Liability Asset Management Corporation (LAMC) which was formed to manage the consolidation and servicing of a portion of the country’s state-owned enterprises (SOE) debt, has serviced a total of 27.3 billion birr for the loan taken by two pubic enterprises.
Habtamu Hailemichael, Director General of Public Enterprises Holding and Administration (PEHA), stated in the first half of the budget year that LAMC has settled the arrears owed by Ethiopian Sugar Corporation and Chemical Industry Corporation to the creditor and state-owned financial giant, Commercial Bank of Ethiopia (CBE).
The asset management corporation that was formed early last year, was set up to ensure that SOEs, do not continue to amass unsustainable debt with no expectation of future bailouts.
LAMC has soaked up and administered the debt of selected highly indebted public enterprises like the two, Sugar and Chemical Industry corps.
As per its mission, in the first half of the current budget year, LAMC has settled 13.98 billion birr for the Sugar Corp and 13.3 billion birr for the Chemical Industry Corp.
Looking back, in the past, the sugar corporation received billions of birr in loans from local and external sources for the new sugar mill projects that are being constructed in different parts of the country. However, the project accomplishment has been significantly lagging which places the corporation in a hot seat in terms of loan repayment.
Similarly, the current settlement for Chemical Corp is related to the project that has seen a high delay in a fertilizer complex that is yet to start operation.
PEHA said that the debt settlement that LAMC has settled on behalf of Chemical Corp is related to Yayu Multi-Complex Industries project.
PEHA’s Director-General on the other hand said that in the first half of the budget year public enterprises have settled the debt for external loans as per their plan.
“External debt of USD 54.7 million for Sugar and Chemical corporations has been settled as per the projection,” he said.
The comprehensive SOE reform agenda which is carried out by the government has targeted SOEs to run to a healthier asset and liability position.
On the asset side, the primary source of finance for the LAMC, which was formed as a business entity with a capital of 570 billion birr, will be the privatization proceeds and SOEs’ dividends. Recently, the Ministry of Finance (MoF), which is the regulatory body of LAMC, stated that the telecommunication sector transactions and the privatization of the Sugar Corp will generate proceeds to finance the LAMC’s liabilities in the short term.
Capital’s secured information from relevant sources indicated that the government is finalizing to hire consultants for the privatization of sugar millers to which five of them are established as an independent legal industry by the latest Council of Ministers’ regulation. The council has also approved a regulation to form the Ethiopian Sugar Industry Group that may reform the current corp.
LAMC will also engage in additional revenue-generating activities.
“For instance, it can invest the privatization proceeds and underutilized public assets to generate additional revenue. This approach will ensure that debt service on the SOE stays on track without burdening the central government’s annual budget,” MoF recently stated.
Ethiopian Electric Power, Ethiopian Electric Utility, Ethiopian Railway Corporation, Ethio-Engineering Group, Chemical Industry Corporation, Construction Works Corporation, and the Sugar Corp are at high risk of debt distress.
PEHA administers 36 public enterprises, while 15 of them are included recently to be regulated under the administration.
Unlocking debt to realize potential: LAMC settles 27.3 billion birr in arrears
NBE faces backlash over Sinqe Bank’s new president
The National Bank of Ethiopia’s (NBE) recent approval of Sinqe Bank’s president has been put under backlash by sector experts who have gone further to state that the new appointment is a sign of double standards from the central bank. On the flip side, the leadership at Singe has refuted the said claims and has argued that NBE has played by the book, in terms of approval.
In the letter that NBE wrote on March 18 which was signed by Frezer Ayalew, Director for Banking Supervision Directorate, it stated that the regulatory body accepted the request of Sinqe, which filed its request on March 1, for the approval of Neway Megersa as president of the bank.
The brief approval letter of NBE added that the assignment acceptance is given on the consideration of special treatment.
This decision of NBE has raised concern from the sector experts who claim that the central bank’s appointment has crossed the relevant directive for the appointment of the seat. They said that such kinds of decisions would erode the strong stance of the regulatory body, which is well known for its highly strict regulation stand.
NBE’s ‘requirement for persons with significant influence in a bank directive number SBB/70/2019’ article 5.1.2 states that a chief executive office (CEO/president) shall have a minimum of 12 years experience in banking, of which, at least five years shall be as senior executive officer.
Neway to this end presents 13 years of experience in the banking industry, serving Nib International Bank for 5 years as planning and research officers and 8 years of service at several positions in Oromia Bank.
Moreover, Neway was working as board chairperson of the Sinqe Bank, while he was at the top of Kegna Beverages, a parastatal of Oromia region, before he proceeded to become president of Sinqe.
Neway has also stated that he was confused by the term used by NBE, which stated that the approval was given on a special case. He however argues that he has relevant requirements for the post.
“For Sinqe’s approval request the response of the regulatory body was supposed to be as simple as yes or no,” he says, adding, “I am confused why they put the term ‘special treatment’ on their approval letter.”
He told Capital that as far as his knowledge is concerned, the requirement mentioned on the directive is all about experience as well as age, which he fulfills.
The 2006 directive of NBE specifically stated that the CEO of a bank shall be at least 30 years old, which is not mentioned on the directives which were issued on the 2012 or 2019 amendments.
However, experts said that referring to a minimum age for the CEO or president in the directive is not relevant, since the work experience requirements by default push the president’s age to be above 30.
Neway said that he has 13 years of experience in the banking industry of which 7 years was as a member of the executive management.
Capital’s effort to get information from Yinager Dessie, Governor of NBE, and Frezer was unsuccessful.
However, sources at NBE said that the latest special approval is to be seen as a policy decision given by the Governor.
Sinqe is the upgraded financial firm of the former Oromia Credit and Saving Share Company (OCSSCO).
Public enterprises’ resilience generates double revenue
In the first half of the budget year, the gross profit of public enterprises has shot up by almost double when compared to similar periods of last year. In similar fashion, profits surpass the set projections.
During the press conference held on Wednesday March 23 at PEHA headquarters, Habtamu Hailemichael, Director General of Public Enterprises Holding and Administration (PEHA), indicated that in the half year that closed early January 2022, the public enterprises have been able to generate 271.4 billion birr in revenue which was three percent higher than the projection to be attained in the stated period.
In the first half year of the budget year, PEHA had targeted to generate close to 264 billion birr revenue.
Habtamu reminded that the period that passed in the first half of the budget year was very difficult in light of the law enforcement operation in the northern part of the country, “while in this difficult period public enterprises’ performance has catapulted.”
The performance has not only surpassed the projection but it has also shown a wide increment compared with the same period of last year’s budget.
In the first half of 2020/21, the revenue generated from public enterprises was about 170 billion birr which is 60 percent lower than the first half 2021/22 budget year.
Similarly, in the stated period, the profit before tax has also outperformed the projection and last year’s same-period performance.
In the stated period, the public enterprises were expected to earn 36.7 billion birr as profit before tax, while the actual performance reeled in almost 52 billion birr or 42 percent higher than the projection. The gross profit has also spiked by 97 percent compared with the same period of last budget year.
According to Habtamu, enterprises in transport and logistics, communication, and finance sector are the major contributors to the revenue and profit.
From the total 36 public enterprises that PEHA oversaw, four enterprises including the Ethiopian Railway Corporation and Ethio Engineering Group have registered losses.
In the stated period, the public enterprises in general generated USD 3.83 billion that is 96 percent of the target. The foreign currency generation has also increased by USD 540 million or 16 percent compared with similar periods of last year. Ethiopian Airlines Group and Commercial Bank of Ethiopia took the 94.7 percent of hard currency generation, while the remaining 5.3 percent hard currency generation was secured through Ethio Telecom, Development Bank of Ethiopia and Ethiopian Electric Power.
Connecting Africa
Wingu.africa is East Africa’s first carrier and cloud neutral data center group with award-winning operating expertise and experience, offering a single point of contact and world-class facilities and services in key markets. The firm is uniquely positioned in East Africa, enabling global and regional customers to get direct access to all transoceanic and regional cable systems as well as interconnection to the group’s rapidly expanding network of carrier and cloud neutral data center facilities.
The company is built on the principles of carrier-neutrality, providing a platform that nurtures an open environment to give businesses the best options for connectivity and services, with excellent infrastructure and a connected eco-system, for the benefit of all clients.
As the firm nears commissioning of its first phase Data Centre in Addis in April, Capital’s Metasebia Teshome reached out to its CEO, Anthony Voscarides, for in depth insights of the company’s project. Anthony has over 25 years of international telecommunications experience working in Australia, Greece, Cyprus, UK, the Middle East and Africa. Excerpts;
Capital: What is a data center?
Anthony Voscarides: A data center is a facility that provides shared access to applications and data using a complex network, compute, and storage infrastructure. Industry standards exist to assist in designing, constructing, and maintaining data center facilities and infrastructures to ensure the data is both secure and highly available.
Data centers vary in size, from a small server room all the way up to groups of geographically distributed buildings, but they all share one thing in common: they are a critical business asset where companies often invest in and deploy the latest advancements in data center networking, compute and storage technologies.
The modern data center has evolved from a facility containing an on-premises infrastructure to one that connects on-premises systems with cloud infrastructures where networks, applications and workloads are virtualized in multiple private and public clouds.
Capital: What benefits could having datacenter locally gives to the country?
Anthony Voscarides: For many businesses today having a local data center just makes sense. It provides the infrastructure and security of a dedicated data center and companies enjoy the benefits of having their servers in the cloud while still maintaining physical control of their systems.
Today’s hardware needs certain cooling, conditioned power, backup generators, sophisticated security systems and the like, and each of these systems has its backup in case of failure. Thus having a local facility means, one can keep an eye on redundancies.
Moreover, the world keeps on integrating with technology. For instance, if Microsoft was to set up its firm here, it needs a suitable tech environment to do so and having local data centers bolsters that.
To give a good comparison, New York has more than 200 large scale data centers, whereas the total centers in Africa do not even reach this mark. Thus since more needs to be done on this front, having a local data center is a necessity, in order to have fast access to information.
Capital: Tell us about the whole facility of your data center, on what status is the construction? What makes your facility different from others?
Anthony Voscarides: Our data center is in Addis Ababa ICT Park, seated on a 15,000 square meters of land, and it allows us to deliver solutions to businesses requiring fortified server hosting for their critical services and operators.
It is a tier 3 facility which is designed to host up to 800 racks on competition of all phases with a maximum power requirement of up to 10 MW. The power delivery is via two separate sub stations and two physically separated feeds ensuring maximum availability. In the case of multiple utility failures, there are dual UPS and dual generators which will power the site without interruption until power is restored.
Data connectivity to the site will be supplied by in country ISP, Websprix and ethio telecom using multiple fiber paths. This ensures reliable customer access to the Ethiopian national and metro networks.
With regards to our current status, we are soon commissioning our center by the 20th of April this year, meaning everything will be tested and connected to go live to our first customers.
What makes us different is our commitment to Ethiopia, which is to provide a safe, secure and stable platform for the many talented Ethiopians, including young entrepreneurs with vision and ambition. To this end, the various government authorities have been very helpful to overcome challenges that we have faced. We are now on a good track to deliver the promised services.
Capital: How much did you invest in the project? Does your firm have plans on increasing investment within the country?
Anthony Voscarides: Our initial investment for the first two phases of the centers was about 26 million dollars. We plan on having four phases which means we will be increasing our investments in the country.
Currently, phase one in nearing commissioning on April whilst the second phase is to go live by the end of 2022. Moreover, we are planning on having at least one more facility outside Addis Ababa.
Capital: What benefits could your data center give to our country?
Anthony Voscarides: We have a lot of people locally that work with us through innovation. Our innovation center will be able to attract young talent to come and use servers that we have available for them to use for free as part of the programme to creating innovations here.
Ethiopia is a country that has existed from time immemorial, with a very special and unique ancient language. The country is comprised of a young population with a pool of talent and we seek to empower these talents by creating a data center that will nudge their dreams and aspirations.
The spectacular growth of the data center industry represents far more than just an industry success story: the reality behind it, and its explosion, represents a profound change in the way that we are living our lives and the way in which our societies are ordered. When looking at connectivity, the notion of speed of access is crucial, as opposed to the number of people connected. Thus we want to present a high speed of access to Ethiopians, which will mold faster innovations and better performances in doing work.
Moreover, our company is centered on helping the community. We look forward to helping the community where chances arise as well encourage the use of innovations.
Capital: Who are your targeted customers?
Anthony Voscarides: Any customer that requires connected access is our customer of choice. Currently, we have signed with five firms who are big on data access.
Capital: How are you going to work with telecommunication operators?
Anthony Voscarides: Each and every telecommunication operator is connected to a data center. We have been in talks with Ethio-telecom to use our centers and we will see how that progresses.
The benefits of having more than one data center is that if one fails the other one takes over, which in our industry is called redundancy.
Capital: How do you see the current development of the IT sector in Ethiopia?
Anthony Voscarides: Ethiopia has an amazing potential and energy with her innovative, youthful populations who have the enthusiasm to learn. Thus I see an exponential growth and the sector continues to expand and transform.
Capital: What makes your company different from other datacenter providing companies?
Anthony Voscarides: We provided services as a carrier neutral data centre, which operates neutrally as a public service. This means that nobody will take advantage of you, since everybody on the facility is treated equally. There is no form of favoritism.
We also bring our expertise from our success projects such as the Djibouti Data Center (DDC) which is the first and only Tier 3 carrier neutral data center ecosystem in east Africa with direct access to all major international and regional fiber optic cable systems connecting Europe, the Middle East, and Asia markets with East Africa. The DDC also operates the Djibouti Internet Exchange (DjIX), a neutral and independent Internet Exchange Point (IXP) in Africa. Both the DDC and DjIX are catalysts in East Africa that enable new applications and services that help to drive economic development and social well-being in the region. Thus we want to reflect the same in Ethiopia.
We also adhere to all security protocols as per the requirements of the government, in order to protect the crucial data of the country. In addition to that, we also provide physical security, such as cameras and biometrics so that nobody enters the facility un-identified.
