The National Bank of Ethiopia (NBE) is evaluating the amended directive FXD/47/2017 which addresses external loans and supplier’s credit, Capital learned.
The directive amended the 2002 ‘external loan and supplier’s credit directive no. REF/05/2002’ which allowed foreign investors to access foreign commodity credit with a guarantee from local commercial banks. The law was applied as of October 2017. It has been criticized by local investors engaged in import substitution and heavy industries. The financial leaders and experts have also expressed their concern that it may pressure them to settle the credit as opposed to allocating foreign currency on a letter of credit basis. At the same time banks expressed anxiety that they would be unable to collect their money from manufacturers who received large loans. In the past two years the hard currency shortage has forced manufacturers to shrink their production or stop it altogether.
Experts are arguing that the directive goes against the investment proclamation.
Legal experts argued that the 769/2012 investment proclamation erroneously mentioned on the central bank directive FXD/47/2017 as ‘679/2012’ on its part one article 2/4 stated that investor means a domestic or a foreign investor that invested in Ethiopia.
“The proclamation indicated that it has not divided local and foreign investors in relation to acquiring external loans,” a business consultant said, “but they claim the central bank directive went against it.”
“This is an apartheid law that only benefits foreigners at the cost of local investors,” one of the legal experts explained.
This was one of the top issues in discussions held at the central bank last week between leaders of the central bank and financial firms.
Bankers said that the suppliers’ credit scheme not only affects local investors but the financial institutions themselves because there is a risk their clients may default.
“When the banks secure hard currency they focus on settling the credit rather than approving the LC for other clients who are not included in the supplier’s credit scheme, which is also another effect on local investors,” bankers told Capital, “this system has also forced the local producers to be excluded from the market and suffer from bankruptcy due to several expenses including overhead cost and salary for employees that are difficult to avoid”.
“The suppliers credit issue was mentioned in the meeting and we have also asked about the legality of the directive when comparing it with the investment proclamation,” one of the participants at the meeting told Capital.
However sources who attended the meeting told Capital that any response regarding the supplier’s credit was not given by the governor.
Meanwhile sources said that the central bank is looking at the directive to see what to revise. Sources said that the governor ordered experts to revise it, however Capital was unable to confirm it from Yinager Dessie (PhD).
Investors that Capital talked to said that they are not against facilitating credit for FDI’s since it is one of the ways to attract new investors. “We are claiming that the law should consider the reality,” an investor who asked to be anonymous said.
They said that if they partly or fully sold their factories to foreigners the factory may be allowed to import input via the supplier’s credit scheme. “We are asking this, why did the government force local investors out from the manufacturing sector using these kinds of tactics. However, at the same time the government pushed the local business community to get involved in the manufacturing business as opposed to focusing on importing finished goods and wholesale trading,” they claimed.
According to manufacturers, currently several businesses like heavy industries in the chemical, metal and some food and beverage and garment companies owned by local investors are up for sale because they are unable to run their usual operation and at the same time the bank loans have to be paid.
When local investors, who have thousands of employees, layoff their workers, it will also affect the social structure, according to experts.
NBE evaluating suppliers credit scheme
WHAT ABYE AHMED MUST DO NEXT
Fast forward ten years, I hope to tell my granddaughter that once upon a time, Ethiopia appeared headed for a bloodbath. Many believed that ethnic extremism would capture the day and that the country was destined for violent chaos. In the end, Abye Ahmed and Team Lema’s visionary leadership proved them wrong.
Jumping back to 2018, Addis Ababians (and the Diaspora) remain overwhelmingly crazed by Dr. Abye and Team Lema …And why is it that Dr. Abye and Team Lema are so mesmerizing?
One of the main reasons is that these fellows, by some miraculous actions, not only defeated and chased TPLF’s goons and its minions, they, and in particular Abye Ahmed (AA), had the temerity to do what no typical Prime Minister would dare do… manage a revolution; and he has done it with so much style, sophistication, flair and wit, it may have heralded the end of an era.
Let me share my five favorite take-homes so far: Peace with Eritrea, opening of the political space for all, freedom of the press, a ministerial team that for the first time in the country’s history is equally balanced between men and women, and the pushup stunt with the mutineers.
No, Dear Readers this fellow (AA) can walk on water and can perform miracles. He literally tried to make us believe that government is now a saint, that it (the government) fears us… the citizens? But we’re no fools. Cover it up with sweet honeyed myths at the end of the day we know government uses a big stick to get what it wants.
Anyway, there is nothing wrong for citizens to begin to think of Ethiopia as a possible success story as long as they understand that the post-TPLF transition remains unfinished. Reforms take time, and progress depends on patient, considerate, and honest win-win deals. Allowing win-win deals is the only way to know what people want… and the only way for them to get it. Win-lose deals imposed by governments are a drag on growth and progress.
Meanwhile, to claim the crown in 2020, there are three issues Abye Ahmed should consider, before time is running out:
Establish a Special Committee on Electoral Reform that will consult broadly with Ethiopians from north to south and from east to west. The aim is to improve the representativeness of our political system, make sure it works effectively and fairly for all nation and nationalities of the country. The Committee should, among other things, deal with issues of public financing for political parties, identify and conduct a study of viable alternate voting systems to replace the first-past-the-post system, develop cases for or against parliamentary democracy, examine mandatory voting, create E-Consultation on Electoral Reform to solicit Ethiopians living abroad views on the issue etc…and more. The big challenge here is to try to figure out a system where the pluses outweigh the minuses.
Establish a Task Force that will identify actions to address Government regulations that are unnecessarily burdensome, complex, redundant, or duplicate to unleash business transformation. In Ethiopia today business is the victim of excessive regulations. Clearly business go through too many regulations and, in many cases, these regulations impose excessive and unnecessary costs on business. The main focus should not be on policy as such, but rather on any undue costs for business in the implementation of policy through regulation. In short, such taskforce should be tasked to identify a forward agenda comprising some 80-100 reforms to existing regulations that would boost growth. In addition, the taskforce should also advise how the processes and institutions responsible for regulation could be improved to avoid the same problems simply re-emerging.
Reform the Judicial structure of the country. It’s critical at this juncture for both the federal and regional governments to occupy a direct role in shaping the nation’s court system. Because it’s critical to maintain control over the quality of judges and patronage opportunities for prestigious judicial positions on the nation’s most senior courts, the government (regional and federal) should agree to allow the federal government with the authority to appoint judges to the regional superior courts – that is the superior and appeal courts in each region. As a consequence, in each regional state, there exists a regionally-created court system in which the lower courts – where the vast majority of the nation’s legal business occurs – are administered by provincially appointed judges. In that same province the superior courts, which hear trials involving serious criminal offences, civil suits involving amounts above a specified limit, and appeals from the province’s lower courts, are supervised by federally appointed judges.
Anyway the guy knows what to do and how to do it. But just in case…
Stay tuned!
Authority to install device limiting speed to 80km/h
All vehicles including diplomatic, government and NGO to be included
The Federal Transport Authority has finished a final draft that will make using and administrating electronic speed governing (ESG) devices mandatory. This month the draft is expected to be signed and implemented. Commercial vehicles will be the first to use ESG followed b diplomatic, government and non-government organizational vehicles and then finally private taxies.
The directive stipulates that the maximum speed will be 80kmh, unless a located has put a lower speed limit into effect. Any car made in 2000 or later will need to use ESG, according to the draft, which goes on to read that earlier model vehicles will be dealt with at a later date.
The machine which is going to limit the oil and air running to the engine is also specified to have a Global Positioning System (GPS) which is going to track every movement of the car. The device will send the data of the car to a database using the telecommunication fleet management system in which the owner is going to be responsible for the costs, according to the draft. When the vehicles are offline it will save the data and send the information when it is back on the network.
“We finalized the preparation of the database and the display board is being installed now,” said Yakob Belay Director of Road Safety Directorate at the Authority.
In the first phase, which is expected to enter into operation within the coming six months, public transports accommodating 12 people up to 65 seats, carriage service givers, dump trucks will install the device.
“We chose to implement the directive on the commercial vehicles first is the nation is facing a tremendous threat with the alarmingly increasing deaths and loss of property year after year,” said Yigzaw. “Studies are showing 85% up to 90% of accidents occur due to speeding.”
In this past fiscal year alone 5,118 people died from car accidents while 4479 lost their lives in the 2016/17 fiscal year. In addition, 7,754 people suffered major injuries, which was an increase of 268 from the previous year. Every year there are more injuries and fatalities from accidents and 80 percent of these are males. The total damage caused to property was 920.77 million birr in the 2017/18 fiscal year which was a slight decrease from last year’s damages of 1.18 billion birr.
Any vehicle which does not install the ESG will not get its annual competence certificate at the end of the year. Also, the authority has finalized the specification of the machines to be imported.
“We will call experienced importers to get licenses and import the machine starting from the week of the approval of the directive,” said Yigzaw.
The authority is entitled, by the draft directive, to issue, renew or terminate the import license for the importers. Also, the renewal of the machine will be cited by the authority.
Owners are expected to purchase, install and follow-up the functionality of the device and vehicles using the machine will get a sign.
Drivers are obliged not to drive any vehicle which is supposed to have the speed limiter and when there are problems with the machine they have to immediately stop the car and report the problem to the owner, reads the draft.
The bill also states that anyone who sells the speed limiter should also have a trained team to install and maintain the machine. The authority will license shops who sell the devices which are expected to organize the data of their customers digitally and manually. Also, availing the spare parts for the machine will be mandatory. The shop owners are expected to carry only brands authorized by the authority and carrying any others will cause a penalty, according to the draft bill.
Until the end of the last fiscal year the nation accommodated 935,888 vehicles most of which were cars at 212,317. Addis Ababa is the highest destination for the registration of the cars with 553,938 vehicles while Oromia and Amhara Regions were followed with 129,339 and 67,299 significantly.
The directive also compels the transport associations to oblige their members to use the machine and they have to deny them any work when the speed limiter is disabled. Associations which accept new members without installing the machine will be penalized.
Any device to be imported is obliged by the authority to give an alert to the driver and send the report to the database when the maximum limit is excelled.
After the authentication of the directive vehicles which enter the country will be only those who have the specified speed limiter. The directive also sets a specific time for the reporting on the implementation of the directive and for the authority to solve the problem, that is five days each.
In the global market the price of the device runs from USD 65 to USD 200 on average.
Pakistan may restart Ethiopian bean imports
A green light from Pakistani Ministry of National Food Security and Research is highly anticipated to recommence the export of beans that was banned last year due to safety issues.
The beans which were banned by the Pakistani controlling body are red kidney beans, pinto beans, red speckled beans and other similar bean types.
For the past 19 months the red beans, which are one of the major export products in the pulses category, were banned by Pakistan regulatory body due to a concern over a ‘serious, destructive and virulent quarantine disease’, widely known as ‘Fusarium Chlamydosporum’.
It has affected the Ethiopia exporters business and the hard currency generation expected from Pakistan.
A few weeks ago a delegation from Pakistan made up of experts in quarantine analysis paid a visit to Ethiopia to evaluate the country’s pest risk analysis scheme to recommence the trading, according to Gebrekidan Asresahegn, Director of Plant Health and Product Quality Control Directorate at Ministry of Agriculture and Livestock Resources (MoALR).
“They have visited our quarantine facilities in addition to meeting with top Pakistani and Ethiopian officials,” Gebrekidan added.
“Now we are waiting for an official confirmation letter from the relevant body in Pakistan like they promised, since they are delighted by our safety procedures and rules,” he added.
However exporters in Ethiopia are not happy with the confirmation delay. They claim that the relevant government body was forced to push to get the confirmation.
Some of the exporters who declined to be mentioned stated that they are already in the process of shipping the product for clients in Pakistan and other people have also bought a huge amount of red kidney beans for export, but they are stranded.
On October 30, 2018 the Department of Plant Protection at Ministry of National Food Security and Research of Pakistan wrote a letter to Pakistani importer that the Ethiopian Ministry and Oil seeds and Pulses Associations copied. The letter mentioned the beans and advised Pakistani importers not to open a letter of credit (LC) with their banks for import of the stated commodities from Ethiopia to avoid any financial loss as the import permits have been issued mistakenly by the department.
The letter was signed by Dr. Mukammad Basit, Deputy Director for Plant Protection Advisor and Director General at the Pakistani department. It added that the pest risk analysis with the National Plant Protection Organization of Ethiopia is under process and has not been finalized so far to import the commodities.
Plant Health and Product Quality Control Directorate, which is a legal body to give a quality accreditation for export commodities, Director of Ethiopia has accepted that some of the exporters in Ethiopia are asking his office to know the latest development. But he argued that his organization should get confirmation from its counterpart in Pakistan to give a permit to import Ethiopia’s beans. “They have promised to send a confirmation letter within few periods and we are still waiting for the response. But at the same time we are also communicating with the embassy here to accelerate the process,” Gebrekidan said: “we are eager to get the permit since export is the priority otherwise for the delay it is not our fault,” he said denying the claim from exporters here. He added that the exporters association has information on the matter.
However exporters said that since the Ethiopian beans are banned by Pakistan Kenya is using the advantage. They claimed that Kenya exported Ethiopian kidney beans transported via Moyale, a border town between Ethiopia and Kenya, as it is Kenya origin. “They are earning up to USD 300 per ton from the product they got from Ethiopia,” a private consultant on the oil seeds and pulses exports told Capital. “It shows how the matter affects our earnings and benefits others,” he added. He said that the government body has to insist on getting the go ahead from the counterpart.
Beans are part of the Pakistani diet and others in the region, mostly used to make a traditional cuisine, known as Rajma.
