Posts Page | Capital Newspaper | The Paper That Promotes Free Enterprise

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

Local News

June 17, 2019

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.

Sin tax on beer spikes 45%

Local News

June 17, 2019

After banning beer advertisements the government plans to take another gulp out of the beer industry. In the new fiscal year, which starts July 7, hopes are that a 45.4 percent excise tax increase will amass 4.246 billion birr in revenue.
This is a growth of 1.3 billion birr from the 2018/19 fiscal year when the government planned to collect 2.92 billion birr from beer excise taxes, which is also known as a sin tax levied mostly on luxury goods and items dangerous to people’s health.
Experts expect this to case beer prices to increase.
The government is working to expand the tax base and improve the tax regime.One of the taxes under amendment is the excise tax that has been discussed in the past couple of weeks with stakeholders. Capital was able to look at the draft document. It appears that taxes on some goods will change and that new products will become eligible for the excise tax but details are not mentioned. Previously an excise tax ranging from 30 to 100 percent was applied to 19 categories of products with 10 bands of tax rates ranging from 10 to 100 percent.
The government has been encouraged by international partners like the World Bank and International Monetary Fund improve tax collection from the current 10 percent of the GDP at least up to peer countries in the region. In the Sub Sahara region, the average tax to GDP ratio is about 18 percent.
The government’s goal is that at the end of the GTP in 2019/20 budget year tax collection would increase to 17 percent of the GDP. It has also undertaken several reforms in the past few months and others are coming soon. The excise tax, which is expected to contribute about 9 percent of the total tax collection this year, is one of the amended taxes.
For the current year the government plans to collect 10,366.3 billion birr and 8,738.1 billion birr from imported goods and locally produced products respectively. The sum of two is about nine percent of the total targeted tax collection for the year, which is about 211 billion birr.
For the 2019/20 budget year the government has targeted to collect 9.64 billion birr in excise tax from locally manufactured goods and 9.3 billion birr from imported items that is mainly collected from automobiles.
The targeted excise tax collection from automobiles is almost five billion birr and followed by textile by close to 2 billion birr.
Recently Eyob Tekalegn, State Minister of Finance, said that the revision of excise tax law would enable the government to collect an additional 20 to 30 billion birr annually.
The Ministry of Finance is amending a proclamation that was originally introduced in 2002 and amended in 2008. It allows the Ministry of Revenue (MoR) to approve a license for companies engaged in business activity which would be expected to pay excise tax. At first it was unclear which companies would be subject to excise tax, commonly known as ‘sin’ taxes.
Excise taxation, which is one of the oldest indirect taxes imposed in the country, was first introduced in 1931, before the Italian occupation, on excisable products such as alcoholic beverages, cigarettes, incense, carpets and clothes.
According to experts, the amended draft document indicated that ad valorem tax would be considered and manufacturing companies that paid tax on the raw material would be exempt and the calculation would be made on sales instead of production. However, the exemption or excise tax deduction does not include alcohol, tobacco and sugar products.
One of the new things that the draft proclamation added is revising the rate based on the market condition. Articles 10 states that the ministry shall adjust the tax ratio every two years and take inflation into account.
Sugary drinks, alcohol, tobacco, salt, petroleum, perfumes, textile, types of adornment like gold or silver, TVs and video cameras, some types of cars, carpets, asbestos, watches, and dolls are some of the products subject to excise tax.

HST celebrates its 15th anniversary

Local News

June 17, 2019

HST, the well-known local consultancy firm with international competency and that provides several supports for the private and public sector celebrates its 15th year anniversary.
For the past years HST was present on major business deals in the country as a consulting firm and support several huge companies including international businesses on their activity here.
Over the years, HST partners also played a leading role in strengthening the accounting and finance profession in the country. For instance about a decade ago the firm’s senior partners led one of the national technical committees on drafting a financial report law and design appropriate institutional structure for adoption of International Financial Reporting and Auditing Standards (IFRS).
“On the basis of the committee’s recommendation in 2014 the Ethiopian government enacted a financial reporting law and established the Accounting and Audit Board of Ethiopia to regulate financial reporting and corporate governance in the country,” Solomon Gizaw, one of the founding partners and current Managing Partner and leader of the Consulting and Training functions, said at the anniversary ceremony, which was held on Friday June 14 at the Hilton Hotel.
In early May 2019 HST’s two partners, Solomon and Zekrie Nigatu, Director of Corporate Finance and Executive Development, has also volunteered to serve as member of a National Public Finance Management Advisory Council chaired by Eyob Tekalign State Minister of Finance with the core objective of improving accountability in the management of public finances in Ethiopia.
HST was formed by the merger of three firms; Haile Leul Tamiru and Co, Solomon Gizaw and Co and Tekeste Gebru and Co.
“Although the firms had 12 years of combined experience, HST (represents the first initials of the name of the founder) had a humble beginning. For the first 7 to 8 years the firm supported many clients in many sectors of the Ethiopian economy with audit and tax services to improve their compliance system,” Solomon said.
He said that over the last seven years, HST expanded its audit and tax services to include management consulting services in the areas of corporate finance, strategy, human capital and corporate trainings which have contributions to its clients’ core area of operations.
One of the qualities of the company is that it follows a competence based talent management system in attracting, developing, rewarding and retaining its employees and spends millions of birr every year for long term professional training and development.
Solomon said that the firm currently has 12 partners and directors and is targeting to increase the partners and directors to 25 with 500 multi-disciplinary professional staff from the current 135 and achieve the firm’s set revenue target by 2030.
“To realize this vision the firm has already formed HST-Agriculture that is a sector based consulting business unit that focuses on agriculture capacity building, project management and market access to agriculture products,” he said. The service for the stated sub sector will commence service in September later this year.