A discussion was held on reforming the regulation of legal practices in Ethiopia, on Wednesday May 1 at Intercontinental Hotel. The consultation aims to take opinions from practicing lawyers about the first draft of the regulation presented by the working group on the law governing legal practices.
Invasive market practice sprouts price hikes
Speculation and conspiracy has escalated the price of sesame seeds at the Ethiopian Commodity Exchange (ECX) leading to record prices every day over the past couple of weeks.
On Friday May 3, during trading at ECX, sesame seeds maxed out at over 7,120 birr per quintal for Humera Type, which had been trading at 6,600 birr on Tuesday April 30.
Experienced exporters are angry and say the government must take action to avoid a disaster waiting to happen.
One person who works in the sector said the current maximum contract registered at Bunna International Bank is about USD 1,700. However, the actual purchasing price is higher than the real international market.
“The current price rate the total cost of the product including FOB Djibouti is about USD 2,655 per ton, if we consider that a quintal of sesame seeds is at 1,700 birr. While the maximum contract observed recently based on the information of Ethiopian Pulses, Oilseeds and Spices Processors-Exporters Association (EPOSPEA) is USD 1,730 per ton,” the expert told Capital.
They went on to tell Capital that they wonder how the USD 925 difference can be covered.
A person who works in sesame trading notes several conspiracy theories currently taking place. Speculation is running rampant that the government may soon devalue the birr against the dollar.
“Some of the active traders say the birr will decline in the coming weeks and are buying sesame at a high price and then storing instead of exporting them. However, the government has not indicated that the birr will be devalued,” one trader said.
However, an owner of a long established exporting company, who did not want to be named, told Capital that those buying the seeds at high prices are new comers trying to get hard currency. 
“When companies ask banks for hard currency they are not able to get it immediately. As a result, several new exporters have emerged in the past few years,” he said. “Most of us that are old exporters are not active on the market due to the price hikes,” the exporter said.
Exporters are complaining to the Ministry of Trade and Industry, who has promised to change operations and impose strong controls on trading.
According to reports from the trading floor the day price for sesame seeds is ranging from ten percent up our down from the previous day’s closing price.
People exporting and trading sesame say sesame seeds trading reaches the maximum ten percent increase allowed every day. “The government has to act on this issue and allow people playing by the rules and trading for the right reasons to be on the trading floor,” a trader complained.
“Relevant government bodies have to cross check how those buying the seeds for this huge amount of difference are compensating their loss are they acting under invoice or money laundering,” they stressed.
“If this isn’t stopped it will not only affect exporters but the entire system and the country.”
One of the traders claimed that the National Bank of Ethiopia or relevant government body should release a statement regarding devaluation speculation.
“Due to the price escalation I have been forced to terminate my contract. We have to sell the product on the time otherwise the market will be affected,” one of the exporters said.
Traders say if the current trend continues it will be even more severe in the coming rainy season in July and August.
Last rainy season a record price, at the time, for sesame seeds was observed due to similar devaluation speculation at around 5,800 birr per quintal.
Before the price hike was observed in the past three weeks, the average price of Humera type sesame seeds, which is a high quality, was ranging from 4,800-5,100 birr, while the Wellega type average price was 4,200 birr per quintal. According to the April 30 trading numbers, the Wellega type was sold at a floor price of 5,300 birr.
Exporters also claim that the price of soybeans has hiked in the past few weeks.
During her latest meeting, Fetlework Gebregziabher, Minister of Transport and Industry (MoTI), told exporters that, like coffee, sesame seeds contract should be registered at the central bank before transfer to commercial banks, and the contracts of other exporting items will be registered at the ministry. This is considered one instrument to control the export market.
Capital’s effort to talk to Misganu Arega, State Minister of MoTI, which is responsible for overseeing of sesame trading was unfruitful.
The Council of Ministers during its extraordinary meeting approved the Draft Banking Business Proclamation, allowing Diaspora to establish banks in Ethiopia.
The top government cabinet rescheduled their regular meeting from this weekend to Thursday May 2, during a busy week full of activity at the PM’s office. Because it was World Press Freedom Day, many international figures and global government leaders held talks with the PM. So meeting and making a decision during this busy time indicates the government considers this issue a priority, according to some who closely follow the banking sector.
Since the coming of Abiy Ahmed (PhD) as Premier the relationship between the Diaspora and the government has dramatically improved and significant bonds have been created since Abiy’s tour to North America and Europe.
With recent incidents, banks were forced by the Central Bank to identify Ethiopian shareholders and non-Ethiopians and to then sell the shares of non Ethiopians, who would change their citizenship to another nationality after purchasing shares of local banks or securing inheritances from family when they were not Ethiopian.
During that time the government ordered banks to sell the shares in an opening bid and settle the extra amount of the share value to the government. This meant banks that might consider one share as having a 1,000-birr value, may sell out the value by, for instance, 10,000 birr, and then transfer the extra 9,000 birr to the government by taking the original value which was 1,000 birr even though that money is not as valuable now since ten or twenty years may have passed.
A source at the central bank said that this action was one of the factors that would lead Diaspora to refrain from using legal ways of money transfer in the past few years in addition to boycotting and expressing anger with political suppression in the country.
The boycott has affected the country’s hard currency earning significantly since remittance was a major source of hard currency. In fact, it is even more than the country’s commodity export, which tacked on USD 3 billion, whereas legal remittances are close to USD 5 billion.
During the council meeting three issues were addressed in the draft proclamation.
The most highly anticipated one of these three documents was the amendment on banking business. The oldest proclamation affecting the financial sector excluded all non Ethiopian individuals from being involved in the financial industry whether they were Diaspora or not.
The new banking business bill, sent to parliament for final approval, would create an opportunity for Ethiopian born foreign citizens not only to buy shares of existing banks but create their own new banks in the country. They would be handled like other business that are opened to Ethiopian Diaspora but closed for other nationalities.
The amended proclamation also allows the existing banks to mobilize finances from not only local sources but overseas sources with the goal of expanding the country’s economic growth.
Experts at the Central Bank said that the government’s current strategy is creating a feeling of ownership in the Diaspora community. “The Trust Fund is one such strategy. Other financial sectors like insurance and microfinance schemes will also be opened for the Ethiopian community abroad,” a source at the National Bank of Ethiopia told Capital.
Financial experts explained that the current decision would allow the country to get more foreign currency through investment in the financial sector besides mobilizing deposits of foreign currency at existing banks.
“It will also play a big role in relinquishing the parallel market, which is now affecting the country’s official hard currency earnings,” an expert said.
The proclamation to provide for banking business No. 592/2008 stated that foreign nationals or organizations fully or partially owned by foreign nationals are not allowed to open banks or branch offices or subsidiaries of foreign banks in Ethiopia or acquire the shares of Ethiopian banks.
Sources said that the new proclamation has amended this but it will also include other financial businesses. The new law is considered the start of opening the financial sector to foreign investors, which has been one of the two major areas that members of World Trade Organization wanted Ethiopia to open.
Experts said the Continental Free Trade Area that the country recently ratified to open its market to African products and services with no tariffs will also push the country into such kind of decisions to be competitive in the continental market.
Besides opening the financial sector to the Diaspora the government also lifted the limit on Diaspora accounts, which was USD 50,000 until recently, to an unlimited rate.
The Global Food Policy Report 2019 has come out saying rural revitalization needs to take place to address persistent crises and improve food security.
According to the, rural people around the world continue to struggle with food-insecurity, poverty, inequality and environmental degradation.
In 2018, many regions of the world faced increasing rates of hunger with global undernourishment continuing to rise for the third year in a row and stagnation tackling malnutrition
“Climate change, deforestation, soil degradation, and pollution increasingly challenge rural productions, sustainability, and well being. Lack of rural infrastructure services and scant economic opportunities have compounded these challenges,” the report reads.
Rapid population growth has exerted increasing demand on small scale agriculture which was had a hard time meeting urban demands. Characterizing rural-urban linkages, identifying value chains, and addressing the constraints of production and productivity are some of the goals the report argues need accomplished.
“The central tenet of this flagship report comes up with a new concept of Rurbanomics which calls for re-thinking the relationship between rural and urban economics as interdependent and integrated.
The concept will promote rural-urban partnership and linkages to empower rural populations and achieve inclusive and sustainable development, said Lamin Manneh, general director, UNDP regional service center for Africa.
He further noted that UNDP supports African countries eradicating poverty and reducing inequalities and exclusion by combining those six signature solutions on poverty, governance, resilience, environment, energy and gender.
The report calls for an action agenda strengthening rural-urban linkages, transforming agro-processing system, scaling up non-farm opportunities for creating jobs for the poor, improving the wellbeing of rural communities and empowering local government. It recognizes Ethiopia and Rwanda amongst other countries in the continent for leading the way and setting notable examples of how the principles of Rurbanomics are realized.
Establishment of integrated agro industrial parks in all regional states presents tremendous opportunities in creating jobs for rural communities and addressing food security in Ethiopia.
The massive rural transformation program in rural infrastructure development, installation of irrigation systems, high value crops, secondary cities development and having a range of agro-industries in rural areas puts Rwanda as exemplary in realizing Rurbanomics.
“Rural revitalization is timely, achievable, and most importantly critical to ending hunger and malnutrition in just over a decade,” said Shenggen Fan.
IFPRI is an international agricultural research center founded in the early 1970s to improve the understanding of national agricultural and food policies to promote the adoption of innovations in agricultural technology and has a presence in 46 countries in Sub-Saharan Africa and 170 countries in the world.
Capital is the longest-established private English newspaper in Ethiopia
Contact us: info@capitalethiopia.com
© Newspaper WordPress Theme by TagDiv
