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Mind the small print

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Mind the small print

Contracts serve to record an agreement on principle and codifies what parties have promised to do. It also implies consent to the agreement and provides recourse if the parties do not keep their side of the deal. In other words, a contract describes the deal between two parties as well as what repercussions there will be in case the deal is not respected by any of the two parties.

Much as it is common in Ethiopia to regard a contract as an intention to be renegotiated the moment circumstances change, the actual legal implications are in fact binding. This contradiction is observed more often in countries where constitutions are derived from foreign models and it is no wonder that the implementation of rules and regulations is subject to different interpretations. In other words, if a dispute over a contract is taken to court, the contents of the contract will be taken more literally than the signing party had perhaps intended.

It is therefore wise to take contracts more seriously than is often done and to make sure that your interests are included in it. More often than not a contract is drawn up by the party, who has more experience in dealing with third parties and contracts are usually derived from models used earlier. The language used is often complicated and intimidating, and there is a chance that the weaker party will sign without fully understanding what the implications are or making sure that his/her interests are well described.

Examples are found in employment contracts, housing contracts and sales. And while the employee, tenant and client are eager to sign and get the deal they so long looked for, they may end up in a weaker position than was necessary, more especially if they did not bother to read the so-called small print. What to do? Here follow some suggestions.

In the first place it is important to sit down and try and define what you want out of the deal you are about to make. Easy as it sounds, it is surprising how difficult it often is to describe exactly what you want. It is helpful to ask yourself some questions like:

  • What are you actually looking for? What product or service will improve the quality of your life or your business? When you are looking to rent a house or office space for example, what are the minimum requirements in terms of space, location, facilities, quality and maintenance? Once you know what you are looking for, your search will be focused, and it becomes easy to say “no” to what doesn’t meet your minimum requirements.
  • What can you afford? While prices follow market trends, this is not to say that you need to follow suit. There is a limit to everybody’s budget, and it is important to set that limit. Defining the range that you are willing and able to pay for the services or product you are looking for provides you with a framework within which to negotiate. Again, it becomes easy to say “no” once the costs are beyond the limits that you set for yourself.
  • For how long do you require the services or product you are looking for? It is important to set a timeframe and include a minimum period for example when renting premises. One-year contracts are common but are not in your interest. Try and negotiate for longer periods as this will allow for less stress and uncertainty.
  • What are the advantages and the disadvantages of the deal that is being offered? It is interesting to note that while somebody eagerly wants something, the disadvantages are easily brushed aside. Often, the client ends up with less value for money than was necessary.

Secondly, get a second opinion. Ask around and be informed. Find people in your social circles whom you can trust and who are able to advise you. And if you can afford it, personally or in your business, hire the services of a lawyer or consultant, and get expert advice on matters you are not an expert in yourself.

Thirdly, include conditions in the contract that will protect your interests. Write them down, put them on the table and have them included in the contract. Don’t accept the excuse that the standard contract normally doesn’t include your issues. You should not sign until you are confident that your interests are represented.

As mentioned earlier, contracts are often drawn up in complicated language. Ask yourself whether you understand the rest of the contract. If not, ask for an explanation, negotiate if necessary and have the issue written down in a way that is understood by both parties.

Finally, know what the consequences are for not sticking to the deal. Exceptions and consequences are the issues that are often found in the small print at the bottom of the main text or as footnotes, discouraging you to go into the details. You need to understand for yourself and accept what the exceptions are and what the  consequences will be in case you or the other party want out. Don’t take this lightly. If the consequences are too light, the chance for the contract to be broken is higher, putting you at more risk than necessary, which is what you want to avoid in the first place.          

Remember, a contract is an agreement between two parties, and you are responsible yourself for making sure that your own interests are protected. Don’t expect the other party to do that for you.

Ton Haverkort

Financial literacy and investor education- whose role is it in a nation? Why they are the critical pillar for the Ethiopian Capital Market to thrive

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Financial literacy and investor education- whose role is it in a nation? Why they are the critical pillar for the Ethiopian Capital Market to thrive

For those of you haven’t read  my previous  three  articles, I discussed the  importance of the ecosystem approach for the Ethiopian Capital  Market to thrive, provided historical grasp about the genesis of  capital markets around the world and potential pitfalls capital markets harbour and pointed out that the Ethiopian Capital market at its early stage might suffer from the financial sector market concentration etc., and in the last edition  I pointed out the various regulatory risks and  how to mitigate them.

In this edition I will discuss – Financial Literacy and investor education. I will deep dive and explain whose  role is it and how can it be done at the national level. Who has the explicit mandate or is there such a thing?  What is the role of the Capital Market Authority’s role if any?

Within a fast-evolving  financial  landscape where  access to financial  services is made easier while more risks are being transferred to citizens the world over (this could be argued either way- in principle  this is the case in most  countries), financial  literacy has  become a key life skill for individuals  as well as micro and small businesses. Remember Small and Micro businesses are

the engine and source of employment for most economies.

Financial education can help enhance financial literacy by increasing financial knowledge, skills and attitudes. In turn, this can contribute to individuals’ (including vulnerable and low income) participation in financial,  economic and social  life as well as to their financial  well-being.  As a complement to financial inclusion and financial consumer protection, financial education is also important to restore confidence and trust in financial markets

Capital markets play a significant role in the economic development of a nation While the advent of capital market   in Ethiopia  brings many  opportunities to  access finance   and  increase economic activities-  democratise investor  participations and  stimulate growth  for it to thrive among  other  things  it requires financially  literate  and  educated investors.   Capital  markets facilitate the mobilization  of savings  from investors to businesses and  governments that  need capital. They also  provide a platform  for raising capital, capital markets enable businesses to expand, innovate, and create jobs, which in our case is critical to provide meaningful work to our growing and  young  population. Further,  they  offer  a  wide  range  of securities for investors, depending on their risk tolerance and investment goals and guide investors to put their money in investments with high returns, ensuring  money goes to projects with big growth potential. In a nutshell, capital markets are  indispensable in promoting  sustainable economic growth  and development. This is  only  fanciful  if the  wider  population has  no  knowledge  of the  basic functioning of the financial systems and the capital markets.

In Ethiopian context  with the advent  of the Capital  Market, the critical questions remain how educated (financially literate) and aware are citizens?

Financial literacy in Ethiopia is currently at a relatively low stage, even when compared with peers in Sub-Saharan Africa. This low level  of financial  literacy  negatively  influences the  level  of financial inclusion. Roughly, 82 percent of the unbanked adults reported not owning an account

due to lack of financial literacy or awareness. Low basic literacy and limited awareness of mobile internet, especially among  women,  are barriers  to meaningful access, usage, and control  over financial and digital financial services.

However,  efforts  are being made to improve this situation. The National  Bank of Ethiopia has developed a National  Financial  Education Strategy.  Additionally, the UN Capital  Development Fund (UNCDF) and  the  Ministry of Innovation and  Technology in Ethiopia  have  convened key stakeholders to deliberate on nationwide digital and financial literacy survey. This survey aims to measure Ethiopians’ financial and digital literacy levels and how it is utilized in financial matters. This was in February 2023, and no information whether the survey took place and the result if so.

Ethiopia’s goal is to ensure that 70% of its citizens are digitally literate and financially included by

2025. This highlights the recognition of digital and financial  literacy as crucial  to achieving this goal. There is no data or study  that  informs  us of how this grand plan is tracking  with only 12 months left. It suffices to say to attract retail investors (important for wider reach and financial inclusion)  increasing the  level of financial  literacy  is critical  in Ethiopia.  Again, knowing the baseline is critical to develop a national financial literacy and inclusion strategy.

Why this is important and how can we educate citizens and whose role it is?

Financial  literacy  plays  a  crucial  role  in the  functioning  of capital markets by empowering individuals  with the knowledge  and skills necessary to make informed  financial decisions. This understanding  fosters  greater   participation  in  financial   markets, as   individuals   are  better equipped to assess investment risks, evaluate the suitability of various investment options, and implement effective risk management strategies. It also provides a means in understanding how the economy works, that is, how to earn, spend, save, manage, and invest money. Works.

Moreover, financial  literacy  can  contribute to market  efficiency and  stability,  as it reduces the likelihood  of hasty  investment decisions and  susceptibility to  fraudulent schemes. It also promotes the use of financial instruments and can help reduce inequality by enabling individuals to take advantage of new investment opportunities. In essence, financial literacy not only benefits the individual investor but also enhances the overall health and vibrancy of capital markets.

The responsibility for educating citizens falls on multiple stakeholders. Governments often play a pivotal role through  public education systems and initiatives like the OECD recommendation on Financial  Literacy, which  emphasizes the  importance of financial  well-being.  Additionally, non-profit   organizations  and   financial   institutions  contribute  by  providing  resources  and programs to  enhance public  understanding of financial  concepts.  Schools are  increasingly incorporating financial literacy into their curricula to equip students with essential financial skills from a young age. Moreover, the private sector, including employers, can offer financial education as part of employee benefits. Ultimately, a collaborative effort from all these entities is necessary to improve financial literacy rates and promote economic stability and growth.

Similarly, investor education is a shared responsibility among various stakeholders, each playing a crucial role in enhancing financial literacy. Regulatory bodies like the Ethiopian Capital Market Authority have a key role to play in advancing  financial  literacy through investor education as part of their investor protection mission. Financial institutions often provide resources and tools to help educate investors about different types of investments and the risks associated with them.

Additionally, individual Companies CEOs and other executives, like Warren Buffett, have done a lot to educate investors. They often share information with investors and teach them  important concepts that  can  be  widely applied.  Furthermore, financial  Advisors and  Planners provide personalized advice and education to help investors make informed decisions. Moreover, many media outlets and publishing companies produce content aimed at educating investors. This can range  from news  articles and  blog posts to books  and  online  courses. In summary, investor education is a shared responsibility among various stakeholders, each playing a crucial role in enhancing financial literacy.

I thought this was my last piece, but couldn’t contain  both investor education and investor protection in one piece, so, I will conclude with the importance of investor protection, why it is important and what it takes the Capital Markets to do this. In short, investor protection indirectly promotes a vibrant capital market. Investors will freely enter the capital market in large numbers only when their interest is fully protected. This would bolster confidence and enables ordinary citizens to part their savings into the      various investment opportunities. Furthermore, investor protection helps  maintain the integrity of the market. It ensures that the

public has the necessary information to make informed investment decisions. Stay tuned…

Mengistu Woldemariam is a Senior consultant in business and finance.

Previously lecturer in corporate finance and accounting and currently works in consumer and investor protection. – Senior Program Manager

Writer could be contacted: Weldemariammengistu@gmail.com

E-Commerce Economics and Africa

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E-Commerce Economics and Africa

Recent socioeconomic progress in Africa has occurred in the context of ubiquitous information and communications technologies (ICTs). According to the International Telecommunication Union 2017 data, 67 percent of African population, estimated to be about 1.13 billion, now has mobile phones and 26.5 percent are now using the Internet. Policymakers and African development partners foresee a lot of possibilities in the opportunities made available by ICTs in the continent’s effort to stem widespread poverty and in the role of small and medium-sized enterprises (SMEs) in that effort. In this context, over the last decade, African countries placed high priority on the development and implementation of national ICT policies and plans.

According to the United Nations Conference on Trade and Development (UNCTAD), SMEs account for 60 to 70 per cent of all employment in developing countries, and hence contribute to poverty reduction. In this regard, many countries in Africa have given high priority to the growth of SMEs. Kenya, for instance, released a major strategic plan, known as Vision 2030, in which ICTs and SMEs have been identified as major driving forces for its realisation. Similarly, Ethiopia, in its Growth and Transformation Plan has given top priority to micro and small enterprises, targeting to create employment opportunities for more than three million people and aiming to boost access to ICTs.

In recent years, the role of SMEs in economic development has grown in importance in Africa as the continent’s economic transformation gained momentum. Many countries are directing their strategic development towards industrialization through the growth of the local SME sector. The importance of SMEs in development and poverty reduction cannot be over emphasised.

According to UNCTAD recent data, these enterprises represent 99 per cent of all firms in developing countries, as well as play a significant role in creating employment opportunities. Another key factor supporting the need to focus on SMEs is that they tend to adapt more easily to technology compared to large enterprises. The adaption process in large enterprises is often slowed by a bureaucracy and a stricter hierarchy involved in making decisions. When SMEs are able to see the added benefits of using ICTs, they are more willing to adapt their businesses strategies.

The results of two e-commerce readiness assessments carried out in the Gambia and in Ethiopia under the Economic Commission of Africa (ECA) strengthen this proposition. Both studies suggest that there is general awareness of the potential in using the Internet for commerce among SMEs. Furthermore, due to widespread coverage and use of mobile phones, mobile commerce now provides more opportunities for SMEs, especially in rural areas.

For example, a study found that after remote communities in Uganda were provided with access to a mobile network, the share of bananas sold rose from 50 to 69 per cent of the crop. Established by TradeNet, Esoko, a company in Ghana, provides a mobile and web-enabled repository of current market prices and a platform to enable buyers and sellers to make offers and connect to one another. The World Bank report revealed that in this regard, a recent study of farmers with small landholdings in northern Ghana found that farmers had experienced a 10 per cent increase in revenue after they began receiving market prices from Esoko in the form of a short message service (SMS).

Goldman Sachs reported that globally, e-commerce sales are growing more than 19 per cent a year. Compared to large enterprises, SMEs have a low share of the global e-commerce market, however, they are increasingly adapting to the growing technological revolution and benefiting from the global online market.

E-commerce involves the sale or purchase of goods and services by businesses (business to business), individuals (business to consumer), governments (business to government) or other organizations, and is conducted over computer networks. It builds on traditional commerce by adding the flexibility and speed offered by electronic communications. This can facilitate efforts to enhance operations that lead to substantial cost savings, as well as increased competitiveness and efficiency through the redesign of traditional business methods.

Different studies indicated that both SMEs and large businesses have benefited from the adoption of e-commerce. Such benefits, inter alia, includes lower transaction costs; reduction in advertising and promotion costs; rapid communication between buyers and sellers; ability to reach new customers; shortening the traditional supply chains, including minimising transport obstacles and reducing delivery costs; and eliminating physical limitation of time and space. Empirical research shows that small enterprises that adopt e-commerce perform better than those that do not adopt it due to e-commerce’s catalytic effect on business performances.

There are several explanations for the slow diffusion of e-commerce in developing countries, in general, and in Africa, in particular. Economic Commission of Africa (ECA)-supported e-commerce readiness studies conducted in Ethiopia and in the Gambia, as well as other studies undertaken across the continent, broadly identify similar challenges pertaining to growth of e-commerce in Africa.

Affordable ICT infrastructure, particularly the Internet and broadband, is one of the key factors affecting the growth of e-commerce. Digital literacy among consumers and businesses in terms of computer literacy, language barriers, awareness of e-commerce benefits, lack of confidence and security in online transactions, including lack of a skilled workforce in e-commerce enterprises, are common in many countries. Limited delivery and distribution networks (physical transportation), in both Ethiopia and the Gambia, and the absence of proper street addressing and naming were raised as areas of concern in delivery.

Systems related to electronic payment, branding/recognition, and the issue of tracking, monitoring and taxation systems are also some of the challenges that affect the online transaction process. Legal frameworks to build security and trust are common issues that both consumers and businesses find difficult in adapting e-commerce as their business strategic tool. Ensuring legal and regulatory environments are critical for the complete functioning of e-commerce in a country.

Many SMEs have benefited from ICTs in their day-to-day business activities, including experiencing gains in enhanced productivity. However, due to lack and cost of access to Internet connectivity, many SMEs are not always tapping the full potential of the Internet. Furthermore, high-quality and reliable e-commerce requires advanced telecom services, such as broadband and mobile broadband services, at affordable prices to consumers.

Thus, governments and other partners need to take advantage of the opportunities that are emerging in the use of the new ICT landscape, particularly in innovations in mobile applications. Governments need to ensure that SMEs benefit not only from being connected to the Internet but also from any technological evolution that can increase the speed of data flows and can help reduce costs to consumers. Furthermore, much of the support to e-commerce depends on putting in place the right infrastructure, regulations and policies for e-commerce to thrive. In this regard, the role of government and the private sector is of paramount importance in realising this. Finally, a critical mass of workers with ICT skills is crucial for the further development of e-commerce and mobile applications. In this regard, governments can play an important role in ensuring that the education systems provide training of the necessary skills for building a viable digital economy.

Tackle the Great Ethiopian Run with Orbis UK

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Tackle the Great Ethiopian Run with Orbis UK

Run in one of the world’s most iconic 10km races at altitude in East Africa with the charity Orbis UK.

Join Orbis UK for a trip of a lifetime to the Great Ethiopian Run in November. The 10km event is Africa’s biggest road race with more than 45,000 participants and winners over the years such as Haile Gebrselassie, Tirunesh Dibaba and Yalemzerf Yehualaw.

As part of the Orbis team, the charity will handle your travel, accommodation, and food and race entry. The eye care charity will also guide you every step of the way as you experience life in this fascinating country with traditional dining, entertainment and excursions included.

By joining Orbis at the 2024 Great Ethiopian Run, you’ll be helping to save sight too. You will witness Orbis at work in the local community and visit a local school and water station to see how Orbis is making real change in the region. Meskerem, a seven-year-old girl who lives in a village in Ethiopia with her parents, grandmother and three younger brothers, is one of the people you could help.

She should be enjoying her time at school right now but because she suffers from an active trachoma, a painful and highly contagious eye disease, the sunlight hurts her eyes, making it difficult to read or write. Symptoms include itching, irritation, discharge, swelling, light sensitivity and redness. Without treatment, repeated trachoma infections can lead to irreversible blindness. Meskerem is not alone either. More than nine million children aged one to nine in Ethiopia live with active trachoma. However, with the provision of antibiotics during twice-yearly mass drug administrations in her village and education on good hygiene practices, trachoma can be prevented.

Her mother, Alemitu, says: “Meskerem has discharge from her eyes and hides from the sunlight. Trachoma stops her from playing with her brothers and makes school difficult for her. It’s a painful condition.”

Normally playful and energetic, Meskerem becomes withdrawn when her trachoma infection flares up. Her village, with 10-15 homes close together, relies on farming and pottery work. Without electricity and with limited latrine facilities, the nearest clean water is an hour’s walk away.

In 2017, the local trachoma prevalence rate was as high as 30%. Thanks to the sustained efforts of Orbis and partners, this rate has fallen to 9% in the most recent survey. Key to this progress are the mass drug administrations and house-to-house screenings by Orbis-trained Integrated Health Workers. By running the Great Ethiopian Run with Orbis you will be joining them on their mission to bring sight and hope to children like Meskerem.

Addis Ababa, the Ethiopian capital and venue for the Great Ethiopian Run, is an epicentre of global running. Many of the greatest endurance athletes in the world train in Addis or the nearby Entoto Mountains with many of them taking part in the annual Great Ethiopian Run.

Grand African Run Plays Significant Role in Bringing Ethiopian Diaspora Together, Says Athlete Derartu Tulu

The Grand African Run strengthens solidarity and fosters unity among Ethiopians living abroad, Athletics Federation President, Derartu Tulu said.

The upcoming 6th edition of the Grand African Run will be held in Washington D.C. on October 12, 2024, under the theme “Togetherness is better.”

“This annual event brings Ethiopians and their families together to celebrate their culture,” the Grand African Run said in a statement sent to ENA. “It’s conducive to share their heritage with their children, “Derartu added.

She also expressed hope for a vibrant celebration and encouraged all Ethiopians abroad to be on board. The Grand African Run Director General, Gashaw Abaza on his part said the event is a one-day, 5km family fun run.

He also said it’s an opportunity for Ethiopians, their descendants, and all Africans to connect with their roots and support worthy charitable causes. The general director also highlighted the event’s role in reuniting the Ethiopian diaspora.

He called it a joyous homecoming for the Ethiopian diaspora community. Adding to the excitement, the director announced there will be a lottery draw to all the participants to win a brand new 2024 Toyota Corolla.

Gudaf Tsegay signs up for three Gold medals at Paris Olympics

Ethiopian Gudaf Tsegay will be seeking to emulate Sifan Hassan after signing up for three races at the Paris Olympics with two of them set to be against Kenya’s Faith Kipyegon.

The Ethiopian Athletics Federation has announced its roster for the 2024 Paris Olympic Games, and two-time world champion Gudaf Tsegay is set to compete in an ambitious triple: the 1500m, 5000m, and 10,000m races.

Tsegay, who has medaled in all three events at international championships, recently ran the third fastest 1500m time in history and holds the world record in the 5000m from last year’s Prefontaine Classic. She also posted the third fastest 10,000m time just a month ago.

This move adds significant excitement to the women’s 1500m, where Faith Kipyegon was widely expected to achieve a three-peat. Kipyegon, who will run the 1500m and 5000m double, won both events at the last World Championships, setting up a highly anticipated showdown with Tsegay.

Tsegay’s attempt to compete in three events mirrors the feat of Dutch athlete Sifan Hassan at the Tokyo 2020 Olympics.

Hassan won gold in the 5000m and 10,000m, and bronze in the 1500m, becoming the only athlete to medal in all three events at a single Olympics.

At the 2023 World Championships, Hassan repeated her remarkable performance with silver in the 5000m and bronze in the 1500m, though she placed 11th in the 10,000m.

Other notable Ethiopian athletes at the Paris Olympics include Birke Haylom and Diribe Welteji in the 1500m, Medina Eisa and Ejgayehu Taye in the 5000m, and Sembo Almayew in the steeplechase.

The 800m squad features Duguma, Alemu, and Mesele. On the men’s side, Yomif Kejelcha will attempt the 5000m and 10,000m double for the first time, while reigning Olympic champion Selemon Barega will focus on the 10,000m alongside Aregawi.

National record holder Hagos Gebrhiwet will compete in the 5000m after a historic run in Oslo. The men’s steeplechase team includes Lamecha Girma, Firewu, and Wale.

One surprising omission from the team is 2022 10k World Champion and world record holder Letesenbet Gidey. The reasons for her exclusion have not been disclosed. Freweyni Hailu, Hirut Meshesha, and Biniam Mehary are listed as reserves.

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