The highly anticipated congress of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) is pushed for unspecified period, Capital learnt.
It is not disclosed why the meeting is postponed. However in the coming week the 180 member council of the ruling party is expected to meet in Addis Ababa. According to the information Capital obtained, the meeting is expected to focus on the assignment of the new party chairperson, who shall be the upcoming PM.
The ruling party regularly held its congress every two years in the past three decades. However the latest congress that was expected to be held in the coming month in Hawassa, 275km south of Addis Ababa, has been postponed again for unspecified period. It was initially planned to be held in September 2017 but was postponed to March 2018.
Sources told Capital that there is no preparation being done for the congress that is considered as a crucial event for the ruling front that set its policy and strategy besides electing executive committee, chair and deputy chair.
According to the rule of the party the congress has to be held at least every two and half years.
In the past couple of years the country’s political arena is registering significant and historical changes besides instability for the past two year.
A week ago the party chairman and Prime Minister Hailemariam Desalegn announced his resignation from both positions, while state of emergency has been placed a day after the PM announcement.
The release of several prominent political leaders and activists also happened in the past weeks.
The upcoming congress of the ruling party has been highly expected since rumors that indicated there is division with the party climbing. After the PM resignation the expectation for the congress has been heated.
EPRDF postpones congress again, Council to meet on Thursday
Djibouti severs contract with DP World for container terminal
The government of Djibouti has come up with an unexpected but strong decision related to the concession contract of Doraleh Container Terminal (DCT).
A communiqué signed by Mohamed Abdoulkader Moussa, Minister of Equipment and Transport, indicated that the government would discontinue its concession contract with global port operator DP World, as of February 22.
The new move will make the government of Djibouti the full owner of the modern port based on a law issued late last year.
Experts said that the decision the taken by the government of Djibouti is very strong. Sources close to the issue told Capital that the government fully owned the container port the same day the letter was issued.
Previously, DP World, a Dubai based company, agreed with the government of Djibouti to manage the Port of Djibouti, the oldest port in the country, and it was also responsible for managing DCT, an exclusive container port that opened in December 2008.
“Pursuant to the law of 8 November 2017 on strategic infrastructure contracts, the Government of the Republic of Djibouti has decided to proceed with the unilateral termination, with immediate effect, of the concession contract awarded to DP World for the operation of DCT,” a communiqué issued on Thursday stated.
It elaborated that, in terms of strategic infrastructure contracts, the November 8 2017 law is designed to protect the nation’s best interests, especially those relating to state sovereignty and economic independence.
The Djibouti government pointed out that it had established a legal framework allowing for renegotiation, when required, of concluded contracts bearing on the management or operation of strategic infrastructure. “The law also authorizes the government to terminate the contracts in question,” it added.
According to their statement, the Doraleh Container Terminal concession agreement contained elements in flagrant violation of the sovereignty of the state and the best interests of the nation. It went on to say that there had been attempts to speak with relevant bodies from the DP World side.
“These factors have been talked about on several occasions with the management of DP World,” it said.
The statement added that since 2012, the Republic of Djibouti has tried everything within its power to renegotiate this contract without calling into question the interests of its partnership with DP World and the development objectives of Djibouti’s port activity.
“Good faith attempts by the Government of Djibouti and its representatives to reach a negotiated solution or to resolve the issue amicably have been rejected without reason by the management of DP World,” it further stated.
The communiqué also claimed that the latest attempt, dated February 1, 2017, was answered only by a resolution taken by DCT’s board of directors in which the state of Djibouti, the 66.66 percent majority shareholder of DCT, will be contested in a new arbitration procedure without its consent.
“As a result and in accordance with the law of November 8, the government today issued a decree terminating the concession,” it added.
As stipulated by the law of November 8, normal compensation procedures will be implemented.
The November 8 law article one stated the government may renegotiate or, as necessary, terminate, in whole or in part, all contracts relating to the design, construction, management or operation of strategic infrastructures when it considers that the stipulations of these contracts prove to be contrary to the fundamental interests of the Republic of Djibouti.
In article two it added that should it be decided, as the case may be following an unsuccessful renegotiation attempt, to terminate, in whole or in part, a contract referred to in Article 1, such a decision shall be pronounced by an Order in Council of Ministers.
“The decree of cancellation of the contract specifies the possible methods of compensation of the holder of the contract in question and indicates, if necessary, the recovery by the State or by any other public establishment or public company, to the need specifically created for this purpose, of the rights and obligations under the relevant contract to preserve the continuity of the public service,” the law issued in November last year added.
In its statement on Thursday DP World claimed that DCT is the successful port since the beginning.
However on Friday Djibouti Ports and Free Zones Authority (DPFZA) said that the government of Djibouti took this decision in light of the recent poor performance of the DCT, and to rectify irregularities in the agreement covering its operation.
“Since 2008, DCT has achieved only 57 percent of its total volume, despite operating in a favourable import-export environment,” DPFZA argued.
The government of the Republic of Djibouti has henceforth taken over the management of the terminal. In another appointment letter signed by president of Djibouti, Ismail Omar Guelleh, and issued on February 22 Warsama Hassan Ali was appointed Director General of DCT.
DPFZA on its statement on February 23 sated that DCT has now been placed under the authority of the Doraleh Container Terminal Management Company (DCTMC), a fully state-owned company that will be managed by DPFZA. “The port will be managed and developed in line with DPFZA’s strategy to develop Djibouti as a world-class trade and logistics hub, building on its existing position in the region,” the authority said.
“In the meantime, DP World developed other ports in countries close to Djibouti and used aggressive tactics such as the deliberate slowing of the development of DCT in favour of their main asset at Jebel Ali, which is in the UAE,” the authority added.
Last year DP World agreed with the self independent Somaliland to manage the Port of Berbera with massive new port and related facilities.
The authority also added that the original agreement, which contained a number of irregularities, excluded Djibouti from decision-making processes and the management of the company.
The communiqué indicated that the decree authorizes the requisition of all the goods and personnel essential to the running of DCT. “The decree also authorizes the automatic transfer of all contracts and personnel necessary for the operation of the terminal,” it added.
It has also given an assurance to the partners that work will be continuing as usual. It said that the government of the Republic of Djibouti assures all partner operators, associated companies and site employees of its commitment to maintaining continuity of service and to developing Doraleh’s port activities.
DCT is an instrument essential to Djibouti’s economic strategy.
Experts at Djibouti told Capital that the new decision may have a positive effect on the Ethiopian side. They said that tariff decreases at the port may occur because of the recent announcement that other ports in Djibouti managed by Djibouti Ports and Free Zones Authority declared a price decrease on port handling.
“At the recent meeting held in Addis Ababa with private stakeholders several issues were raised from both sides including the current new decree allowing the government of Djibouti to manage the DCT directly. They argued this could give an opportunity for the government to answer questions easily,” an expert based in Addis Ababa told Capital. He added that the effect would be observed in the coming few months.
Djibouti was the first destination for DP world when the two bodies agreed to port management in 1999. Since 2000 DP World began managing the old port in Djibouti and in 2008 it developed a container terminal at Doraleh with about one third share. In the past few years the government of Djibouti claimed that there was a hidden deal on the port handling and related issues affecting the benefit of the country.
It has been disclosed that there were attempts to solve issues through negotiation. However it did not work out. DPFZA said that negotiations undertaken in good faith by the government of Djibouti and its representatives to find a solution to this situation, going back six years, were rejected by DP World.
According to the authority statement that issued last Friday, last month, DPFZA engaged DP World in detailed discussions, with a view to finding a good faith settlement that included the purchase of DP World’s stake. “DP World declared their desire to sell their shares in DCT, but subsequently added an additional restriction on Djibouti developing new ports on its territory. This condition, which poses a serious threat to Djibouti’s national sovereignty, was rejected by the government of Djibouti,” it claimed.
The company’s move to east Africa is its second footprint after the Arab world, it then became a global company. Early in the 2000s the gulf state agreed with the government of Djibouti to establish and operate ports along the coastlines of the country in the Aden Gulf.
The major aim of the project is to boost the port handling capacity of Djibouti, which is the nearest alternative port and almost equivalent to the distance of Assab for Ethiopia which is not really preferred given the tense conditions between the two nations due to a three year border conflict between the end of 1998 to early 2000.
Capital’s effort of get a comment about the issue from Ahmed Shide, Minister of Transport, and Mekonnen Abera, head of the Ethiopian Maritime Affairs Authority was unsuccessful.
Djibouti is a major outlet for Ethiopia’s import/export. In the past few years the country concluded three new ports with a huge handling capacity.
The new railway also makes Djibouti’s ports ideal for Ethiopia.
It was recently announced that another three ports and related facilities will be built in the coming weeks. One of the projects is also a port that is exclusively a container terminal like DCT.
Despite devaluation black market dollar rate gap highest ever
Even though the National Bank of Ethiopia (NBE) has taken actions to stop black market trading of foreign currency, the price difference between foreign currency on the black market and in the banks has actually increased.
Previously the black market rate was 20 percent higher than the bank exchange rate because of the hard currency shortage.
Despite the fact that the government devaluated the birr by fifteen percent against major hard currencies on October 11, 2017 which meant that it was the same as the black market rate, the black market returned the favor and went up as well.
NBE has implemented a new scheme for approving letters of credit (LC). It stipulates that banks use the given price of items when they allocate hard currency.
The new scheme that banks adopted is that the LC amount that individual or companies request needs to be equivalent to the actual price of the imported items.
According to observers, the current gap between the legal market and the parallel market has reached up to 25 percent, the highest it has ever been.
According to information that Capital gathered, hard currency sellers are getting over 34 birr for a dollar from the illegal forex market.
However the legal market is buying a dollar by 27.22 birr. Experts are confused about this because the devaluation was expected to solve this problem in December last year NBE imposed a new law forcing banks to allocate hard currency for importers based on the volume of import items.
The law was expected to stop illegal remittances exchanged based on the rate of the black market.
It is believed that importers are asking the amount of a hard currency from banks that does not actually cover the volume of the total import items. Many believe that hard currency collected from illegal remittances from abroad is linked to the same importers that cover the balance cost of the import in addition to the LC that they get from banks.
For instance a company that imports 10 vehicles would get a LC approval from banks that only covers the price of two cars and the balance will be covered from the hard currency collected from family or friends abroad, who send the money from overseas to Ethiopia. When this happens a receiver in Ethiopia secures the money in birr at the black market rate and the hard currency is not transferred to the country but instead is used to import items.
But the new law that NBE imposed would fully cut this illegal action, since the importers are expected to import the product based on the real value estimated by the Ethiopian Revenue and Customs Authrority and the amount written on the LC. However the hard currency exchange in the illegal marker does not changed, according to experts. Even it has shown sharp increment in the past few months than the expected reduction.
Previously any importer who wanted hard currency for their import was not obliged to submit the price of the imported items at exporting countries’ markets.
For instance if an individual wants to import a vehicle that may cost USD 10,000 they would not be obliged to request the full amount for the vehicle purchase.
Under the current rules individuals or companies who want hard currency can get it from banks and the balance then is filled by different sources mainly from parallel sources or black markets.
According to ERCA over 5,900 items are imported from abroad.
The hard currency crunch that the country faces has forced the central bank to apply new rules and regulations regarding the management of hard currency and tackle the illegal business.
When the new NBE rule is issued experts at private banks told Capital that the NBE rule will contribute to increasing banks’ hard currency earnings and reducing illegal remittances, which are one of the major reasons for illicit finance flow.
Even though the issue has not been studied, importers are using finance from outside sources, who collect hard currency secured from illegal money transfers, for their imports, according Teklewold Atnafu, Governor of NBE, who spoke about the issue during his appearance at the Budget and Finance Affairs Standing Committee of the Parliament in December.
It has been confusing the banking industry. There are still other ways that either importers or people in the black market can game the system. “Most of the country’s hard currency earnings are illegally smuggled abroad,” an expert said.
In its latest statement the IMF forecasted that the country had enough hard currency reserve to last for two months. It had been 1.9 months in the past fiscal year, according to the IMF report. It is considered healthy for a country to have at least three months of forex reserves.
Ethiopia improves slightly on global corruption index
The annual Corruption Perceptions Index (CPI), released by Transparency International (TI), has ranked Ethiopia 107 of 180 countries included in the index for the year 2017.
The index, which ranks countries on a scale of 0 (highly corrupt) to 100 (very clean), awarded Ethiopia a score of 35 – a slight improvement from 2016 and 2015 when the country was given 34 and 33 points, respectively.
The report states that failure to punish individuals implicated in graft continues to be a major stumbling block. Incompetence and ineffectiveness of anti-corruption agencies also attributed to the poor ranking.
Among East African countries Rwanda was the top performer with a score of 55 at position 48.
TOP AND BOTTOM
In the new report, there were no changes at the top and bottom with New Zealand and Denmark ranked highest with scores of 89 and 88 respectively. Syria, South Sudan and Somalia were the lowest with scores of 14, 12 and 9 respectively similar to 2016.
Western Europe was ranked the best performing region with an average score of 66.
The worst performing regions are Sub-Saharan Africa (average score 32) and Eastern Europe and Central Asia (average score 34).
Botswana emerged the highest ranked country in Africa with a score of 61 followed by Rwanda.
The newly released CPI provides a good baseline for the African Union (AU) anti-corruption efforts in 2018. This year the theme for the AU is: “Winning the Fight against Corruption: A Sustainable Path to Africa’s Transformation.”
‘In some ways, the CPI points to a more hopeful future for Africa. The transformations in Rwanda and Cabo Verde show that corruption is manageable with well-sustained effort. Long-term anti-corruption investments in countries like Cote d’Ivoire and Senegal are also steadily paying off. On the other hand, tackling corruption remains a herculean task for countries at the bottom of the index, like South Sudan and Somalia,’ the reports reads.
‘Despite being the worst performing region as a whole, Africa has several countries that consistently push back against corruption, and with notable progress. In fact, some African countries score better than some countries in the Organisation for Economic Co-operation and Development (OECD). Specifically, Botswana, Seychelles, Cabo Verde, Rwanda and Namibia all score better on the index compared to some OECD countries like Italy, Greece and Hungary. In addition, Botswana and Seychelles, which score 61 and 60 respectively, do better than Spain at 57’ the report further reads.
The key ingredient that the top performing African countries have in common is political leadership that is consistently committed to anti-corruption. While the majority of countries already have anti-corruption laws and institutions in place, these leading countries go an extra step to ensure implementation.
The report also recommends that governments and businesses do more to encourage free speech, independent media, political dissent and an open and engaged civil society and should minimize regulations on media, including traditional and new media, and ensure that journalists can work without fear of repression or violence. In addition, international donors should consider press freedom relevant to development aid or access to international organisations.
