After two years of heading the policy bank, Development Bank of Ethiopia (DBE), Getahun Nana, former vice-governor of the National Bank of Ethiopia (NBE), submitted his resignation letter mid this week to the Prime Minister Office.
According to sources, Getahun seemed ready and intending to leave his coveted post at the DBE where he had replaced Esayas Bahre, who left in 2016 after being suspended from his post.
Meanwhile, experts in the finance sector speculate that Getahun may be headed for the NBE governor’s post.
Getahun, before joining DBE, was one of the longest serving financial sector watchdogs at the central bank and served as a vice governor of the National Bank of Ethiopia (NBE) for seven years. Later he was appointed by the then Prime Minister Hailemariam Desalegn to revive DBE.
At DBE, the levels of Non-Performing Loans (NPL) has declined from 28 percent to 20.54 percent in the current fiscal year. From the total NPL basket, the majority is accounted for by two sectors: manufacturing and commercial farming. As of January, 2018, DBE’s NPL level is 8.6 billion birr. Still the NPL of the bank remained above the 15 percent maximum cap set by the National Bank of Ethiopia.
DBE is a specialized state owned development financial institution, which is supervised by the Public Financial Enterprises Agency.
The Development Bank of Ethiopia was the first development finance institution in Ethiopia and as such it was designed to assist in the development of industrial and agricultural production and foster the investment of private capital for productive purposes
The goal of this bank is to promote economic development via financing commerce, industry, agriculture, and manufacturing. Each period of Ethiopian political history has used the bank for different purposes. Thus, the bank has changed its name several times.
The removal of Esayas, which was at the time largely related with a controversial finding by a study conducted in the Office of the Prime Minister that exposed the misuse of loans disbursed to commercial farms, particularly in Gambella Region among others has put the bank in a limelight.
Getahun Nana leaves DBE May go to govern NBE
NBE eases supplier’s credit scheme to local firms
Due to the ongoing shortage of hard currency, companies in the manufacturing sector have recently been authorized to import the badly needed raw material for their production plants using supplier’s credit scheme.
This scheme was only allowed to export oriented investments through a permit from the National Bank of Ethiopia.
Now, firms whose mother company is foreign based, even if they are not export-oriented are allowed to benefit from this scheme to import their raw materials so that they continue producing.
Suppliers’ credit guarantees are guarantees issued by a commercial bank to provide security to a local or foreign supplier/beneficiary on behalf of a local customer, representing a commitment on the part of the bank to meet any claims to be made by the beneficiary, in case the debtor (local buyer) fails to repay in accordance with the terms and conditions of the contract.
According to NBE’s Directive for Amendment of External Loan and Suppliers Credit Directive supplier’s credit means an interim short term financing provided by a third party supplier. The directive also states that an exporter and a domestic investor who are engaged in export-oriented investments are eligible for an external loan or supplier’s credit provided that the acquired loan is going to finance the export-oriented investment.
However, “the supplier’s credit scheme is a risky business, but we have no choice. We have to use this to continue production,” said one manufacturer, who is using this scheme for the last few months.
“The supplier’s credit will need to be paid back in 180 and 360 days after placing an order, this will also affect us as it takes from two to three months for the raw material to reach here,” added the manufacturer.
Meanwhile, experts say this unfortunately will affect local manufacturing companies with no access to such credit and that are queuing for access to foreign exchanged through Letter of Credit.
These local manufacturing companies feel that as National Bank of Ethiopia eased the procedure to acquire suppliers’ credit to those companies that have subsidiaries in foreign countries, they will be able to remain afloat while they will be forced to go out of business as they have no way of acquiring raw materials for their products.
Experts in the finance sector also indicated that such loans can be insured. The suppliers providing the credit supply would pay a premium to be insured which may affect the price.
Insurance firms such as the African Trade Insurance Agency (ATI) usually insure such kind of arrangements, say these experts. ATI is a pan-African institution established by African governments and AfDB to support and encourage inter-African trade. It provides risk solutions to companies, investors, and lenders interested in doing business in Africa. ATI recently elected Dr. Yohannes Ayalew as their new Chairman. Yohannes is currently the Vice Governor and Chief Economist of National Bank of Ethiopia.
Midroc asks for community environmental impact study to assess cyanide risk
Midroc Gold Mine Plc is asking for an additional impact study at its gold mine in Lega Dembi. They want it to include the area surrounding the gold mine and to be expedited within the shortest period possible.
The company is currently the only major high scale precious metal producer in Ethiopia. However the company suspended production after its license was revoked two weeks back.
Residents in the area complain that the mining negatively impacts human and animal health. The company stated that it is using the chemical, called cyanide, which is used for gold mining worldwide, and added that the chemical is proven that it does not have any effect in the environment.
In the statement that the company sent to Capital, it stated that it wrote a letter to the Ministry of Mines, Petroleum and Gas (MMPNG) saying it attempted to the public’s attention that the use of cyanide does not have a negative impact on the health of babies and mothers.
A few weeks ago the ministry placed a temporary suspension on mining to conduct additional studies on its impact.
The statement that the company sent to Capital indicated that Midroc Gold expressed its desire for the study to include the areas outside the mining location.
“The company has accordingly complied with the order of MMPNG by stopping its production activities and has requested the ministry to expedite the additional study,” the statement that the company sent to Capital explained.
“Every single day without production has a negative effect on the country’s foreign currency earnings,” the company said.
It has also elaborated that considering the negative impact and the financial loss each unproductive day hinders the moral of the workers. “Mirdoc Gold Mine requested the relevant ministry to conclude the study being undertaken in the shortest period possible,” it added.
Midroc Gold Mine is a company under Midroc Group, one of the groups that the billionaire Sheik Mohammed Hussein Ali Al-Amoudi owns.
Currently, Ethiopia has a single large-scale gold mine, the Midroc Gold Mine at Lega Dembi, Shakisso, Oromia Regional State, which is an operating open pit mine in Ethiopia.
The mine was privatized and awarded to Midroc Ethiopia in 1997. A mining license was awarded and a new company – Midroc Legadembi Gold Mine Share Company (Midroc Gold) commenced production in August 1998. The Lega Dembi deposit is the largest gold producer in Ethiopia.
Dam filling study, joint fund for infrastructure agreed during GERD meetings
After a closed door meeting that lasted nearly 15 hours the Tripartite High Level Ministerial meeting of Ethiopia, Egypt and Sudan agreed on several ongoing operations along the eastern Nile basin.
Chief diplomats, water ministers and security leaders of the three countries met at the Inter Continental Bistro Hotel from noon on Tuesday May 15 until three in the morning of May 16 to finish negotiating.
Since the construction of the Grand Ethiopian Renaissance Dam (GERD) at Tiqur Abay (Blue Nile) began in 2011, officials from the three countries have held several meetings. However, this is only the second one held at such a high level. The first was in Khartoum, Sudan in early April.
According a statement from the Ministry of Foreign Affairs of Ethiopia (MoFA), one crucial deal the three countries agreed to was to form a joint infrastructure fund.
In regards to the infrastructure fund high level high officials from the three countries agreed to work out the most suitable modality to establish the Fund.
In 2016 when they met at Sharm El Sheikh, Egypt leaders of the three countries agreed to establish an infrastructure fund to provide for joint infrastructure and development proposals in their respective nations.
According the organization’s statement the MoFA Tripartite High Level Ministerial Meeting accomplished successful agreements. The countries agreed to establish an independent, national, scientific study group to analyze the filling of GERD. They also agreed to present queries and observations to the consultancy.
This was seen as a good move for the region because it helps establish trust based on cooperation among the affected countries.
Experts, who declined to be mentioned, stated that the outcome of the latest meeting indicated that the dialogue between the three countries became about filling the dam with water as opposed to the construction project.
“During the filling, countries including Ethiopia, took into consideration the mutual benefits of the region,” one expert said. Meles Alem, Spokesperson of MoFA, told Capital that the three countries been agreed to form a National Independent Scientific Research Study Group made up of five experts from the three countries to look at the water filling process.
The countries will establish a National Independent Scientific Research Study Group. The mandate of the group is to discuss ways to enhance the level of understanding and cooperation among the three countries with regard to GERD, including discussing and developing various scenarios related to the filling and operation rules in accordance with the principle of equitable and reasonable utilization of shared water resources while taking all appropriate measures to prevent the causing of significant harm.
The group is expected to hold nine meetings and submit the outcome of its deliberations within three months for consideration of the water ministers who will report to the high level ministerial body.
“The agreed minutes reached last night (early morning of May 16) are an example of compromise between countries that are seeking joint solutions for common challenges,” Ana Cascão, independent researcher working on Nile hydro politics, told Capital via email, “Similar to previous Nile agreements, it includes ambiguous clauses- which hopefully will turn out to be an example of constructive ambiguity and not the opposite,” Ana added.
Meles, who is delighted by the outcome of the closed door meeting, said that Ethiopia has insisted the downstream countries undertake the water filling study by scientists and experts comprised from the three countries as opposed to a third party. “Our proposal has been accepted by both countries,” he added.
In its statement MoFA said that the agreements reached during the second Tripartite High Level Ministerial Meeting is a step forward for Ethiopia.
The independent researcher working on Nile hydro politics said that if it helps to speed up decisions on the most urgent issue – alternative scenarios for the GERD filling – then it is a good outcome.
“Time is not on the side of any of the parties, therefore mutual trust must take the front seat – now, and not later,” she told Capital.
According to the statement of Egyptian MoFA, a delegation led by Sameh Shoukry, minister of MoFA, met with PM Abiy Ahmed (PhD) on Tuesday morning before they went to Tripartite High Level Ministerial Meeting. MoFA of Egypt stated that the Egyptian delegation formally invited Abiy to visit Cairo as soon as possible.
The next meeting shall take place in Cairo early July.
