Even though the National Bank of Ethiopia (NBE) has mandated several preconditions and laws for banks to follow in order to reduce the hard currency shortage, manufacturers claim that the process is not being followed properly. Meanwhile bankers argue that they are focusing on their profitability.
Businesspeople Capital interviewed said their industry mostly secures a letter of credit (LC) from public financial firms as opposed to private banks, who have been strictly advised to give priority to manufacturing after acquiring some basic import items.
Senior banking experts that Capital spoke about the issue said that even though the central bank made strict rules they are distributing their hard currency to the sectors and businesses that maximize their profits and give more advantages.
A senior baker, who worked on one of the old established banks, said that it is obvious that banks find ways to bypass the NBE law for the sake of profit. He said there is uncounted hard currency, even though the resource is very limited. “In this case banks are looking for customers who are coming with different benefits for banks,” he said.
A senior expert said that even the central bank applied directives banks do not follow the directives strictly. He said that the LC is one of the areas that the regulatory body has not properly followed the implementation. “There is a huge limitation and lack of capacity by the experts at NBE besides the weak follow up of the operation of the banks,” he added.
In this serious hard currency shortage, sources said that even though there is a NBE directive that requires on a first come first serve basis, “one of the private banks operating in the country has approved over USD 50 million within a short time interval for a single importer, who is not engaged in the export sector. While there are several customers waiting for long period on the registration list of the bank to get the foreign currency,” a source said.
The NBE directive issued in 2016 stated that 40 percent of the LC’s must go to the imports of the priority sector. The import of petroleum, fertilizer, agricultural machines, inputs, spare parts, medicine and related items, industrial inputs and accessories, supplement food for babies, are mentioned as a priority for the hard currency allocation.
Official sources at banks, who demands anonymity, admitted that the first come first serve or priority import goods of the NBE are not properly applied by banks. “We are giving a priority for customers who come with better deposit or benefit of the bank,” one of the bankers said.
“Even though some times NBE issued a directive it is not properly followed that gives plenty room for bankers to abuse the sector,” another banker said.
However the manufacturing sector actors who are mainly engaged on import substitution or export complained that they are almost stopping their production, while others that import the finished products that can be produced locally are accessing the hard currency. One of the manufacturers told Capital that he has opened an LC at one of the private banks he could not get the foreign currency because another investor secured thousands of dollars from private banks within a short period of time to import the goods the manufacturer produces locally.
Manufacturers complained that despite NBE regulation that considered the priority and benefit of the economy, it is not properly controlling the banks day to day activity whether they are following the registering line or the priority sectors.
“Recently the central bank penalized bank leaders on illegal activity in relation with hard currency allocation, while the sector is highly corrupted on different and visible conditions,” a business actor who has close relation with the banking sector expressed his observation. Manufacturers claimed that the Prime Minister Office should be involved on the issue to see the challenge at the central bank and commercial banks. “Our hope on the financial regulatory body has vanished,” the manufacturers said.
“It is confusing why the central bank prefers silence in this regard,” he added. Other experts recommended that the hard currency illegality that is seen on private banks might be tackled if the government facilitated about USD one billion that can be disbursed not at once but within few periods of time. Manufacturers have expressed their concern that the shortage of hard currency might create an economic crisis in the near future since several heavy and medium industries that managed over a 100 thousand employees halting their operation for several months. Manufacturers have claimed that what they are producing is not higher than 10 percent of their capacity and the others have already shut their factories due to lack of input.
Manufacturers say NBE acts inconsistently
Budget grows by 3.6 % in birr, shrunk by 15% in dollars
The Ministry of Finance and Economic Cooperation (MoFEC) has tabled the 2018/19 budget at the parliament with a lower capital budget compared with the 2017/18 budget year.
In his 22 page budget speech Abraham Tekeste (PhD), Minister of MoFEC, tabled a proposal which will most likely be approved by the parliament before the end of the current budget year. The budget is 346.9 billion birr. This is a growth of 3.6 percent compared with the current budget year. Even though the budget has shown a 12 billion birr increase it has significantly decreased compared with hard currency, which is the major resource for importing items.
Accordingly in the 2017/18 budget year the government’s budget was USD 13.9 billion, which has now shrunk to USD 12.5 billion because of the 15 percent devaluation applied in October 2017.
Even thought the government has approved 320 billion birr for this year the actual disbursement has been reduced by 50 billion birr according to the Finance Minister.
He said that for the budget year it has been targeted to collect over 200 billion birr from tax. “While the actual collection would not be expected to surpass 150 billion,” he said. For the current budget year several governmental projects have been transferred due to lack of the expected funds from tax.
The tax collection has been very weak, according to Abraham. He stressed that the tax collection has to be closely followed for better performance.
The budget documents indicated that for the coming budget year the tax collection will be 211 billion birr. The external assistance and external loans are 19 billion and 32.7 billion birr respectively, while the balance is coming from different government investment and other incomes. The budget deficit is 2.3 percent of the GDP or 59.3 billion birr.
The capital budget for the federal government is 133.6 billion birr, which a reduction of 4.4 percent compared with the preceding year or over one billion birr. The capital budget reduction is an extraordinary situation for the sector since in the past it showed significant growth compared with the preceding year. The subsidy appropriation to regions has stood at 135.6 billion birr which is a 15.7 percent increase compared with the preceding year and it is the 39 percent of the total budget, while the recurrent budget is 91.7 billion birr.
AFRICA & BIG POWERS
Once again, big powers politics in Africa is in full swing. The west, besides leveraging its economic dominance, is militarily positioning itself all across the continent. North Africa has already seen military onslaughts. Gaddafi was deposed and the Sahel was destabilized (Libya, Mali Niger, etc.) Whatever the pretexts of the day for incursion (military or otherwise) the real interest remains the same; the control of Africa’s mineral and other wealth! AFRICOM (the US Command newly set up to deal with the ‘dark continent’, to use a Eurocentric phraseology) and other institutional tools of the west are readied to be unleashed full scale to facilitate more extraction as well as contain the BRICS, particularly China. Ascending powers like China have tried to make their own inroads, mostly by utilizing the strategy of ‘give and take’. By and large, Africans have benefitted from China’s engagement!
China is still a novice when it comes to playing power politics on a global scale. For instance, China’s dealing with Africa, centered almost exclusively via the nation states, might have won it some temporary victories, but it won’t be enough. If China wants to secure the trust of Africa’s multitude, it has to go deep, so to speak. Even though, the general African sheeple (human mass) is still positively disposed towards China’s engagements, it lacks knowledge/understanding about China’s long history, to say nothing about our own history of colonialism and flag liberation. On its side, China must start becoming a bit more critical of states that do not respect the wishes of their own population. For example, stealing goons seating on the boards of SOE (state owned enterprises) involved in the extraction sector (petroleum, etc.) should not be allied with, because in the long run criminal activities will negatively impact not only China’s image, but also its tangible material interests. When the going gets tough, it is these thieving characters that flee to the west from their own countries of birth exposing China to unsuspected risks!
In addition, China should deeply appreciate the complexity of Africa’s nation states that have diverse populace. Its old strategy of ‘people to people’ should have been elevated to genuine relations that encompass all, not only commerce. China’s image as an obsessed scion of crass mercantilism (in late modernity) cannot on its own, support large-scale initiatives, which by their very nature involve more than mere trade and investment. For example, Africa’s component of the Belt and Road Initiative (BRI) need a thorough sensitization, in order to mobilize sufficient support from the people who reside on the ground. High-level discussions on such issues are necessary but not sufficient. The Chinese policy of exclusively relying on the ever-changing African states, (some failed and failing) not only governments, has started to take its toll. China must do more to win the ideological heart of the African sheeple on a continuous basis, if it wants long-term genuine collaborations.
How is China trying to transform the global order? What is a multi-polar world system, which the BRICS and others are trying to bring to fruition? What is China’ s vision, come fifty years from now? Is it more of the same, like the current western objectives (domination) or does it have concrete plan to save life and life support systems on the planet? What does China mean by ‘Ecological Civilization’? Most importantly, how do they plan to involve the rest of us in these endeavors? Such discourses are conspicuously absent, particularly at the grass root level in Africa, where it matters most. This information gap must be rectified!
On the other hand, the West has no illusion about Africa’s aspirations and potential. Genuine liberation from wants is not going to be achieved by heavily relying on debt and largess from the rich countries of the west. That has been tried and failed. What must be attempted is; a robust dynamic policy that clearly understands our position in the world system. Polarizing globalization, in which we find ourselves in, is not to be celebrated, but rather to be fought tooth and nail. Our western educated elites (with the exception of tiny few) do not understand this phenomenon. That makes them quite dangerous. Russia and the East European countries tried to follow that route and we know where they ended up. The largest country on the face of the earth became mere playground of oligarchs at the service of monopoly capital. Western strategy plays on all fronts and at all levels. From the education of the African elite, to the NGOs, to the diaspora, to the hyphenated elites, to dominant media/entertainment, to IMF/BW, to AFRICOM, etc., all tools are used, rather effectively. An important and disturbing feature one observes about the west is; it is only the logic of capital and not the logic of life/humanity that seem to matter in collective societal existence. This is scary! Commodified life only leads to unfulfilled way of life; frustration, violence, increased use of drugs, legal (Opioids) or otherwise! See Meijer’s article next column and others on page 43,60 & 62.
The whole objective of capitalist modernity, it seems, is not to benefit the global sheeple. That is, at best, only a side activity, a mere by product of the accumulation strategy. Herein lies the difference between the west and the rest of us! Worshipping ‘monopoly capital’ and its tutelages cannot be the alpha and omega of existence. Africa needs to learn a whole lot from the experiences of others, who have been at it for quite a while. To this end, we need sober and erudite reflections. Unfortunately, Africa also runs short in this department. What we have in abundance is ‘belly thinkers’ or zombified intellectuals who preach for our complete subjugation, without even knowing what they are talking about. Who can blame them? After all, they are paid to disseminate propaganda not wisdom, which they conspicuously lack. To the dismay of many, it is this ‘intellectuals yet idiots’ (Nassim Taleb of ‘Black Swan’ fame) or what we call the ‘Ivy Idiots’ that are allowed to dominate public spaces and attendant discourse on our continent!
Here is an old Ethiopian proverb relating to the above predicament: “Trying to collect dung where there have been no cows is a futile exercise.” Good Day!
Haile Menkerios says goodbye
Haile Menkerios has concluded five years of leadership as Special Representative of the UN Secretary-General to the African Union, and Head of UNOAU.
In a special farewell reception held at Sheraton Hotel last Wednesday a delightful set of memories were shared among staff of UNOAU and his friends recalling who Haile was and his professional accomplishments.
Haile said more needed to be done to resolve the many security problems in Africa and all stakeholders should work in harmony to address Africa’s issues.
