In the ongoing legal saga between billionaire Sheikh Mohamed Ali Al Amoudi and his ex-partner and close friend Abinet Gebremeskel, a judge has ruled in the tycoon’s favor in relation to the Bole Tower PLC case.
The plaintiff, Abinet, filed a charge with the Federal First Instant Court Commercial and Investment Bench in September 2021. The complaint demanded that Al Amoudi, the defendant, resign from the firm or that it be dissolved, as Abinet owns forty percent of the company that was founded approximately 22 years ago.
In his filing, Abinet stated that he disagrees with the defendant, who has filed multiple charges in different benches, and that he played several important roles in the company’s expansion while serving as general manager.
He also added that he has personally invested in order to complete projects. He asserted that the defendant ought to vacate the share company or the court ought to rule that the firm must dissolve in accordance with the recognized legal process in the nation.
The defendant contended that dissolving the company would harm the national interest and also argued that his exclusion from ownership should not be enforced.
Instead of dissolving the company, he contended, the plaintiff should be excluded from the company or sell his ownership position.
Additionally, Al Amoudi filed a lawsuit against the plaintiff, alleging that Abinet was responsible for the disappearance of company legal documents, such as the memorandum of association, from the local government administration and for the unauthorized transfer of ownership of a land parcel and other properties at the investment site.
In his charge sheet, the defendant also said that the plaintiff obtained a 425 million birr loan from Dashen Bank in the company’s name, but that he misused it and transferred it to himself, his friends, and family, harming the company’s interests.
Additionally, he stated that the plaintiff was supposed to incorporate the 2,000 square meter parcel of land as business property, as per the company’s memorandum of association, but he did not.
He maintained that the plaintiff had obtained a title deed in his own name in opposition to the terms of the company’s memorandum of formation.
He argued that the court should bar the plaintiff from ownership of the business by their decision.
The plaintiff, on his part, argued that, aside from the 2,000 square meters he claimed to be in accordance with the memorandum of association, he intended to include two plots of land of 3,383 square meters and 1,971 square meters that belong to him, and that there is no legal basis to include them in the company.
The court that convened on Monday, April 8, rendered a ruling that rejected the plaintiff’s demand that the defendant quit the firm or dissolve it.It reminded me of the recent ruling by the Federal High Court that stated Abient personally did not own the properties, but rather the Share Company did. In regards to the defendant’s expulsion from the share company, the First Instant Court concluded that the plaintiff had not provided a reasonable explanation and therefore the defendant would remain a shareholder in Bole Tower plc.
The plaintiff, who served as general manager of the firm for 20 years, was accused by the defendant of improperly leading the business, not paying his share payment as stated in the company’s memorandum of association, dishonestly altering the title document, and committing other unlawful acts.
Furthermore, the defendant requested that the plaintiff be prohibited from owning any shares in the business. The court made a final decision, ordering the plaintiff to leave the share company and allowing the defendant (Al Amoudi) to remain the company’s owner, taking into account the verdict of the Federal Higher Court and the decision of the First Instant Court in other related cases.
Very recently, the First Instant Court has issued a verdict on Abinet’s removal from the position of general manager at the company.
The court, which dismissed the defendant’s argument that Abinet had not fulfilled his commitment to contribute shares, also stated that Abient would receive his entire interest from the company upon his departure.

The financial sector is said to be threatened by a significant depositor concentration in the banking sector.

A new report launched by the National Bank of Ethiopia (NBE), a central bank, aims to address risks and promote financial stability in Ethiopia.

The report, ‘Financial Stability Report’, examines developments and risks in Ethiopia’s economy in general, and in the financial sector in particular. It evaluates the risks that the financial sector, including the banking industry, faced in the fiscal year that ended in June of last year.

It states that the high concentration of deposits and the difference in maturities between deposits and loans may create liquidity risk in the banking sector, despite the existing high liquidity ratio.

According to the report, at the end of June 2023, 56.3 percent of the total banking sector deposits were held by only 0.5 percent of the total banking sector depositors. “In addition, the liquid assets of banks only included a small share of high-quality liquid assets (cash).”

“As a result, some banks were facing real-time transaction-level liquidity shortages,” it added.

The report elaborates that the liquidity stress test considers the aggregate impact on the banking sector liquidity if the top ten depositors in each bank suddenly withdraw all their money.

It states that the stress test results show that the banking sector liquidity ratio would fall from 24 percent in the pre-shock situation (based on data as of the end of June 2023) to 13.0 percent, slightly below the 15 percent regulatory minimum requirement.

However, some of the banks would be in a worse situation than the industry average. “Even though the systemic bank, Commercial Bank of Ethiopia (CBE), shows resilience to the shock, 18 banks would fail to meet the regulatory minimum requirement – four medium-sized banks and 14 small banks.”

These results suggest that many Ethiopian commercial banks are highly sensitive to liquidity risk from sudden withdrawals by a few big depositors. The banking industry has also become more sensitive at the end of June 2023 than in the previous year.

The report also reveals that the banking sector’s loans and advances are concentrated in the hands of a few large borrowers.

It states that the top ten borrowers from the banking industry held 23.5 percent of total loans and advances of the banking industry at the end of June 2023, a significantly higher share than a year earlier, which was 18.7 percent.

The report said that even though borrowers with an individual credit exposure of above 10 million birr constituted only 0.5 percent of the total, they held almost three-quarters (73.7 percent) of the entire banking sector loans – again, a higher share than the year before. Virtually all loans (99.8 percent at the end of June 2023) were held by borrowers from urban areas.During the same period, the ratio of loans to deposits rose by 0.9 percentage points to 60.6 percent. Meanwhile, the ratio of loans and bonds to deposits dropped slightly to 90.3 percent. “This is still very high, though, and suggests that nearly all depositors’ money is held by borrowers rather than being liquid assets, which could lead to a liquidity problem under unfavorable circumstances.”

Total deposits at end-June 2023 reached 2.2 trillion birr, accounting for 24.8 percent of GDP, while the total loans and bonds of banks amounted to 1.9 trillion birr, representing 21.7 percent of GDP. Total bank deposits grew by 24.6 percent, reflecting rapid growth in both saving and time deposits. Similarly, loans and bonds grew by 24.3 percent. However, GDP increased at a faster rate than the share of deposits, causing it to decrease from 28.2 percent in the previous year to 24.8 percent by end-June 2023. The share of loans and bonds also decreased from 16.0 percent to 14.3 percent.

Total assets of commercial banks reached 2,845.9 billion birr by end-June 2023, marking a 19.9 percent increase from the previous year.

By end-June 2023, the total assets of the financial sector amounted to 3.12 trillion birr, which was 20.4 percent higher than the previous year. These assets accounted for 35.8 percent of GDP, compared to 42.1 percent at the end of June 2022.

Tighter regulatory standards on credit and deposit concentration risks are necessary, given the high concentration of loans and deposits. NBE intends to mitigate market risks by implementing prudent measures and enhancing governance standards and practices.

The report classified commercial banks into three categories based on their assets: large, which includes only CBE; medium, which includes five banks (Awash, Abyssinia, Dashen, Hibret, and Cooperative Bank of Oromia); and small, which includes the remaining financial firms.

The Ethiopian government has enacted a pivotal policy shift, opening previously protected commercial sectors to foreign investment. This strategic move, articulated in a directive chaired by Prime Minister Abiy Ahmed, aims to invigorate the nation’s productivity and competitive stance in the global market.

The directive, which was released last month, reminded that the government had developed a policy to protect specific trading sectors from competition from foreign investment. The purpose of this policy was to support the growth of domestic investors, both qualitatively and quantitatively, and their integration into the global trade value chain. Ultimately, it aimed to shift them towards value-added investments.

The preamble of the directive, issued by the Ethiopian Investment Board and chaired by Prime Minister Abiy Ahmed, stated that the policy objective has not been met on the scale anticipated. This is due to the long period of time since policy implementation began, and because the protected sectors have faced complaints about service reach, quality, efficiency, and an increasing trend of illegal practices.

Another concern mentioned is the lack of fair competition practices in the restricted business areas.

To address these challenges, a new approach is required. This approach aims to reorganize the national policy rationale on reserving the export, import, wholesale, and retail trade sectors for domestic investors. It also promotes the gradual opening of these sectors to willing and capable foreign investors. Further liberalization measures will be based on practical appraisal of the implementation process and valuation. This approach is outlined in the Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investments No. 1001/2024. The directive mentions important policy changes that have been recently brought up by government representatives, such as Adanech Abiebie, Mayor of Addis Ababa, and the Prime Minister.

However, experts told Capital that due to a strong desire to join the World Trade Organization, the government will eventually open up the entire sector. The question is simply when this will happen.

Retail

Under the new law, a foreign investor may now participate in retail trade investments that were previously restricted to local investors. According to the directive, within three years, retail trade on land/building with a floor area of at least 2000 square meters should commit to establishing five supermarkets, and complete the opening of at least two.

A foreign investor looking to create a hypermarket should invest in a facility with a floor size of at least 5,000 square meters. For larger facilities, the required floor size is 10,000 square meters.

Export

In terms of the export industry, foreign investors will now oversee the management of raw coffee, khat, oilseeds, pulses, hides and skins, forest products, poultry, and livestock. According to the directive, a foreign investor wishing to export raw coffee must contractually commit to exporting at least USD 10 million worth of the commodity within the permit year and must have been sourcing at least USD 10 million worth of raw coffee annually from Ethiopia for the previous three years. For oilseeds, it is five million USD, and for khat and pulses, it is one million USD.

It is open to the livestock sector subject to prior experience and permit-linked contractual commitment. For foreign companies wishing to participate in the export trade of hides and skins, forest products, and poultry, their annual performance for the last three consecutive years must be at least USD 500,000. Additionally, they must contractually agree to attain the export of the same amount.

In accordance with the directive, a foreign investor who has never before purchased goods from Ethiopia must prove that it has a well-established market and present a purchase order contract worth at least USD 12.5 million for raw coffee, at least USD 7.5 million for oilseeds, USD 1.5 million for khat and pulses, and at least USD 750,000 for poultry, hides and skins, and forest products. The minimum amount required for other export trade products covered by the directive is USD 500,000.

Nonetheless, experts in the trade industry and others working in the export market have doubts about the recent approval.

They said that all items that may be exported are exported and that it can have an impact on the current local exporter.

According to an expert in the export business, “the government has unquestionably meticulously analyzed the advantages and disadvantages of opening these sectors to foreigners, albeit with certain conditions,” making this move a significant milestone.

“The prosperity of our country ultimately depends on progression, the sale of agricultural goods throughout the world, and strong foreign exchange revenue that are essential to our aspirations for development,” an exporter said.

“But I have doubts about whether this tactical adjustment can significantly increase our foreign exchange profits,” he added, posing the questions of what significant contributions foreign companies can make and what aspects of Ethiopian exports the foreign exporters neglected to address.

The exporting of oil seeds and pulses, where practically all exportable volumes are shipped annually, was mentioned by an exporter who has been in the company for about 25 years and is one of the main contributors of hard currency.He continues, “I think a more promising approach would involve concerted efforts by the government to expand agricultural lands, thereby boosting the productivity of exportable commodities. It seems unlikely that Ethiopian exporters lack the capacity to fully utilize available export volumes.”

“A revolution in agriculture is desperately needed,” experts underline that increased output will unavoidably result in more exports and, as a result, larger foreign currency revenues, essentially closing the current foreign exchange imbalance our country faces.

Import

As per the new directive, with the exception of fertilizer and petroleum import trade, a manufacturer, an agent of a manufacturer, an existing manufacturing in Ethiopia exporting 50 percent of its goods, or an investor committed to importing at least USD 10 million worth of commodities yearly should be involved in the import industry.

The new law further states that any foreign investor may participate in wholesale trade investments, with the exception of fertilizer imports.

It further states that the Ministry of Trade and Regional Integration, the Ministry of Industry, the Ministry of Revenue, the Ministry of Agriculture, the Customs Commission, the National Bank of Ethiopia, and other organizations chosen by the Board would form a permanent joint committee.

The committee meets to determine whether the initiatives carried out in accordance with this Directive are accomplishing the intended goals, to take prompt action where required, and to oversee the whole implementation process.