for the people of Africa. This general capital increase represents a very strong commitment of all our shareholders to see better quality projects that will significantly have an impact on the lives of the people in Africa – in cities, in rural communities, and for millions of youth and women.”
With the new general capital increase, the Bank plans to do more, with the following expected results: 105 million people to have access to new or improved electricity connections; 244 million people to benefit from improvements in agriculture; 15 million people to benefit from investee projects; 252 million people to benefit from improved access to transport; and 128 million people to benefit from improved access to water and sanitation.
Adesina noted that “the Bank will continue its leadership role on infrastructure development, strengthening regional integration, helping to realize the ambitions of the African Continental Free Trade Area, supporting fragile states to build resilience, ensuring sustainable debt management, addressing climate change and boosting private sector investments. We will do a lot more. This is a historic moment.”
