Stock market to start in May
The National Bank of Ethiopia (NBE) which has reintroduced the primary money market a couple of weeks ago announced it would commence the highly anticipated secondary market in May 2020.
The government announced that it would start the stock market by 2020 without giving a specific time frame.
Ethiopia actually had a stock marked before most other African countries, (around 60 years ago) but when the Derg took over that stopped.
Yinager Dessie, Governor of NBE, told Capital that the central bank is preparing the document to table it to the Council of Ministers in the near future.
Currently finance is only accessible in a primary market that is directly related with banks for the private and public sector or through treasury bills (T bill) for the government.
“Capital market is another source of finance that is separate from banks and currently in the process to commence from initial stages,” Yinager says “for instance three weeks ago the T bill has recommenced with the aim to attract private banks and other private sector players and to make a transition for the biggest market.”
“Based on our observation the beginning is very good that is good step to move to the secondary market.”
He said that according to the NBE target, the secondary market will begin by May 2020, but it depends on the cabinet decision at the federal government.
“The legal framework is under development and skilled professionals are being prepared, while preconditions are in the process and in the coming few months we will commence it,” he explained.
“The final go ahead will depend on the Council of Ministers’ decision,” he added.
According to the governor, the central bank will deliver the draft document to the council that will decide whether the business would be started by regulation or proclamation.
If the council of Ministers’ approve it as a regulation the starting time will come soon, but if the council decides the law should be ratified as a proclamation it would be sent to the parliament.
“As per our evaluation the T bill average interest rate offer that banks participate in the auction is attractive and reasonable,” he said.
Most of them offer about 7.5 percent to 8.5 percent but some of the banks offer up to 15 and 16 percent at the auction, according to Yinager.
“Most of the offers that come from the banks at the auction is very encouraging,” he said.
“This will show us what the market interest rate should be. When the market goes up and people understand how to use it the capital market structure will improve,” he added.
Recently NBE stopped the NBE bill directive enforcing banks to buy 27 percent of bonds from every loan that they disbursed for clients. NBE has reintroduced the weekly T bill with an attractive interest rate to attract banks and other interested players.
International partners like the World Bank are providing technical and others support to commence the stock market.
Currently the country’s finance accessibility is very poor; most of the citizens are not benefiting particularly from the loans.
Gem, APlus win wheat contracts
Top two bidders disqualified
The Public Procurement and Property Disposal Service (PPPDS) has selected Gem Corp DMCC to supply over 2.8 billion birr worth of milling wheat to the Ethiopian Trading Businesses Corporation (ETBC). APlus has also been awarded a milling wheat supply contract worth 200,000 metric tons.
ETBC via PPPDS, which is responsible for buying huge federal government procurements, is buying 600, 000 metric tons of milling wheat to stabilize the local demand.
The procurement was undertaken on two separate international bids which were divided to 400,000 metric tons in the first bid and the balance 200,000 metric tons under another bid.
For the 400,000 metric tons PPPDS put in for a bid on four separate lots with 100,000 metric tons each which attracted 11 companies seven of which offered their prices for all four lots and the remaining participated in two or single lots.
Gem Corp offered the third lowest price yet it secured the award to offer the 400,000 metric tons of milling wheat.
A week ago Capital reported that Hakan Agro DMCC and Agrocorp International offered the lowest rate for the two lots, but they were disqualified from the bid because they failed to attach the guaranteed assurance that Aphlatoxin requirements would be complied with.
Experts criticized this but they said a decision to disqualify the two companies. They claimed this goes against normal protocol. Based on the previous trend the procurement body should communicate with bidders and ask if they can come up with the assurance within the give time. This is normally a one or two day period. However, the procurement body disqualified them from the bid process without any further effort.
Experts who are familiar with the case claimed that this is not good for the country. “Making the two lower bidding companies forfeit, costs the country millions of birr,” sources said.
The bid document indicated that Hakan Agro offered the lowest rate for the first two lots and Agrocorp the cheapest price for the 3rd and fourth lots.
Hakan has offered USD 214.44 and USD 218.44 for the first and second lot per metric ton that manages 100,000 metric tons each, while for the same lots Agrocorp has offered the second lowest price which is USD 218.47 and USD 219.97 respectively.
For the same lots the third lowest offer came from Gem Corp DMCC, who offered USD 221.31 and USD 222.34 respectively.
At the same time Agrocorp has offered the lowest price for the third and fourth lots that are USD 221.47 and USD 222.97 per metric ton respectively and Gem Corp follows at USD 224.41 and USD 225.45.
According to sources awarding the procurement to Gem Corp will cause Ethiopia to lose more than 47 million birr. The wheat bid will cost 2.837 billion birr.
In the other bid to buy 200,000 metric tons of milling wheat a company owned by Ethiopian but based in Dubai, A Plus, was awarded. Experts have also claimed that the company does not have ample experience to participate in huge bids like this.
Other government agencies are also buying wheat through the same government body for their different schemes. Currently Gem Corp which won 900,000 metric tons from one million tons to supply to the Ministry of Agriculture has delivered all but 300,000 metric tons.
