Abay bank reels in huge profits, its highest yet, for the 2022/23 financial year. As the report showed, the bank recorded earnings of 2.1 billion birr in profit before tax, which showed a growth of 63 percent compared to the previous year.
In similar fashion, the amount of deposits of the bank increased by 29 percent from the previous year, and now stands at a colossal 41.8 billion birr.
The bank announced its performance for the financial year at the 14th general meeting of shareholders and said that the interest-free banking service deposit account increased by 40 percent peaking at 2.3 billion birr.
In the general meeting held on November 11, 2023, the bank disclosed to its shareholders that the financial powerhouse grew by 35 percent in terms of assets, which is now at 55 billion birr.
The United Insurance Company (UNIC), one of the first insurers to enter the market when the private sector was allowed to reengage, generates more than one billion birr in premiums. The firm’s great stride was also anchored by increased capital and in contrast to what was anticipated, earnings per share also increased dramatically.
The chairperson of the insurance company board of directors, Wondwossen Teshome, said during the company’s 29th general assembly on Thursday, November 9, that UNIC had achieved significant milestones in the fiscal year that ended on June 30, 2023.
According to him, the firm has identified this year as an exceptional one since it paved way for earnings to a premium of more than one billion birr during the fiscal year. According to the annual report, the insurance company’s gross written premium (GWP) for both life and general insurance operations increased by 58 percent to reach 1.5 billion birr from 953 million birr, the previous year.
According to the annual report, the GWP for general or nonlife insurance alone surpassed one billion birr, rising from 860 million birr to 1.35 billion birr. The premium rate increase on vehicle insurance beginning in November 2022 was noted as the primary driver of the 57 percent rise in the general insurance GWP.
In the reporting year, nearly every business class experienced growth; however, the motor class had a 77 percent increase in comparison to the previous year. Similar to this, UNIC’s life insurance business has shown impressive growth on GWP. The life business has grown by 65 percent in the closed year, reaching 154 million birr.
The net claims for both insurance businesses have now increased by 33 percent in the reported year, that is, from 349 million birr to 463.5 million birr. “The corporate loss ratio, however, has dropped dramatically to 47 percent from 61 percent in the 2021/22 fiscal year. Additionally, it is less than the industry average of 59 percent for the fiscal year 2022/2023,” the annual report stated.
In comparison to the same time last year, the total underwriting profit from the generals and life insurance businesses increased by 75 percent to 433.4 million birr. According to the report, UNIC’s earnings before tax increased from 206.5 million birr to 391 million birr, an 89 percent increase. Likewise, the profit after tax increased from 181.5 million birr to 327 million birr, an 80 percent increase.
The insurance firm has obtained a rise in earnings per share, which is extraordinary considering that it grew its paid up capital to 840.6 million birr during the reporting period, a 68 percent increase. According to industry analysts, a capital increase typically results in a decrease in earnings per share. “Generally, a company’s earnings per share for the upcoming year is expected to show a reduction when it boosts its capital that expand the share base, but our performance has registered extraordinary success regarding this,” Meseret Bezabih, CEO of UNIC told Capital.
“The primary reason for our success is our effective cost control. We also adopt a prompt approach to claim settlement, which has helped us avoid the market price hikes,” Meseret said. “One of the factors contributing to the year’s notable rise was the increase in vehicle insurance that went into effect in November of last year; these are the main factors that will increase our earnings,” she added.
According to UNIC, its earnings per share have increased by 29.4 percent, in the 2022/2023 fiscal year in contrast to the previous year. According to the audited report, the company’s earnings per share have increased to almost 48 percent from 37 percent in the 2021/22 fiscal year.
The insurance company, which has investment across a number of sectors including shares and buildings, has also increased its investment income. The company’s yearly investment revenue has also climbed by 47 percent to 255.6 million birr in the year under review.
UNIC’s overall asset has increased by 52 percent to about 3.3 billion birr, with nearly 1.5 billion birr representing the whole equity. The firm has 61 branches as of the end of the fiscal year, including seven new ones that opened during the year under review.
The report identifies abnormal competition among industry players as a challenge, noting that the sector regulatory body, the National Bank of Ethiopia, has issued a directive setting a minimum premium rate for motor insurance, which should allay concerns about premium undercutting rather than service quality. The research has included personnel turnover and inflation as other issues facing the industry.
The edible oil producers association reveals that, despite its members’ claims of having sufficient capacity to meet local demand at a fair price; it is still waiting on government to take swift action with regards to providing foreign exchange for the speed up of production.
This week, the association wrote another letter pleading with the government to assist the industry, which is severely backtracked by lack of sufficient input.
The Ethiopian Edible Oil Manufacturing Industries Association, an organization that represents edible oil manufacturers, recently contacted the Ministry of Finance (MoF) to request for foreign exchange help for the industry. The interest group stated in a letter that although oil producers are about to run out of input, the government is taking the lead and setting aside millions of dollars to import finished goods.
In a recent letter dated Monday, November 6, the association requested a response from the MoF about the issue, which is similar to a request it had sent not too long ago.
The sector lobby group also mentioned in the letter that its members are unable to import crude oil for their manufacturing due to a lack of foreign cash. The statement read, “However, the Ethiopian Industrial Input Development Enterprise is importing millions of dollars worth of finished products on the issuance letter of credit scheme that is backed by the Commercial Bank of Ethiopia.”
According to the statement, the combined yearly production of six of its members requires over 1.15 million metric tons of crude oil. Fibela Industrials has a manufacturing capability of 300,000 and 285,000 metric tons for Shemu and Hamaressa, respectively, of the declared yearly production requirement.
The letter states that WA Oil Factory, Al Impex Business, Gifti Foods, and Packaging can process 135,000, 114, 816, and 27,375 metric tons of crude oil annually.
The association also noted in the letter it delivered to the MoF earlier this week that domestic edible oil prices would be reduced if foreign exchange was provided in accordance with the indicated production capacity.
“In addition to the drop in retail prices for customers, the foreign exchange charge incurred for raw materials is far less than that of importing finished goods,” the letter further states, “In addition to additional advantages for manufacturers and the economy as a whole, industries would generate more employment if they were running at their full potential.”
Recalling of the allocation for the previous budget year which was under the demand and capacity of the pressers, it stated, “Although we expressed the actual demand of our factories for the budget year, which started on July, the foreign currency is yet to be released.”
Speaking with Capital, oil pressers expressed optimism that the government would respond favorably to their request for foreign exchange to be allocated for the necessary purchase of crude oil and other parts pertinent to their sector. According to Shemu, a pioneer in the business and one of the manufacturers based in Dire Dawa, the industry is now manufacturing food oil at a low capacity.
An executive at the plant stated, “We are accessing foreign currency and raw material in different ways, at least to run the industry and hold employees.”
The official at Shemu explained that most of the foreign currency generated to import the crude oil is coming from the supply of detergent products that the company produces on the lines of its factories and supply to UNHCR.
He explained the issue to Capital, saying, “We are forced to operate at minimal capacity because we are running with very limited foreign currency.”
“We are facing a challenge in the interim, and we are hoping that the government will assist us in increasing our output by providing the necessary foreign currency,” he expounded.
Regarding the continuation of its operation, at least on minimal level, the official at Shemu clarified that the company’s supply of detergent goods, which it manufactures on-site and supplies to UNHCR, accounts for the majority of the foreign exchange earned to import crude oil.
Shemu is renowned for its line of cleaning products, which includes detergents and soaps.
Additionally, he said, “We are engaging to create alternative sources of raw material for sustainable supply, including from farms that we are acquiring.” The firm uses oilseeds as an input from recently acquired farms.
The industry lobby group stated, “Our members are in danger of having to manage their employees and stop production due to a lack of foreign currency allocation.”
The Ministry of Industry (MoI) admits to being aware of the difficulties that the local metal sector has had to endure at the hand of the illegal import of finished products. Members of the Ethiopian Association of Basic Metals and Engineering Industries (EABMEI) asserted during the organization’s general assembly on Thursday, November 9, that the importation of various metal commodities with legal covering and almost no customs charge has been endangering the local industry.
Members stated that the revocation of the circular issued by the previous Prime Minister to prohibit the reckless import of completed metal goods has created an impact on local producers, who have constructed a five-fold production capacity in opposition to local demand.
A representative of the MoI stated during the general assembly that his office has been aware of the concerns expressed by manufacturers, noting that, “We have seen activities that are damaging the sector and the challenges that the sector has faced visibly. A portion of the issues arise from policy makers with lack of understanding, which might be resolved if the association worked hard in coordination with the appropriate government agencies.”
“We are aware that the local metal sector can produce more than the region’s need locally and may export goods outside. Since there is enough capacity locally, MoI does not promote the import of commodities,” he explained, adding, “In order to overcome obstacles, the industry should be helped in a structured and polite manner.”
Another official from the same ministry stated that the nation would profit from having access to materials that would support domestic manufacturing rather than importing completed items.
The metal business has been severely impacted in recent months by illegal activity and the use of legal paperwork to import massive quantities of metal goods.
“Rebar and sheet metal are imported via a variety of illicit means and under legal schemes,” said Solomon Mulugeta, General Manager of EABMEI.
He noted that despite EABMEI’s expressing concern for various government agencies, concerning information regarding criminal conduct is still being sent to the association. Members of the association that Capital reached out to expressed that nearly entirely illegally imported goods are sold for far less than what local producers actually have to pay for their production expenses.
Manufacturers, including foreign direct investments (FDIs), expressed dissatisfaction at the press conference that was held during the general assembly, claiming that they came to the nation or invested in the industry because of government’s backing and the rule of law.
The steel industry has always been a vital and growth-engine sector, and Dharmesh Lakhani, Business Head at Abyssinia Group of Industries, one of the largest FID invested in the steel industry, recalled that it is of utmost importance for any country to begin industrialization and move towards the growth path.
“Since Abyssinia and other firms have been operating here for the past 20 years, we have produced a lot of tax revenue and responsibilities in addition to creating a large number of employment opportunities. We wish to go with the expansion in a way that is right for the nation and its citizens,” Dharmesh highlighted.
“From the government’s perspective, we would like to see that this is resolved logically. I would say that a small portion of vendors have imposed very critical problems that are raised at the moment and we would like to address it as soon as possible,” he stated at the press conference.
“We have released a complaint regarding unlawful imports, illicit items, and incorrect product pricing. For the sake of the industry, we will, of course, see to it that a solution is found as quickly as possible,” he said, adding, “We would like to see the nation find a solution rather than face a major issue that would affect them all.”
Managing Director of Habesha Steel Mills, a major rebar manufacturer and another FDI investor, Kishen Raval, described the situation as nearly a survival issue, citing, “The players that are bringing the contraband or imported material on duty free bases and selling into the market are vicious. This is extremely dangerous, and those in the legal system who uphold the nation’s legal system are in grave danger.”
“However, you should like this needs to be addressed by the government so that industry can have the confidence to further invest,” the head of Habesha Steel Mills continued, noting that the industry is still expanding, “There is more work to be done, and the future holds many opportunities.”
“The majority of the steel industry, including us, pays high taxes and is consistently recognized by the government as a gold or platinum taxpayer. But given the current circumstances, it is really difficult to carry on; the industry is being harmed by all these importers who are bringing in illegal goods or who have extremely low customs levy rates,” he elaborated.
“We understand they are only able to compete because they are bypassing the rule of law,” he cited, adding, “As an industry, we are really significant employers, directly employing over 25,000 people and indirectly employing over 100,000 people. As a result, this has to be addressed so that, once it is, the sector may expand even further.”
Manufacturers claimed that the unlawful activities primarily employing the Dire Dawa Customs office is putting their factories on the verge of shut down.
As Solomon stated, “We need swift correction else the crisis would not be corrected right away and the harm would not stop at industries but would instead affect the whole country’s economic and financial sector.”
During the discussion, a representative from the Ministry of Revenue stated that his office is eager to work with industry participants to address their issues.
Capital has acquired many invoices issued for buyers from Djiboutian vendors and customs papers. According to the customs declarations issued at the Dire Dawa branch, the customs duty levied on steel imports is nearly insignificant when compared to legitimately imported goods.
The industry players stated that the government’s various initiatives have brought about the majority of the sector’s enormous investment, but the present state of affairs has caused some to leave the nation and discouraged others from making investments in Ethiopia.
Even though there is only a two million metric ton local demand for all forms of material, the sector has set itself up to produce ten million metric tons of steel products yearly.
Still, the industry can only accommodate roughly 20 percent of its production capacity because of the absence of ample foreign currency.
Members urged the government to support the industry with a range of policy instruments, including a complete ban on the import of completed steel products and duty-free incentives.
They stated that, although importing steel items like rebar had been banned for a while under the previous Prime Minister’s administration, the ban had been lifted a few years prior without sufficient reason.
