Experts argued that before public banks are reformed the National Bank of Ethiopia (NBE) should reform itself.
In a panel discussion entitled: ‘the state of financial intermediation and the resilience of the Ethiopian financial sector’ organized by the Ethiopian Economics Association financial experts recommended reform begin at the Central Bank.
With regard to economic reform the government has said it wants to change the Commercial Bank of Ethiopia and the Development Bank of Ethiopia (DBE). DBE is experiencing problems with a high amount of non-performing loan.
Michael Addisu, an expert in the financial industry, said at the panel discussion that the institutional capacity of the Central Bank should be conducted before going to financial enterprises. “Modernization of human capital and the legal framework at the Central Bank is a priority,” he explained.
He said that NBE has limited capacity which must be improved if the financial sector is to modernize.
On different occasions experts criticized the capacity of NBE saying they have just as much knowledge as other banks. They argued that private financial firms and their experts are much higher regarding skills and knowhow than at the regulatory body but that occasionally they abuse the sector.
Geberhiwot Agaba, the financial and economic sector guru, said there are critical limitations in the regulation area. “Ideally regulations should by an efficient system with acceptable cost at the financial firms,” he added.
He recommended nurturing as opposed to controlling the financial firms is the best way to improve the sector. “A more consultative approach is also the other way,” he added.
Eyob Tesfaye, an economist, who chaired the panel, said that the public financial sector should be lead properly since they are the asset of the tax payers.
He hinted that DBE is looking for 16 billion birr capital injection under its reform but he stressed that that is also needs accurate management.
Michael also adds that technology should be mandatory in banking to boost the sector. “The coming of modern technology like crypto currency should be considered,” he underlined why the sector should be timely technological capacity.
Geberhiwot said that the country would not achieve its ambitious development plan with a single development bank.
Geberhiwot said most of financial firms are commercial banks that focus on short term loans since the saving would be repaid in a short period.
He said the major saving sources are deposits that has limitation to provide long term loans. Geberhiwot said that the loans sector is also aligned with collateral, which excludes many from financial sector. “The project idea financing is almost nill in the country. The loan mainly focuses on trade which is either import or export,” he added.
Tewodros Makonnen, economist, said that for 100 birr loan the collaterals is 125 birr. “It shows how accessing loans is highly embedded with strong collateral,” he added.
Geberhiwot said the country does not have syndicate finance that was crucial as sources of financing.
“There is a mismatch compared with product packages at the financial firms and the demand in the society. Even though the country is dominated by a young society, the youth group cannot access finance even if it has good business ideas since collateral is mandatory,” Michael said.
Michael added that even though the financial sector has registered significant growth regarding branching out the concentration is limited in the capital that is 35 percent and in other major cities. “This shows the financial sector would have a long way to expand,” he added.
Youth have not been saving money because interest rates don’t keep up with inflation.
Experts said that the society prefers to invest in long term assets like buildings or vehicles, since they have better accumulation compared with inflation. Panelists stressed that controlling inflation is the best way to improve saving.
Tewodros said that studies indicate that controlling high powered money shall control inflation in the context of Ethiopia but the government is not using it properly. “The question is how much the government is controlling the high powered money to slash the inflation,” he said.
Tewodros also insisted the Central Bank be independent from the government. He claimed it would be crucial for the sector growth.
Eyob said banks are collecting the savings from the poor and provided for elites that are not also invested in real sectors like agriculture and industry, which can build the country. He criticized the elites focus on the cities on the development of service sector.
The Home Grown Economic Reform (HGER) can only be improved if the financial sector reforms, he added.
Reform NBE first, financiers say
BGI completes takeover of Zebidar
BGI Ethiopia, a pioneer foreign brewer in Ethiopia, has finished buying out all the shares in Zebidar Brewery at a total cost of 1.825 billion birr.
Previously in January 2018, the mother company of BGI Ethiopia, Castel Group, bought the shares of Belgian brewery, Unibra S.A. which was the major shareholder of Zebidar.
Since then the board of Jemar General Industries, a company formed by Ethiopians had a 42 percent share in the brewery. Zebidar Brewery is located about 166km south west of Addis Ababa at Gubre Woreda around Welqite town of Gurage Zone, SNNP.
According to information Capital obtained from BGI Ethiopia, Jemar and BGI agreed on the buyout of the Ethiopian share at more than 1.8 billion birr.
“Of the stated amount about 430 million birr is capital gains tax which has already been settled,” sources at BGI said.
Jemar has also received a 350-million-birr installment and the balance will be settled every month based on an agreement between the two sides, according sources.
Initiated by local shareholders Zebidar began making beer on January 5, 2017 with a unique pull-off cap bottle and an investment of 1.3 billion birr. The factory has a production capacity of 350,000 hectoliters per year.
Jemar has 1,100 shareholders who invested in the brewery and Zebidar is the second beer maker in the SNNP region after Hawassa’s BGI factory.
BGI was the major shareholder at Raya, taking 42 percent. They took the remaining 58 percent by investing 2.5 billion birr in 2017.
Currently BGI has diversified its breweries, including; south Ethiopia at Hawassa, 275km of south of Addis Ababa, in north Ethiopia at Kombolcha, 376km of Addis Ababa in Amhara region, and Maychew, 667km north of Addis in Tigray region in addition to its factory in the heart of Addis Ababa around Mexico Square.
In 1997 BGI became the first foreign brewery to invest in Ethiopia. It is also the owner of the oldest brewery and beer brand, St George, after it bought the brewery when it was privatized at a cost of about USD 10 million.
Police mop up dirty water distributors
The Federal Police are going after people illegally distributing unsafe bottled water, Capital learned.
Sources in the water industry told Capital that the federal police are collaborating with stake holders, and police in Oromia and Addis Ababa. They have been conducting investigations, mainly along the outskirts of the city.
According to sources, last week the Federal Police began prosecuting suspects at several production sites. They are sill in the process of arresting other perpetrators.
Capital previously reported some of the 80 water bottling companies around Addis Ababa are producing unsafe water. In addition to illegally packing the water, there is a chain between input and label producers and distributors. In their annual meeting of the Ethiopian Bottled Water and Soft Drinks Manufacturing Industries Association (EBWSDMIA) the issue was hotly debated.
Assembly participants said they have seen many illegal bottlers operating on the outskirts of Addis Ababa. Not only are they using below standard plastic packaging, they are also putting not-potable water into the bottles.
Association leaders told members they are following the case with federal, city and regional security forces. The assembly leaders of EBWSDMIA alerted bottlers to follow their sales and marketing staff who might be working in cahoots with fake water producers.
Ashenafi Merid, General Manager of EBWDMIA, declined to give details about the Federal Police’s latest mission. “I can’t give details since the case is not finalized,” he told Capital.
Capital’s effort to get further information from the Federal Policy Public Relation division was unfruitful.
The association, which recently merged with soft drink and juice packing association has more than 100 members with over 50,000 employees.
CRONY CAPITALISM & ELECTIONEERING
Whether we like it or not, it is crony capitalism that has won the day in our modern world system. If truth be told, there is no place on earth where crony capitalism is not the main operating mode of accumulation. Rhetoric aside, the institutions of economic governance directly and indirectly encourage the entrenchment of crony capitalism across the board. From Ethiopia to Estonia from USA to Uganda, crony capitalism is now the actual face of the dominant global system. But there are plenty of problems associated with crony capitalism. The main problem being; unlike old-fashioned capitalism, crony capitalism alienates more than it empowers. As a result, it instigates insurrections, both creeping and abrupt, all over our planet!
In many countries oligarchs cannot exist without their supporting politicos. This also applies to our continent. The propaganda of the global ruling elites, which insinuates the possibility of creating genuine wealth outside of generalized corruption, is, by and large, a farce. Here is how the game is played. The crooked politicos need faux front companies to steal the country’s resources. Some of these stolen resources are recycled to facilitate elections, including vote riggings. Every time there is an election in an African country, the banks invariably become overstretched, as these institutions will be instructed to extend plenty of credit to the connected oligarchs. The money is then used to buying votes. A couple of millions of birr to a strong candidate can be quite convincing to force withdrawal. Frankly speaking, a billion birr can do electoral miracles! Vote rigging has become common and elections have been rendered mere rituals necessary to usurp power. Like anywhere else, the project of wining election, by hook or a crook, is the driving force of Africa’s psychopathic politicos.
Once the incumbents are reelected, plenty of money will again be directed to the old cronies, via tenders, government procurement, tailor made projects, etc., etc.! Rinse and repeat!
Elections are influenced by the preponderance of the ‘deep state’ in the core countries and the ‘Mafiosi State’ in the peripheries. Wining election outside the desires of the deep state/Mafiosi state is not easy. Nonetheless, upsets can and will happen when things become absurdly offensive. When such a point is reached, the sheeple (human mass) will cast its massive ‘protest vote’. In the process outsiders can usurp power. This is what happened in the recent Ukrainian election. Recall that we have defined the deep state as the military-intelligence-industrial-banking-media-complex. Invariably, the deep states of the powerful states would like to see submissive governments in the weak states of the nation-states system. To this end, everything will be done, including election rigging. Showing signs of stubborn independence, on the part of the weak, might well bring havoc to their existence. In the long run, these countries almost always face internal difficulties that can easily unwind coherence and expose them to fragility. Venezuela, Zimbabwe, Ukraine, etc., are the latest victims!
Crony capitalism creates money out of thin air. In crony capitalism the old fairytale of ‘from rags to riches’ through hard work is conclusively proven to be just that; fairly tale. Most of the money in global circulation is created by commercial banks. This phony/unearned money is systemically channeled to those loyal to the system, i.e., aspiring oligarchs and their political handlers behind the veil of capitalism. The creation of phony money always creates inflation and inflation disproportionately affects the working poor/stiff. The convertibility of countries’ currencies into gold, via the US dollar was abandoned in 1971. Since then countries print their own money as if there is no tomorrow, until they can’t! The case of Zimbabwe, and many others before it demonstrate this brutal reality of printing money with abundance. Those that depend on constant supply of bank money are not affected by inflation. It is only those who are forced to earn their keeps by selling their labor, mental or physical, that suffer the consequences of inflation. This is the main reason why crony capitalism supports vacuous electioneering!
Resistance to crony capitalism, by extension electioneering, is growing by the day. See Smith’s article next column. The ‘Yellow Vests’ movement in France is now on its 44th week. The MSM (main stream media), as part and parcel of the deep state, doesn’t want to cover the weekly protests of the ‘Yellow Vests’. On the other hand, the Hong Kong demonstrations are always on the news. Any perceptive reader can easily pinpoint which protests are favored by the deep state and which are not. Clearly, the ‘Yellow Vest’ movement is mostly about the existing injustice of crony capitalism and the frequent farce of electoral democracy! No wonder the global power that be, very much detests the awakening of the French sheeple. In places like ours opposition to crony capitalism can take a very undesirable turn!
Crony capitalism and useless elections go hand in hand, one cannot exist without the other. The two are always in a symbiotic relation. This relation is one of the main defining characteristics of late modernity. “If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.” Charles Hugh Smith. Good Day!
