The latest quarterly bulletin of the National Bank of Ethiopia (NBE) indicates that fresh investment projects and investment capital was almost nil in the first quarter of the fiscal year.
The bulletin that shows the overall economic condition of the country states that in the first quarter of 2019/20 fiscal year that ended on September 30, only 9 investment projects with investment capital of 60.7 million Birr became operational. It added that both the number of investment projects and investment capital showed 98.3 and 99 percent decline compared to the same period last year.
At the same period of last year the number of projects operational were 554 with 5.88 billion birr investment capital. The number of operational investment in the fourth quarter of the past fiscal year has been 112 with 898 million birr capital.
According to the quarter review document, from the stated number of investments and capital there was no foreign investments. “All investment projects were private and domestic,” it explained.
However Abebe Abebayehu Ethiopian Investment Commission Commissioner strongly disagrees with the report. “In the first quarter of the budget year there was 700 million dollar inflow of foreign direct Investment. Moreover 33 businesses become operational during the stated period,” Abebe told Capital.
A year ago six foreign investment projects with investment capital of 199.2 million birr were operational, while the public investment were nil during the whole year of last year.
According to NBE’s report, the nine investment projects in the first quarter of this budget year have generated employment opportunities for 112 people of which 45.5 percent (51 jobs) was permanent and 54.5 percent (61 jobs) temporary. Compared with the same period of last year the employment generation has dropped by 99.6 and 98.8 percent respectively for permanent and temporary employment.
These figures were 12, 506 permanent and 5,174 temporary jobs at the same period of last year.
Regarding regional distribution from the nine new operational investments, except one investment in Tigrai all are in Addis Ababa.
“In terms of regional distribution, 88.9 percent of the total projects with 75.3 percent of total investment capital were in Addis Ababa and 11.1 percent of total projects with 24.7 percent of capital are in Tigray,” the report states.
While in terms of job creation Addis Ababa received 80.4 percent of the permanent employment and 67.2 percent temporary employment while that of Tigray region was 19.6 and 32.8 percent respectively.
As for sectoral distribution, manufacturing constituted 55.6 percent of the total investment project while construction and real estate, renting and business activities took 22.2 percent share each. Of the 60.7 million birr capital invested, the share of manufacturing sector was 66.4 percent, and that of real estate, renting and business activities 26.3 percent and construction 7.2 percent.
About 76.5 percent of the permanent employment was created by manufacturing sector while real estate, renting and business activities created 23.5 percent, according to the quarterly bulletin of the central bank.
Likewise, manufacturing sector was the leading sector by employing 67.2 percent of temporary labor force followed by real estate, renting and business activities which constituted 32.8 percent.
The registered operational investment in Tigray region in the stated period was consumed almost one fourth of the total investment for the period, while it has only created 10 permanent and 20 temporary jobs.
The bulletin indicated that operational investment in other regions in the stated period was zero. However in the first quarter of 2018/19 each one investment with capital of 40 million birr and 123 million birr were operational in Amhara and Oromia regions respectively. But it was zero for all regions in the fourth quarter except Tigray and Addis Ababa.
However regional investments slow downed the situation in Tigray region is different for instance in the first quarter of the 2018/19 9 projects with capital of 34.3 million birr were operational that improved to 12 projects and 103 million birr capital at the fourth quarter.
Otherwise all of the 533 projects are based in Addis Ababa.
Hailu Jelde, Commissioner of Oromia Investment Commission, which is the biggest region regarding investment potential, capacity and strategic location, told Capital that the region is focusing in enhancing previous investments to undertake their businesses on full capacity.
A couple weeks ago Investment Trend Monitor, the United Nations Conference on Trade and Development (UNCTAD) report, stated that the foreign direct investment slowed down to USD 2.5 billion in 2019 from USD 3.2 billion a year ago.
Operational investment projects dropped by 99%
Agriculture focused bank in the making
The National Bank of Ethiopia (NBE) gave direction to the Ministry of Agriculture to come up with a detail plan for the formation of an agricultural bank.
In the latest version of ‘Addis Weg’ that focused on the agriculture sector reform strategies, Anteneh Girma, Policy Advisor of the Minister of Agriculture and Chair of Technical Committee for Agriculture Reform, said that the sector is denied adequate finance compared with other sectors.
“The sector is the major source for the economy but it is not supported when it comes to finance. It competes with other sectors like real estate or construction sector to access finance from banks,” Anteneh who presented the targeted reforms on the sector at the discussion said.
According to the Advisor, from the total loan disbursed in the country, the agriculture sector only secures less than 10 percent. He added that under the reform of the sector the formation of agricultural bank is crucial besides other ways to expand access to finance for the sector.
He indicated that besides an exclusive bank for the sector, cooperative banks should be established to support the sector.
“Banks should provide from 30 to 40 percent of the total loan for the agriculture sector,” he added.
The NBE first quarter report for the 2019/20 fiscal year indicated that 39.6 billion birr was disbursed in fresh loans, while the agriculture share was 4.1 billion birr or 10.3 percent of the total amount.
In this period domestic trade was the major beneficiary of the total new loans accounting for 8.3 billion birr or 21 percent.
From the total outstanding credit of the banking system that was 574 billion birr in the first quarter of the budget year, the agriculture sector only took 18.7 billion birr or 3.6 percent.
Sources at the Ministry of Agriculture told Capital that the ministry is working diligently on the formation of exclusive bank for the sector.
The issue was also raised on the discussion with officials at Ministry of Finance, which support the idea and promised to work on the formation process.
Sources indicated that to some extent light papers have been developed regarding the issue but details should be done for the realization of the agriculture bank.
So far, sources said that, NBE believed that under the financial inclusion strategy, introduced about three years ago, the issue was covered and special bank would not be necessary. However the central bank indicated that it encourages undertaking detailed studies.
Even though the Home Grown Economic Reform document does not directly mention the formation of exclusive agricultural bank, it discussed about improving finance for the sector.
“The study is expected to be done by this budget year and the final decision would be known by then,” source close to the case told Capital.
The agricultural reform strategy also added an optional financing scheme like warehouse receipt and contract farming to be expanded.
The reform strategy identified that the agriculture policy should consider the supply and demand side together than focusing only on the productivity or supply side as is the past. “Productivity has been the major target for the agriculture sector in the past,” the policy advisor explained.
Anteneh said that the agriculture structural transition is very late compared with the national resource the country have.
“Ethiopia has 16 million farmers including pastoralists that are still engaged on poor productivity. From the total farmers most of them own land less than half hectare,” he added.
“The agricultural policy focuses on the supply side of the sector but it would be changed to the supply and demand side,” he explains adding “the sector should consider on the production of products under the consideration of demand.”
According to the new reform, considering the demand side means engage on import substitutions, export oriented commodities and industrial inputs besides considering to introduce new products since the consumption is changing with economic and income growth.
The strategy also added that the agriculture sector should consider the linkage of urban to rural since formation of rural towns improve the agriculture sector and encourage the educated youth settle in those towns.
The strategy also revealed that improved legal and policy framework guidelines are crucial to realize the expected changes.
For instance the policy of land management and use should be improved and independent institution is required.
Legal framework regarding land rights that include transferring, rent or give as a gift would be also included under the reform and land consolidation to entertain the use of modern technology is also the other area that needs policy frameworks.
Encourage researches and researchers like providing royalty fee at public institutes and support the private sector to play its role on the research is another part that needs reform.
Improving the market linkage and grading of products is also stated as a crucial point to modernize the sector and encourage the actors.
New importers to start supplying palm oil
The Ministry of Trade and Industry (MoTI) announced that the 24 selected edible oil importers are processing letter of credit (LC) to fill the market demand, while local pressers claim they are neglected to access foreign currency.
Wondimu Filate, head of Public Relation at MoTI said that the selected companies are in the LC process for the past one month and in the near future they will commence importing oil.
From the 24 selected palm oil importers, four are party affiliated endowments from four regional ruling parties of Tigray, Amhara, Oromia, and SNNP and Ethiopian Industrial Input Development Enterprise (EIIDE), a public enterprise is also included on the list.
In a letter MoTI wrote to the state financial giant, Commercial Bank of Ethiopia, it requested the bank to give priority for the companies to allocate the scares hard currency to import consumer goods that consumes over half a billion dollar every year.
Meanwhile oil pressers in the country claimed that they did not get such kind of special attention by the government to import the crude oil.
They claimed that it takes several months to get the foreign currency to import semi products, while the government is giving better attention for finished product importers.
“Our operation is the value addition business that saves more foreign currency since we import the crude,” one of the pressers, who demands anonymity told Capital adding that their investment has also created several jobs, which is not the same for the finished product importers.
“We understand why the government support importers to import the basic commodity but similar attention should be given for local investors,” the presser claimed.
Wondimu said that the 24 importers are selected in different criteria including their future strategy to engage on the production of the commodity in the country. “Oil pressers shall also play on the import of the finished product,” he told Capital.
“The government is providing several incentives like financial support, import of crude oil on duty free manner for local pressers besides involving on the import of finished oil,” he argued.
However pressers ridiculed his argument and stated that access to foreign currency is very difficult for them to import the crude.
“We are waiting on the line like other industry to access the foreign currency at banks but other importers are getting support from government,” they said.
Since July 2015 the government selected ten palm oil importers including the four party affiliates and one public enterprise until it stopped last September 2019.
In the past few months EIIDE filled the gap in market until regions give selected companies to import the oil. Every month 40 million litter of oil is imported to the country.
This time around Amhara region selects five importers that will import the total quota for the region which is 7.76 million litter per month.
Oromia, which is the biggest consumer with over ten million litter per month has selected seven importers.
The other biggest consumer of the product by 7.58 million litter per month is Addis Ababa, and selected three private companies and EIIDE.
For SNNP four importers will supply 7.4 million litter per month.
The supply for Tigray will be done by Gunna that imports 2.3 million litters for a month.
Dire Dawa and Afar will get the product from EIIDE and other regions select one company each for the supply.
Coca-Cola announce launch of Schweppes Novida Pineapple
The Coca-Cola Company announced the official launch of Schweppes Novida Pineapple, a refreshing, new non-alcoholic, malt based beverage, with a uniquely crafted pineapple flavour, for the first time in Ethiopia.
Coca-Cola held a launch event at Marriott Hotel in Addis Ababa, through a fashion extravaganza featuring top Ethiopian designers to commemorate the remarkable occasion.
Schweppes Novida is the perfect alternative for non-alcoholics and the ultimate mixer for those that indulge in alcohol. The unveiling of Schweppes Novida Pineapple beverage portrays the company’s continued investment efforts to bring innovative and new products to provide more choices for consumers in the country.
When asked about the launch of their new Schweppes product, Coca-Cola’s Managing Director Daryl Wilson said, “At Coca-Cola, we are dedicated to the continuous innovation of our products to meet the growing demands and beverage preferences of consumers.”
The launch of Schweppes Novida Pineapple is a significant milestone for Coca-Cola in Ethiopia as the company strives to introduce the first fruit-flavoured, non-alcoholic premium malt drink to the Ethiopian market.
The Coca-Cola brand manager, Tigist Getu stated, “We are very happy to bring Novida Pineapple to the Ethiopian market and we are confident that consumers will love the new great-tasting, malt beverage”.
In conjunction with the launch event, the Coca-Cola Company will conduct an integrated multi-media marketing campaign to promote Schweppes Novida Pineapple, including product sampling to consumers to try the new malt beverage.
