18 December 2013 News Round Up


Visit of Permanent Secretary of DFID to Ethiopia

The permanent secretary of the Department for International Development (DfID), Mr. Mark Lowcock, paid an official visit to Ethiopia last week and held meetings with government officials and UK businesses operating in Ethiopia.

During his visit, Mr. Mark Lowcock noted UK would extend its support to Ethiopia with a view to enhance the development of the country. He added that the UK would continue to extend its support for poverty reduction and human resource development projects.

In his interview, Mr. Lowcock commended Ethiopia’s progress towards achieving the MDGs.

He said he has witnessed fantastic progress in reducing poverty and infant mortality and in ensuring the attendance of more boys and girls to schools.

Mr. Lowcock also pointed out that in earlier years the focus of the British development assistance was on human development and such things as health, education and water and sanitation.

However he noted that the government of Ethiopia and that of the UK have agreed that, while the human development assistance should continue, more will be done in the area of economic development. According to Mr. Lowcock, the UK would spend this year about 0.7pc of its national income, which amounts to 16 billion dollars, on Official Development Assistance (ODA) and Ethiopia is the largest recipient of the amount.



World Bank’s Fight against Extreme Poverty Gets Record Support

$52 Billion for IDA, the World Bank’s Fund for the Poorest

MOSCOW, December 17, 2013 – Despite tough economic times, a global coalition of developed and developing countries today pledged to accelerate the fight to end extreme poverty by committing a record $52 billion in financing over the next three years for the World Bank’s fund for the poorest, the International Development Association (IDA).

“This is a success for the global community,” said World Bank Group President Jim Yong Kim. “We are deeply appreciative of the extraordinary efforts made by countries, many of which are facing their own economic challenges, to stretch to help the poorest. We are committed to making the most of every scarce development dollar to create new opportunities and bring about transformational change in the lives of poor people.”

The coalition agreed that increased funding was needed to tackle the toughest issues in fragile and conflict-affected states to help those countries tip the balance toward stability. This IDA replenishment will see an increased focus on the most challenging frontier areas, greater private sector mobilization, and stronger, more targeted investments in climate change and gender equality, as key to shaping the future. A strong commitment to more equitable growth underpins these efforts.

IDA is the World Bank’s main instrument for achieving the goals of ending extreme poverty and boosting shared prosperity in the world’s poorest countries–home to nearly one billion people living on less than $1.25 per day. The funding will allow IDA to deliver customized and innovative solutions to help the poorest countries address their most pressing development challenges.

In line with the IDA17 overarching theme of maximizing development impact, this financing is expected to provide, for example, electricity for an estimated 15-20 million people, life-saving vaccines for 200 million children, microfinance loans for more than 1 million women, and basic health services for 65 million people. Some 32 million people will benefit from access to clean water and another 5.6 million from better sanitation facilities.

IDA17, which runs from July 1, 2014 to June 30, 2017, will span the target date for the MDGs and the launch of the post-2015 agenda—a pivotal crossroad in the global effort to end extreme poverty.

“We have a unique opportunity to harness a changing global economy to help the poorest countries get on a path to sustainable, inclusive growth, lift millions from poverty, and increasingly fund their own development,” said Sri Mulyani Indrawati, World Bank Group Managing Director and Chair of the IDA17 negotiations. “Investing in the future of the poorest countries is an investment in the future prosperity and security of all countries.”

A total of 46 countries pledged to IDA, and the World Bank Group is continuing the tradition of contributing its own resources to IDA.  IBRD and IFC are providing close to $3 billion to IDA over the next three years.

While grant contributions remain at the core of IDA’s financing framework, IDA17 is using Concessional Partner Loans as a way for countries to increase their contributions—in recognition of the exceptional circumstances of the current fiscal environment amid strong demand for resources.

“IDA is a unique partnership of developed and developing countries that share a commitment to invest in a better future for the world’s poor and for the global good,” said Joachim Von Amsberg, World Bank Vice President for Concessional Finance and Global Partnerships. “At a time of ongoing economic difficulty, this outcome is a testament to the spirit of global solidarity that underpins IDA.”


The International Development Association, IDA, is the World Bank’s fund for the poorest countries. One of the world’s largest sources of aid, IDA provides zero- to low-interest credits and grants for investments in health and education, infrastructure and agriculture, and economic and institutional development to the least developed countries—40 of them in Africa. These countries are home to 2.5 billion people, 1 billion of whom live in extreme poverty, surviving on $1.25 a day or less. Since its inception, IDA has supported activities in 108 countries. Annual commitments have increased steadily and averaged about $16 billion over the last three years, with about 50 percent of that going to Africa. Funding for the fiscal year ending on June 30, 2013, enabled more than 160 new operations.



Ethiopia splits state owned giant public utility into two

Tesfaye Ejigu

The government in Ethiopia split into two the Ethiopian Electric Power Corporation (EEPCO), one of the state owned giant public utilities and renamed it the Ethiopian Electric Power Office (EEPO) and Ethiopian Electric Service (EES). The two are tasked to undertake what industry analysts say is an over ambitious plan of becoming an international company. The government says it decided to split EEPCO after three years-long study and consultation with an international consultant.

“The corporation has to get modernized by the process Classification Framework (PCF) to meet the widening electric service demand,” Dr. Debretsion G/Michael, Ethiopia’s Deputy Prime Minister and Board Chairman of the now split EEPCO, told journalists at a press conference on Tuesday Dec. 18th. He added EEPCO could not carry out all the various responsibilities unless it is restructured in a way it upgrades its services. Dr. Debretsion further said the corporation was on a transitional phase since last August.


Dr. Debretsion G/Michael hopes splitting the state owned giant power utility will help improve its unsatisfactory record/ Photo: Addis Standard

According to the new arrangement, Power Grid Corporation India (PGCI) took the management of the Ethiopian Electric Service (EES) on a two and half year contract. According to the contract, PGCI will carry out power feasibility studies to determine the highest needed voltage power capacities of transmission lines. The company won the contract for 21 million USD.

The second half of EEPCO, the Ethiopian Electric Power Office, (EEPO), will be headed by Azeb Asnake, former project manager of Gilgel Gibe III hydroelectric power project, which is expected to go operational soon.

However, some industry analysts worry that the split will have human resource management concerns. Employees, especially on top management level will lose jobs, even if there are over 4,100 vacant positions to be made available as a result of the split. Currently, EEPCO has 13,372 employees. EEPO needs 5,600 workers, while EES needs 11,728 workers. Property sharing among the two companies has already been in effect. Dr Debretsion indicated “the issue of who pays which debt has already been stated clearly.”

According to Dr. Debretsion, PGCI’s services will proceed under quarterly evaluations. Key Performance Indicators (KPI) measurements such as finance, customer satisfaction, trouble shooting, automation, and human resource development are employed to evaluate PGCI’s undertakings.

Established in 1989, PGCI is engaged in the power transmission business in India and runs 150 substations.  According to the official website of the Corporation, about 45% of the total generated power in India is wheeled through PGCI. Its Ethiopian counterpart, however, generates all of the power produced (at the transitional phase of the contract) for the national grid and administers all of its transmission lines.

Currently, Ethiopia is the biggest power exporter in the horn of Africa and is aiming to be one of the continent’s biggest exporters upon completion of the construction of several ongoing hydro power projects. The government is working on its ambitious plan to make the power sector one of the major export earners for the country. However, EEPCO is best known for its inefficient handling of power distribution, and chronic power cuts. There was a minute long black out during the press conference, too.



Tendaho dam, irrigation project implementation progressing well

Addis Ababa, 18 December 2013 (WIC) – The implementation of the Tendaho Dam and Irrigation Project launched in Afar State is now well in progress as 90 per cent of the required construction materials are fulfilled.

Project Manager Eng. Abraham Berhe told members of the Natural Resource and Environmental Affairs Standing Committee of the House of Peoples’ Representatives during a recent visit to the area that the Dam will have a capacity to develop 60,000 hectares of land.

The stated area of land will be developed by using 1.86 billion cubic meters water harnessing the Awash River. Some 50,000 hectares of the stated area will be covered with sugarcane and the remaining for fodder development. The execution of the irrigation project, which has a capacity to develop 25,000 hectares of land, is expected to be finalized next June.

Upon completion, the project is expected to create jobs for up to 60,000 citizens, Eng. Abraham said.

Water, Irrigation and Energy State Minister Eng. Wondimu Tekle on his part said the Tendaho and Kesem projects were launched with the objective of developing and supplying sugarcane for the Tendaho Sugar Factory.

Eng.Wondimu said the projects were designed to meet the local demand for sugar thereby enabling the country to earn foreign currency from export through realizing the GTP. They are also aimed at enabling the public in the area benefit from irrigation development, he added.

The State Minister also stressed the need to further strengthen ongoing efforts to overcome capacity limitations related to designing and construction works in the country.

Water Works Design and Control Deputy Manager Kassahun Lulseged also said that the project includes construction of water distribution centers, reservoirs and troughs as well as laying of water pipelines mainly in 14 villages in Aysaita, Dubti, Mille and DetBahri. So far, work in six villages has been finalized, he added.
The construction of social service facilities, residential units, alleys and flood prevention schemes, among others, is nearing completion. Seven institutions, which include primary schools, health facilities, flour mills and training centres will be constructed in the villages, he said.

Standing Committee Vice Chairperson Dr. Gemeda Dinegde on his part said executives of the project have undertaken activities to fill gaps identified in the implementation of the project last year. Hence, implementation of the project is picking up.

Gaps in undertaking integrated activities in collaboration with stakeholders and failure to address social problems as well as provide the necessary information on the project to the public, among others, were identified as weaknesses in project implementation.

Dr. Gemeda also pledged increased support both by the committee and the government for the success of the project thereby achieving the development plans of the country, Dr. Gemeda said. Afar is located 558-kms away from Addis Ababa.



Manufacturing sector recorded higher earnings

Ethiopia’s manufacturing sector has registered an encouraging improvement over the past five months of the current fiscal year. The sector, which has an important place in the Growth and Transformation Plan (GTP), has earned more than 165 USD over the period exporting manufactured products. That earning represents a significant increase of 22% from the same period of the previous year, showing positive changes in quality and quantity of good from the manufacturing sub-sectors of textiles and garments, leather industry, agro processing, chemicals industry and pharmaceuticals.

The government of Ethiopia has an extensive plan to increase the country’s export earnings and create jobs through an expansion of the manufacturing base. To achieve that goal and to maintain the successes so far gained, the Ministry of Industry has partnered itself with technical and vocational training institutes to ensure the quality of skill sets and the number of trainees needed meet the demand of the manufacturing sector. The Ethiopian government is also keen on creating a conducive investment climate for investors.



Ethiopian Commodity Exchange to go online

The Ethiopian Commodity Exchange (ECX) is making preparation to introduce online trading and establish Remote Trading centers in multiple locations across the country. The ECX is continuing on its work of easing the process of commodity transaction and facilitating an improved access to information for market players.

This undertaking is expected to bring an enhanced efficiency and increased liquidity as it would allow participation in the commodity transaction process without the need to be physically present at the trading floors of the ECX. The Investment Climate Facility for Africa (ICF) is forwarding USD 2.2 towards the total cost of USD3.8, the balance of which will be covered by the Ethiopian government.

During a visit of the ICF’s Board of Trustees to the headquarters of the ECX, the CEO, Ato Anteneh Assefa said “with the implementation of the Online Trading System, the ECX will become more accessible to its stakeholders, especially the millions of small holder farmers.” The ICF’s Board Co-Chair also said “we are happy to be involved in this project. It is symbolic of what is happening all over Africa, in terms of opening up the trues market to those concerned – the millions of farmers.”

The Online Trading System will certainly help the ECX to improve its services and expand its reach. Since its establishment, the ECX has been hailed as an institutionalized market place that has transformed the commodity market of Ethiopia by providing an unprecedented market and information access to Ethiopian farmers and traders.



Sustainable land management project receives 2 billion Br financing

The Ethiopian government has received nearly two billion birr to implement the second phase of a project designed to decrease land degradation and improve its productivity.
The Ministry of Finance and Economic Development (MoFED) signed the agreement of approximately 1.95 billion birr with the World Bank (WB) on Tuesday December 10 for the Sustainable Land Management (SLM) Project.
USD 50 million of this amount comes from the WB via a loan agreement while the government of Norway contributed USD 40 million in grants. USD 13 million of this was financed by the Global Environment Facility.
Sufian Ahmed, Minister of Finance and Economic Development, signed the agreement with Guang Zhe Chen, Country Director for the WB.
Chen, believes that Ethiopia is a leader in the African region, when it comes to tackling the adverse impact of climate change. He pointed to Ethiopia’s climate resilience and green economic strategy and said this project will enhance that  strategy by raising the productivity of land resources and promoting climate smart agriculture by introducing and expanding sustainable land and water management practices.
The project is due to directly or indirectly benefit close to 1.7 million people in six regional states namely Amhara, Tigray, Oromia, SNNP, Gambela, and Benishangul Gumuz.
Sufian said that this phase will attempt to reduce land degradation and improve its quality in selected watersheds and targeted regions by using the methods and technology tested in the first phase.
The Minister said the project is in line with the second pillar of the Growth and Transformation Plan, which focuses on maintaining agricultural growth through expanding watershed supervision and implementing effective water management and water moisture retaining strategies.
This phase two SLM project, which will be implemented in 135 watersheds or weredas, throughout the country, has four components.
According to the Minister the SLM will focus on improving and adopting new technology and methods for smallholder farmers and communities around watersheds to manage their land in a more sustainable manner.
They then plan to work with government agencies and other people that have a stake in managing land and water resources to learn how to do so more effectively. The program also will work to help small farmers become more financially secure so that they will become motivated to adopt sustainable land and water management practices.
The Minister said the project will support the Ministry of Agriculture (MoA) to make sure resources are delivered and that results and progress of the project are documented.
The cost of land degradation in Ethiopia is estimated to be between two and three percent of agricultural Gross Domestic Product (GDP), according to the World Bank.



Leather Industry Takes Panning From Government

Various developments in the operating processes have been targeted as ways to improve the sector’s efficiency

Tadesse Haile, right, state minister of Industry and Wondu Legesse, pondered over ways of enabling Ethiopian tanneries better prevent significant environmental impact from enhancement of production.

Expressing his disappointment with the export performance by the leather industry in November, Tadesse Haile, center, pointed out that the government was not in a position to listen to any excuses.

The Government has expressed disappointment with leather and leather product exporters, after the country’s foreign exchange earnings fell short of expectations and previous performances.

Export revenue in the first quarter of the 2013/14 fiscal year amounted to 628 million dollars. This is just 71.4pc of the government’s plan for the period and 10pc lower than the same period a year ago.

According to the Ministry of Trade’s (MoT) report, the target for the first quarter was 880.1 million dollars, but a decrease in the volume of major export items like coffee and gold has contributed to the decline.

It was against this background that Tadesse Haile, state minister for Industry, disapproved of what he called the ‘disastrous’ performance in the export of leather and leather products.

“I have been to the factories of many of you and we have been trying to address your problems,” Tadesse recalled while making his opening speech, on Thursday, December 12, 2013, at the National Workshop on Technological Options for Better Environmental Sustainability of the Ethiopian Tanning Industry at the Ghion Hotel located at Ras Desta Damtew Street. “The result has, nevertheless, been very disappointing.”

Leather and leather products earned 32.1 million dollars in the first quarter of the current fiscal year. Although the amount has increased by 7.3 million dollars compared to the figure for the same period in the previous year, it still falls short of meeting the target.

“Your companies and your contribution are part and parcel of the overall economy,” Tadesse told tanners. “So you cannot afford to slow down or decrease your volume of export.”

Tanners and experts in the industry gathered on that day to deliberate on ways of attaining better environmental sustainability. It is a high time for the leather industry to opt for proven technologies to primarily meet the Environmental Protection Authority (EPA) norms and to gain greater sustainability.

“I appeal to all the Ethiopian tanners to take full advantage of this workshop to attain better environmental sustainability,” he added.

Ethiopia has started implementing effluent treatment plants in individual tanneries. It has the advantage of big tanneries, which mostly process about at least 10 tonnes a day, generating about 400 cubic metres in a day. Currently, Ethiopia has about 30 tanneries.

The leather industry uses large amounts of water and chemicals and risks animal and plant health unless due attention is given to waste disposal systems, director general of the Leather Industry Development Institute (LIDI), Wondu Legesse, said. “Hence, it is necessary to avail waste disposal systems along with factories installations.”

Although expected to comply with requirements by the Environmental Protection Authority (EPA) norms and to gain greater sustainability, Ethiopian tannery industries, for their part, face some difficulties in doing so.

“Raw materials have increased in price three to four fold,” says Abdissa Adugna, representing the Ethiopian Leather Industry Association (ELIA). “This has created huge problems for tanners in developing capital for their environmental systems.”

Currently, most of the tanneries have primary treatment plants in place, whereas few have primary and secondary treatment systems. A few do not have treatment plants at all. But, even in those with treatment plants, the operation system is questionable, mainly due to the lack of technically trained operators, operational and maintenance issues of electro-mechanical equipment and the availability of chemicals.

Options, such as high exhaustion tanning methods, recycling and reuse methodologies and the minimisation of tanned solid wastes, among others, were presented at the workshop by experts from the Central Leather Research Institute (CSIR) of India.



Cooperative Bank Of Oromia Shows Remarkable Increase in Profits

The bank’s aggressive expansion efforts have been the catalyst behind its rapidly improving performance

Source: Cooperative Bank of Oromia Annual Report, 2012/13.

The Cooperative Bank of Oromia (CBO) has shown a considerable expansion in its assets, registering 6.54 Billion Br – an increase of 82pc during the year that ended on June 30, 2013.

All asset items have gone up. Cash and bank balances have gone up by 180pc, to 3.02 billion Br. This increase is due to the aggressive expansion in branch networks. In the year under review alone, the Bank  pushed the number of its branches up by 25. Among new outlaying branches opened outside of the Oromia Regional State are Metema – a border town in North Gonder Zone of the Amhara Regional State, near to Sudan, 897 kms from Addis Abeba – and Hawassa, the capital of the Southern Regional State, 273kms from Addis Abeba.

The Bank’s aggressive expansion also involved human capital, pushing the total number of its employees up to 1,427 – an increment of 24.5pc compared to last year.

The aggressive expansion also forced the Bank to incur considerable costs. The annual audited report for the year 2012/13 indicates that there was a huge increase in expenses. The total expenses incurred by the CBO went up by 66.6pc to 273.6 million Br. Detailed studies indicate that, except interest expenses, all other costs went up considerably. Employees’ salaries and benefits increased by 107.4pc to 87.82 million Br; general administration expenses increased by 46.5pc to 85.2 Br million and interest expenses increased by 15.8pc to 68.6 million Br.

The CBO’s profit after tax showed a remarkable increase, reaching 189.6 million Br. The profit after tax figure has been constantly on the up over the past few years. Both interest and non-interest incomes have gone up. Interest earned on loans and other investments was up by 39.3pc to 239.7 million Br, while non-interest income items showed a staggering growth of 128pc to 300.9 million Br.

“The Bank relied on resource optimisation to get more profit,” Wondimageghehu Negera, president of the Bank, told Fortune. “We have also cautiously worked on some adaptive strategies and increasing our competitive edge.”

The growth in non-interest income is due to the expansion in local services, as well as an increase in foreign exchange dealings, he said.

Established in 2004 with an authorised capital of 300 million Br, the CBO started operations in March 2005 with a paid-up share capital of 112 million Br.

“I see a robust performance,” Zewde Zeleke (PhD), one of the founding shareholders of the Bank, told Fortune. “I look forward to an even more spectacular performance in market outreach and technology initiatives.”

Cash and bank balances represent 46.27pc of the total assets of the bank, which indicates that the CBO is in a highly liquid position.

“This does not mean that it is not with its downsides,” cautions Abdulmena Mohammed Hamza, an accounts manager for the Portobello Group Ltd – a London-based holding company with subsidiaries in property investment and development. “Such levels of liquidity is unusual in the current economic condition.”

Last year’s figures indicate that the industry cash and bank balances to total assets ratio was 31.5pc and the CBO ratio was 29.6pc.

Provision for doubtful loans and other receivables increased by 717.6pc to 31.9 million Br.

“This shows that a sizeable amount of loans went sour,” says Abdulmena. “The management of the bank needs to thoroughly investigate the cause of such a huge leap and design appropriate mechanisms to reduce it to an acceptable level.”

The reason for the increment in this account, according to Wondimagegnehu, is because most loan repayments are not regular. This forces the figure to go up a little bit.

“It will soon be reduced,” he told Fortune.

The CBO managed to increase its paid-up capital by 152.1 million Br, to 442.34 million Br.

At this pace, the CBO will comfortably reach the capital of 500 million Br set by the NBE, before the deadline of 2016.

When the Central Bank issued a directive to raise the minimum paid-up capital required to establish a new bank from 75 million Br to 500 million Br, in September 2010, the CBO was one of the nine private commercial banks, whose capital was below half a billion Birr.

The CBO officials are also confident that they can meet the NBE’s requirement of accumulating 500 million Br of capital by 2016.

The current level of capital and reserves of the bank enabled it to have a Capital Adequacy Ratio (CAR) of 29pc. This is far higher than the legal minimum of eight percent.



 EIA Proposing Amendment to the Investment Law

The Ethiopian Investment Agency (EIA) is proposing amendment to the Investment law, Fortune reported.

The proposed amendment, which has now reached the Council of Ministers (CoM), has been in the making for the past six months, according to Fortune.

“The main reason to amend the regulation is to prolong the period that investors can import capital goods (machinery) duty free,” said Getahun Negash, the Agency’s public relations and communication director told Fortune.

Under the current law, investors enjoy duty and tax exemptions on capital goods imported for the establishment of the businesses only until they acquire a commercial license. After the commencement of operation, investors will then be considered as an existing business and are thus not entitled to the incentives, according to Getahun.

The Agency is helping investors seeking to import machinery after acquiring a trade license “through its board decision, by issuing a special letter,” Getahun told Fortune. The incentive framework only embraces investors in the manufacturing and agricultural sectors, excluding services.

The proposed amendment now seeks to extend the period of time duty free privileges enjoyed by investors.



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