The rule of law has once again eroded in a majority of countries this year, according to the World Justice Project (WJP) Rule of Law Index 2023.
This is the sixth consecutive Index marking global declines in the rule of law. This year alone, the rule of law declined in 59% of countries surveyed—including Ethiopia.
Since 2016, rule of law has fallen in 78% of countries studied. The rule of law factor to decline most between 2016 and 2023 is Fundamental Rights—down in 77% of countries.
Over the past seven years, Index scores for Constraints on Government Powers have fallen in 74% of countries—including Ethiopia. Around the world, legislatures, judiciaries, and civil society—including the media—have all lost ground on checking executive power, the Index shows.
These and other authoritarian trends continued in 2023, but they are slowing, with fewer countries declining in 2022 and 2023 than in earlier years.
Constraints on Government Powers fell in 56% of countries, compared to 58% in 2022 and 70% in 2021. Likewise, a smaller majority of countries saw overall rule of law declines in this year (59%) as compared to the last two (61% and 74%).
A smaller majority of countries (56%) also experienced a decline in Fundamental Rights again this year, compared to 2022 (66%).
On the other hand, declines in the functioning of justice systems are now expanding.
Two thirds of countries (66%) saw their Index scores for Civil Justice fall this year, up from 61% of countries last year—including Ethiopia. Greater justice delays and weaker enforcement are largely to blame. Meanwhile, scores for Criminal Justice also fell in slightly more countries this year (56%) than last year (55%).
“The world remains gripped by a rule of law recession characterized by executive overreach, curtailing of human rights, and justice systems that are failing to meet people’s needs,” said WJP co-founder and president William H. Neukom. “People around the world are paying the price.”
Regionally, Ethiopia ranks 30th out of 34 countries in Sub-Saharan Africa. The region’s top performer is Rwanda (ranked 41st out of 142 globally), followed by Namibia and Mauritius. The three countries with the lowest scores in the region after Ethiopia are Mauritania, Cameroon, and the Democratic Republic of the Congo (138th globally).
In the last year, 20 out of 34 countries declined in Sub-Saharan Africa. Of those 20 countries, 10 had also declined in the previous year.
Among low income countries, Ethiopia ranks 15th out of 18 countries.
Globally, the top-ranked country in the 2023 WJP Rule of Law Index is Denmark, followed by Norway, Finland, Sweden, and Germany. The country with the lowest score is Venezuela, then Cambodia, Afghanistan, Haiti, and the Democratic Republic of the Congo.
The decision of the government to facilitate the local sales of export-quality coffee in foreign currency has been positively received by coffee roasters and exporters. The Ethiopian Coffee and Tea Authority (ECTA) made history recently with a directive that closely monitors the coffee sector under government supervision. According to the new guidelines, certain locations will be designated for the local sale of coffee in foreign currency.
Coffee has been a significant export commodity for Ethiopia since the late 19th and early 20th centuries. Currently, it is the largest source of hard currency and a vital source of income for a quarter of Ethiopians. However, Ethiopian buyers have faced stringent export standards for coffee, and until about five years ago, adding value to the coffee beans was uncommon. In recent years, the government has implemented legislation and policies to encourage Ethiopian businesses to engage in value addition and export.
While value addition has been promoted, local sales of coffee products were not permitted until recently. This changed when Wild Coffee Ethiopia, a renowned premium coffee roaster, obtained a special license to sell its products in foreign currency at its shop in Addis Ababa.
“I advocated for a mechanism to sell coffee in foreign currency locally to relevant government officials,” says Gezahegn Mamo, CEO of Wild Coffee Ethiopia. “I would like to express gratitude to those who understand the concept and allow us to conduct this business for the benefit of the country and my company.” “Until recently, I was the only roaster selling coffee in foreign currency, but with the ECTA’s directive, those with the capacity to conduct this business can now legally sell the product, which is great news,” he told Capital.
Addis Belay, CEO and founder of Arada Coffee, expressed appreciation for ECTA’s decision, saying, “Our brand has gained significant acceptance in the global market, and we currently sell our beans at a good rate in duty-free shops at Bole International Airport.” He described the previous approach as paradoxical because, although they had good global penetration, Ethiopian policy prevented them from selling the beans domestically.
“The policy forces foreign workers in Ethiopia to obtain Ethiopian coffee from outside, even though Ethiopia exports coffee that is widely regarded as being of extremely high quality worldwide,” Addis stated.
According to Addis and Gezahegn, there is a substantial foreign population in Ethiopia, including expatriates from international organizations, embassies, and NGOs who are paid in foreign currency. However, they are not allowed to use foreign currency to purchase food in Ethiopia, forcing them to import it from abroad. This directly affects the country’s hard currency earnings.
“Nevertheless, such initiatives enable the nation to earn more hard currency without incurring additional costs for shipments and other expenses,” they claimed. “Addis Ababa is a major conference hub in the continent, a destination for travelers and tourists that can tap into the lucrative opportunities of this business,” Addis added, referring not only to foreign residents but also to visitors who pay in foreign currency.
According to these roasters, the new decision will contribute to elevating Ethiopian coffee’s recognition on a global scale. Gezahegn mentioned that the response has been quite positive since his company, Wild Coffee, was allowed to sell value-added coffee in foreign currencies two years ago. “I am thrilled to be a trailblazer and demonstrate how we can change the previous trajectory,” he remarked.
Gezahegn expressed some reservations about the new regulation, particularly regarding the requirement stated in article 4.6 of the directive, which mandates sellers to report transactions to the authority on a weekly basis. He believes that a reporting frequency of one to three months would be more practical. According to Article 5 of the directive, tourist hubs such as hotels, motels, lodges, pensions, restaurants, and cafes are permitted to offer export-grade value-added coffee. Additionally, parks, airports, and international conference centers have been included as hubs to market the beans.
Ethiopia, as the birthplace of coffee, boasts a diverse selection of coffee varieties unmatched by any other producer worldwide.
The Ethiopia Capital Market Authority (ECMA) discloses that registration activities are in the pipeline and will begin to on board investment banks in the coming few weeks. In compliment, the highly anticipated share sales directive is said to take effect at the start of the upcoming year.
The regulatory body tasked with overseeing the Ethiopian Securities Exchange (ESX), a soon-to-be securities exchange, and market participants disclosed that it will begin licensing investment banks that have interest in participating. These banks are anticipated to be significant players in the secondary market.
A draft directive to license securities brokers, investment advisers, operators of collective investment schemes, investment banks, securities dealers, custodians, market makers, and credit rating agencies was released by the authority during the previous fiscal year.
Since its release in recent months, the proposed law has been the subject of extensive discussion among pertinent parties. Now that the order has been passed, the authority stated that it would be starting the registration process for investment banks in the upcoming weeks.
The capital market formation proclamation states that international investment banks interested in participating in the emerging capital market may apply for licenses.
Foreign investment banks are interested in taking part in the impending trading, according to senior legal advisers at the ECMA Sirak Solomon and Solomon Bekele. “We expect some companies shall apply for registration,” they said.
It is anticipated that less than a handful of companies would register for investment banking services.
According to the capital market proclamation of 2021, an investment bank is a type of non-deposit financial institution that helps governments, businesses, and other entities raise capital by means of underwriting, serving as a middleman between securities issuers and the investing public, assisting in mergers and other corporate reorganizations, and serving institutional clients as a broker or financial adviser.
With respect to potential local operators acting as investment banks, the National Bank of Ethiopia and ECMA have reached a consensus that the current legislation requires financial institutions to form subsidiaries in order to function as investment banks.
According to the authorities, when the securities exchange opens for business, these local banks will have the expertise and ability to handle tasks including underwriting, investment advising, and other tasks.
Nevertheless, it’s unclear if a directive allowing financial intuitions to establish subsidiaries was issued by the financial regulatory bank.
The capital market service providers licensing and supervision directive, section VII, article 47, states that investment banks are required to act as brokers or financial advisers for institutional clients, facilitate mergers and other corporate reorganizations, act as a middleman between securities issuers and the investing public, and facilitate the issuance of securities by businesses, governments, and other entities through underwriting.
It is anticipated that the public offering and trading of securities directive, which has been subject to public consultation for the past two weeks, will be ratified within the next two months after passing the legal ratification process and taking into account pertinent feedback from the general public and governmental entities.
Due to its potential to greatly control the market, which is now very ambiguous and highly manipulated, the impending share sale directive is eagerly awaited. It is anticipated that the new guideline would reduce potential risk and increase buyer trust.
Prerequisites for the offer procedure also include the appointment of an investment bank and the acquisition of an external, impartial legal opinion.
Businesses that are just getting started must choose a compliance adviser and have ten percent of their funding come from core investors.
Once the resource mobilization was completed, the transitional provision for those who are presently selling shares should have registered at ECMA.
According to the legislation, such already-existing share firms must report to the ECMA on their activities in accordance with the public offering and trading of securities directive.
Solomon stated that there will be a one year transitional period for “Existing companies who may offer the existed share to the market,” and that the authority would thereafter oversee their operations.
The proposed directive also specifies the offer term, which is six months for newly formed firms and ninety days for established ones. In contrast, the commercial code specifies a five-year share sales period.
In reference to the matter at hand, article 80 sub article one of the draft directive stipulated that, in the event that a company is still in the formation stage, the offer period may be as long as five years, as long as the issuer or offeror satisfies the necessary requirements. Additionally, if the offer period determined by the issuer or offeror exceeds a year, the offeror or issuer is required to disclose this fact in the prospectus’s “risk” section, warning potential investors of additional risk.
The same sub-article continues, “That the issuer or offeror shall provide to the Authority update on its capital raise activity on a six-monthly basis; that the prospectus shall be valid for a period of one year; and that the issuer or offeror shall file with the Authority a new prospectus and have such prospectus approved before the current prospectus expires.” The guideline is quite severe with regard to advertising, which is one of the contentious concerns on the experience that now exists.
No issuer or investment bank may publicize the offer or sale of securities before the prospectus has been approved, according to Article 31.
“Unless it states that a prospectus is or will be published, as the case may be, and indicates where investors can obtain or will be able obtain it, no advertisement, notice, poster, or documents relating to a public offer for which a prospectus is or will be required under these directives shall be issued to or caused to be issued to the public,” it continued.
Certain business related exemptions exist, such as those for government offers, investments under five million birr, and mobilization of high-net-worth individuals, but not more than fifty persons.
