By Muluken Yewondwossen
The Addis Ababa City Road Authority (AACRA) underscores that for the coming ten year, it needs half a trillion birr to expand the metropolitan road network.
Currently, the city administration is allocating on average over a 10 billion birr every year which has allowed the road authority to handle several projects on its way to improve the infrastructure of the continental hub.
According to Moges Tibebe, Director General of AACRA, the road infrastructure that the city currently oversees is estimated at 247 billion birr.
As Moges indicates, the major share of the city administration budget goes to the capital budget of which the priority share is allocated towards road sector development.
“From the total 140 billion birr for the 2023/24 budget that the Addis Ababa City Administration approved, AACRA secured 11.6 billion birr,” he said.
Addis Ababa is the busiest city in Ethiopia that hosts the major portion of motor mobility and the fast increment of number of vehicles has made the road of the city congested, despite the city administration undertaking several new projects and road upgrades in the past two decades.
In the past few years AACRA’s project handling and project accomplishment has shown significant improvement. For instance, it is constructing the 2.4 billion birr worth, 11 km Qality-Tulu Dimtu road that is at 69 percent completion. The road also serves as the oldest gateway from Ethiopia’s logistics hub Djibouti to the city center.
The overpasses of Lebu, Imperial and Bole Michael which in total cost over 2.1 billion birr are expected to improve the traffic activity in the ring road network, and are other major project examples that are in the final stage for inauguration.
AACRA is also constructing the Bole Qality-Qilinto that includes the longest bridge of 42 meters for the city located at Village 5 around Gelan Gura.
“Totally, we are constructing a 2.3 km long river bridge and over passes that would ease the traffic activity in the city,” Moges said, adding, “The road infrastructure demand is very high in the city that needs to be sorted out which and is our major priority.”
“Currently with the support of the World Bank a transport master plan is being carried out that would allow identification of projects that should get a priority so as to see major improvements on the traffic movement,” he added.
“We are now undertaking a design work for road projects that will be constructed in the coming ten years that are expected to a cost of over 500 billion birr,” the Director General highlighted.
As Moges informed Capital, as per the master plan that was carried out by the World Bank, in the coming ten years USD 9.5 billion is required, that is, over 500 billion birr.
“In terms of birr, the amount would show changes as per inflationary experience that we are observing,” he explained whilst further elaborating, “For instance, in the past less than two years the price of fuel has surged from 23 birr per liter to 76 birr, cement, rebar and bitumen price are also surging so for sure the estimated of half a trillion birr cost will surge in the coming years.”
He reminded that most of project inputs are imported, which is out of control when it comes to managing the cost.
Budget from the city administration, loan, grant and resource from Road Fund are the major sources of funds for the road sector development in the city.
The budget allocation from the city administration is increasing every year. For example, AACRA’s budget this year has increased by almost three billion birr compared with the 2022/23 budget year’s initial budget, which was 8.95 billion birr but has now expanded to 12.4 billion birr from the resource that was allocated on additional budget.
Moges also expected this year budget to have additional funding like the past budget year, “As the initial budget, this year’s budget has set a record high.”
As he explained, since the resource that is needed for the coming ten years is very huge, AACRA is considering public private partnership on selected project sites.
To attain that, the city administration is developing an ultramodern traffic management center at the newly constructed Addis Ababa City Transport Bureau HQ at Megenagna.
“Besides undertaking aggressive road construction, we are also working to optimize the current infrastructures through intelligent transport system that will allow the use of existing roads with modern information systems,” he explained.
As the DG disclosed, in order to introduce an intelligent transport system, the civil works have been accomplished with Hisense, a contractor, on its way to install required technologies at the center and selected corners at a cost of USD 20 million to kick start the intelligent transport system.
According to AACRA’s, which is one of the well performing public office in the city administration, 1,014 km road projects that includes maintenance was carried out in the past budget year that ended July 2023.
Currently, AACRA has 528 projects out of which 54 are asphalt road projects.
Moges said that in the past five years, 82 asphalt road projects have been accomplished, which indicated that the city administration gave sensible attention to the sector development.
As the AACRA head emphasized, sustainable change in the city road is crucial for improvement.
According to the sector experts the sector still needs further effort particularly in allocating huge resources to undertake massive and aggressive expansion in the sector.
In parallel with expanding the road network, the Addis Ababa City Administration is carrying out several initiatives to improve motor mobility in the city including conducting projects to accelerate seamless traffic flow.
According to Moges, one of the ways to make Addis Ababa, a standard city is for the World Bank to provide several supports.
With the support of Word Bank the first drainage master plan is being undertaken, “Similarly, the transport master plan, which is the first at this level, is developed that is a big input for the city’s structural master plan on its revision in the coming four to five years.”
World Bank is also supporting the bus rapid transit strategy study.
Currently, AACRA is also revising the 20 year old, 28 manuals like design manual, specifications and guidelines.
The manual revision is currently being carried out by DarAl-Handasah, a well known international consultant, with the support of World Bank which will improve the road sector development that shall adopt the current international experience.
“In the past, the design manual gave priority to vehicles with the highway concept. Now it has been revised with the consideration of mixed traffic,” the Director General cited, adding, “The revision manual will take in to account non-motorized traffic, mass transportation, and public space and give priority to safety,”
“The international partner is also supporting the 4.5 km road project that stretchs from British Embassy-Haya Hulet-Bole Medhanialem,” Moges added.
The intelligent transport system is also supported by World Bank, while the civil work cost is fully covered by the city administration.
500 Billion birr required for metropolitan growth, City Road Authority signals
Omo Bank appoints Abraham Alero to steer its ship
By Muluken Yewondwossen
The financial sector supervisory body, National Bank of Ethiopia (NBE), approves the appointment of Abraham Alero as the founding president of Omo Bank, an upgraded microfinance powerhouse. The bank is now underway to move its head quarters to the capital city.
According to the letter that was signed by Frezer Ayalew, Bank Supervision Directorate Director at NBE, and issued on August 25, the go ahead was given to Abraham, to take lead of the bank.
Abraham who is not new to the banking sector previously served as the President of Berhan Bank, having joined as vice president in March 2013, rending a seven years service after which he resigned in November 2021 due to personal reasons.
As the new Omo bank president informed Capital, “I left Berhan bank to get some break and to inspire other up and coming professional.”
“The business and banking leadership have gaps across the country, and through leveraging my past experiences, for almost two years now, I was engaged in consultancy services to upgrade various professionals of multiple institutions. Now, I am back rejuvenated more than ever to take up my new role,” he said.
Abraham who has a Management undergraduate from the Addis Ababa University also leveled up to secure his master’s degree in Developmental Studies from the London South Bank University.
He joined the financial industry courtesy of the financial giant Commercial Bank of Ethiopia (CBE) as a junior clerk. His professional career CBE spanned for 14 years to which he served in different levels of capacity including senior managerial positions. Abraham then took his talents to Enat Bank where he became the founding project manager for three years.
As per the NBE proclamation, the assignment of senior executives ought to be approved by the regulatory body.
According to the information that Capital obtained from sources Omo is currently on its way to move its head quarters to Addis Ababa, which is a mandatory as per the NBE law. Currently, its HQ is in Hawassa, 270km south of Addis Ababa.
As it stands, the bank is on the process to officially get a HQ building for future inauguration in the heart of the country.
Omo Bank, previously, Omo Micro Finance Institution was established in 1996 with its name sourced from the prominent river basin found in the south western Ethiopia. The institution went on to service the public mainly in the former SNNP region.
A year ago, the institution secured a green light from NBE to upgrade to a bank which then allowed the financial firm to spread its wings nationwide rather than being limited to the former SNNP region.
As a result, major moves are being made to set its base in Addis Ababa and other regions.
At the current stage it has a paid up capital that has surpassed 2.5 billion birr with 12.3 billion birr in asset.
Currently, the bank is modernizing its core banking software with Oracle FS and its integration through its partnership with Profinch. The bank will implement the Flexcube core banking system as well as new fraud prevention and anti-money laundering (AML) software.
Dashen trail-blazes ‘foreign loans intermediation’ opportunity
Dashen Bank becomes the first bank to break the foreign loans intermediation glass ceiling following the financial backing of two well established European financiers.
The instrumental directive, ‘Foreign currency intermediation by banks’ which was first issued in 2020 by the National Bank of Ethiopia (NBE), and which was later amended in December 2021 to allow banks to play an intermediary role to affiliate foreign currency financing for foreign currency earning oriented businesses, has now finally come to life.
Despite the directive having a positive aim of expanding foreign currency availability, it however did not take off as expected up until recently when one of the biggest and oldest private banks, Dashen sealed a deal with two foreign financiers to access USD 40 million under the directive.
During the announcement on Tuesday, August 29 Dashen disclosed that it had reached an agreement with British International Investment (BII), the UK’s Development Finance Institution (DFI) and impact investor, and FMO, the Dutch entrepreneurial development bank to access the foreign currency as a bridge for those who want to accelerate their international business.
As per the joint commitment of the two partners, they will be able to affiliate up to USD 20 million each to Dashen.
Through this commitment, BII and FMO become the first foreign financial institutions to provide long-term funding to Ethiopia’s financial services sector under the new intermediation directive for banks issued by the National Bank of Ethiopia in 2021.
“The loan will help to drive agricultural exports and provide access to much needed foreign exchange within Ethiopia,” the statement issued read.
By providing much needed capital for the expansion of growing businesses, the development finance-backed facility enables Dashen to provide USD-denominated loans to cover the costs of importing machinery supporting farmers towards increased productivity in areas such as harvesting, logistics, and processing as well as in boosting exports earnings.
xxx“We are pleased to have achieved this historic milestone. With the exemplary co-lending of BII and FMO, Dashen Bank is breaking the ice in the materialization of the directive for foreign loans intermediation,” Asfaw Alemu, President of Dashen Bank said, adding, “The forex denominated financing will enable Dashen Bank, one of the top four private sector banks in Ethiopia serving over 5 million customers with a footprint of 800 plus branches, to support export-oriented agribusinesses.”
“On top of the badly needed foreign currency, the lessons learnt through the rigorous due diligence process will help us set the bar high when it comes to sustainable financing in Ethiopia,” he added.
Stephen Priestley, Managing Director and Head of Financial Services at BII said that his firm has been a pioneer investor in Ethiopia for the past 50 years, “Our partnership with FMO and Dashen Bank forms part of a mobilization plan that creates untapped opportunities for DFI and commercial investment into Ethiopia’s financial services sector for years to come.”
Marnix Monsfort, Director of the Financial Institutions Department at FMO said, “By providing much needed foreign currency for on-lending to the bank’s agriculture/exporting clients, FMO aims to contribute to job creation and financial inclusion of rural communities.”
According to Darren Welch, British Ambassador to Ethiopia, this first long-term, international investment into Ethiopia’s banking sector is the latest achievement in the country’s economic reform journey.
As per the, ‘Foreign Currency Intermediation by Banks Directives No. SBB/82/2021 that was replaced by the directive no. SBB/77/2020, article 4 sub article, three 1 and 2, a grace period for principal payment of at least six months and a repayment period of at least two years was included.
“Eligible businesses that shall access the foreign currency are those who engage on foreign currency generating activities, and importing of priority goods,” the NBE rules read.
Dashen is well known as a trailblazer and pioneer on digital financial schemes and for the roll out of foreign oriented payment systems in Ethiopia.
NBE sets floor prices for hotly debated premium rates
The National Bank of Ethiopia (NBE) takes a bold step to keep the vehicle insurance premium rate at a very low level. Following this move, insurance companies will no longer reduce the premium payment.
As it is well known, the premiums in the Ethiopian vehicle insurance market have been declining from time to time, with insurance companies incurring huge losses due to vehicle insurance compensation costs. During this time, the existence of each company has been challenged, which then led the Ethiopian Insurers Association to hire a vehicle insurance rate calculator (Actuary) based on the representation given by its members.
As experts close to the case express, “The implementation of the minimum premium rate has been highly anticipated.”
In a bid to calm the situation, NBE has now set the floor price that cannot be reduced any more. The floor rate does however not include the administrative cost and profit margin that insurance companies should include in their premiums, so each company is required to submit its own premium rate within one month, including its related costs.
Accordingly, the Ethiopian Insurance Association expressed its happiness towards the initiative taken by NBE, “The National Bank has taken appropriate steps to help Ethiopian insurance companies grow out of losses and develop themselves through healthy competition from the unfair market competition that was going out of control based on price reduction and not service quality and efficiency.”
“Since this action has not been taken to meet the current premium rate estimation points; as this type of activity requires daily monitoring and professional in-depth inspection, the association expresses its belief that the bank will make an adjustment of the premium rate based on the current price by hiring an appropriate professional as soon as possible,” the association expressed its hope to the central bank.
