The country might need USD 10 billion a year to achieve its ambitious programs and planned reforms.
In a discussion with international partners and the donor community at the Home Grown Economic Reform designed by the government to be implemented in the coming three years. Vera Songwe, Executive Secretary of the Economic Commission for Africa, said that the donor community should get behind a USD ten billion ask in order to support Ethiopia’s attempt to create 2 million jobs in fields like ICT, agriculture and transportation.
“Ethiopia currently has a USD 10 billion gap – 6 billion in new investment and 4 billion of debt reduction per year – that must be bridged in order to achieve its reform aspirations,” she said.
The Executive Secretary of ECA said Ethiopia’s aspiration to grow from USD 865 to 2219 in GDP per capita was “very ambitious” but that it was doable, citing the success stories of China, Laos, and Vietnam.
International partners like the World Bank, International Monetary Fund, and other donor community members appreciated clearly stated past evaluation and future challenges.
“I appreciated the government’s honesty at looking at the past and challenges in the future,” Carolyn Turk, Country Director of the World Bank for Ethiopia said.
She said it was a deeply ambitious and achievable program.
“Quite ambitious program and even though it is ambitious it is a doable,” Songwe said.
“Several months in the making and spearheaded by some of Ethiopia’s finest minds, our initiative aims to propel Ethiopia into becoming the African icon of prosperity by 2030,” said Prime Minister Abiy Ahmed of Ethiopia.
He made the remarks on 9 September during an event to unveil the Reform Agenda at the United Nations Conference Centre in Addis Ababa.
The Agenda outlines macroeconomic, structural and sectoral reforms that will pave the way for job creation, poverty reduction, and inclusive growth.
Abiy stated that the private sector was crucial for the next chapter of Ethiopia’s growth and development. Consequently, he said, we have “opened up key economic activities to private investments,” adding that these measures will “surely be reflected in Ethiopia’s ease of doing business ranking.”
The PM pointed out that to ensure the success of the Agenda: “we are tightening our fiscal belts, strengthening our public sector finances, shedding our debts, and increasing domestic resource mobilization.”
The Agenda prioritizes sectors such as agriculture, manufacturing, mining, tourism, and ICT.
“If you continue to accumulate debt the way you’re doing now, you will likely fall into debt distress in the next two years and a lot of the structural reforms you have put in place will not bring in the private sector because you will not be a credit-worthy country,” Songwe said.
She recommended paving the way for independent power purchases (IPPs) in a reformed energy sector as a quick-win that can demonstrate the country’s credibility.
The homegrown economic reform has three major pillars; macroeconomic, structural and sectoral reforms. “The economic reform should have holistic and comprehensive approaches that the macroeconomic reform will see foreign exchange imbalance, inflation, access to finance and debt stress, and structural reform will also solve the bureaucratic challenges, doing business and sectoral reform looks at specific problems in every sector,” Eyob said.
Recently Eyob Tekalign, State Minister of Finance, said that the National Bank of Ethiopia under its reform program is working to improve the financial sector regulation. He said all banks including the two public financial firms would be seen equally by the NBE based on the experience of international banks.
Ethiopia needs $10bln per year to achieve goals
Bidders unhappy with solar project rates
The lowest rates were offered for the first public private partnership (PPP) independent power purchase (IPP) of two Scaling Solar schemes, but bidders are complaining.
On Friday, September 6 bid opening, only one company produced a financial proposal for the two solar power projects, while four other companies were involved in the bid process and offered their proposal.
However, the evaluation of the technical document suspended the opening of a financial offer from the companies including: Enel Green Power/Orchid, EDF/Masdar Consortium, FRV/ Globeleq/ Belayab Consortium, and Al-Nowais/ Aldwych/ Alten Consortium.
During the financial opening, a proposal from Acwa Power, a Saudi firm, was the only contender.
As per its financial offer the company gave USD 0.252/kWh for the Gaad scheme in the Somali region and USD 0.0598/kWh on the Dicheto scheme in the Afar region.
The amount was the lowest tariff compared with similar projects on the continent and one of the lowest globally.
On Wednesday September 11 the PPP board in its extraordinary meeting held at the Ministry of Finance approved the winner of project that will generate 125MW each at both sites.
Teshome Tafesse, State Minister of Finance, told Capital that the bid process has shifted to the next stage.
There are companies complaining about the bidding process, while the State Minister said that the claim shall be submitted in the seven days since the board disclosed the bid result.
He added that so far complaints have not been submitted. If is there are any, they will be evaluated based on the process, according to Teshome.
Experts said that the company might manage the project for twenty years with an optional five year extension. Teshome said that the details will be discussed after they speak with the client, Ethiopian Electric Power. He said that the project might take 18 months from start to finish.
The International Finance Corporation (IFC), the World Bank’s private sector wing, which promised to finance the projects, excluded itself on the day before the opening of the bid due to the government refused to give convertibility guarantee for the debt that IFC provides for investors.
Sources stated that initially the project was backed by the International Finance Corporation (IFC), which attracted several prominent firms.
Experts said Scaling Solar is the IFC scheme implemented in other African countries. Based on the agreement with MoF, the Ethiopian scaling program was also developed via the concept, procedure and support of IFC. IFC also agreed to provide the finance at an attractive interest rate to realize the project, which made bidders more confident.
“Based on National Bank of Ethiopia (NBE) foreign currency guideline it has stated that the government would not give convertibility guarantee and based on the country law there is not convertibility guarantee for the private sector investment,” Teshome explained.
He added that it shall be bound by the agreement with the client from the government side and the private sector. “This does not mean that the private sector will not access the finance and change it to foreign currency to service its debt as per the PPP guideline,” he argued saying that the under PPP the private sector will get the finance in foreign currency to settle the debt and other services.
“In the past the private sector wing of the World Bank has provided finance to the private sector in the country without a convertibility guarantee from the government. The current demand is not acceptable. It seems like leverage to change the country’s policy. We led the technical support and knowledge transfer as much as possible on wise manners, and now we stand at the level to handle international level PPP without their support,” he said.
He said that the implication that the offer of a lower tariff is the result of our effort to expand the PPP in the country and the current government’s initiative to improve the economic sector in different directions. The fair and transparent competition and bidding process is the crucial point for the lowest tariff that shall compare with the previous similar trend in the sector.
From the compliant side sources said that some of the companies sent a delegation or are managing the issue via their country’s embassy here. Bidders said that the withdrawal of IFC happened a few days before the opening of the bid so it is difficult for bidders to come up with alternative financers in that short period. Bidders also claimed that the process is not transparent; meanwhile the government argued that process was clear.
“Acwa Power, which came up with finance from Chinese sources, said at the financial offer that it will discuss with the government on the convertibility guarantee that means it should be disqualified from the process,” sources said.
In June 2019 the 49 percent share of Acwa secured by Silk Road Fund that was given to exports that the company will come with the finance from China.
Experts in the area assured that the offer of the company is very fair. “The risk in other country and Ethiopia is different. The political and financial risk from one to other is different. Regarding financial risk of our case it is convertibility. This raises the question of realistic issue on the project in relation with the offered tariff,” experts said.
Kidney, Mung beans exclusively traded on ECX
The Ethiopian Commodity Exchange (ECX) announced that the decision for exclusive right to trade read kidney beans and green mung beans at the electronic trading floor will reduce contraband and money laundry.
Previously the government decided to trade mung beans on the modern commodity trading facility a year ago, although it was postponed for a year in response to suppliers’ request. At the same time even though suppliers who traded the beans on the floor had been conducting illegal activity which harmed the market the government allowed suppliers to optionally trade their product at ECX.
Netsanet Tesfaye, Public Relations Head at ECX, told Capital that the trading floor now has finalized every required preparation to receive the product in the coming harvest season starting next month.
He said that in addition to preparing a center point to receive the product the ECX has also improved its contract for both products. “One of the claims of the stakeholders was the contract issue that we have now improved,” he explained.
Last week, Misganu Arega, State Minister of MoTI, cautioned those who involved in the illegal trade of the products that the government will take severe action.
Netsanet said that to tackle the challenges the collaboration of stake holders like the Ministry of Revenue and National Bank of Ethiopia and the ECX is crucial and they are working strongly to smash the illegal trading of the country’s hard currency sources. The green mung bean had been traded for five years on the electronic trading floor optionally before last year when the government allowed it to trade products like coffee and sesame.
Red kidney beans will also be fully traded on the floor this coming harvest season.
On Friday the commodity trading facility announced that the exclusive trading of the two products under ECX will control the contraband activity, illegal money transaction and even improve hard currency earning, which has declined due to the expansion of contraband.
Besides that, in this harvest season niger seeds will be included as 10th commodity for optional trading at ECX. Recently ECX has announced that it will start to trade cotton in the current budget year. Including cotton is the beginning of trading industrial products onthe floor.
In August ECX has traded 25,386 tonnes of coffee, the major hard currency source of the country, more than 5,000 tones sesame seeds, 1,386 white pea bean, 7, 498 tones of the recently included soybean, 1,955 green mung bean, worth 2.42 billion birr.
The trading value of coffee takes 80 percent of the total amount.
CRIME EVERYWHERE
In late modernity widespread crimes have become one of the major preoccupations of nation states. To be sure, states themselves commit plenty of hideous crimes and they do so by leveraging their monopolistic position on ‘legal violence’. They conduct covert and overt operations routinely, with the help of specialized institutions created for the purpose. Well-organized non-state actors, with subversive political agenda, are also visible in our world system. These include the likes of ISIS, etc. These violently operating entities are customarily called ‘terrorist’ organizations. At times, the labeling can be quite arbitrary, depending on the position of the declarer in the prevailing hierarchical interstate system. For example, the USA recently declared the ‘Iranian Republican Guard’ a terrorist organization, even though it is a bona fide arm of the Iranian state!
Disgruntled and sick individuals bent on committing mass murders are also in the ascendance, not only in the USA, where it is more or less an everyday affair. Unfortunately, the root cause behind such atrocities is one topic not to be discussed in polite company. To some extent, mass shooting is a mere upgrade on the background homicide rate, facilitated by the ever-increasing sophistication of killing weapons. In many countries where homicide is relatively high, mass murders follow suit. Mexico is another example. The mass shootings that are happening in the USA is of a different breed. By and large, it has no perceptible purpose, except mere satisfaction that accrues to the criminally inclined from the very act of killing other human beings! Whatever the reasons that propel one to commit such socially (may be not psychologically) puzzling crime, the availability of weapons to all and sundry, is certainly another major culprit behind the scene. But the question still remains: what lies behind the increasing number of people who are determined to committing very cold-hearted crimes, particularly in such rich nations? See Rall’s article next column.
At least in the case of the traditional crime syndicates, the major reason behind their criminal activities is quite clear. Here, the message is: ‘don’t stand on our way; if you do, we will get rid of you’! While these entities seem to be receding in the west, (core countries of the world system) they are gaining significant grounds in South America, Africa and Asia. To a large extent, these are entities obsessed with making quick and beaucoup money, using all kinds of means, legal or otherwise. When a state fails to have a convincing integrity system with transparent, accountable and participatory mode of governance, the tendency amongst the impatient sheeple (human mass) is to take matters in its own hands. Moreover, in such societies the large majority gradually develops stoic apathy, with unappetizing consequences that are bound to be detrimental to the future of the country!
Those who do not use extreme violence, but are essentially in the same camp with that of the traditional organized crime (fixated on making fast/plenty of money) are running the world financial systems, by extension, the global economy! They do so, mostly by manipulating existing laws and buying influence; like bribing lawmakers, corrupt judges as well as elements of the executive organ. Thanks to the states, these quietly operating criminal syndicates have already setup intergovernmental institutions to protect their various cartels that span the whole world. The most these accomplished manipulators get for their callous crimes is a slap on the wrist, so it seems. If truth be told, the globalization we gullibly/ignorantly talk about is essentially the making of these concocted institutions at the service of these ‘legal criminals’. These people masterminded the financial crisis of 2008, which has destroyed the lives of millions. Soon there will be more devastating crises to come! To add insult to injury, these white-collar criminals have been rewarded for their evil deeds. Policies like QE (quantitative easing) is tailor made to make these criminals even richer. See Smith’s article on page 46.
In Africa it is mostly those affiliated with the ruling elites that commit such intricately massive crimes. As in the core countries, these individuals also revert to physical force/violence, if and when they deem situations demand it! Amongst the various means of criminal accumulation pursued by the Africa’s parasitic elites, we can mention government tenders, transfer of state assets to cronies under various pretexts, including privatization, favoring cronies in the state’s procurement processes, the facilitation of massive bank credit, relative to the underlying, usually front/phony business operations, etc., etc. However, there is always a catch in our context. It is; unlike the strong states of the industrially advanced countries, popular resentments in the weak states of Africa usually result in accelerated mass uprisings, to be followed by generalized destabilization. Unfortunately, ‘It Is Our Turn To Eat’ (Michela Wrong) remains a powerful guiding light to the perennially parasitic African polity. Nonetheless and at the end of the day, ignorance and corruption, fuelled by the ideology of identity politics, will bring neither lasting peace nor sustained prosperity! The cul-de-sac ideology of identity politics only incentivizes comprehensive mal-governance. Elections after elections have not given a glimmer of hope, let alone deliver salvation, to the majority of Africans. This old ‘rinse and repeat’ tactic only benefits the few at the expense of the many. Yet, this dead-end cycle to nowhere continues, until it doesn’t, resulting in state collapse. How many African countries are on the verge of becoming ‘failed states’, mostly on the account of criminal transgression and apparent intransigence on the part of the ruling elites? Refreshingly, traditional antidotes might make a comeback. See Plummer’s article on page 41.
“Forget the politicians. The politicians are put there to give you the idea you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land, they own and control the corporations that’ve long since bought and paid for, the senate, the congress, the state houses, the city halls, they got the judges in their back pocket, and they own all the big media companies so they control just about all of the news and the information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else. But I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them.” George Carlin (American comedian). Good Day!