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Fortune
Volume 1 Number 51
April 22 - 28, 2001
Mob
Rampage Costs Lives, More than 100m
The mid-week chaos that brought the city to a total stalemate,
reportedly taking the lives of more than 40 people and leaving more
than 250 wounded, has cost more than 100 million Br in losses incurred
by more than 200 private and government owned organizations.
Assab/Massawa Ports Stranded
Goods
A Sudden Slump in
Sugar Prices
Short of 82.6m Br, ESL
Insurance Companies
Declare Profits in Millions
Sudan's Promising
Future
Four Companies Short Listed for
Boren's 10-Storey Complex
Ismael's Nephew
Launches a Bank
Sheepskin Sells
an All Time High in Recent Years
SIM
Cards on Sale
EDITORIAL
Stop Talking, Get the Job Done
RESTAURANT REVIEW
Jewel of India
Doing
Business with the UNWould you like to do some business with the
United Nations? Here are few tips of the various organs of this global
giant and their procurement procedures.
VIEW FROM ARADA
The Notice Wall at Arat Kilo
CUSTOMERS' PERSPECTIVE
Facing the Bankers
ECONOMIC COMMENTARY
In Quest of Better Utilization of the Water Tower
MY PERSPECTIVE
Driving in Addis - IX
IN MY OPINION
Looking Beyond the Street Riots
VIEW POINT
What's Wrong with Our Banks?
LETTERS
TO THE EDITOR
TREND
TENDER
MART
BUSINESS
OPPORTUNITY
Mob Rampage Costs Lives, More
than 100m
BY DAWIT TAYE
FORTUNE STAFF WRITER
The mid-week chaos that brought the city to a total stalemate, reportedly
taking the lives of more than 40 people and leaving more than 250
wounded, has cost more than 100 million Br in losses incurred by more
than 200 private and government owned organizations.
The standoff between high school and university students on one side
and the city police forces on the other on Tuesday escalated into
a full-fledged disruption and daylight robbery the next day as mob
took control of the streets inflicting severe damages to properties
in the process.
The hardest hit areas are the shopping centers of the metropolis -
Merkato and Piazza, while the highest loss claim came from the Addis
Kettema Zone of the Ethiopian Telecommunications Corporation, which
said its properties worth 50 million Br have been robbed and totally
damaged.
Work at the branch has come to a complete halt.
The corporation's officials say that in addition to the actual loss
incurred, the damage on its lines has caused service paralysis to
its 23,000 subscribers, not to mention blockages of incoming calls,
making it lose a huge amount of money in revenue.
Another government office, national examination center, has claimed
to loss properties worth 25 million Br, while Anbessa City Buses Enterprise
estimated the damage inflicted to its buses reaching 3.5 million Br.
Relatively smaller businesses around Piazza, such as Glorious Plc,
London Pharmacy, Lion Jewelry and shops in Arada Building, say they
have been robbed properties worth more than two million Br.
All banks, service outlets and stores in Merkato and Piazza were closed
on Wednesday and Thursday. Banks communicated by Fortune could not
disclose their losses yet as they were conducting assessments on the
damage of property and opportunity cost of the two days closure.
But, it appears the rampage is a blessing-in-disguise for glass workshops
in the city. Most of the window and door glass panes of buildings
along main streets in Merkato, Piazza and Arat Kilo have been shattered.
Companies such as Commercial Bank of Ethiopia, Awash Bank, Construction
and Business Bank, United Bank and Insurance, General Mercantile,
Glorious Plc, Dire Industrial, among others, have incurred heavy to
medium damages.
The neon companies, which manufacture the various advertisements displays
that accorded Addis its color at nights, may now get more businesses
since the mob has shattered many of them.
Along the main street of Piazza and Merkato alone, more than 150 neon
lights and advertisement boxes have now been completely damaged. A
businessman who owns a store in the area said that the broken neon
light hanging atop his shop had cost him around 2,500 Br.
Companies such as Construction and Business Bank, Dire Trading, Awash
International Bank, Sanderji & Sons, Bethlehem, Axum, Africa jewelers
and United Bank as well as United Insurance are but few whose ad boxes
were destroyed.
As a result, banks, jewelries and stores around Piazza and Merkato
were hesitant to open their doors on Friday as police were patrolling
around persuading them to open their shops.
Neither were taxis in town fully operational in the two days in fear
of the hangover of the riot and sores around Piazza and Merkato were
seen staying back even yesterday, Saturday April 24.
The two days hooliganism reign in Addis had forced most of the nightclubs
to close their doors as early as 11:00 p.m., while the arrest of many
young people by the police for questioning caused four or five newspapers
from publishing on Saturday.
Amharic weeklies such as Addis Admas, Moged, Me'able and Goh, which
were unable to publish since there were no vendors on the street of
Addis to distribute them. In fact, Addis was quiet on Saturday so
much so that there were no street vendors that normally run up and
down of the main streets carrying different banners of newspapers.
"Not even 200 copies orders came this week," said one of the publishers
who was to publish more that 20,000 copies. "Practically, I was made
unable to publish my newspaper," he added sounding very frustrated.
Top
Assab/Massawa Ports Stranded
Goods
Comm'n to Handle Compensation Claims
BY DAWIT TAYE
FORTUNE STAFF WRITER
The Federal Government has abandoned the suit it had filed before
the COMESA court lodging compensation claims of the properties worth
127 million Dollars stranded at Assab and Massawa ports.
The Fed did this wanting to allow the case be solely handled by the
new commission established inline with the Algiers Agreement, seated
in The Hague.
The case remained pending at the COMESA court for the past two years
before the government decided to retract it.
The peace agreement signed by the governments of Ethiopia and Eritrea
in Algiers in December 2000 stipulates the demand for compensations
for the looted properties and similar other cases to be overseen by
the newly formed commission.
Fed had spent a considerable amount of money for international lawyers
and the Addis Abeba Chamber of Commerce (AACC) had paid more than
half a million Birr to start litigation at the COMESA court.
According to Algiers agreement requirements, both sides have assigned
two of their representatives in 45 days of the signing of the Algiers
Agreement, on December 12, to the commission.
However, sources close to the issue told Fortune that the first meeting
of the commission held on March 27 and 28, 2001, on the structural
formation and other administrative matters has ended without bearing
fruits and another meeting has been recalled to be held at the end
of May 2001.
Businesses who have been victims of the looting are now filling out
compensation forms to be handed to the commission through the Ministry
of Foreign Affairs.
Sources said the ministry would start submitting the forms to the
commission beginning May this year.
The governments of Ethiopia and Eritrea cover the operational costs
of the commission during its life and the Algiers Agreement underlines
that the decision by the commission would be final with no appeal,
according to our sources.
Concerned businesses say that the commission would need more than
three years to wrap-up its work and pass a final verdict after gathering
the compensation demands and other useful information from both sides
and make a thorough assessment.
"Until the decision comes out, people who took loans from banks to
import the goods would fall into a critical situation and even lose
the properties they put up as collateral," fears one businessman.
Informed sources say that even though the looted properties that belong
to more than 400 companies were originally worth 127 million Dollars,
the interest sought by the banks has shot up the amount to more than
200 million Dollars.
Some of the businesspeople who have lost their goods at the Eritrean
ports told Fortune that they are losing hope on getting back their
properties through the legal process and said that assistance from
the government in providing them with loan facilities, cut on bank
interests and tax free importation would be of much better help to
overcome the debilitating debts. Top
A Sudden Slump
in Sugar Prices
BY DAWIT TAYE
FORTUNE STAFF WRITER
The price of sugar in the local market suffers a sudden deep slip
since the past two months, registering a record low this week as one
quintal of sugar was sold for an average of 411.5 Br at the bi-monthly
sugar auction, showing a decline of over 26pc.
This week's price is the lowest since the Sugar Industry Support Center
(SISC) started conducting sugar auctions. The decline is less by 152
Br compared to prices two months ago.
The slump price waves offered at the auctions are felt in both wholesale
and retail markets. The price per quintal of sugar is currently at
428 Br, declining from prices ranging between 580 Br and 620 Br two
months ago. This has in return slid retail prices that constantly
stood at 6.50 Br per kilo down ranging between 5 and 5.50 Br in this
week's market, according to an assessment made by Fortune.
The decline of the prices in the local market is a result of low offers
by companies participating in the national auctions.
The past four consecutive auctions saw a deceleration from 569.5 Br
two months ago to 510 Br a month after and going further down to 411
Br this week.
The low prices offered at the sugar auctions is costing the SISC quite
a fortune as the amount it got at the 60th auction, more than 45.5
million Br, showed a 12.6 million Br decline compared to what it has
managed to generate this week. Top
Short of 82.6m Br, ESL
BY YIBEKAL GETAHUN
FORTUNE STAFF WRITER
Despite its controversial privileges of operating in one of the most
protective business environments, Ethiopia's single national liner
has not been lucky enough to meet its targeted revenue for the past
Ethiopian fiscal year, official data obtained by Fortune disclosed.
Statements revealed that the Ethiopian Shipping Lines (ESL) was able
to earn 207 million Br, less from its target by 82.6 million Br, while
the company, which handled around 30 pc of the country's import export
goods, had incurred some 227 million Br as expenses.
This disparity, according to the data, is due to the 28 pc short in
tonnage of cargoes it had transported during the fiscal year ending
June, 2000.
ESL had projected to earn some 290.4 million Br in revenue, against
the actual revenue generated - 207 million Br. ESL's management had
planned to handle shipments of some 314,400 tons of cargo, and it
managed to carry some 225,900 tons only.
On the other hand, ESL has consumed 81.7 pc in total expense of the
amount budgeted for the year.
Industry analysts say, ESL had to face stiff competition from international
liners, despite Ethiopia's banking system that pressures local importers
to only use the national liner from where it calls or secure waivers
in cases of ports where ESL does not do so.
Analysts believe the banking directive introduced in May 2000 may
help ESL recover during the current budget year.
Meanwhile, ESL is negotiating to sale its oldest vessel, Wolwol, to
a buyer not disclosed so far. According to sources, the Liner is currently
evaluating the offer.
Although ESL officials declined to confirm the report, reliable sources
disclosed that the Liner has already sent its technical manager to
Djibouti for this purpose.
ESL has a plan to replace its oldest vessel with modern and efficient
ones. Sources confirmed that ESL is surveying the market after deciding
to buy a new vessel.
The sale of Wolwol will reduce the number of ESL vessels in operation
to nine. Wolwol has been docked at the anchorage area of the Port
of Djibouti since March 16,2001. Top
Insurance Companies
Declare Profits in Millions
BY YIBEKAL GETAHUN
FORTUNE STAFF WRITER
Following Africa Insurance Company's, one of the member companies
of the conglomerate of EFFORT, announcement of a 5.7 million Br in
net profits last week, Awash Insurance S.C said on Saturday, April
21, it has registered a closer but a slightly lower profit than Africa,
which is 5.5 million Br.
The financial report of Africa Insurance indicates that this year's
profit shows a slight increase of 471,958 Br compared to last year's
performance.
The company grossed a total of over 10.1 million Br during the year
ending June 30, 2000, whereas it had managed reach to a turnover of
more than 13.3 million Br, of which 11.8 million Br was from underwriting.
The report also showed that the company has spent more than 3.1 million
Br in total expenditure exceeding the previous year's by 1.05 million
Br.
Awash Insurance, meanwhile, declared a net profit of 5,538,907 Br
from non-life insurance service in the year ending 31st December 2000.
According to the board of director's report, given to shareholders
on Saturday at the Hilton, the year's net profit shows an increase
of 453,936 Br over last year.
The report was issued on the company's sixth ordinary shareholders
meeting.
During the stated year, Awash generated over 11.9 million Br in revenue
and spent 3.1 million Br in operational expenses. The company also
made investments amounting to 4.25 million Br in Life Line S.C, Nib
and Awash International banks.
Both Africa and Awash are rendering services with a total of 12 and
10 branches they respectively have in Addis as well as in different
towns. Top
Sudan's Promising
Future
Talisman Energy Ltd., Calgary, plans $120 million (Canadian) in capital
spending this year attributable to its 25pc working interest in exploration
and development operations in southern Sudan.
In fact, the company announced a large oil discovery at the Shelungo
wildcat, the first well drilled on the west side of the controversial
concession.
Appraisal drilling will be required.
Talisman operates the 12.2 million-acre Greater Nile Oil Project (GNOP).
Critics allege revenues from the project help the Khartoum government
fund the war against Sudanese in the south.
Last year, Talisman endorsed recommendations in an Amnesty International
report regarding oil operations and the civil war. Talisman agreed
to set up its own human rights monitoring program in Sudan.
The state oil companies of China, Malaysia, and Sudan are partners
in GNOP, which is producing 211,000 b/d of crude that is exported.
Six fields produce oil for shipment through a 932-mile buried pipeline
to a modern offshore loading and storage facility at Port Sudan on
the Red Sea. Several other discoveries are scheduled for development.
Production began in late 1999.
Talisman's 52,750 b/d share of production is forecast to increase
to 65,000 b/d in 2002. The company plans to drill 17 exploration wells
and 25 development wells on the Sudan acreage this year, said Jim
Buckee, CEO.
In a report to analysts, Talisman also reported success in its deep
drilling program for gas in the Alberta Foothills.
Talisman said it drilled 21 successful wells in 2000, up 62pc from
1999, and spent $119 million, up 77pc from 1999. It booked 130 bcf
of proven gas reserves in 2000. Talisman expects to spend $139 million
on deep drilling in the Alberta Foothills this year.
The company said five gas wells drilled in the region in fourth quarter
2000 all produced high rates on testing. Three wells flowed at levels
near 10 MMcfd, one produced 13 MMcfd, and a fifth produced 15 MMcfd.
(OGJ Online) Top
Four Companies Short Listed
for Boren's 10-Storey Complex
BY YIBEKAL GETAHUN
FORTUNE STAFF WRITER
Four local construction companies have passed the pre-qualifications
requirement that would finally allow them participate in a tender
to construct the 10-storey residential complex planned by Boren Real
Estate S.C., a local real estate company.
Varnero, Universal, Elmi Elindo and Berta Construction have been retained
and requested to submit their proposals to the board of directors
of the company.
According to Mulatu Gurmu, general manager of Boren, the winner will
carry out the construction work on a 3,325 Sq. meters of land around
Old Airport area in front of Dil Paints Factory. The company acquired
the land on a 50-year lease agreement from the City Administration
against payment of 265.5 Br per Sq. meter, bringing the total sum
spent on land lease to 882,787.5 Br.
Boren projects to use the building for commercial as well as residential
purposes. The construction work is expected to take 18 to 24 months
for completion.
The complex is designed to have self-contained residential apartments,
which the company claims has plans to put up for sale once the project
is accomplished. Shopping centers, offices and multi purpose hall
would also be incorporated in the building complex.
Company officials said since the announcement of the project, 10 of
the 32 apartments in the planned building have already been sold out.
At a briefing held last Thursday at the Ghion Hotel, Merga Afeta,
board chairman, said his company is a pioneer real estate developer
in the country offering residential apartments for sale.
The architectural and design works by Samuel Seifu Consulting Architects
have been finalized.
The developer is planning to offer three kinds of residential apartments.
The price for a single bedroom apartment with a 47.02 Sq. meters is
282,000 Br, while the 96.7 Sq. meters, two bedrooms type, cost some
491,000 Br each. The price to buy the third type, which is a penthouse,
escalates to 1.361 million Br. The manager said that the company will
transfer ownership to buyers immediately after they effect 50pc down
payment of the total amount.
He said that each apartment would be equipped with cupboards, cabinets,
laundry accessories, deep- freezers, as well as telephone facilities
and satellite receivers.
Taddese Haile, general manager of the Ethiopian Investment Authority,
said that since the real estate development, which is crucial for
the country, has not been privileged for incentives under the existing
investment law, he advised Boren management to link their project
with the construction sector so that they would benefit from tax holidays
given to the construction sector.
Boren Real Estate was established in April 1995 by 55 shareholders,
involved in real estate development, commercial clearing and janitorial
and brokerage services.
It also imports and distributes construction materials in addition
to owning a quarry in the Kaliti area. Top
Ismael's Nephew
Launches a Bank
TAMRAT G. GIORGIS
FORTUNE STAFF WRITER
President Ismael Omar Guelleh's nephew, Bouh Idris Omar Guelleh, whose
father died in the late 1980s, has brought international portfolio
to Djibouti and established the Investment Bank of Africa (IBA).
The new bank has already started operation with an initial capital
of close to 1.7 million Dollars. The new company has 12,000 shares
with each share par value of 140 US Dollars.
Shareholders profile includes Yuri Sidorov of Leda's EC (Bahrain),
Ilia Kars of the International Business Bank of Austria, Miss Natalia
Tvorogova of International Business Trust (Samoa), Bouh Idris Omar
Guelleh, Ali Jabril Ali (Djibouti) and Mahail Ostrovskij from Germany.
The new bank provides all banking services apart from public deposit,
sources said.Top
Sheepskin Sells
an All Time High in Recent Years
BY DAWIT TAYE
FORTUNE STAFF WRITER
Recent market research conducted by Fortune in connection to the Easter
festivity revealed that the price of sheepskin has reached around
42 Br from 34 Br a week before, equal to the price of a sheep with
flesh and blood in close memory, and compared to 14 Br some five years
ago.
It also showed an annual increase of eight Birr a piece in the past
two years.
According to the traders at Gojam Berenda, a sheep stall around Merkato,
the price of sheepskin over the last two years has grown positively
and skin traders have offered better prices than the price prevailed
in the market before Easter. They told Fortune that the storeowners
around the area readily bought all the skin available for sale.
The traders said that even this year on different occasions, the price
was between 32 Br and 34 Br, thus showing that the price would go
on escalating.
A purchaser of one privately owned tannery said that they used the
stores to collect the skins provided by the sheep traders and they
also used them as depositing warehouse to protect skins from damage,
before they delivered them to the tannery.
He added that the price skyrocketed to reach up to 46 Br for quality
skin, the price of which fluctuated from day to day. He admitted that
in the past two years, the price of skin has shown a marked increase.
Ethiopia earns a significantly high foreign exchange from the export
of hides and skin next to coffee. Last year, it was third in foreign
exchange earning proceeded by coffee and khat.
In the first six months of this fiscal year, the country has earned
over 235,5 million Br in foreign exchange, surpassing last year's
total export by about 117.5 million Br, only second to coffee.
Mobile Service Stretches 125 Kms SouthTop
SIM Cards on
Sale
BY MIKIAS WORKU
FORTUNE STAFF WRITER
Two years after introducing cellular phone technology which has been
limited to only the greater part of the metropolitan, the Ethiopian
Telecommunications Corporation (ETC) has extended the service to Nazareth
and Sodere, 98Km and 125Kms respectively south of the capital. Meanwhile
ETC has resumed selling SIM cards to new subscribers as of last Monday,
April 16, 2001.
The mobile connection between Addis and the two towns went operational
a month ago following ETC's finalization of the installation of cell
sites along the route. The new network enables mobile subscribers
to make and receive calls along the Addis-Nazareth-Sodere line.
Similarly, ETC has recommenced selling SIM cards beginning last week
after six months of deadlock. The corporation had stopped issuing
the cards in a bid to avoid congestion by upgrading the capacity of
the existing mobile network prior to taking up new subscriptions.
The upgrading work has been carried out on the 24 sporadic cell sites
where the transmitting and receiving antennas were erected assisted
by experts from the Swedish Ericsson Company.
The number of mobile users currently stands at 24,500. Sources from
ETC's mobile center said that more than 6000 waiting clients have
been registered during the past months wanting to buy SIM cards. The
cards are currently on sale for 858. 95 Br a piece.Top
Facing the
Bankers
Customers' Perspective
You would be surprised to see how many well established
business firms turn to informal lenders to get quick and flexible
loans, Ermias Amelga, a professional banker and owner of a mineral
water factory, told more than 250 participants who met at the Addis
Abeba Hilton to hear his presentation on banking in Ethiopia.
In a 7-page presentation he gave on Friday night, April 20, applauded
by many as eloquent, dynamic, realistic and to the point, Ermias has
argued that a huge gap is being created between the formal banking
system and its counter informal lenders, otherwise locally know as
Arata Abedaris (Loan Sharking is their term in the United States)
due to banks failure to provide flexible and prompt cash loans to
businesses.
Although tons of justifications were thrown from the big wigs of the
banking industry later on to defend the way their banks operate, Ermias
criticized banks for pursuing risk averting and heavily collateral
based lending policy, instead of encouraging loans based on monitoring
customers' cash flows.
He also said the regulatory policy supports a risk averting and collateral
based lending strategy.
"The regulatory policy encourages banks' interest of minimum risk
operation requiring heavy collateral," said Ermias who resents its
effect that "many businesses and projects fail to get off the ground
unable to get financing."
Ermias, who is also one of the directors at the Bank of Abyissinia
that has sponsored two banking forums, observed banks of falling short
in fulfilling their social and national obligations, but are very
fond of giving reasons for not supporting businesses, particularly
the manufacturing sector, whose share of loans stands at only 20 pc
compared to 60pc loans to general trading.
Heads of the various banks, both private and state owned, defend their
position that providing loans without collateral is a risky venture
in a market where accountability and reliability of borrowers has
been in a serious doubt.
"Do we have big borrowers?" questioned Alazar Dessie, the new executive
officer who has joined Bank of Abyissinia recently, estimating that
borrowers number in the country could not exceed 60,000. He said those
that could be categorized as corporate customers are only the insurance
companies, banks and few other share companies.
"Our corporate customers are not more than 1000," confirmed Tilahun
Abay, president of the Commercial Bank of Ethiopia (CBE), the nations
largest bank whose credit portfolio has grown from 3.4 billion Br
10 years ago to 12 billion Br now.
According to Alazar, the banking sector suffers poor financial infrustructure
and lack of accountability on the side of borrowers.
"We need to put an army of people to closely monitor borrowers if
we want to do cash- flow based lending," Alazar defended the existing
loan system.
However, Luelseged Teferi, managing director of Dashen Bank, came
to the defense of Ermias reminding participants that he has been urging
his fellow bankers for 25 years now to come out from the risk avoidance
style of lending to in order to encourage a community that has a culture
that discourages taking loans from banks or from any where for that
matter.
Persistent to his position, however, Ermias urged banks to practice
a lending system of close monitoring and knowing of customers and
flexible enough to consider borrowers cash flow. Otherwise, he warned
that the existing collateral based and ultimately foreclosures of
the collateral only leads to more losses of jobs, cutting production
capacity, less flow of taxes, and fewer buyers of repossessed assets.
Banks would benefit more from rescuing a borrower than being hasty
to repossess assets put up as collateral, Ermias argues in his presentation
of "customer's perspective" chaired by Iyesuswork Zafu, managing director
of United Insurance.Top
Economic Commentary
In Quest of Better Utilization of the Water Tower
Abebe Tadesse
The quest for maximizing the utilization of water resources is becoming
a crucial issue of debate in many workshops and intellectual forums.
And I am not surprised considering Ethiopia's consumptions of its
water resources at a far too little rate amidst misfortunes of hunger,
squalor, disease and early death.
This is despite the more than 122 billion cubic meters of water it
gets from surface resources excluding ground water supply and due
to its good geographical position, which enables it get more annual
rainfall than other neighboring countries.
We have in fact said it over and over again that water resources in
Ethiopia are unevenly distributed. Resources accounting between 70pc
and 80pc of the total in the country are found in the Northwest, West
and Southwest parts of the country, mainly due to the four major river
basins - Abay (Blue Nile), Tekeze, Baro-Akobo and Omo-Ghibe - flowing
in these areas. Except the Tekeze, all the other river basins constitute
about 60pc of the country's entire irrigation potential.
However, irrigation development in these basin areas is presently
at a very minimal level, some other fact we are always fond of saying.
On the other hand, the Awash River Basin, which has comparatively
less irrigation potential, has been highly developed using almost
34pc of the potentials.
This low level of water management has led Ethiopia, which has 3.7
million hectares of irrigable land, to merely make use of the huge
potentials and develop only five per cent of the irrigable land (185,000
hectares), whose better success could have been of vital importance
to Ethiopian farmers.
Since most of agricultural production depends on rainfall, irrigation
investments enable farmers to supplement rainfall and to some extent
gain control over climatic conditions. But more important, irrigation
water makes it possible both to expand the area farmed and to optimize
land use through double or even triple cropping.
There are multitudes of factors that impede irrigation development,
manifested in economic, social, institutional and even environmental
forms.
One of the major economic problems, however, is the difficulty of
financing irrigation projects. The projects usually encounter shortage
of construction materials, lack of skilled manpower, insufficient
construction equipment and machinery, and lack of maintenance, which
not only lead to increased capital costs but also retard the completion
of irrigation projects within the scheduled time frame.
This was the case for some of the large-scale irrigation projects.
Despite the importance of agriculture in Ethiopia, the performance
in the sector has remained much below the available potentials. Less
than 200,000 hectares of land are irrigated and the use of purchased
inputs and machines has been limited.
The poor performance of Ethiopian agriculture has poised a sword of
Damocles over all development strategies.
The reasons for the poor performance of agriculture are numerous,
nevertheless. The traditional methods of farming with minimal use
of modern inputs, poor infrastructure, inappropriate policies of past
and present governments are the major causes behind the backdrop.
The present land tenure system has not been of much help either. It
is alleged to provide insufficient tenure security to induce farmers
make the necessary investments on their land.
Tenure insecurity has forced many peasants to abandon prudent traditional
land management practices such as crop rotation, land fallowing, and
usage of organic fertilizers for fear that at one point in the future,
they might lose the land altogether that they so much enriched and
cherish.
Had there been secured land tenure and enabling environment for investors,
the contribution of the agricultural sector in other sectors would
have been of significant importance, in addition to enlarging the
size of productive land developed through irrigation schemes. Indirectly,
maximization in utilizing water resources could be attained yielding
better results.
The application of irrigation schemes brings multi-faceted advantages.
Due to the dry weather conditions, the soil is often rich in plant
food, since the minerals are not prone to being leached or washed
away of the soil.
If the irrigation method is characterized by natural floodwater, which
is the case in the Abay (Blue Nile) River, which feeds the Egyptian
desert, the soil is constantly being re-fertilized by the deposited
alluviums, which bring new mineral constituents to the land.
Annually, Ethiopia loses three billion tons of fertile soil, which
is roughly estimated to reach around 250 billion Br in annual losses.
When the soil is gone, no water is retained and the land can no longer
produce enough food, fodder, fuel wood or timber.
Improvements in water management are essential to raise agricultural
productivity and to reduce land degradation and water pollution. The
combined use of ground and surface water can improve the timing of
water availability and expand cultivable land area.
Land ownership, farmers' participation, operation and maintenance
of irrigation infrastructure, cost recovery, and completion of ongoing
projects are among few of the issues in water management that seek
due attention to bring about significant results. Quite apart from
its crucial importance in the agricultural sector, water has an influential
place in power generation.
In terms of hydropower, Ethiopia is the second wealthiest nation in
Africa next to the Republic of Congo. Its hydropower development potential
is in the range of 15,000 to 30,000 MW. This enormous potential classifies
Ethiopia as one of the world's leading countries in hydro power potential.
However, from this huge hydropower resource, only an insignificant
portion has been developed for actual use. The government should encourage
the private sector to participate in hydropower generation furnishing
the necessary inputs under its disposal.
A unique feature of water is that for some of its usage, such as human
consumption and irrigation, there are only limited possibilities for
substitution. But despite the water sector's obvious importance to
economic welfare and growth, inadequate policies, weak regulatory
and administrative systems, an insufficient political resolve and
lack of public awareness about water demand management are some of
the problems rampant in Ethiopia. Top
Restaurant Review
Jewel of India * * * *
Tel. 513154,
Location: On the road crossing from Olympia to Debre Zeit Rd, few
meters short of the railway
Serving exclusively Indian food
Service: * * * *
Wonderful! The place provides first-rate service. The humble attendants,
dressed in Indian outfits, rush to welcome customers at the doors,
courteously lead them to their tables and are willing to explain every
item displayed on the rather tick menu.
They are outgoing, but politely, with customers in, advising them
to select from the extraordinarily large choice of dishes and even
come in between meals to invite those who appear to have low appetite
to eat more. They are on standby close at any moment to respond to
any customers' needs. The valets are indeed doing a great job as diners
at the place receive a first class treatment.
An inconvenience that the managers should think to stamp out is the
time that some of the ordered foods take to arrive. Simple dishes
such as the Chicken Fried Rice come in a fairly short period but there
are others more sophisticated ones that take more than 30 minutes
to get at the table. The delay most probably is in an effort to serve
original, fresh and quality food. But should not there be a way to
shorten a bit this extended delay? It sure could drive customers impatient.
But the good thing is the attendants often apologize for the delay
and reassure the coming of a dish. And, truthfully, the food is worth
waiting.
Another thing is: wouldn't it be more convenient if one steward attends
to a customer throughout a meal? Here, the case is, one brings the
menu, another one shows up with the dishes and there comes a third
with the bill.
Food: * * * *
Hoops! One of the reviewers of this restaurant was about to spit fire
despite eating berbere regularly since early ages like most Ethiopians.
It appears most of the dishes are very spicy in nature and chilly-overdosed.
Even the attendants try to warn customers if they appear to be unfamiliar
with the food telling this or that is full of spice and chilly.
But even after giving directives to take it easy on the spices and
chilly, the dishes still arrive with plenty of them. But the place
is a typical cultural restaurant and people who choose to go there
are looking to eat such food and find it delicious. But why not, for
instance, bring the spices and other hot ingredients to the table
and let customers add according to their desires, if that is possible
to do so and of course if it is compatible to the culture? On the
other hand, the more simple and familiar cuisine such as the Chicken
Fried Rice accompanied by delicious yogurt and chapatti is tasty and
appetizing. The menu is exceptionally rich with more than 100 food
items to choose from.
Environment: * * * * *
Excellent!
Starting from the location of the place to the interior set up - with
slight Indian touch - table laying and dressing and impeccably tranquil
compound, the place is simply adorable and has an inviting and pleasing
atmosphere to find oneself in.
Price: * * * *
Considering the professional service delivered, quality of food provided
and the fabulous environment, the restaurant does not charge exorbitant
prices. But one might be surprised to see in the bill that the pita
bread (Indian styled thin home bread) have their prices. The same
is true with other items that serve as additives to go with the main
dishes. Is not bread and sauce part and parcel of main courses in
other places to be charged as if they stand by themselves? Well, it
may perhaps be the practice going with the culture.
PARKING: * * * *
The restaurant has a parking lot in its premises, but a bit narrow
to accommodate all vehicles of clients. If four cars get crammed inside,
parking maneuverability would drop to zero. But there is ample space
along the two-way street outside the compound sufficient and reliable
as two doormen are watching over.
Sanitation: * * * * *
Elegant, impeccably neat and fully equipped. All the required bathroom
stuff is available. The restrooms symbolize that due attentions are
sustainably accorded to them. Top
MY PERSPECTIVE
Driving in Addis - IX
Punishment that Fits the Crime
By Yonas Kebede
It is a good thing the traffic police do not dole out traffic tickets
in abundance or we would all end up at Amanuel. The process of paying
for the traffic violation is punishment in itself.
It takes time, patience and a large supply of tranquilizers.
Paying the annual registration renewal fee for your car or just paying
a traffic ticket may require legal authorization from the owner. A
friend, a parent or anyone else who may generously wish to pay your
fee, in your absence, could not do so without a power of attorney.
Obtaining the power of attorney document is a separate dance with
a life of its own.
You may wish to decline.
Purchasing a mobile phone is also right up there when it comes to
punishing the customer who is willing to be separated from his money.
You are required to produce a house deed or a title certificate for
a vehicle in order to purchase the SIM Card for a mobile telephone.
"This cannot be real," I thought when I first heard of it. It was
real enough and the automobile must be owned by an organization, a
legal person. So, you would better incorporate while you are at it.
My experience (be it from another planet) was that, the service provider
would give you the phone for practically nothing, if you subscribe
to the telephone service. In fact, the service provider will do anything
short of polishing your boots with his tongue to get your business.
This is not to say the telephone service provider should not protect
itself from thieves or from those who have yet to establish credit.
Could this not be accomplished without requiring the new subscriber
to purchase a house before applying for a mobile phone?
It is a marriage between 21st century technology and Stone Age management,
pure and simple.
Meanwhile back at that old farm, my ordeal with the registration process
was finally coming to a slow conclusion. But not before vigilant traffic
officers focused on missing license plates stopped me half a dozen
times. I did go to the police station to retrieve my license plate
and was told it was forwarded to the dreaded Megenagna, for my convenience.
But the officer to whom I surrendered the license plate said to pick
it up from the station, I painfully argued. Yes, but where is it written
that the right hand has to know what the left hand is doing?
There is no end to this saga.
In the past year and half I was stopped a number of times for different
traffic violations. At first, it was because I could not locate the
traffic lights. These things are not exactly "in your face". Addis
traffic lights are subtler than most and often I drove through the
red lights.
The police understood.
One of them even engaged me in a subject matter that was in everybody's
mind at the time . . . the accidental launching of Nuclear Missiles
as a result of the Y2K bug. At other times, I was sent on my way after
a generous doze of admonishment.
Lately though, it has been a rather different experience. I find myself
going through the tail end of the red light near the Parliament. Signaled
to pull over to the curb by the traffic police officer, I stopped
and produced my driver's license. I admitted that I was at fault and
wanted to know what the penalty was.
"140 Birr" the officer replied.
I waited for the ticket. A few moments of silence go by as the officer
examined my license. More time passes.
"What shall we do?" he asked.
He wants my opinion?
Here I am ready to pay the penalty, to face the music, to meet My
Maker and he is going to disappoint me. I insisted on being fined
and admitted my guilt again. This is a new experience and I needed
to feel its full impact. Nothing doing. This guy must be an angel,
except I do not see any wings.
If this happens a few more times, I will lose respect for the red
light altogether. No wonder the Addis driver insists on inventing
and re-inventing the traffic rules as he rolls down the road. Just
avoid driving without an expired registration and you are home free.
Home was where drivers stayed this past few days having opted to whether
the danger of having a windshield smashed by a stray or deliberate
rock, or worse.Top
Editorial
Stop Talking, Get the Job Done
The trouble here in Africa is that we talk much about many things
in connection with our underdevelopment but we often fail to do much
about it. There is enough expertise, many theoretical works and researches
on particular issues but little willpower to have things done in real
life and make a change on the ground.
We have been talking about our water resources for the past many decades
as we have been talking about our livestock or agricultural potentials
without even managing to feed our people. Ironically enough, the more
we talk about our natural endowments, the harsher nature strikes and
millions of our compatriots continue to suffer from hunger and poverty.
Experts never tire to tell us that Ethiopia has billions of cubic
meters of potential water resource adding that we have only so far
used less than two per cent of this potential. They repeat the same
figures year after year whenever they meet to discuss the problems
besetting our agricultural development.
The job of experts is to do research and present their findings to
the public and the government. It is up to policy makers to act on
these findings and use them as practical guides to action. The trouble
is that there are serious gaps between researchers, policy makers
and the implementing agencies that lead to inaction.
Water resource development demands huge investments that are expected
to come from foreign sources. But lending institutions would not come
to us with bags full of money and give it to us to develop our water
or any other resources.
Foreign investors and lenders are not going to come to build irrigation
or hydroelectric projects for us. We should be the owners of our destiny
and start to make things done first and then ask for assistance. Expensive
projects are often designed on paper and then we wait for investors
to come and implement them. This is a wrong approach that did not
work in the past. It will not work in the future too.
We should start with our own resources, however modest they might
be and then seek foreign funding and not the other way round.
The very first step towards this goal should be to get rid of vague
and obstructive policies and put in place clean cut and enabling reforms
to initate more investment to come to the sector.
In other words, we have to change our policy framework in such a way
as to make it generate enough incentive for practical action. Now
is the time more than ever for cutting on the talks and embark on
actions to make dreams come true.
We cannot keep on simply daydreaming forever while we are going hungrier
and poorer.
Where is the Private Sector Involvement?
The Fed has recently introduced a new directive creating what is known
as the door-to-door exchange or delivery system of goods for importers.
The directive puts an end to the previous system under which businesses
themselves were directly involved in import and export cargo at the
port of delivery.
According to this directive, the Federal Revenues Board and the Ethiopian
Customs Authority will destine imported goods against payment of foreign
currency to the inland dry port on arrival and dispatch centers as
designated.
Some businesspeople fear the whole process is bound to fall under
the exclusive control of the Ethiopian Shipping Lines (ESL) and a
few companies allied to it.
This is in fact the extension of the previous directive that forced
importers to use only ESL ships for their import-export needs irrespective
of tariff levels in international marine transport market.
We recall that this directive was criticized by many businesses when
it was issued as being contrary to the principles of free market and
as something constraining the free choice of more profitable liners
by importers or exporters.
The latest backlash of this directive was the decision by the Djibouti
authorities to hand over the stevedoring of vessels at the Port of
Djibouti to their own nationals, thereby excluding Ethiopians from
the business.
As this directive was not issued in consultation with local businesspersons,
so is the new revised directive on cargo delivery.
The recent announcement of the door-to-door delivery system was a
surprise to all, especially to private businesses in the import and
export trade.
Few high-ranking government officials summoned up some directly concerned
government and private organizations to declare the rule to follow
from now onwards. The majority of the business community is still
in the dark about the exact proceedings of the new system, and why
it was introduced in the first place.
The new directive might have negative as well as positive aspects.
But this is not the whole point. The point is that directives affecting
the activities of private companies should always be issued with prior
consultation or discussion with private sector operatives so that
they would not complicate business transactions or incur unnecessary
costs as the directive to use only ESL ships for import-export trade
has done.
The Fed might not have the legal obligation to do so but it would
have been good for it and for the economy as whole to seek the opinions
of the private sector in such serious matters before facing the negative
consequences that cost so much to businesspeople later on.
The private sector is a major stakeholder in the country's economy.
It is the government's day-to-day rhetoric that the future of the
country's development is the private sector.
True!
But how is it expecting to accomplish a rightful partnership with
the private sector by choosing exclusion instead of putting heads
together and come up with a better outcome? The government should
involve businesses and retain their recommendations in the formation
of any regulations that have direct, or indirect for that matter,
effects on the economic environment.
This, we believe, is the right path to attain growth and prosperity.Top
In My Opinion
Looking Beyond the Street Riots
By Yosef B.
One week after the student strike at the Addis Abeba University, the
riots spilled over into the streets of Addis creating much chaos and
confusion and leading to the loss of lives and the destruction of
public as well as private properties.
This was a rare occurrence by Ethiopian standards although it is a
familiar event in much of the developing world. This is also something
the authorities should have expected and not something that should
have created shock and disbelief, as much as panic or confusion.
The student strike started as a peaceful protest against the infringement
of academic rights by the educational authorities. The students were
well-behaved, disciplined and insisted that they were making purely
academic and administrative demands. Their peaceful protest was confined
within the university campus. They refused to go out of the campus
and into the streets because they knew it was illegal to do so.
All went well until police stormed their compounds, beat and arrested
many students without the knowledge of the university authorities.
That was the last straw that broke the camel's back. Police action
against the students was the most serious mistake that later on turned
a peaceful protest into an angry backlash.
The authorities too seemed to have misread the situation or underestimated
the explosive potentials of the student protest.
"There is nothing you can change by shouting," Education Minister,
Genet Zewde, was quoted as saying.
When we look at the events on Wednesday, we can safely say that the
authorities had failed to grasp the seriousness of the situation.
Police did indeed apologize for sending two plainclothedmen into the
campus who tried to provoke the students into going out of their compound
to demonstrate.
That was a big mistake indeed.
But the apology did not help much because the damage was already done.
Many students were beaten, some of them seriously. That also embittered
them further and led them to the hardening of their demand for the
withdrawal of the campus police, which became the single most controversial
issue.
The educational authorities and police had indeed underestimated the
potential for the peaceful campus protest to spillover into the streets
and engulf non-student elements in its wake, although the signs of
such an explosion were there particularly starting from last Tuesday.
There was enough evidence for the authorities to be more flexible
and set a timetable for the withdrawal of the campus police so that
the strike would not go out of control as it did the next day.
Instead of occupying the university compounds, police should have
expected street riots and made the necessary preparation to protect
the lives and property of citizens. It should have deployed sufficient
number of policemen to protect businesses and public places because
the symptoms of street anarchy were already visible on Tuesday.
The striking students have before and after the events of Wednesday,
April 18, insisted that they had no intention to go out of their campus
or turn violent. The high school students who boycotted classes on
Wednesday in solidarity with the university students carried the peaceful
protest into the streets. Soon, they were joined by thousands of unemployed
youths and hooligans who brought the crisis to a peak by rampaging
public buildings and private businesses.
Police reacted in panic because they were not prepared for such an
eventuality. They too had underestimated the explosive minesof the
student protest or were ill prepared for such a possibility.
What made matters even worse was the absence of riot control and management
techniques on the part of the police. As a result of this, they could
not protect public and private property or avoid unnecessary losses
of lives.
In Addis Abeba where more than 35pc of the youth is unemployed, there
was more than enough accumulated bitterness and worsening poverty
to ignite the street riots and the looting that followed them.
The student youths too are a highly frustrated and demoralized generation
who do not see any prospect of improving their lives even if they
succeeded in their education. Many university graduates are unemployed
and this is an explosive chemistry that needs the slightest opening
to burst into the open.
And that was what happened last Wednesday as the lost generation of
Addis made its point in the streets of the capital.
The loss of lives and property is of course regrettable. The event
should, however, occasion deep rethinking of many aspects of the political,
economic and social conditions in the country in general and in Addis
Abeba in particular. This will not definitely be the last time students
or the unemployed youths would take to the streets and cause mayhem.
As long as the economic situation is not improved, a single spark
will be enough to produce a conflagration. The government, in cooperation
with the private sector, should focus on immediate tasks of job creation
for unemployed youths or implement poverty alleviation programs targeting
the youth and the poor in particular. Unless the root cause of the
social malaise is addressed, police action alone would not help matters
much. It might even cause further deterioration of the situation.
Regarding the university student protest, the educational authorities
should work on an immediate plan to meet the demands of the students.
As they have agreed earlier, they will have to remove the campus police
and replace them with civilian guards in whatever form. They will
have to do this urgently because they are bound to face the same demand
as soon as the campus will be opened once again.
That would also be the only viable way to persuade high school students
to resume classes at least for now.Top
View from Arada
The Notice Wall at Arat Kilo
by Girma Feyissa
Arat kilo is one of the most important crossroads and a hub of activities
in Addis Abeba. The unique statue is a monument to the suffering of
innocent people women and children who were martyrs to their country
burnt to death during the fascist invasion (1936-41). It also depicts
the victorious return of our gallant patriots and freedom fighters
to the capital.
Arat Kilo, conveniently located amidst higher learning institutions
and government offices and political bureaus, has always been a venue
for manifestations and expressions of free thoughts. The square has
always been the center stage of activities and a place where people
like to converge to for one reason or another.
As a child, I remember the residents in the neighborhood used to gather
around the statue every evening to listen to news broadcast from a
public address system installed on a pole, the speakers fixed to face
every direction. In those good old days a few people owned radio sets.
There was a minor cross- country bus terminal close by. I used to
enjoy the reactions of new arrivals coming from the interior land
listening to the radio broadcast. Once there was an announcement of
a lost - and - found bundle of commodity, dropped from a truck coming
from Debre Berhan. There were couples of men looking up at the speakers
and shouting in response to the announcement aired identifying themselves
as owners of the lost goods! It was an incredibly hilarious incident
and everybody around had fun. Some stand byers were making fun of
the new comers to town.
At one of the corners where they have now party bureau extension or
something, there was the Young Men Christian Association better known
as YMCA center where different kinds of sport and cultural activities
took place including trampoline believe it or not. This was a kind
of apparatus with some kind of material fixed tight to metal frames
and where gymnasts jump up and down performing acrobatics. (Oh! How
far back have we have gone over five or so decades. It is a pity)
There was a minor dispute, once upon a time, over the title of the
statue. Some people used the Amharic "Yenetsanet" before statue while
scholars tried to correct them by putting the word "Yedil" instead.
The former signifies "the statue of freedom" while the latter stands
for "the statue of victory".
I think the scholars were trying to put across the idea that we only
lost the battle, not the war. Ethiopia has always been free though
invaded and momentarily occupied. Every thing indeed seems to come
only to pass. The right title may or may not be the statue of victory.
But the area is popular as Arat Kilo an expression that is even extended
to refer to the power that be. "View from Arat Kilo was a popular
column published in the defunct "Addis Reporter."
Arat Kilo is also a nostalgic expression of student movement and struggle
for freedom of expression, demonstrations, the right to organize etc.
Time and again students of Addis Abeba University have used the precincts
for demonstrations and expressions of wants and desires. It has always
been the same throughout the years. The difference may be in the intensity
of manifestations.
The sit- down and sing strike and peaceful demonstration that we used
to partake gleefully has now turned to a violent rampage and looting
that turns fatal and culminates in a heavy loss of public property.
Of course the student community has little or nothing to do with the
irrelevant destruction.
It is indeed ironic that the present day politicians in the highest
echelon of power, once political activist fighting for democracy,
should now be on the other side of the fence where demonstrations
are addressed, stones and rocks are thrown at!
Arat kilo is also a center of business and trade news vending and
peddling of various items and articles holding the forefront of "big
discounts." The vendors announce in a warning tone that one would
have himself /herself to blame for regrets over not using the opportunity
of the discount on the grounds that one hasn't heard about it. One
had better listened with care.
"Hurry up, hurry up, here is a big discount. What used to be sixty
is now twenty, hurry up don't miss the opportunity, never say you
haven't heard it " The sound of yells and calls fill the air.
A lot of people enjoy being there just for the fun of it. They muck
around and end up reading some of the notices and advertisements posted
on the retaining wall of the popular and age old Jolly Bar, some of
our leaders might remember it with a feeling of reverence. With regards
the wall I would like to refer to as the "Free Bulletin Wall". It
has no equals in the city. Even the wall of St. Gorge cathedral won't
stand anywhere near. That wall is unique in terms of handling free
ads.
If you can spare enough time to go through all the notices and commercials
form one end to the other, you will realize how much you have missed-
what ever it be. These days you see matured and serious men and women
converge at the "Free Bulletin Wall" to read the posted mail. The
most frequently advertised vacancy is the computer literate secretary
wanted by numerous NGO's and private enterprises. Of course computer-training
centers advertising themselves are aplenty.
Vacancies aside, there are all sorts of sales promoting posters that
are written in bright colures, styles and language intending to attract
extension. No advertisement is allowed to have a single hour extension
of expiry time. On the contrary, some notifications are superimposed
on others deemed less attractive or unimportant. Take the case of
posters announcing the forthcoming of a novelty print of an Amharic
weekly for instance. Posters don't give a hoot. They either tear it
down or paste another one over it. No body complains against their
judgment. By the time you come around for a second round you would
read new ads posted while you went through.
Creative job seekers benefit from the free services of the Bulletin
wall; they advertise their services like giving tuition classes for
grade 10 or 12 students to prepare them for school leaving examinations.
There are those who advertise their services on commission to buy
or sell anything ranging from old sofas to brand new cars, from 30
years old typewriter to the latest personal computer with its color
printer set. There are those who advertise what they have lost while
traveling by bus or taxi, particularly important documents. I once
read a notice pleading the return of his driving license offering
all the money and the wallet as if driving licenses are of no use
to someone else. He must have been a newcomer to town 'Try the tourist
my friend! The Free bulletin wall offers a lot of fun. Have a look
at it.Top
Letters to
the editor
Dear Sirs,
I am a patient of both diabetes and gout among others and I believe
a large number of the population is afflicted with one or both of
the above illnesses. People in this predicament are obliged to take
the required medication on a regular basis. Neither are there any
permanent cures for them, making the treatment life long.
The problem is the medicines have not been made locally available
for a long time now, though it is sometimes possible to obtain these
drugs that are contraband in origin and thus very expensive.
Due to my predicament, a friend of mine managed to send me six months
supply of the drugs from abroad through the mail. Believe it or not
I was unable to clear the medical consignment without the Ministry's
approval. It took many days of back and forth between the clinic,
hospital and the Ministry of Health before I could receive my medication.
I would like to recall a case where an individual was unable to clear
three packets of coated aspirins.
If drug importers are unable to provide us, patients, with life saving
drugs, what is the alternative? This applies to numerous other serious
illnesses as well.
These are not luxury items.
The unavailability of life saving drugs only encourages contraband
medication which is sold at exorbitant prices and whose quality cannot
be guaranteed.
Are there any way outs from these that would probably be suggested
from any concerned party?
Kind Regards,
SARA MAKONEN, A.A.
Dear Editor,
Your analysis on ERA is full of data and figures. These kind of information
anyone can get from Addis Zemen. We expect deeper economic analysis
from you (Abebe).
However your opinion on Eletawii Addis is interesting and to the point.
Keep up the good work.
Sincerly Your's
FASSIL EgualeTop
VIEW POINT
What's Wrong with Our Banks?
BY ERMYAS AMELGA
The banking sector is a critical component in the development of a
significant industrial base and the achievement of sustainable economic
development in Ethiopia.
The commercial banking system in Ethiopia is, in effect, the entire
financial and capital markets structure for the private sector economy
in the country. The private sector in Ethiopia has no other sources
of organized or institutionalized financing. As such, the banking
sector must be structured and mobilized, to become a driving force
in the country's industrial and economic growth.
It is critical that we all understand the significance of the banking
sector's role in prudently adapting to the realities of the Ethiopian
business environment. The banking industry cannot view itself as any
other sector of the business community which is primarily involved
in furthering its own business interests and maximizing profits.
The banking industry, especially in Ethiopia, has a heavy national
responsibility to be concerned with facilitating, to the greatest
degree possible, the growth and development of the business community
which is involved in value adding business activities that create
jobs, generate profits, pay taxes and drive sustainable long term
economic development.
One of the services banks provide is deposit mobilization and payment
of interest on such deposits. From a customer's perspective, banks
provide a place to "invest money". This is a very critical service
because, with the exception of the very limited opportunities to buy
shares in a few companies, in Ethiopia today, bank deposits are the
only available form of institutional portfolio investment. Unfortunately,
the real rates of return paid on these deposits are inadequate to
attract substantial levels of savings. As a result, the county's savings
rate and rate of investment are severely compromised.
While the banks pay deposit rates of approximately 6pc to 9pc based
on the size and duration of deposit commitment, the Birr has on average
depreciated approximately 7pc a year over the past five years and,
while the real rate of inflation is some what ambiguous, it is assumed
to be positive.
What minimal consumer deposits flow to the banks are there primarily
since there are no alternatives? Regulations on rates on bank deposits
and deposit terms have been liberalized but banks still do not have
attractive deposit rates. A lot could be said about the customer service
aspect of the banks retail operations but I keep my focus on the bigger
picture issues of direct business and economic growth facilitation.
On the asset side of the banking industry's balance sheet, we find
loans. This is the other major service banks in Ethiopia provide and
this is the activity which most occupies the industry. In looking
at the industry's loan portfolio, we find that approximately 60pc
to 70pc of the portfolio is comprised of loans to finance trading
activities, approximately 20pc of the portfolio is to finance manufacturing
or industrial activities, approximately 10pc of the portfolio is to
finance real estate loans and there is virtually no retail lending
activity.
The composition of the banking industry's loan portfolio tells us
a lot about the role that the banking industry is playing or not playing
in facilitating sustainable national economic development. The fact
that 60pc to 70pc of the banking industry's loan portfolio is comprised
of loans to trading activities and only approximately 20pc of the
portfolio is comprised of loans to industry indicates that the banking
sector may not be playing as big a role as it could in facilitating
industrial development.
It could also be argued by the banks that the low percentage of loans
to productive activities is simply a reflection of the country's very
low level of industrial development caused by a variety of factors
including its 17-year recent socialist history with no private sector
economy and the many non-financial constraints to industrial development
that exist in Ethiopia. The truth is probably somewhere in between
the two perspectives.
From a customer perspective, I would like to present my view of where
the banking industry falls short in adequately addressing the needs
of its borrowing customers which is the area with which I have the
most experience and familiarity.
My perspective is shaped by my experience as a former commercial and
investment banker in New York and Los Angeles, my experience as a
board member and chairperson of several board committees for a significant
commercial banking firm in the U.S., my experience as a director of
Bank of Abyssinia and also my experience as a major borrowing customer
of Bank of Abyssinia and the Commercial Bank of Ethiopia.
In discussing the needs of the banking industry's customers, I wanted
to focus on the needs of manufacturing or industrial customers as
this is where my experience is and since I believe this is the class
of customers where the shortfall in service provision is most acute
and the need for improvement most important from a national perspective.
As we all know, the availability of financing is one of the most significant
requirements or components for the establishment and growth of any
business. The establishment and growth of industries and economies
worldwide has been driven and fueled by the ready availability of
convenient financial resources. Silicon Valley and companies like
Microsoft would not exist without venture capital; many of the Tiger
Economies of Asia would not have developed without the availability
of flexible and cheap bank financing.
You would say, "see what trouble that got them into" but I would argue
that is more a question of poor control, mismanagement, poor execution
and unhealthy excesses rather than a problem with the strategy of
providing conducive financing sources and institutions.
The problems of the Ethiopian banking industry are lending policies
as I see them include the following.
A risk avoidance versus a risk management mode of operation; a regulatory
system that reinforces and, to some extent, imposes a risk avoidance
operating strategy; a collateral based lending strategy; an inadequate
focus on knowing the customer and not staying close to the customer,
as well as monitoring his or her business.
In identifying these major problem areas on the lending side, I have
kept in mind that Ethiopia has a very weak and undeveloped industrial
sector; that our 17-year of socialist rule has severely impacted the
capacities of the industrial sector and the banking industry; that
the banking industry has a significant problem loan portfolio and
that the difficulties and obstacles facing business people in Ethiopia
in general are extra-ordinary.
Banks in Ethiopia in making loans focus on collateral rather than
on cash flow and close monitoring of the borrower. Banks do look at
the cash flows of a borrower when initially granting loans but after
that there is little follow-up and monitoring of the borrower's business.
Banks rely on the collateral supporting the loan as their security
and rest easy. As a result, they are generally unwilling to make uncollateralized
loans except to a few of their best and most established clients.
The result is that many worthy projects and businesses never get off
the ground for lack of financing, the banks miss out on a lot of good
business and the economy's growth is diminished.
Most importantly for the banks, they are unaware of their borrowers
problems in servicing their loans until very late and are, therefore,
unable to head off problems or address them before it is to late.
This is detrimental to the banks and to their borrowers. It deprives
the banks of the opportunity to be aware of and manage the operating
risks of their borrowers businesses.
The regulatory structure reinforces this mode of operation through
its predominant emphasis on collateral availability as the standard
for establishing the credit worthiness of a loan.
In addition to the risk management issue, the problem with this collateral
based approach to lending is that there is an acute shortage of acceptable
collateral in the private sector. This is due to our short history
with a free enterprise system in Ethiopia and the very limited historical
opportunity to accumulate private capital i.e. collateral. Unless
the banking system develops the capacity to accept broader categories
of collateral and the ability to undertake cash flow lending, it will
continue to fail to meet the financing needs of the private sector
and will assume unnecessary credit risks in its loan portfolio.
In saying this, I am fully appreciative of the need for prudent lending
and the problems of bad debt the industry faces. We do, however, need
to find a better balance between the needs of the market and the requirements
and operations of the banks.
Now from a bank perspective, their current mode of operation may be
appealing. Most of the loan portfolio is comprised of short-term well
collateralized loans (mostly to trade related activities) that are
not as severely impacted by adverse developments in the economy. A
reflection of this loan portfolio characteristic is that Ethiopian
banks are reporting record profits in an economy that by most accounts
is not doing very well.
Parallel to all this, it is common knowledge that there is an informal
banking industry in Ethiopia that is thriving. I am referring to "Arata"
lenders or what in the West is referred to as "Loan Sharking". These
are individuals with capital who make loans at very high interest
rates of approximately 10pc per month to borrowers which are unable
to access bank financing due to lack of collateral or because of the
perceived "risk" of the required loan.
This parallel lending industry serves a very important role in the
country's financial system as it partially fills the huge gap in financing
availability to the private sector. These lenders can process a loan
in as short a time frame as two or three days, are flexible in their
working arrangements but are also risk averse. Borrowers are willing
to pay rates of 10pc per month and more because they have no other
options.
I think that the major lesson for the banks in looking at their informal
sector competitors is that lending, as with all investing, should
be viewed in the context of a risk versus return analysis. What I
mean by this is that, instead of having loan programs with varying
rates of interest to compensate for differing levels of risk in loans,
our banking industry has very narrow interest rate parameters to match
a very narrow set of "acceptable" lending risk parameters and loan
terms.
I and many other borrowers would be more than happy to pay significantly
higher interest rates in return for more flexibility and availability
in loans from banks. You would be surprised at how frequently many
established businesses are forced to borrow in the informal loan market
to meet their financial needs.
My prescription as a customer as to what banks can do to better meet
the borrowing needs of their customers:
Banks must recognize their responsibility to facilitate the growth
of industry in Ethiopia; banks should establish loan standards and
procedures that better reflect the resources and capacities of manufacturing
and industrial enterprises in Ethiopia and do so prudently by properly
"managing" the risks involved in such loans; the National Bank needs
to be involved in facilitating the establishment of such loan standards;
the focus in lending should shift to closely monitoring and, if necessary,
cash controlling versus security through collateral; the current very
aggressive strategy for managing problem loans needs to be changed
as it is having a very chilling effect on business; the banks should
work together cooperatively to bring about these changes; while my
personal experience with the banking sector has been favorable in
spite of the problems my business activities have encountered, the
broader problems I have mentioned above are there.
Many business people regularly complain about the difficulty of getting
adequate financing to start or properly operate their businesses.
This is not a problem for them only but for the growth of the whole
economy as well. We must be able to change this if there is to be
any hope of having a significant indigenous industrial sector in Ethiopia.
As anyone who has been involved in banking overseas can attest, the
focus in granting loans is on identifying the risk parameters of the
expected cash flows from the borrowers business and then closely monitoring
and, where appropriate, actually controlling the cash flows through
"lock box" or "blocked account" mechanisms. This assures that loan
proceeds and the cash flows from the borrower's business are collected
and applied appropriately and that the banks' senior security position
is protected.
It will, of course, require that Ethiopian banks develop the internal
capacity to properly practice this form of lending and loan management
to prudently conduct business in this manner.
This issue becomes even more critical when we come to the management
of problem loans. The recent practice in Ethiopia is increasingly
to take possession of the assets of the delinquent borrower and to
try to liquidate these assets to recover their loans. In principle,
this is what banks the world over do when all else fails. The problem
with the situation in Ethiopia is that the implementation of this
final course of action has been destructive and ineffective.
It has been destructive because the repossession of such assets has
often been done by closing down the businesses involved even in cases
where it is possible to keep the repossessed business operational
and also because there appears to be a very limited market of buyers
for such repossessed businesses and assets.
Closing down a business immediately reduces its value for the bank
and also results in the lose of jobs, taxes and productive capacity
which are already in such short supply in the country. The apparent
lack of buyers for such assets and businesses is an issue that requires
a multi-faceted approach to resolve and requires that we look at the
realities of the country's limited private sector resources and capacities,
business and asset valuations, financing terms and proper marketing
strategies for the disposal of these assets. This is an issue that
warrants much discussion that I hope we can take up with the audience
at the conclusion of my presentation.
Finally, the issue of how the banks in Ethiopia work or don't work
with each other in addressing these issues is critical. From what
I have seen, there is little communication and cooperation between
banks on issues of mutual concern. I believe this is simply a reflection
of how business is generally done in Ethiopia where competitors seldom
identify their mutual interests and band together to effectively address
them. There are many operational and strategic benefits to adopting
a strong industry association and it is in the interests of the banks,
their customers and the economy that they do this. Again, I hope this
is an issue we can more fully discuss latter.
I have covered a lot of ground in this presentation and not delved
into issues in any depth with the view to allow adequate time for
questions from the audience to guide the rest of our discussion to
your particular areas of interest.Top
Doing Business
with the UN
Would you like to do some business with the United Nations? Here are
few tips of the various organs of this global giant and their procurement
procedures.
Treat the following tips regarding access to UN contracts separately;
familiarise yourself with the registration procedures of each; respond
to all tender invitations; monitor the UN websites and hyperlinks;
and identify projects for the area you are based - do not just focus
on Head Quarter (HQ) procurement.
By the way, many observers are of the opinion that the UN is a "passive"
buyer in that the onus is on those tendering to present themselves
and meet UN product specifications, delivery times etc.
Quick delivery is often important and attention should be paid to
alternative transport routings and logistics. In the markets themselves,
the office of the UN Resident Coordinator (usually the locally-based
UNDP Representative), is a valuable source of information.
The United Nations Common Supplier Database (UNCSD) was set up to
standardise the Organisation's procurement procedures. The Inter-Agency
for Project Services (IAPSO) manages the database in Oslo. Not all
UN bodies subscribe to the UNCSD.
The United Nations Secretariat Procurement Division is divided into
three sections: all HQ's with office supplies; special missions such
as peace-keeping and tribunals; and support services. Contracts less
than USD 25,000 are informal with requests for quotations ROQ's used;
if there are defined specifications, "Invitations to Bid" are used;
and for more complex targets, usually engineering contracts, "Requests
for Proposals" are utilised. This procurement entails 440 types of
goods and services. USD 468 million was disbursed during the last
financial year.
The Rome-based World Food Programme (WFP) is the largest procurement
agency disbursing USD 400 million to USD 600 million mainly on bulk
grain, rice cereals and transport services. It has an important regional
office in Harare. The UN is not a major purchaser of food perishables.
These are bought locally.
Another major procurement agency is the United Nations Children's
Fund (UNICEF) which, in 1998, had an income of USD 966 million dedicated
to 161 country programmes. Main categories were: vaccines, medical
supplies and equipment, pharmaceuticals, transport, water and sanitation,
IT equipment (this sector is growing), nutrition (special items only
such as vitamin mix, biscuits, milk powder), cold storage equipment,
and communications equipment. Substantial use is made of air charters.
UNICEF has its own register, rules and regulations. It has a contracting
centre in Copenhagen for centralised purchasing. It also uses a direct
ordering system which accounted for USD 400 million in the last financial
year.
Direct annual purchases by UNHCR totalled some USD 300 million. There
is a large requirement for mosquito nets - Africa requires 30 million
and 1,5 million will be procured this year. Insecticides are also
required. Potential suppliers must be from profitable firms which
are able to meet requirements by volume and specification - sometimes
at short notice and including over the December period. Procurement
direct from manufacturers is preferred but traders may be used on
occasion. UNHCR does not follow the UNCSD procurement system. Prospective
suppliers are advised to attend bid openings. The diplomatic mission
in Copenhagen should be asked to assist with central procurement.
The New York-based UN Office for Project Services (UNOPS) was created
in 1995 to coordinate procurement for a number of UN agencies as well
as to supply non-UN agencies. It is described as a project management
and procurement consultancy. It subscribes to the UNCSD but also keeps
its own register. In 1999, its turnover was USD 568 million. UNOPS
buys a wide range of goods and services such as iron and steel, motor
vehicles and spares, pharmaceuticals, information technology equipment,
chemicals and fertilizers, earth-moving equipment etc. Recent deals
include USD 200,000 worth of cement for Benin and USD 500,000 worth
of steel billets for Cote d'Ivoire. Services include engineering,
training (eg. land-mine clearing), infotech, and environment (through
the Global Environment Fund.) Procurement is based on open International
Competitive Bidding, Limited ICB and National ICB depending upon the
value of the contract. Relevant documents are Invitation to Bid, Request
for Proposal, Invitation to Tender, and Request for Quotation.Top
Trend
Momentum of Deposit Mobilization
BY ABEBE TADESSE
The introduction of modern banking in Ethiopia goes back to the year
1905. The first bank by the name Bank of Abyssinia was established
with a starting capital of 100,000 pound sterling. However, it was
not easy for the bank to overcome the competition of the informal
credit system or the ingrained habit of private lending.
In 1942, the state's Bank of Ethiopia was established and continued
to serve as both commercial and central bank of the country until
1963, when a new legislation brought to life the Commercial Bank of
Ethiopia and the National Bank with two respective functions. During
the same year, a private bank named the Addis Ababa Bank was founded
and rose to become an energetic rival to the state-owned Commercial
Bank of Ethiopia in the subsequent decade.
However, such a liberalized financial system was disrupted in 1974
with the coming to power of the Derg regime, which nationalized all
bank and non-bank financial institutions.
Following the advent of liberalized financial sector to the exclusive
participation of the local private sector in January 1994, six new
private banks namely, Awash International Bank, Dashen Bank of Abyssinia,
Weggagen Bank, United Bank and Nib International Bank, were established.
Both private and government owned banks now compete among each other
for deposits, loans and other banking services. This competition,
however, has not yet resulted in a significant alteration of balance
sheet of the banking industry as the sector is still dominated by
the Commercial Bank of Ethiopia (CBE).
Deposits are mobilized almost from all economic agents including individuals,
private and public business enterprises, financial institutions and
the government.
The emergence of private banks since 1994/95 was a new feature in
the financial sector and their share in total deposits increased from
0.33pc in 1994/95 to 11pc by 2000.
The total amount of deposits mobilized by both private and public
banks in the year 2000 was 20.38 billion Br. Of this amount, CBE alone
mobilized more than 16 billion Br, while private banks altogether
managed to gather about 2.24 billion Br in deposits.
Mobilization of deposits started to gain momentum during the post-reform
years spanning from the period 1991/92 to 1999/2000. Growth rate of
total deposits in this period averaged 19 pc per annum. Top
Tender Mart
Suppliers of explosives and accessories. Blue Nile Construction Enterprise,
Tel: 513000, PO Box 1182. Open on 17 May 2001. Publication The Ethiopian
Herald 15 April 2001.
Suppliers of polyester fiber. Awassa Textile S.C., Tel: 518900, PO
Box: 1083. Open on 12 May 2001. Publication The Ethiopian Herald 15
April 2001.
Contractors of category GC/RC1 and above for the construction of three
bridges. Ethiopian Roads Authority, Tel: 156603, PO Box 1770. Open
on 19 June 2001. Publication the Ethiopian Herald 15 April 2001.
Bidders for the importation of mineral fertilizer. Agricultural Inputs
Supply Enterprise, Tel: 515119, Fax: 511311, PO Box: 100077. Open
on 10 May 2001. Publication The Ethiopian Herald 15 April 2001.
Suppliers of various spare part items. The Ethiopian Electric Power
Corporation, Tel: 560027, Fax: 550822. Open on 15 May 2001. Publication
The Ethiopian Herald 15 April 2001.
Suppliers of 15 tone of polyester single yarn. Edget Yarn and Sewing
Thread Factory, Tel: 717148, Fax: 713855, PO Box 456. Open on 11 May
2001. Publication The Ethiopian Herald 15 April 2001.
Suppliers of diesel generating set, forklift track, power hacksaw
and other materials. Addis Ababa Foam and Plastic Factory, Tel, 513255.
Open on 4 May 2001. Publication The Ethiopian Herald 15 April 2001.
Contractors of category GC/RC 6 and above for the maintenance of Tikur
Anbessa Specialized Hospital compound asphalt. Construction Design
Enterprise. Open on 10 May 2001. Publication The Ethiopian Herald
15 April 2001.
Suppliers of construction machinery, equipment, and vehicles. Procurement
Service Enterprise, Tel: 663613, Fax: 663579, PO Box. 7858. Open on
31 May 2001. Publication The Ethiopian Herald 15 April 2001.
Suppliers of plan sifter, vibro separator and grain weigher. Yerer
Flour S.C., Tel: 02-111543. Open on 30 April 2001. Publication The
Ethiopian Herald 15 April 2001.
Suppliers of ingersoll rand wagon drill spare parts. Blue Nile Construction
Enterprise, Tel: 513000, PO Box 1182. Open on 17 May 2001. Publication
The Ethiopian Herald 15 April 2001.
Suppliers of laboratory supplies, reagents and culture media. SNNPRG
Health Bureau, Tel: 06-201061. Open on 14 May 2001. Publication The
Ethiopian Herald 15 April 2001.
Suppliers of wheat. Nazareth Floor Factory, Tel: 112978. Open on 25
April 2001. Publication Addis Zemen 16 April 2001.
Suppliers of video camera, TV monitor stabilizer and other materials.
Central Statistics Authority. Open on 18 May 2001. Publication Addis
Zemen 17 April 2001.
Bidders for the consulting service of design review and construction
supervision. Rurla Roads Authority of the Amhara National Regional
State, Tel: 200921, Fax: 201988, PO Box: 382. Open 2 May 2001. Publication
The Ethiopian Herald 17 April 2001.
Suppliers of desktop XRF analyzer. Ethiopian Miniral Development S.C.,
Tel: 186594, Fax: 611776, PO Box 2543. Open on 17 May 2001. Publication
The Ethiopian Herald 17 April 2001.
Bidders for the consultancy service on restructuring, salary scale
revision, development of operating policies and procedure manuals.
Ethio Nippon Technical C.O., PO Box: 2250. Open on 15 May 2001. Publication
The Ethiopian Herald 17 April 2001.
Suppliers of personal computers and printers. Finchaa Sugar Factory,
Tel: 512486, Fax: 512911, PO Box 5734. Open on 27 April 2001. Publication
The Ethiopian Herald 17 April 2001.
Surveying companies to inspect the quality of grain. Disaster Prevention
and Preparedness Commission, Tel: 513687. Open on 3 May 2001. Publication
The Ethiopian Herald 17 April 2001.
Bidders for erection of metal water tank. Development Bank of Ethiopia.
Open on 24 April 2001. Publication The Ethiopian Herald 17 April 2001.
Top
Business
Opportunity
EI-Nasr Export and Import Company is looking for exporters of garments.
Contact with the following address: - Giza - Cairo Egypt, Tel: 0224151542,
Fax: 0224151542, E-mail: faiedco@usa.net.
Alukson Investment is looking for exporters of garments - under wears,
cosmetics, electronics, watches, and cameras. Contact with the following
address: - Marhe Plantain Douala, Cameroon, Tel: 237-98-39-69, E-mail:
aluksoninvestment@yahoo.com.
Ste Climax Benin Ltd is looking for exporters of men/ladies under
wears, silk scarves, brassieres, pants and watches. Contact with the
following address: - Carre, No: 103 Missebo, 01 Bp 4107, Cotonou Republic
of Benin, Tel: 00229-935133, Fax: 00229-313701, E-mail: kalspence@usa.net.
Ropedo International Inc. is looking for exporters of men shirt. Contact
with the following address: - 2nd Fl. No. 4, Lane 560, Chong-Cheng
Rd. Hsin-Dan City, Taipei Shen, Taiwan R.O.C. Tel: 886-2-22185256,
Fax: 886-2-22188636, E-mail: emmal@mail.bestbags.com.tw.
Al-Status Impex is looking for exporters of bed sheets. Contact with
the following address: - 701, Status Apts., Yari Rd, Versova Andheri
(West), Mumbai, Maharashtra 400061, India, Tel: 00-91-2636-0294, Fax:
00-91-2631-8297, E-mail: alstatus@edifmail.com.
Jose Pintor is looking for exporters of garlic, kiwis, mandarins and
oranges. Contact with the following address: - Tel: 34917866115, Fax:
3491786616, E-mail: lombardi-fruits@autorespond.com, Spain.
Noble Distributors is looking for exporters of garlic, onions, potatoes
& fresh fruits, tin packed foodstuffs and vegetables fruits pickles.
Contact with the following address: - 68100, Kuala Lumpur, Malaysia,
Tel: 60-3-61205576, Fax: 60-3-61207742, E-mail: humble@tm.net.my.
Productos Lombardi, S.L. is looking for exporters of fresh flowers.
Contact with the following address: - Mercamdrid, Ed. Cefrusa 1, Madrid,
Spain, Tel: 34-91-786-6115, Fax: 34-91-786-6116, Homepage: http://
www.teleline.es/personal/vitalian.
Rombo M is looking for exporters of fresh fish. Contact with the following
address: - Moscow Russia, Tel: (7095) 955-13-42, Fax: (7095) 955-13-42,
E-mail: rublevam@mail.ru Website: http://www.httpcity.ru/Rombo M.
Tang Ma International Trade Inc. is looking for exporters of tantalite
with Ta2o5 of 3-5 pc. Contact with the following address: - Rm. 602
Hongta, Building Shuiwantou, Jida, Zhuhai City, P.R.C China, Tel:
86-756-3362919, Fax: 86-756-3362050, E-mail: i2000tangma@21cn.com.
Top
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