The state financial giant, Commercial Bank of Ethiopia (CBE), continues on its astonishing performance stride for the second consecutive year by surpassing targets despite the challenging economic hurdles faced in the past budget year.
For the financial year that closed June 30, 2022, the financial enterprise disclosed that the gross profit it earned surpassed set targets, in addition to its total asset surpassing over a trillion birr.
According to Teklewold Atnafu, Board Chair of CBE, the ended year was very difficult and was accompanied by several and huge challenges, “the problem is not of CBE or the banking industry or of the Ethiopian economy, but these are global economic challenges that have a ripple effect on us as well, and which sadly are still ongoing.”
He reminded the price spike on food items, petroleum, fertilizer and other commodities in the global market, and adding that reduction of aid and external loans and internal factors like conflict in the north, drought and other natural disasters in the south and other places had huge effect on the economy.
“Despite pressures from external and internal sources in the economy, we were able to register 6.6 percent growth, which I believe within the financial sector is a positive stride in the right direction,” he added.
Abie Sano, President of CBE, said that even though the financial year was full of problems; his bank was able to attain success in comparison to the preceding year surpassing its set targets for the 2021/22 financial year.
For the 2021/22 financial year, CBE targeted to mobilize an additional 112.8 billion birr in deposits and of it 110.6 billion birr was from the private sector depositors.
“The actual add up on the deposit mobilization was 154.9 billion birr which is 137 percent of the target and 11 percent higher compared with the preceding year,” Abie highlighted.
The private sector contribution for the fresh deposit mobilization was 105.6 billion birr placing the private sector saving position to 655.4 billion birr from the total deposits to stand at 74 percent share.
As of June 30, CBE’s deposit mobilization had reached 890.1 billion birr increasing by 21 percent from 735.2 billion birr of June 30, 2021.
Regarding repossessing of loans and advances that was given in the previous period, the bank targeted to collect 121.6 billion birr, and achieved a sum of 120.6 billion birr which is 102.5 percent higher in comparison to similar period of the 2020/21 fiscal year.
In the budget year under review, the fresh disbursed loan and advances was 179.2 billion birr which showed an increment of 67.6 billion birr compared with the same period of 2020/21 financial year.
According to Abei, the loan that was provided for the private sector was 34 billion birr.
In the year, the foreign currency earnings were USD 2.6 billion of that USD 2.2 billion was secured from remittance. According to the President, the hard currency earnings attained 89.2 percent of the target and were almost similar to that of the previous year.
The bank also provided USD 7.7 billion for import, of that, USD 1.4 billion was for the private sector and USD 995 million for fertilizer import.
“The foreign currency that was supplied for the year had an increment of over 42 percent compared with the same period of last year,” the President said, during the opening session at the annual performance evaluation event held at the newly built CBE HQ skyscraper.
Regarding profit, the bank secured 27.5 billion birr which is 16.3 percent higher than the projection set and 43.9 percent higher from the preceding year.
Similarly, the financial giant’s asset has risen to 1.2 trillion birr from 991.3 billion birr a year ago.
The bank that manages 1,824 branches has 35.9 million deposit accounts of that five million account holders are interest free banking service clients.
CBE sifts high profits despite turbulent economy
Ethio telecom eyes Djibouti
Ethio telecom eyes Djibouti’s telecom market, to make its first oversees service to the bordering state owned telecom company.
“Based on the re-amendment of the Ethio telecom establishment proclamation, we have been working to figure out priority areas to expand our business outside of Ethiopia and to stay competitive,” said Frehiwot Tamiru, CEO of the telecommunications firm whilst speaking at a press briefing given on Thursday July 22, 2022 regarding its annual performance. The CEO indicated that after analyzing both shortage of foreign currency and limitation of capital of the state owned telecom-company, the firm has completed selecting priority areas and its preparation to expand its business outside of Ethiopia for the 2022/23 fiscal year.
Despite the CEO not disclosing the names of countries of interest, sources explain that the firm is planning to expand its business in to the Africa market including managing telecom companies such as that of the Djibouti telecom market. To this end, according to sources higher officials of Ethio telecom have paid a visit to Djibouti to assess the overall situation.
The Djibouti government is aiming to sell a minority stake(40 percent) in the incumbent telco (retaining some control of decisions) while securing the financial backing and the management acumen of a foreign operator. The scheme is part of a larger plan to modernize the country’s economy more generally.
“One of our request to the re-amendment of the establishment proclamation is to be able to start serving outside of Ethiopia,” said the CEO indicating that even though Ethio telecom received the permit to work at an international level, it still didn’t start making moves as of yet. Ethio-Telecom Establishment (Amendment) Council of Ministers regulation no. 480/2021 allows Ethio telecom to participate in any equity investment both domestically and at international levels.
In the already ended 2021/22 fiscal year, Ethio telecom has garnered 61.3 billion birr in revenue, which is 87.6 percent of the target and 8.5 percent increment from the previous budget year.
“Given the current challenging environment in our country, this achievement can be considered as remarkable,” said the CEO. The main factor for Ethio Telecom’s under-performance is the continuing civil war in the Tigray region. Out of 3,473 base stations, 45 percent from the total were out of operation and 1,144 of those sites are still out of operation. As indicated its earnings before Interest, Taxes, Depreciation and Amortization (EBTDA) was 60.4 percent of the revenue.
On her six month report of the firm, restoration costs were estimated at 328.9 million birr. As the CEO indicated, her firm has done its analysis to know the overall infrastructure damage due to the war in the northern part of the country. “Perhaps there are still many woredas [districts] remaining including Tigray region where we cannot provide our services and nor can the conditions and status of our telecom infrastructures be known,” explained the CEO. Besides Ethio telecom as Frehiwot said the World Bank is also doing its analysis to know the overall infrastructure damage on Ethio telecom.
The revenue share when described in terms of service types show 51% share for mobile voice, 27% for data & internet, 10% for international business and 5.7% for value added services and 6.6% for other services. During the period, 146.6 million dollars had been generated in foreign currency scoring 82.3% of the target.
According to the report total subscribers of ethio telecom have reached 66.59 million, achieving 104% of the subscriber base target and an increase of 18.4% from the previous budget year similar period. Mobile voice subscribers reached 64.5 million, Data and Internet users 26.1 million, Fixed Services 885.3K and Fixed Broadband subscribers reached 506.8K. Telecom density has also peaked at 63.3%.
“Ethio Telecom is currently engaged in various network expansion and telecom infrastructure capacity enhancement projects. The rollout of 4G/LTE has been completed in 136 cities and pre-commercial 5G services have been launched in Addis Ababa depicting our achievements in the year,” said the CEO adding that, “Currently, we are running a total of 217 projects on infrastructure and system capacity expansions and enhancements aiming to boost network coverage.”
Beside the telecom service, Ethio telecom’s Telebirr has acquired more than 21.8 million subscribers within 14 months with a total transaction value of 30.3 billion birr. Moreover, it has more than 76,000 agents and over 21,600 merchants engaged on the platform so far. In addition, 974.3K USD was remitted through the international remittance service partnering with 37 counties within the last six months.
Ethio telecom is the second-largest operator out of 195 African operators and rated 26th overall out of 778 companies, according to GSMA.
Feasibility heightens for EIC to join EIH umbrella
The Ethiopian Investment Commission /EIC/ starts feasibility study preparations in order to be part of the newly established state owned commercial entity, the Ethiopian Investment Holding (EIH), as a public enterprise.
The EIC, when this transpires will thus be reestablished as an autonomous Federal Government Agency having its own legal personality will be accountable to the Prime Minister. According to sources close to the issue, Capital was informed that for several years, EIC had been considering to be formed as a public enterprise, and currently the commission is analyzing to become a budgetary public enterprise under the EIH.
Currently, the commission is an autonomous government institution accountable to the country’s Investment Board, which is chaired by the Prime Minister. A Commissioner, who is also member of the Board, heads the EIC.
The main objectives of the Commission is to establish a conducive investment climate, attract and retain investments, and implement a transparent and efficient investment administration system leading investment promotion activities, as well as compile a list of potential investors, and implement targeted investor recruitment work, rebrand and build the country’s image. Moreover, it was set up to serve as a nucleus on matters of investment whilst leading, promoting, coordinating and enhancing activities thereof.
Similarly, the main aim of EIH is also to attract investors by consolidating assets for monetization and establishing a co-investment platform further strengthening the national institutional framework for capital mobilization. The public wealth fund holds 27 mammoth public enterprises with an estimated asset holding of over two trillion birr within its portfolio. When EIC finally joins, it will be the 28th public enterprise to under EIH.
At its core, EIH’s formation was to maximize the value of state owned assets through professional management leveraging international best practice.
The change is said to help increase the role of private sector investment in all sectors of the economy including in productive and enabling sectors which has proven necessary to accelerate the economic development of the country, as well as ensure its sustainability through strengthening domestic production capacity thereby improving the living standards of the people.
According to sources, the change is needed to create an economic framework that fast-track the global competitiveness of the National economy by increasing export performance, generating more and better employment opportunities, and facilitating sustainable and entwined linkage among various economic sectors.
Goh Betoch’s first year financial stride
The one and only mortgage bank, Goh Betoch Bank, concludes the financial year with bright books, meanwhile it in fact operated for few months.
The bank which officially opened its doors on October 25, 2021 disclosed that the financial year that ended on June 30, 2022 was primarily used to finalize the formation process and create operational capacities like recruiting personnel, providing trainings, emplace core banking and data centre facilities and others.
In the first months, the mortgage bank was also fully working on a five year strategy that was conducted in collaboration with HST Consulting PLC, a prominent consultancy firm.
“Mostly in the first few months, we have been running the foundational works including fulfilling some policies and strategies that the regulatory body demanded. So it is difficult to say the banking services were fully commenced in the financial year,” Mulugeta Asmare, founding President of Goh Betoch Bank, said, adding, “We have also provided services to customers and have been able to mobilize deposits, provide loans, as well as facilitating some other operations like forex.”
He reminded that as a new entrant there have been some challenges like securing oversea correspondents and having SWIFT membership, in addition to adopting and synchronizing its system.
The bank that has four branches including the one in Dire Dawa began providing loans in the fourth quarter of the financial year and disbursed over 300 million birr in this short period, while the deposit mobilization was about 260 million birr.
62 percent of Goh’s deposit mobilization is tending to savings for mortgage, which is its specialization even though it provides other basic commercial banking services.
“As our core business model, we have special attention for those who have savings for housing schemes. The long term funds and financing is our priority due to that we have different incentives for those customers,” Mulugeta, who is often praised over his former successful leadership at the Bank of Abyssinia, explained.
“Our facility is providing solutions for depositors, who are looking for houses through various means such as constructing their own plots of land, or access from developers and other alternatives,” he explained the inner working priorities of the bank.
He added that the demand is very high in terms of loan access for a housing scheme “the bank is currently responding as per its capacity and different approaches.”
He said that the bank expects preferential treatment from the regulatory body, National Bank of Ethiopia (NBE) unlike other commercial banks, “we have officially provided our expectation to NBE and we hope for a positive response from the regulatory body. As far as my knowledge, they are delighted about the service we want to provide to the public and we expect a directive that shall support the mortgage initiative.”
He also added that the interest of foreign partners is very high, “we have approached overseas partners who shall invest in different schemes with us, and we hope that it pay dividends in future.”
“We evaluated the year as being very successful since it’s the inception period, and we look to soar our wings higher in the current and upcoming years,” he said regarding the operation for the past financial year, adding, “in the current budget year we shall run on full capacity.”
In the financial year under review, the bank was able to conclude under a positive balance sheet, which is not common in the sector, “Compared with the period where we commenced our real operations, such types of success is quite rare.”
“We have been working to manage our expense. Thus for the closed period, we have attained to cover our costs including organizational expenses that were incurred starting from the under-formational processes, which started in 2019,” the President said.
“Despite working for a few months under limited scale, our income has surpassed the expenses, reeling in profits of 6.3 million birr,” he explained.
As a mortgage firm, the bank may not have a priority to run extraordinary ways of opening branches and in the current financial year it has targeted to double its branch number to including major cities like Hawassa and Bahir Dar.
Currently, the bank that has 127 staffs has four branches in Addis Ababa and Dire Dawa.
Goh is the first mortgage bank after a long while, that dates back to the state owned Housing and Saving Bank (HSB) that was formed by the merger of Imperial Savings and Home Ownership Association and the Savings and Mortgage Corporation of Ethiopia mid 1970 during the Derg period. HSB was also reconstituted to Construction and Business Bank in 1994 as a commercial bank before it became defunct and merged under the state giant Commercial Bank of Ethiopia in 2016.
Housing is a major challenge in Ethiopia particularly in cities. One of the major challenges for the sector is that it is almost neglected from financing.
According to a study conducted a year ago there are one million residential houses in demand in the capital which are bound to spike to 4.4 million in the coming ten years across the country.
A year ago Getahun Nana, Chairperson of Board of Directors of Goh, cited the study and stated that to ease the current accumulated housing demands, at least 1.2 million houses ought to be built as soon as possible, “besides that every year 100,000 houses have to be constructed to cover fresh demands.”
According to the Getahun, who served as the vice Governor at NBE, 70 percent of the existing houses in cities is under standards and actually need reconstruction.
Ethiopia is the second most populous and the fifth least urbanized country in Africa. At present, 21 percent of Ethiopia’s of 112million residents live in urban areas (23.5 million people), according to the national definition which is significantly below the Sub Saharan average of 40.4 percent. There are over 950 towns and cities in the country.
According to figures from the Ministry of Urban Development and Construction, currently, in the country there are over four million houses in the country, but 30 percent are sub standard and 74 percent of them require crucial renovation.
