Wednesday, January 19, 2022
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Oromia region drifts away from ECX


Oromia region decides to incline towards vertical integration trading which has sharply shrunk the coffee product supplied to the electronic trading platform, Ethiopian Commodity Exchange (ECX), Capital has learnt.
It is to be recalled that on its establishment in 2008, ECX had embarked its exclusive trading with coffee and other export commodities followed the path.
However, a couple of years ago the Ethiopian Coffee and Tea Authority (ECTA) introduced vertical integration as an alternative to trade export for coffee besides the electronic trading platform.
The authority has also stated that it has seen success on the new trading scheme in terms of increasing the volume and value from coffee export. It has also said that the scheme has made farmers more to benefit more from the scheme.
Particularly in the past budget year, a significant volume of coffee was exported through vertical integration, a scheme that connected exporters directly to suppliers or farmers rather than a platform facilitated by ECX.
In the five months of the budget year, the coffee export has registered huge achievement to which Adugna Debela, Director General of ECTA, told Capital that the role of vertical integration was significant in attaining the success.
Reliable sources told Capital that the administration in Oromia region has reached a consensus to sell almost all export coffee through vertical integration.
“The regional administration at senior level has decided this year’s harvest to be sold through the new scheme rather than ECX,” a source told Capital.
Based on that, most of the beans which is the major export commodity of Ethiopia which is sourced from Oromia will not trade at ECX.
Sources at ECX have also confirmed that. Sources said that currently the bean that comes from Oromia is mainly specialty or a product that is sold for a local market.
“The volume of coffee that is traded at ECX in the first six months of the current budget year has declined significantly. It shows how the bean that comes from Oromia has dropped,” sources at ECX said.
Oromia is producer of more than three quarter of coffee in the country.
“Currently we are mostly trading coffee which comes from Sidama and West South, the two new regions which split from SNNP, and from Gedio of SNNP,” ECX’s sources added.
Coffee products in the family of Mizan, Tepi, Bench Maji, Yirga Chefe and Sidama are included from those that come from the stated regions above, while small volumes of coffee from other regions like Gambela has also come to the ECX warehouse for export.
However the regional administration passed a decision that almost all export coffee shall be traded outside the ECX, which caused uproar by some of the suppliers. “Some of the suppliers want to trade the product through ECX since they shall get their money immediately when the bean is sold, while on the vertical integration that may not happen,” sources explain.
Some other experts support the decision of Oromia region.
Dawit Tadesse, Assistant Professor and Managing Partner of Lead Plus Consulting, partly supported the decision. “As far as my knowledge, the impact assessments of ECX that show increase for the country, in earnings, production and productivity have not been conducted. Besides that the trading platform was formed on the aim to empower the farmer. Actually it has not benefited farmers since the main actors are suppliers who buy the product from farmers and exporters,” he expressed his argument to Capital.
“There were hypothetical assumptions that farmers shall sell their products on competitive price since they have prices and other relevant information because of the modern trading platform but actually they are still out of the play ground,” a lecturer and business consultant explained.
He said that the new experience that connects farmers to exporters is the latest trend that may benefit farmers.
“Commodity trading systems in other African countries have not been successful, while their governments are not using the trading platforms as mandatory and the only scheme for their agricultural products,” Dawit elaborates, adding, “it is different in Ethiopia. ECX is politically imposed by the government and it is the only trading place for major agricultural export commodities like coffee or sesame.”
“If it was not an exclusive trading place the benefit or failure of ECX would have been seen. I am not stating that ECX is fully defunct. In my view the government must see alternative ways to modify the trading scheme to make farmers benefit more from the scheme,” he concluded.
In related with the out coming of new products, ECX has also introduced several beneficiary schemes to attract suppliers to trade the beans through its trading scheme.
In the first five months of the 2021/22 budget year, the country secured almost double hard currency compared with the same period of last year from coffee export.
Few weeks ago Adugna said that the vertical integration scheme brew success in terms of export earning.
For the current year five months over 133,113 tons of coffee has been exported showing increment of 51,546 tons compared with the preceding year.
ECTA’s projection was that to earn USD 359 million by exporting 108 thousand tons of coffee. However, the actual performance exceeded by 44 percent in terms of revenue that was USD 515 and 23 percent higher in volume.

Birr shrivels in value against the dollar


The value of birr has shown a depreciation of over a quarter when compared against the dollar in a single year.
The government under the Home Grown Economic Reform Agenda has taken several macro economic reforms besides structural changes and sectoral reforms.
One of the measures taken by the government is that of making the value of birr equivalent to its market value.
As per that measure, the value of birr has dropped by 25.5 percent year-on-year from December 31, 2020 to December 31, 2021 against the USD.
As the depreciation rate hit more than a quarter in a single year, the government has promised to apply a policy to give the birr a proper place against major hard currencies for the time being since the exchange market is currently regulated by the government which will be free to be governed by the market in due time.
Owing to the depreciation of the currency, the urgency to move towards a market-based exchange rate and foreign exchange (FX) market liberalization is well on course.
Under that process, a fraction of cents depreciation will be observed on the daily exchange rate in the past few years. International partners like the IMF have also urged the government to increase the pace of exchange rate depreciation.
According to the exchange data, on December 31, 2020 the selling price of a dollar was 39.96 birr that surged to 50.17 at the end of last year. The exchange rate on Thursday January 13 stood at 50.43 birr.
Within six months of the current fiscal year that started on July 1, 2021 and closed December 31 alone, the birr has depreciated by 12.5 percent value against USD.
Meanwhile the depreciation rate to USD is not similar compared with other major hard currencies like pound sterling or euro.
The value reduction of birr against the pound and euro is a bit lower in terms of percentage when compared with the USD.
For instance the selling rate of pound on December 31 2020 was 51.94 birr that depreciated by 23.68 percent to 64.24 birr.
Similarly, the selling rate of a euro on December 31, 2020 was 49.03 birr that reached to 56.51 birr after a year by depreciation of 15.25 percent.
Meanwhile in the preceding period for instance in the past fiscal year, the depreciation rate of birr against pound and euro was higher when compared with the depreciation rate against USD.
According to experts, the difference in rate between currencies depends on the value of the major exchange rate in the global market.
National Bank of Ethiopia recently reported that during the fourth quarter of 2020/21 that ended June 30, 2021, in the retail foreign exchange market, the average buying rate in the forex bureau of commercial banks stood at 42.53 birr /USD, showing a 25.6 percent annual depreciation, while the selling rate (43.37 birr /USD) depreciated by 25.7 percent. Thus, the average spread between the buying and the selling rates increased to 2.0 percent from 1.9 percent a year ago.
“During the review quarter, through the fast depreciation of Birr along with the relative price advantage of domestic economy nominal effective exchange rate/NEER appreciated by 80.1 percent and resulted in real effective exchange rate/REER to depreciate by 0.01 percent. Thus, it slightly enhances international competitiveness of the country in global market,” the report disclosed.
About a year ago, officials of the Ministry of Finance had stated that the government is using the diversified devaluation method.
Eyob Tekalign, Finance State Minister, explained that the meticulous approach, which is derived from Ethiopia’s context, was introduced to adjust the distorted foreign exchange system.
The State Minister indicated that the shortcomings in Ethiopia’s poor market system have caused a huge disparity between birr’s real value and the amount it is being sold at in the market.
He said the distorted foreign exchange system and the market do not showcase the real value of the birr.
The government has also stated about two years ago that continued commitment to closing the gap with the parallel rate is to eventually move to a market-clearing exchange rate but signaled a need to continue moving with caution.
It has also stated that a FX roadmap has been undertaken to lay the groundwork for an eventual move to a market-clearing exchange rate.

Ministry vows to back afflicted SMEs

(Photo: Anteneh Aklilu)

Ethiopian Ministry of Labor and Skills has begun detailed assessments on the damages of enterprises resulting from the conflict in the northern part of the country, with the severity of the damages to be disclosed as soon as assessments are finalized.
According to the Ministry, the damage is unknown. As a result, the Ministry has formed and sent a team to look into the matter. “We are carrying out an extensive investigation on the damages after which we will provide the necessary assistance required following the analysis,” explained Muferiat Kamil, Minister of Labor and Skill.
As the Ministry said, based on the assessment enterprises will get different supports to re-build their businesses.
The Ministry is working to bring the government, private sector, development partners, and young people together to ensure that all young people are either in education, training, or in employment by 2030.
The Ministry of Labor and Skills has also organized a forum to connect the Ethiopian Diasporas that came home following the Prime Minister’s call to bloom entrepreneurs.
Speaking at the ceremony, Muferiat indicated that the government is conducting different efforts to support the sector including preparing policy. And the Ministry in its part is working with different stake holders and government organizations to develop the sector.
The Diaspora Tech Homecoming: Entrepreneur Pitch and B2B connecting event which was held on January 13, 2022 at Friendship Park with the presence of higher government officials brought together 50 plus selected startups who attended the program briefing participants on their product and service.
In her opening remarks, the Minister of Labor and Skills underlined that it is important to encourage entrepreneurs and keep them engaged. During the ceremony novice entrepreneurs were exposed to potential investors and Diaspora from various countries. Similarly, the Diaspora, esteemed ministers and guests from various institutions visited the works of the youth.

ECAA sees rejuvenation in leadership


Ethiopian Civil Aviation Authority (ECAA) sees shift in leadership as three top leaders get appointed. Hiwot Mossisa has been assigned to represent Ethiopia on the international aviation organization that is under UN. Successor to the founding head of Ethiopian Maritime Authority (EMA) and the sector guru has also been replaced.
Late this week the Office of the Prime Minister has announced the assignment of two new top leaders for ECAA. While sources said that the assignment of additional leaders is expected. Besides that EMA has got a new head after almost a decade and half, while the assignment of new representative at the global aviation stage shall be disclosed in the coming days.
As per the new post that Prime Minister Abiy Ahmed has given to Getachew Mengiste, who previously represented Ethiopia at the International Civil Aviation Organization (ICAO) based in Montreal, Canada, sees Getachew becoming Director General of ECAA succeeding Wosenyeleh Hunegnaw (Col).
Mengistu Nigussie, who was serving ECAA under the air space management position, was also assigned to the position of Deputy Director General leading the Air Navigation sector.
Sources told Capital that the assignment of another Deputy Director General for Aviation Regulation at ECAA is expected. According to sources, despite the name of third officials not being revealed as of yet, sources opine that the authority will consider gender parity on the matter.
Wosenyeleh (Col), who was a former technician at Ethiopian Air Force, served at the top position for 14 years. His service duration is the longest ever for the post at the authority.
He told Capital that there are problems and weaknesses everywhere but on his leadership the authority enabled to register several successes.
“In my view for the past 14 years without a single day leave, I provided the required effort the country demanded from me,” Wosenyeleh (Col) says, “When i was in leadership, we have tirelessly worked to make the authority internationally well recognized to which ICAO and other local and international partners acknowledge, the same.”
He said that during his leadership, ECAA has achieved highest ICAO audit results that most African countries were unable to attain.
Aviation sector experts told Capital that the former Director General was successful in capacity building, training and producing new professionals, while there are claims in related with salary and benefit, which is beyond his power.
“I shall give my testimony that Wosenyeleh (Col) achieved in terms of increasing the number of air traffic controllers, and the authority has been highly engaged on capacity building and trainings,” one of the sector observers told Capital.
The new Director General, Getachew, served as State Minister of Transport before he was assigned for international representation. Experts said that Getachew, who is the 21st leader of ECAA, is the right selection for the post since he has ample knowhow about the sector. “When he was at the Ministry of Transport he was responsible to look after ECAA and for the last five years he was at ICAO,” they underlined stamping their stand highlighting how the person is perfect for the position.
Zayed Woldegabriel, former head of Ethiopian Roads Authority (ERA), was ICAO representative in Canada before he was called to face corruption charge during Prime Minister Hailemariam Desalegn reign.
Mengistu replaced Shimeles Kibreab, who left the authority about five months ago because of age.
The unknown third official is expected to fill the vacant post of Aviation Regulation at ECAA. Sources said that Fenta Olana (Col), was assigned on the post on his return from the US. “About six months ago Fenta (Col), who served on the deputy head position for about a year, has returned to the US,” sources said.
Popular figures including former President Giram Woldgiorgis has led ECAA. Before Wosenyeleh (Col) Tefera Mekonnen, and Mesfin Fikru, who are now serving on senior positions at the continental aviation body had led ECAA from 2001 to 2005 and from 2005 to 2009 respectively.
ECAA basically provides air navigation, inspection and certification of aircraft, airports, airlines and aviation professionals. The objective of the authority is to ensure safe and reliable air transport service in Ethiopia.
It was recalled that a couple of weeks ago Hiwot was replaced by Misganu Arega as CEO of Ethio Engineering Group (EEG), which is part of the infamous and defunct Metal and Engineering Corporation. Now she is expected to fill the space left by Getachew.
Hiwot, who also served as civil engineer at Ethiopian Airport Enterprise when it was under ECAA, has served at senior position in ERA before she was assigned as founding head of Ethiopian Toll Roads Enterprise. On her last career, she served as State Minister of Transport and CEO of EEG.
Ethiopian Airport Enterprise that is under Ethiopian Airlines Group since July 2017 was under ECAA before it was established as a separate public enterprises about 2002.
Hiwot told Capital that it is early to state details.
On Friday the PM has also given another appointment to the Ethiopian Maritime Authority (EMA). As per that Yehualaeshet Jemere, former State Minister of Transport (MoT), has become the second Director General for EMA to fill the vacant position that was left by the founding head and maritime sector guru, Mekonnen Abera.
Mekonnen, is known for the big role he has played from the inception to the re-establishment of the government regulatory body for the maritime industry that was dissolved after the fall of Derg. The Marine TransPort Authority regulatory services was dissolved and transferred to different offices like Ministry of Transport and Ministry of Trade, while the study that Mekonnen and others were involved in showed that a relevant regulatory body will be required to govern the sector despite the country being landlocked.
Based on that EMA was established in 2007 by Proclamation No. 549/2007 and Mekonnen was assigned to undertake the formation and leadership responsibility and he led the regulatory body for 14 years.
He told Capital he resigned from the responsibility about three months ago. Mekonnen who started his career on the logistics sector at the former Maritime Transit Service that he served up to marketing manager service has had a career that has spanned 35 years in the sector. “Privately I will continue providing my service in the sector that I specialized in,” he said.
Besides playing a leading role to form EMA Mekonnen is stated as a prior actor for the formation of dry port and multimodal services, while those who know his role said that he contributed heavily to form the Ethiopian Shipping and Logistics Services Enterprise with the amalgamation of four public logistics enterprises.
When he was State Minister at MoT Yehualshet was responsible to regulate the activity of EMA and ECAA besides other responsibilities.
Yehualshet has also served as Deputy CEO and Rail Network Division Head at Ethiopian Railways Corporation.