The board of directors of the National Bank of Ethiopia (NBE) aligns strategies in the form of convertibility guarantees and proclamation amendments to anchor the public private partnership (PPP) initiative which is yet to take a foothold in the country’s vital mega projects landscape.
Currently, two energy projects are under negotiation to embark on the PPP.
After undertaking massive studies and legal document developments through the Ministry of Finance (MoF), the government in 2018 enacted the PPP proclamation 1076/2018 which formalized private sector involvement through public projects for both parties mutual benefit.
Unfortunately, to date not a single project has come to fruition despite few projects coming close in the past few years.
One of the challenges to adopting the initiative has notably been with the foreign currency risk that the country faced in addition to a bad rep with the western partners, who sided against the government in connection to the northern Ethiopia conflict that erupted late 2020.
Companies, which had reached agreements with the government to engage in the energy development under the PPP framework pushed for convertibility guarantees at the pinnacle of the conflict which have since dialed down following a peace deal in November last year in South Africa.
The government cognizant of this gave some vital but selected projects to be supported by a convertibility guarantee. According to Ahmed Shide, Minister of Finance (MoF), the NBE board in whom he serves as member, has approved the currency convertibility guarantee for companies which invest on the PPP arrangement.
Experts in PPP Directorate General, which is under the MoF, disclosed that the decision was passed to give a guarantee for projects that have big values for the country.
“The decision taken by the NBE board is a big step for PPP and has boosted the confidence of interested parties who want to invest on PPP arrangement,” they said.
In the budget year, four PPP projects were targeted to be floated and so far on a special condition through the government to government (G2G) approach, two energy projects are under negotiations.
According to Ahmed, AMEA Power of Dubai, UAE is under discussions with the government to make moves on a significant energy project.
The negotiation is focused on the Aysha Wind Farm I project in Somali region to generate 300MW, and as Ahmed describes, “The one to one negotiations have been completed to about 90 percent and the only pending issues to be put to bed are tariffs which will soon be finalized.”
Similarly on another G2G approach with MASDAR, an Abu Dhabi based state company, discussions are underway to generate 500MW of solar energy in projects situated in Somali and Afar regions.
The Minister said that on the implantation of PPP, companies are demanding some sort of arrangements in issues like foreign accounts in related to the project, “They are demanding freedom on financial transactions, particularly for their projects.”
Demands in connection with the foreign currency issues have been one of the concerns that were raised by PPP developers.
Based on that, the NBE board has given a decision to provide support for the PPP investments and strategic investments on the guarantee of repatriating their profits.
As per the decision to give convertibility and transferability guarantee, minor preconditions like debt equity ratio will be demanded for provision of the guarantee for companies who demand investment in PPP.
“We hope that it will accelerate the PPP,” the Minister said, adding, “In the future, we believe that the foreign currency issue will not be a concern but in the short term, we have decided to give the guarantee.”
“It will attract investments on energy particularly geothermal, solar and wind that will go a long way to help our energy mix,” Ahmed underscored.
In the budget year, parliament has also amended the PPP proclamation on the aim to award projects through a direct negotiation manner besides the open bidding process. As experts in the PPP Directorate General express, the move has also increased the interest of potential investors.
In the beginning of the budget year, the government had issued an expression of interest (EOI) for the development of integrated diagnostic center (IDC) through PPP, while it has since been annulled due to lack of competitive participants from those who expressed their interests.
The information that Capital obtained from the PPP regulatory body signaled that the major intention of the EOI was to invest on the health sector with the private sector particularly with local investors, while it was canceled due to lack of competitive participants of which most were local participants.
The bid will be refloated in the near future with minor revisions on the document.
Within the past two years, 23 projects have been identified under PPP from over 100 proposals, while from the selected project some will not be executed under PPP as per the recommendation that came from detailed studies. Roads, energy, housing, and health are included on the selected projects.
On the aim to expand the development path through different instruments and on the objective to expand public service activities, to reduce project delays and cost overrun and to increase the utilization of resources from the private sector on public services; the government issued the first PPP policy in August 2017 which was followed by the proclamation.
Gov’t shifts gear to ensure PPP projects come to life
Wingu, Ride partner to provide swift services to customers
British business, Wingu Dot Africa and Ride which is run by Hybrid Design sign an agreement to administer data related services in a swift and secure manner including at call centers.
Nicholas Lodge, Chief Strategy Officer at Wingu, expressed that his firm is pleased to work with Ride, a company that has a solid name in Ethiopia, offering thousands of job possibilities.
“We have offered the Djibouti data center services for more than ten years. We have also collaborated with Ethiopian banks and Safaricom. Every hour, hundreds of people phone Ride to seek its services. Quick messaging transmission is achieved. In order to give Ride clients even-faster service without forcing them to leave their homes, we took care of this and used the tele infrastructure provided by the government. We’ll make every attempt to offer them reliable service,” Nicholas vowed during the signing ceremony.
According to Ride Manager Samrawit Fikru, the data center service given to a business that is industry experienced and savvy would aid Ride in its work.
“Our data is occasionally disturbed. That squanders the time of our devoted clients as well as the drivers we employ. We have agreed that Wingu would provide us with its services and safeguard them while consolidating our database,” Samrawit stated.
“As a result, we will not waste time on the data center’s service, and this will help us in better connecting the transport seeker with the transport supplier,” the Ride manager further elaborated showing the merits of the new partnership.
New trade policy promises to liberate the country
Ministry of Trade and Regional Integration (MoTRI) drafts the first ever trade, quality and livestock trading policies to streamline the country’s economic backbone of commerce and standards.
The draft trade policy targets that the country’s trade will be liberalized in the medium run of the policy implementation.
Despite trade being one of the longest economic rocks of the country, a clear policy to lead the sector has yet to be set.
Because of the sector’s problematic nature, the government over the course of the last five years has placed the gas on the pedal to alleviate these challenges by drawing a clear strategy to curve out a trade policy.
As a result, a draft directive was developed by MoTRI and has been published for additional inputs before its ratification by the Council of Ministers.
The preamble of the draft document indicated that the policy will lead the country’s trade system and will consider trade negotiations, agreements, unification, international practices and trade chains. It will also focus on commodity, service and agro industry sectors that the government and international trade players give priority to.
The trade policy is noted to be based on the creation of a robust trade sector, fair trade, and on the acknowledgement of government’s involvement on selected sectors, in consideration of the efforts of filling the gaps.
As the writings cited, “Even though the country has several bilateral, regional continental agreements to expand its trade relation, lack of a policy framework on the trade sector has created a gap for those who have ample knowledge about the agreements and the opportunity that they made. Due to that the policy will narrow the gap and create opportunity for its citizens.”
The policy also considers the global value chain (GVC) on the trade sector that will allow trading actors and SMEs to be part of the GVC and AfCFTA.
It also mentioned barriers like customs procedures; transport and logistics supplies will be eased through the policy.
The policy documents are said to demand the coordination and involvement of several ministries and other stakeholders.
As noted, the document will be an instrument for the Ethiopian trade system, and is signaled to increase productivity and diversity in the economic drive in order to build reliable and tangible development in the country.
The trade policy also gives priority to harmonize the country’s trading system, export access to input and in the expansion of the international trade besides facilities that open the market.
The policy has put three execution strategies that are classified as short, medium and long run. The initial period will focus on building a capacity for intuitions that are responsible to implement the policy.
The second phase will focus on liberalizing the commerce and the joining of the World Trade Organization on the aim to expand the potential that shall be attained when the market will be opened for global actors.
In the long run, it has targeted to boost the country’s trade and through diversified export items, it aims to attract more investments that shall be backed by a strong economic system.
In related developments, MoTRI has also drafted the first ever quality policy and livestock trading policy.
Currently, the country has regulatory bodies like Ethiopian Standards Agency, Conformity Assessment Agency, and Ethiopian National Accreditation Office which have been formed to control quality and standards but they do not have policy that helps them run on a given legal framework.
The draft policy is said to offer a solution for this and shall abide by a legal framework that allows the country to be competitive. It is further expected to allow the country to develop a required legal framework under the goal of the policy. The quality policy will cover every dimension of production quality whether it is service or goods.
The livestock trading policy also targets to use the country livestock resource properly and expand the benefit from it.
The draft document stated that despite Ethiopia being one of the richest countries on livestock resource, the potential is yet to be fully exploited; as a result the policy was crafted to guide the sector to be run accordingly.
Real Estate powerhouse Flintstone Homes, preps to sells share in July
Flintstone Homes, one of the pioneering private companies engaged in the real estate and construction sector, prepares to go public with offerings of ten million shares.
The company plans to start share selling as of July 15, 2023 and targets to generate 5 billion birr from the share sale.
According to the company’s founder, Tsedeke Yihune, during a press conference held at Hyatt Regency Hotel on Tuesday, May 16 2023, the minimum amount of shares offered for sale is 20 thousand birr while the maximum is two million birr, at one thousand birr a share.
The sale of the shares was said to be necessary mainly to transform the company from a five-person partnership to a public property, as well as to obtain additional capital. The company plans to build ten thousand houses and deliver them to consumers in the next five years.
“If an individual can start out with a capital of 6,000 birr and do in billions worth of work then it accordingly means that thousands of shareholders’ money and good management will enable to do more transcendental work,” Tsedeke noted, indicating that the plan is also to solve the company’s serious financial problems.
As indicated on the press conference, Flintstone Homes is expanding its reach in different regions. Tsedeke stated that they had plans to expand real estate construction in Oromia, Amhara, Tigray and Afar regions, especially in rural towns. The founder further pointed out that although the security problem prevented them from achieving their plans, they will implement their projects as soon as peace prevails.
During the company’s response in a series of frequently asked questions that pointed towards not delivering houses on time, the firm cited that over the last eight years it had not been able to deliver projects as per said timelines since delivering cost friendly homes takes time. Likewise, financial problems and the recent rise of cement and steel prices have aggravated the issue.
Flintstone Homes is a real estate business which was launched in 2008 by Flintstone Engineering s.co, which was formerly known as ‘Tsedeke Yihune Construction’ when founded in 1992 whist joining the Ethiopian construction sector as a level 8 building contractor. A year later the company was named Flintstone Engineering.
The firm in last 15 years has handed over five thousand houses including shops to customers. The company has about 3,500 houses under construction, and about 6,500 houses that are about to be completed and placed on the market. In the next five years, a total of 10,000 houses are planned to be handed over to customers.
