In a bid to develop a financial policy which accommodates financial technology (Fin Tech) the Ministry of Innovation and Technology brought together regulators and operators in the industry. Led by Dr. Eng. Getahun Mekuria the meeting clarified the opportunities, challenges and policies that would help innovative technology driven companies reach their full potential in Ethiopia.
Fin Tech describes a variety of financial activities such as money transfers depositing a check with your smartphone, bypassing a bank to apply for a loan or managing investments without a middle person.
Successful Fin Tech companies like Deliver Addis and Apposit talked about what they have been able to accomplish, using the existing legal framework and infrastructure.
Feleg Tsegaye, who founded Deliver Addis, an online food delivery service, mentioned that his company now employs over 400 people and works with 40 restaurants. People can use their mobile app to order food from the menus online and have it delivered to their location.
Established three and a half years ago, the company, now transacts over a million birr per month. When the customer orders food online the motorbike driver takes the order, picks it up and then collects the payment from the customer.
“Since our business is getting busier as the traffic and gas problems push people to order food wherever they are, we are experiencing a payment modality problem,” said Feleg. “We can agree with banks to use the payment but now we don’t want to engage with many institutions. If there is one payment modality online, it will make life even easier. We use our own method to minimize risks with our drivers collecting cash”.
Deliver Addis, did not want to build everything by themselves so round table meetings are critical in order for them to reflect on the real problems they face in the absence of strong Fin Techs.
An example of a platform that Deliver Addis is asking for is Apposit in Nigeria which provides access to digital payments in partnership with Paga Payment. Paga now has more than 11million customers and generates over USD 30 million in income.
Ethiopia’s financial policy has not allowed Fin Techs to grow. However, the National bank of Ethiopia was represented in the meeting to hear the successes and needs of participants it the industry.
The participants asked for the financial regulatory body to allow a virtual wallet. Also the issue of Intellectual Property(IP) for the specific operation is asked for in addition to using an IP to access finance. Most Fin Techs raised the issue that the only property they acquire is the patient over their system and the fact that banks only use physical collateral is discouraging and backward.
Stable policy was seen as a major concern. Three company representatives state that they lose from 1.5 million birr to USD eight million for operation costs. They mentioned that they would begin operating and NBE would find a way to ban their activities.
Investors stated that when they would invest they would attempt to follow proper procedures but then the laws would change. They stated this is why it is leading companies to participate in illegal business after denied the legal one.
“We reached into an agreement with Ethio-telecom be an electronic top-up agent but then NBE sent a two-page letter to the telecom and it just stopped,” said one of the operators. “The Bank sometimes issued circulars which are against the constitution but everyone implements them without questioning.”
Organized information was another major concern. Companies need this to change especially with regard to credits in order for them to be able to operate in the future. The Absence of a National ID and the lack access to criminal, court and other records were things they wished to see improve.
Tech representatives pointed to the aging of policy makers in a youthful country.
“In Ethiopia people over 45 years are about 7 percent of the population and yet the nation’s policy is made by them,” said one of the attendants. “Large scale research on the need and character of the new generation has to be made and young professionals must participate in the policy enactment.”
Government agencies were seen as archaic including the Information Network Security Agency.
Among the participants, many exemplified Apposit to be the second leading payment system overseas.
“The main reason for the financial policy to fail is it is made to benefit one bank that is the Commercial Bank of Ethiopia,” a participant said to many nods in the room.
“The relationship between the two should be neutralized as it is making the economy pay the price,” said another participant.
The dialogue addressed the concerns and frustrations of the financial technology enterprises as government representatives tried to explain shortcomings.
Getahun Nana, former vice-governor of the National Bank said he would take responsibility for past mistakes as he was part of the policy made at the time.
The main role of the bank is to make sure the nation has a stable financial environment and that it is secure from threats. He stated that the nation has moved forward in digital awareness, but has not achieved much. The dialogue is set to continue in order to develop a concrete policy.
Budding tech startups ask for friendlier policy
Soybean, chickpea trading start at ECX
The Ethiopian Commodity Exchange officially has begun trading soybeans and chickpeas. The occasion was recognized at a ceremony held on Wednesday January 16 at the trading floor located around Mexico Square.
Recently, the trading floor stated that chickpeas and mung beans were arriving at its warehouses so that trading could begin. Soybeans will be traded exclusively, while chickpeas are optional.
Currently, ECX is handling the exclusive trading of coffee sesame seeds and white pea beans at its modern market.
These three products are exclusively traded at ECX, while soybeans would be the fourth product even though mung bean was expected to become the fourth product sold at the trading facility.
Within two weeks the ECX warehouses received close to 20 thousand quintals of soybeans. This is an indication that trading the crop via ECX should be a popular endeavor, according to Wondimagegnehu Negera, CEO of ECX.
In the first four trading days 2,550 quintal of soybeans were traded before the official launching ceremony.
Since December 31, 2018 ECX began receiving the two commodities at nine warehouses in different locations.
The statement ECX sent to Capital indicated that in the past five years the production of chickpeas and soybeans in the country has reached 440 thousand and 76 tons per annum respectively. On average the country exports 54 thousand tons of chickpeas, which is one of the staple food items in the country, and 58 thousand tones of soybeans every year. In the past budget year, the country has earned USD 91 million from exporting the two crops.
The production of soybeans has dramatically increased in the past couple of years. Different surveys indicate that the area covered by the oil bean has increased. Production has risen as well.
A 2014 study undertaken by Mekonnen Hailu and Kaleb Kelemu of the Ethiopian Institute of Agricultural Research found that the total hectare of land under soybean production during the last 10 years (2004-2014) has increased by 10 fold; while the total volume of production during the same period increased by 21 fold.
Experts in the sector recently told Capital that the production for the current harvest is expected to be high since several areas in the western part of the country are currently covered by soybeans. “I have information that in the past rainy season several areas in Welega, Benshangul Gumuz, west Amhara including Metema, which is new to soybean production, have been covered by the oil bean,” an exporter who requested anonymity said.
He supported ECX’s decision to begin trading soybeans. “It would harmonize the price which is different than what we have observed previously,” the exporter who is also a consultant in the oilseeds and pulses sector explained. “During one period last year a quintal of soybeans was 900 birr but the price dramatically increased to 1,700 birr within a month when the number of buyers increased suddenly. The price will stabilize when ECX begins trading as they give a limited percentage up or down floor prices.”
India, Vietnam, China, Canada and Pakistan were the major destinations for the crop during the past export season. Experts at the export sector explained that clients purchasing Ethiopian soybeans particularly in India really like the Ethiopian product due to its multiple varieties and not using GMO as opposed to West African countries. “Buyers in India give from ten to 20 USD more prices per ton for Ethiopian soybeans than other west or southern Africa products even though Ethiopia’s product is very limited,” exporters told Capital.
A year ago Ministry of Trade ordered ECX to undertake the exclusive trading of red kidney bean and mung bean, however it postponed this for an unspecified period because exporters claimed that they needed more time for preparation. Recently the ministry sent a letter to ECX to introduce the exclusive trading for mung bean, which has been optionally traded on the floor during the last five years, as soon as possible.
The CEO has also indicated that in the near future the trading floor will commence optional trading of Niger seeds and beans.
ECX began operation in April 2008.
Rethinking The New Global Mercantilism
Since last year, scores of notable economic analysts seriously argued that if President Donald Trump has his way, the liberal market economy of the post-II World War period is ending. On the other hand, the Trump camp proudly and unapologetically embraces mercantilism.
Recently, Henry Kissinger made an interview with the Financial Times. In his interview, the grand master of global diplomacy made this breathtaking confession. Henry Kissinger said “Trump may be one of those figures in history who appears from time to time to mark the end of an era and to force it to give up its old pretences. It doesn’t necessarily mean that he knows this, or that he is considering any great alternative. It could just be an accident”.
Could it be that, via his trade mark tweets, President Trump is laying out a new paradigm for the world economy? This is supported by the fact that President Trump finds ever more supporters in the world for his illiberal views. At a minimum, the liberal world order, as we knew it and came to rely on it in economics and business, is not only punctured in the United States.
Martin Hufner, the former chief economist of Germany’s HVB Group argued that it is high time to rethink the global model. He noted that if President Trump has his way, the liberal market economy and globalization are giving way to the brave new world of unvarnished mercantilism.
As an economic analyst, Martin Hufner sketch out what this world seems to look like. According to him, the emerging mercantilist world order can be revealed in seven brief principles. First, not open, but closed borders: Tariffs and protectionism are deemed to create jobs. These walls are instituted to limit competition on the job market.
Second, interventionism rather than free markets. If the economy does not develop in the way President Trump wants it, he does not hesitate to threaten individual companies with the lobe “state intervention.” Rule of law is different.
Third, forget striving for any consistency in economic policymaking. What matters now is creating deliberate surprise and uncertainty in the markets through unexpected measures and using it to one’s national advantage.
Fourth, reign in the independence of the central bank. Better yet, subordinate monetary policy under the executive power of the president. The United States Federal Reserve is still independent, but President Trump has already made it clear that he does not like any Fed policy of raising interest rates.
Fifth, use of interest rates unabashedly to promote business and to create jobs. The goal of price stability is virtually absent in President Trump’s vocabulary. Sixth, forget balanced budgets. The federal public deficit in the United States so far this year is $70 billion higher than in the same period last year. Seventh, instead of aiming for redistribution as a form of economic and social justice, make no apologies for favoring the rich in society. Witness the last United States tax reform.
Of course, not all of these Trumpian goals are shared by all neo-mercantilists. Robert Hicks of Michigan University said that it is very far from a consistent system. But it will undoubtedly shape investment prospects on global capital markets. Key elements of the new equation are: Economic growth is being inflated via tax cuts on short notice.
Robert Hicks noted that in the long run, however, growth under the aegis of global mercantilism will be lower. Capital is not used so efficiently, market uncertainty is greater and world trade is less dynamic. Productivity is not growing so fast anymore. In addition to the demographic brakes on growth, economic policy is added as a slowing factor.
At the same time, inflation tends to be higher because nobody cares. However, governments may intervene in prices for specific goods, which are particularly important for people. In the long term, price controls in individual sectors are conceivable.
According to Martin Hufner, the interest rates of banks and on the capital market will be lower in the long term. This should stimulate the economy, not least the construction sector. Corporate profits will be higher than under previous conditions. That helps the stock markets. At the same time, exchange rate fluctuations will tend to be greater.
