Why Ethiopian Import and Export Traders Are Reluctant to Take Dollars from Banks Despite Cash Availability at Lower Rates

Why Ethiopian Import and Export Traders Are Reluctant to Take Dollars from Banks Despite Cash Availability at Lower Rates Despite a recent foreign exchange reform by the National Bank of Ethiopia (NBE) and substantial dollar allocations by the Commercial Bank of Ethiopia (CBE), Ethiopian import and export traders remain reluctant to access foreign currency from banks. Between July 22, 2024, and September 30, 2024, CBE distributed over USD 282 million across various sectors, yet businesses have utilized only 28% of the available foreign exchange. This reluctance persists despite the availability of dollars at lower rates than what is typically found on the open market. Several reasons account for this phenomenon. First, Ethiopian banks allow only spot trading, which exposes traders to significant risks due to exchange rate fluctuations. Second, the ongoing economic slowdown and inflation have weakened demand for imports, making the market less attractive for traders. Third, Ethiopia’s tight monetary policy has created cash flow issues, making it difficult for businesses to secure the necessary local currency to settle forex payments. And finally, despite substantial forex allocations, businesses have been unable to fully capitalize on these resources due to the challenges mentioned. Here is a closer look at these issues. 1. Spot Trading and Exchange Rate Fluctuations A key issue discouraging traders from using bank-offered forex is the reliance on spot trading. Spot trading means that traders must buy or sell foreign currency at the current exchange rate, without the ability to hedge against future currency fluctuations. In Ethiopia, where the birr has seen significant depreciation in recent years, this exposes businesses to major risks. For example, imagine an importer needing to buy $100,000 to purchase goods from abroad. At the time of the transaction, the exchange rate is 1 USD = 60 ETB, meaning they will need to pay 6,000,000 ETB. However, by the time the goods arrive and payments are due, the birr might depreciate further to 1 USD = 65 ETB. In this case, the importer will need to pay even more in birr to cover the same $100,000, potentially causing financial strain or losses. In contrast, hedging allows businesses to lock in an exchange rate for future transactions, protecting them from unfavorable currency movements. For instance, with a hedging contract, an exporter might agree to sell $100,000 at a future date at a fixed rate of 1 USD = 60 ETB, regardless of the market rate at the time of the transaction. This provides more financial certainty, but Ethiopian banks currently do not offer such mechanisms. Without access to hedging, traders are exposed to volatile exchange rates, making spot trading a high-risk endeavor, especially in a fluctuating market like Ethiopia’s. 2. Economic Slowdown and Inflation Ethiopia’s ongoing economic slowdown and high inflation have created additional barriers for traders. The consumer index—a measure of household consumption and economic activity—has been on the decline, which discourages importers from bringing goods into the country. Even with forex available at lower rates, many importers fear that weak consumer demand will leave them with unsold goods, making their investments unprofitable. Inflation has eroded the purchasing power of consumers, further reducing demand for imported goods, which are often more expensive than local alternatives. As a result, traders are reluctant to take on the risk of importing goods that may not sell, especially in a market where households are tightening their belts. Additionally, the export sector has been sluggish, further compounding the issue. With declining external demand for Ethiopian goods, exporters are earning less foreign currency, making it difficult for them to sustain operations or invest in future imports. 3. Tight Monetary Policy and Cash Flow Constraints Ethiopia’s tight monetary policy is also playing a significant role in limiting traders’ access to foreign exchange. In an effort to control inflation, the government has restricted the availability of local currency (birr), which has created cash flow issues for businesses. Current regulations require importers to deposit between 50% and 100% of the transaction value in birr before they can access forex from banks. This policy locks up significant amounts of capital, leaving businesses with limited cash flow to cover other operational expenses. Even if forex is available at lower rates, many traders find themselves unable to meet these high deposit requirements, preventing them from securing the dollars they need to conduct business. For example, an importer looking to purchase $100,000 would need to deposit up to 6,000,000 ETB (assuming an exchange rate of 1 USD = 60 ETB) in advance to access the forex. With cash flow already strained by tight monetary conditions, many businesses cannot afford to tie up such large sums in forex transactions, even if the rates are favorable. Low Utilization of Allocated Foreign Exchange Despite the challenges outlined above, the Commercial Bank of Ethiopia (CBE) has made significant strides in distributing foreign exchange. Following the NBE’s reform of the foreign exchange management system, CBE distributed over USD 282 million between July and September 2024. The allocations were made across four rounds and targeted key sectors such as pharmaceuticals, manufacturing, and import/export businesses. The breakdown of the distribution includes: Medicines and medical supplies: USD 208,290,167.10 Machinery: USD 42,777,753.94 Raw materials and consumer goods: USD 18,153,777.53 Service fees and miscellaneous expenses: USD 13,237,737.99 Despite this sizable allocation, the utilization rate by businesses has averaged only 28%. This low uptake highlights the disconnect between the available forex and traders’ ability or willingness to access it. Many traders are either unable to secure the necessary birr to meet pre-payment requirements or are unwilling to take on the risk associated with spot trading and fluctuating exchange rates. The reluctance of Ethiopian import and export traders to take advantage of the dollars provided by banks, despite lower rates, stems from several interrelated factors. The reliance on spot trading without hedging mechanisms exposes traders to significant exchange rate risks, while the economic slowdown and inflation have reduced demand for imports, making the market less attractive. Additionally, tight monetary policies have squeezed cash flow, making it difficult for businesses to secure the local currency required to access forex. Although the recent foreign exchange reform and sizable allocations by the CBE are steps in the right direction, these measures alone are not sufficient to address the broader issues. Introducing hedging mechanisms, easing cash flow constraints, and stimulating consumer demand will be crucial in encouraging businesses to fully utilize the available forex and participate more actively in international trade. Until these systemic issues are resolved, the low utilization of forex by traders is likely to persist, regardless of the rates offered. 9 COMMENTS Dereje Yoahnnes October 14, 2024 At 10:28 pm I really have enjoyed the analysis and appreciated the examples used to help readers easily understand the issue. I want to raise a two issues. Firstly, it is true that devaluation of local currency make imports more expensive to local consumers. This when coupled with lower purchasing power of domestic consumers, it leads to decline in demand for imported goods. But I don’t see why demand for Ethiopian exported goods are declining when local currency is devalued. Contrary to this, it is expected that Ethiopian goods get cheaper to foreign consumers thereby increasing the demand for exported goods, why is demand for Ethiopian exports decline? Secondly, it is not right to introduce tight monetary policies to curb inflation? Governments are advised to decrease money supply during inflation, and thus introducing tight monetary policies is part of the that policy to stablize the economy. After all, the objective of the government is not to help businesses to fully utilize the available forex, but to stablize the economy. So, why do you suggest the government to introduce easing cash flow constraint, which is beleived to increase inflation. Best, I really have enjoyed the analysis and appreciated the examples used to help readers easily understand the issue. I want to raise a two issues. Firstly, it is true that devaluation of local currency make imports more expensive to local consumers. This when coupled with lower purchasing power of domestic consumers, it leads to decline in demand for imported goods. But I don’t see why demand for Ethiopian exported goods are declining when local currency is devalued. Contrary to this, it is expected that Ethiopian goods get cheaper to foreign consumers thereby increasing the demand for exported goods, why is demand for Ethiopian exports decline? Secondly, it is not right to introduce tight monetary policies to curb inflation? Governments are advised to decrease money supply during inflation, and thus introducing tight monetary policies is part of the that policy to stablize the economy. After all, the objective of the government is not to help businesses to fully utilize the available forex, but to stablize the economy. So, why do you suggest the government to introduce easing cash flow constraint, which is beleived to increase inflation. Best, Markos Yosef October 15, 2024 At 4:15 am That all are right each has its own influence. Flactuation of ETB devaluation rates day to day and customers demanding capacity make major part of high risk. Political issue itself has significant amount of influence. That mean what are theEthiopia social medias distributing and truth on the ground is very different. For example on the social media the Ethiopia Government says (PM Dr Abiy Ahmed Ali) say about salary of citizens will be increase by 300%, however on the ground it was far different. Example Lecturer salary of MSc/BMA on the ground increased insignificant amount. The former salary 12579 ETB and now was 13982 ETB. The variatios is around 11% only but promised salary 300% incresement. Due to huje difference between media propogand and truth on rhe ground goods on the price flactuate day to day that make demanding capacity reduces. That all are right each has its own influence. Flactuation of ETB devaluation rates day to day and customers demanding capacity make major part of high risk. Political issue itself has significant amount of influence. That mean what are theEthiopia social medias distributing and truth on the ground is very different. For example on the social media the Ethiopia Government says (PM Dr Abiy Ahmed Ali) say about salary of citizens will be increase by 300%, however on the ground it was far different. Example Lecturer salary of MSc/BMA on the ground increased insignificant amount. The former salary 12579 ETB and now was 13982 ETB. The variatios is around 11% only but promised salary 300% incresement. Due to huje difference between media propogand and truth on rhe ground goods on the price flactuate day to day that make demanding capacity reduces. Girma October 15, 2024 At 4:01 pm Thanks Addis insight, this is a critical insight. Hope the NBE takr sdvantage of the advice and recommendations, like, in addition increasing the sslary of gov workers, among others. Thanks Addis insight, this is a critical insight. Hope the NBE takr sdvantage of the advice and recommendations, like, in addition increasing the sslary of gov workers, among others. Abrham Nigussie October 16, 2024 At 8:20 pm Yes good iam my local payment system Ethiopia commercial Bank iam very interesting so it is me and my family live country bank please this process by short time finished iam need Yes good iam my local payment system Ethiopia commercial Bank iam very interesting so it is me and my family live country bank please this process by short time finished iam need Andualem October 16, 2024 At 9:07 pm I disagree there is no usd available at the bank. We requested many times. I disagree there is no usd available at the bank. We requested many times. Solomon October 16, 2024 At 9:22 pm Thank you, for the analysis. I toally agree with it however the political conflict also has big role in declining demand for hard cureency since the importer opt to change thier local currency to hard currency than involving in trading. Thank you, for the analysis. I toally agree with it however the political conflict also has big role in declining demand for hard cureency since the importer opt to change thier local currency to hard currency than involving in trading. fame fame October 17, 2024 At 7:03 am The fact that we understood that their is an artificial inflation & importer taking advantage of windfall money. As far as i know one of the objective of market driven forex trading is to discouraged use of imported goods & use locally produced goods wich is working. the other thing gvt tight Monetary Policy will help the country to make sure every source of incomes are legitimate & go through bank also has an impact on tax. However, our traders usually hide their source of income not to pay tax or avoid further question. The fact that Importer used to buy fx from parallel market with ($1with birr 120 ) supply goods but the money flow out of bank channel was uncontrollable but now government trying to control it & protect citizens but importer are reluctant to abide by law. This shows how most of our trader not scientifically equipped with business ethics to do proper analysis do diversified business and take calculated risk. Obviously every body will not be importer or trader . The fact that we understood that their is an artificial inflation & importer taking advantage of windfall money. As far as i know one of the objective of market driven forex trading is to discouraged use of imported goods & use locally produced goods wich is working. the other thing gvt tight Monetary Policy will help the country to make sure every source of incomes are legitimate & go through bank also has an impact on tax. However, our traders usually hide their source of income not to pay tax or avoid further question. The fact that Importer used to buy fx from parallel market with ($1with birr 120 ) supply goods but the money flow out of bank channel was uncontrollable but now government trying to control it & protect citizens but importer are reluctant to abide by law. This shows how most of our trader not scientifically equipped with business ethics to do proper analysis do diversified business and take calculated risk. Obviously every body will not be importer or trader . Tamirat Tadesse October 17, 2024 At 8:40 am It’s all well explained by Addis. Unwillingness of our traders is dependent on inflation, purchasing power of people, ruling style of nation bank to stable economy, addition of Tax,….restricted exporter and importer It’s all well explained by Addis. Unwillingness of our traders is dependent on inflation, purchasing power of people, ruling style of nation bank to stable economy, addition of Tax,….restricted exporter and importer Etsay October 19, 2024 At 4:46 pm well described! The political instability has also threatened the traders from taking the funds with additional challenges that mentioned here. Thank you well described! The political instability has also threatened the traders from taking the funds with additional challenges that mentioned here. Thank you Comments are closed.

Ethio Telecom to Offer 10% Stake to Local Investors via TeleBirr App

Ethio Telecom to Offer 10% Stake to Local Investors via TeleBirr App Ethio Telecom, the state-owned telecommunications company, has been granted a broker license by the Capital Markets Authority of Ethiopia, enabling the company to sell 10% of its stake directly to local investors through its TeleBirr application. This initiative marks a shift from the previously planned method of selling shares through the Ethiopian Securities Market. According to Dr. Brook Taye, Chief Executive Officer of Ethiopian Investment Holdings, who spoke at the African Investment Conference in London on September 28, 2023, Ethio Telecom will begin offering shares starting from Wednesday, October 18, 2023. The decision to use the TeleBirr app for the sale of shares is intended to simplify the process and avoid the costs associated with an Initial Public Offering (IPO). Share Offering and Market Development The Ethiopian government had earlier indicated that 10% of Ethio Telecom’s total value would be made available for local stock buyers as part of its broader economic reforms. While the Ethiopian Securities Market was originally expected to manage the sale, the plan has been altered, allowing Ethio Telecom to facilitate the process independently through its digital platform. Ethio Telecom’s broker license, issued by the Capital Markets Authority, permits the company to directly manage document-based transactions for the sale of its shares. This move comes in conjunction with the upcoming launch of the Ethiopian Documentary Market, which will officially begin its services next month and is expected to further develop the country’s investment landscape. Financial Performance and Future Goals Ethio Telecom, which is celebrating its 130th anniversary this year, reported earnings of 93 billion birr in the 2022 fiscal year. The company aims to increase this figure to 163.7 billion birr in the coming years as part of its long-term financial objectives. The decision to offer shares to the public is part of the government’s broader strategy to increase private participation in state-owned enterprises, and it aligns with the country’s overall economic goals of expanding local investment opportunities. Ethio Telecom’s decision to sell shares through its TeleBirr app represents a notable step in Ethiopia’s evolving financial system. By utilizing its own platform, the company aims to streamline the investment process for local investors. This move also highlights the Ethiopian government’s focus on enhancing public engagement in the country’s key industries as part of its broader economic reforms. 6 COMMENTS TomM October 15, 2024 At 4:24 pm Thank-you for the helpful story. Should this sentence “Ethio Telecom will begin offering shares starting from Wednesday, October 18, 20232 read “..October 16, 2024”? The previous sentence also references 2023. Dr Brook Taye was at the African Financial Services Investment Conference )AFSIC) on 8 October 2024. Thank-you for the helpful story. Should this sentence “Ethio Telecom will begin offering shares starting from Wednesday, October 18, 20232 read “..October 16, 2024”? The previous sentence also references 2023. Dr Brook Taye was at the African Financial Services Investment Conference )AFSIC) on 8 October 2024. Asefa Bekele October 15, 2024 At 4:25 pm realy digitaal system which update by asefa bekele bassa.my carrent city …..wolayta soddo…mehal kifle ketema…… realy digitaal system which update by asefa bekele bassa.my carrent city …..wolayta soddo…mehal kifle ketema…… Ethio Telecom IPO today - African Capital Markets News October 15, 2024 At 11:01 pm […] Telecom has been given a stockbroker licence so that it can sell shares to the public, according to this story on Addis Insight […] […] Telecom has been given a stockbroker licence so that it can sell shares to the public, according to this story on Addis Insight […] Asefa Bekele October 16, 2024 At 8:03 pm thanks thanks Asefa Bekele October 16, 2024 At 8:08 pm thanks , thanks , Mohamed a nour November 9, 2024 At 7:07 pm Ok this good idea but we need very good information to study this shares to people of Ethiopia and lot of good information from the TV and the internet to Ok this good idea but we need very good information to study this shares to people of Ethiopia and lot of good information from the TV and the internet to Comments are closed.

Ethiotelecom’s 10% Public Share Sale: A Turning Point for Ethiopia’s Telecom Market

Ethiotelecom’s 10% Public Share Sale: A Turning Point for Ethiopia’s Telecom Market Ethiotelecom, Ethiopia’s state-owned telecommunications giant, has announced plans to begin selling 10 percent of its shares to the public. This marks a historic moment in the company’s 130-year legacy of providing cutting-edge telecom services across the country. The sale, which is set to commence on Wednesday, October 23 , 2024, follows the government’s recent decision to open up the telecom sector to private investors, ending Ethiotelecom’s century-long monopoly. This move aligns with Ethiopia’s broader economic reforms aimed at encouraging private sector participation and boosting the country’s economy. According to insiders from Ethiotelecom, the partial privatization will invite domestic and international investors, offering them a chance to own a stake in one of Africa’s largest and oldest telecommunications providers. It is expected to increase competition, enhance service quality, and further drive innovation in the sector. Ethiotelecom has been a key player in Ethiopia’s development, offering services ranging from fixed-line telephone to mobile internet, contributing significantly to the country’s digital transformation. However, with increasing demands for faster, more reliable services, this partial privatization is seen as a strategic move to meet the evolving needs of the market. The Ethiopian government has indicated that the remaining majority stake in Ethiotelecom will remain under state control, ensuring public interest in the company is maintained while encouraging fresh investment to modernize the sector. More details on how and where the shares will be available for purchase are expected in the coming days, as Ethiotelecom prepares to usher in a new chapter of public-private partnership in Ethiopia’s telecom industry. 1 COMMENT mebrahtu October 17, 2024 At 9:41 am that’s a good progress in order to sustain national developments. that’s a good progress in order to sustain national developments. Comments are closed.

Commercial Bank of Ethiopia Allocates Over USD 282 Million in Foreign Exchange After Major Reform

Commercial Bank of Ethiopia Allocates Over USD 282 Million in Foreign Exchange After Major Reform Commercial Bank of Ethiopia Allocates Over USD 282 Million in Foreign Exchange After Major Reform Addis Ababa, Ethiopia — July 22, 2016 Following the National Bank of Ethiopia’s (NBE) overhaul of the foreign exchange management system, the Commercial Bank of Ethiopia (CBE) has announced the distribution of over USD 282 million to various sectors between July 22, 2016, and September 30, 2017. The foreign exchange reform, aimed at creating a competitive and market-based system, introduced new policies that enable banks to better compete in the market and provide more efficient foreign currency allocation. The reform is expected to boost foreign trade by making the supply of foreign exchange more responsive to demand and increasing banks’ foreign currency income. Under this new framework, CBE distributed a total of USD 282,459,436.76 across four rounds, benefiting various sectors including pharmaceuticals, manufacturing, import/export businesses, and government institutions. The allocation breakdown includes: Medicines and medical supplies: USD 208,290,167.10 Machinery: USD 42,777,753.94 Raw materials and consumer goods: USD 18,153,777.53 Service fees and miscellaneous expenses: USD 13,237,737.99 Despite the sizable allocation, the bank reported that the utilization rate by recipients averaged only 28%, suggesting that businesses are yet to fully capitalize on the available foreign exchange. CBE assured that it will continue to distribute foreign currency regularly to meet the needs of businesses in various sectors, in accordance with the new policy. The reform is seen as part of a broader effort by Ethiopia’s central bank to enhance the country’s foreign trade competitiveness and modernize the financial system, supporting sustained economic growth.

Ethiopia to Introduce Mandatory Licensing for Real Estate Valuers, Enhancing Market Trust

Ethiopia to Introduce Mandatory Licensing for Real Estate Valuers, Enhancing Market Trust Ethiopia is set to introduce a mandatory licensing system for real estate valuers as part of its new Real Estate Development and Immovable Property Transaction and Valuation Bill. The primary goal of this new regulation is to establish a more transparent, reliable, and professional property valuation process in the country. By ensuring that only certified professionals can conduct property valuations, the government aims to improve trust in real estate transactions and safeguard the interests of buyers, sellers, and investors. Mandatory Licensing for Real Estate Valuers A central aspect of the bill is the mandatory requirement that all real estate valuers obtain a professional license before they can appraise properties. The licensing process will be regulated by federal, regional, and city authorities to ensure that only qualified professionals are authorized to assess property values. This system is intended to standardize valuation practices and reduce the risk of inconsistencies that have affected the real estate market in the past. By implementing this system, Ethiopia seeks to professionalize the real estate sector and reduce the influence of unlicensed brokers. The aim is to foster more accurate and trustworthy property valuations, based on market data and established valuation principles, providing a more consistent and reliable foundation for real estate transactions. Building Market Trust Through Professionalism The introduction of licensed real estate valuers is expected to increase confidence in Ethiopia’s property market. Inconsistent valuations have been an ongoing challenge, sometimes leading to uncertainty in property transactions and discouraging potential investments. By mandating that property valuations be conducted only by licensed professionals, the bill aims to provide clarity and ensure that valuations reflect current market conditions. Licensed valuers will be required to adhere to established codes of conduct and use scientific methods and data-driven approaches to determine property values. This structured approach is expected to reduce speculative pricing and enhance fairness in the property market. With more transparent and predictable valuations, market participants will have greater confidence in the real estate sector. Regular Property Valuations and Transparent Processes The bill also includes provisions for regular property valuations, which will be required at least every five years. This regular reassessment will ensure that property values are kept up to date with the latest market trends and developments. Property valuations will also be made publicly accessible, allowing all parties involved in real estate transactions—buyers, sellers, and investors—to have access to consistent and reliable information. This emphasis on transparency is a key part of the bill, which seeks to eliminate information imbalances in the market and reduce the likelihood of under-the-table deals. By making valuation reports publicly available, the government aims to create a more open and fair real estate market. Safeguarding Property Owners and Buyers The new licensing system is designed to offer protection to both property owners and buyers by ensuring that valuations are conducted by certified professionals who follow clear guidelines. This reduces the risk of unfair valuations that could negatively impact the parties involved in a property transaction. In the event of a disagreement over a property’s valuation, the bill provides a structured complaint process, allowing property owners to file appeals if they believe their property has been misvalued. This system is intended to ensure that property valuations are fair and that disputes can be resolved in a transparent and consistent manner. Government Oversight and Enforcement Government oversight will be a key element of the new system, with local authorities, including city mayors and district administrators, responsible for reviewing and approving property valuations. The government will also have the power to investigate complaints and discrepancies related to valuations, ensuring accountability and addressing any potential concerns. Valuers found to have violated professional standards or ethical guidelines will face penalties, including suspension or revocation of their licenses. This regulatory framework is intended to maintain high standards in the property valuation process and ensure that all parties adhere to the rules. Encouraging Investment and Economic Growth The introduction of mandatory licensing for real estate valuers is also expected to encourage greater investment in Ethiopia’s real estate market. By providing more accurate and reliable property valuations, the new system is designed to reduce risks associated with property transactions, making the sector more attractive to investors. This is particularly important as the country seeks to boost investment from both local and international sources. Accurate property valuations will also contribute to the development of a more efficient property tax system, allowing cities to generate additional revenue for infrastructure projects. As Ethiopia’s urban centers continue to expand, a robust property valuation system will be essential for managing the growing demand for real estate. 1 COMMENT Ethiopia to Introduce Mandatory Licensing for Real Estate Valuers, Enhancing Market Trust - Ethio Diaspora Hub Service October 12, 2024 At 9:44 am […] Click here to read more […] […] Click here to read more […] Comments are closed.

Proposed Bill Enforces 80% Completion Requirement for Real Estate Sales

Proposed Bill Enforces 80% Completion Requirement for Real Estate Sales Real estate developers who sell houses before construction begins must deposit the money they collect in a closed bank account. They are also prohibited from handing over houses to customers unless the construction is at least 80 percent complete. Bill Submission to the House of Representatives The bill was submitted to the House of Representatives today, detailing new regulations for the real estate sector in Ethiopia. Prohibition on Advance Payments Without Proper Documentation The bill prohibits real estate developers from registering clients and collecting advance payments unless they have obtained a land ownership certificate and a building permit for the house in question. Introduction of a “Qualification Permit” Under the new bill, developers will be required to obtain a “Qualification Permit.” This applies to both local and foreign investors, who must have built and supplied at least 50 houses in order to qualify. Source of Financing Requirement for Developers Developers, both domestic and foreign, are required to prove they have the necessary “source of financing” for their projects. However, domestic investors are granted permission to sell homes early under specific conditions. Regulation of Pre-Sale Financing The bill addresses the common practice of developers signing contracts and accepting payments from buyers before construction begins. Developers who wish to raise funds this way must obtain “permission from the relevant body.” Mandatory Bank Accounts for Pre-Sales Developers using the pre-sale method must keep collected funds in a bank account, with strict regulations on money withdrawals. The bill requires that these funds be deposited in a closed account, opened with permission from the relevant authority. Restrictions on Property Ownership Transfer Until a sold house is built and handed over to the buyer, proof of ownership “cannot be sold or transferred” by the developer. Reduction of Harassment and Customer Losses The bill is designed to reduce the harassment and financial losses suffered by homebuyers by imposing mandatory procedures on developers who sell houses early. Prohibition on Selling Houses Less Than 80 Percent Complete Developers are prohibited from selling houses that are less than 80 percent complete. Additionally, unfinished houses can only be transferred to customers with their explicit consent. Registration and Payment Collection Timeframe Real estate developers can only register homebuyers and collect advance payments after receiving both a “Land Ownership Certificate” and a “Construction Permit” from the concerned authority. Limitation on Number of Registered Buyers Developers cannot register more homebuyers than the land legally acquired can accommodate. Access to Government Land for Developers The new decree also outlines the process for developers to acquire extensive government land, based on specific conditions. These include making 40 percent of homes accessible to low- and middle-income segments and building a large number of homes, ranging from 500 to 5,000 depending on the city. Additional Conditions for Government Land Access Developers importing resources unavailable locally in quality or quantity using their own foreign currency (Franco Valuta), and reinvesting profits domestically for up to ten years, will benefit from these land access provisions. Unanimous Referral to Committee The proposed bill, titled “Real Estate Development and Immovable Property Marketing and Appraisal,” was submitted to the House of People’s Representatives and referred to the Standing Committee on Urban, Infrastructure, and Transport Affairs for further consideration.

Ride Raises Fare to 130 Birr: How Fuel Reforms Impact Your Ride

Ride Raises Fare to 130 Birr: How Fuel Reforms Impact Your Ride Ride Transport Service has announced a price increase following the recent fuel and economic reforms. The service, which initially charged 100 Birr, has now increased to 130 Birr as of yesterday. Additionally, they stated that with the new price revision, there is also an increase of 1 Birr per kilometer. This price change follows the Ministry of Trade and Regional Development’s announcement of adjustments to retail fuel prices, effective from October 9, 2024, at 06:00 a.m. The adjustments are part of broader macroeconomic reforms, including the restructuring of the foreign exchange management system implemented in July 2024. These reforms aim to improve business efficiency and address issues that have affected the sector for over three decades, such as transparency and free competition. The government has kept fuel prices stable over the last two months through subsidies, spending over 35.8 billion Birr to prevent burdening consumers. However, officials note that fuel prices in Ethiopia remain significantly lower than in neighboring countries, which has led to smuggling and illegal trading activities. As a result, a phased approach to adjusting fuel prices has been adopted, with periodic increases planned over the next year. The price of gasoline, for example, has risen from 82.60 Birr per liter to 91.14 Birr, with consumers covering 8.54 Birr of the increase while the government subsidizes 26.14 Birr. Similarly, the price of white diesel has risen to 90.28 Birr per liter, with consumers paying 6.54 Birr of the increase, and the government covering the rest. In light of these developments, Ride Transport Service has adjusted its fares accordingly to cope with the rising costs. The government has committed to spending approximately 33 billion Birr on subsidies over the next three months, with the total cost potentially exceeding 100 billion Birr within the next year, depending on global oil price stability.

Ethiopia Opens Doors: 20 Global Firms Licensed in Retail and Wholesale Sector

Ethiopia Opens Doors: 20 Global Firms Licensed in Retail and Wholesale Sector After the announcement of a new directive allowing foreign investors to engage in wholesale and retail business in Ethiopia, 71 international companies have expressed interest, and 20 licenses have been issued since July. It is worth recalling that two months ago, the Ethiopian Investment Board, chaired by the Prime Minister, decided to open up sectors previously reserved for Ethiopians to foreign businesses. Since the Ethiopian Investment Commission began issuing licenses under this new law, 21 organizations have been licensed: 13 to engage in retail business and eight for export activities. On September 23, 2017, a discussion was held at Mesfen Tafesena and Associates Law Office regarding Ethiopia’s investment landscape. The meeting was attended by key stakeholders, including the Minister of Finance, Dr. Eyob Tekalign, and Dr. Brook Taye, CEO of the Ethiopian Investment Holding Group. The senior policy and legal advisor from the Investment Commission stated that many companies granted licenses are from emerging markets. While the advisor did not disclose company names, it was noted that most businesses registered for export are focused on coffee and sesame. Additionally, companies planning to import into Ethiopia have shown interest in sectors like electric vehicles and construction materials. Previously, foreign investment in Ethiopia was heavily restricted, but a significant revision to the investment proclamation in 2020 has transformed the landscape. Since the new law took effect, over 150 investment projects have been launched, with companies registering more than $2.5 billion in investments. In the five years from 2018 to 2023, 85 reform laws have been introduced across 100 agendas aimed at improving the business environment. Dr. Eyob Tekalign, the Minister of Finance, highlighted that in the past two months, efforts to manage the foreign exchange market have increased export revenue, significantly boosted remittance income, and reduced imports. Regarding the recent 10-day training for senior leaders of the Prosperity Party in Adama, the Minister clarified that the discussions were not centered on political issues. Instead, the focus was on leadership and service to the nation. 3 COMMENTS Ethiopia Opens Doors: 20 Global Firms Licensed in Retail and Wholesale Sector - Ethio Diaspora Hub Service October 7, 2024 At 1:30 pm […] Click here to read more […] […] Click here to read more […] Ittu Aba Farda October 8, 2024 At 4:17 am This is a wise move. It will intensify competition promoting price stabilization of commodities including the basic needs like groceries. This is a wise move. It will intensify competition promoting price stabilization of commodities including the basic needs like groceries. Sam October 10, 2024 At 12:28 pm This will make Ethiopia look like Kenya and Uganda. Foreigners specially Indians and Chinese will take over and the local traders/investors will suffer highly. Regadless, this is inevitable and would have happened sooner or later. This will make Ethiopia look like Kenya and Uganda. Foreigners specially Indians and Chinese will take over and the local traders/investors will suffer highly. Regadless, this is inevitable and would have happened sooner or later. Comments are closed.

Minibus Operators Face Uncertain Future Amid New Licensing Threat

Minibus Operators Face Uncertain Future Amid New Licensing Threat The Ethiopian Ministry of Transport and Logistics has introduced a strict new directive to improve public transportation safety and efficiency in line with Addis Ababa’s modernization efforts. While beneficial for the city, these changes create significant challenges for the public transport operators, especially minibus taxi operators, who now must obtain a competency license with stringent requirements. Additionally, hefty fines of ETB 5,000 for a lost license and ETB 1,500 for carrying an extra passenger add financial pressure on drivers. These challenges raise concerns about the sustainability of their operations as they adapt to these reforms while trying to maintain their livelihoods after serving the country for many years. Ayalew Siyoum, Chairman of the Addis Ababa City Minibus Taxi Associations, highlighted the growing challenges taxi drivers face due to new penalties and regulations. With drivers earning only ETB 4.50 per passenger for a 2.5 km trip, totaling ETB 50 for a full load of 12 passengers, rising fuel prices and inflation are cutting deep into their already slim margins. “Many drivers are left with no choice but to ask passengers for additional payments or take on extra passengers just to make ends meet,” Siyoum noted. He emphasized that revising the fare structure is essential to relieve the pressure, allowing drivers to sustain themselves without resorting to overloading or fare hikes. These changes are part of a broader ten-year plan focused on establishing a reliable, integrated transport system that prioritizes safety, accessibility, and modernization. However, the financial burden of compliance may challenge many small and medium-sized operators, potentially leading to increased fares or service closures, raising concerns about balancing safety with affordability for the public. “If it’s based solely on an individual’s desires, it will not succeed,” stated Birhanu Zeleke (PhD), an urban transport expert. He noted that some of the current regulations, such as the sharply increased penalties, appear to disproportionately impact operators. However, he emphasized that many directives from the government are designed to benefit society as a whole, which is why he’s confident that support measures like necessary loans and tax-free vehicle imports will be made available. Zeleke also highlighted the importance of raising awareness among drivers and minibus owners, noting that equipping them with psychological skills is crucial. He believes that this holistic approach might offers greater advantages for both the drivers and the community. “Addis Ababa’s taxi minibuses, many of which are over 30 years old and prone to frequent breakdowns, are in urgent need of modernization.,” said Siyoum. He emphasized that for modernizing of these vehicles to succeed, significant government support is needed, such as tax-free imports and financial loans for new vehicles. The situation poses a tough dilemma for transport operators, who are increasingly worried that high compliance costs could push them out of business. Balancing modernization and safety with economic realities threatens their livelihoods. Moreover, operators argue that the regulations are not only expensive but also vague on how to modernize their vehicles, leaving them uncertain about meeting requirements without clear guidance or financial support. An anonymous driver in the Megenagna area expressed concerns about safety, stating, “We do not feel secure. Even the vehicles we have are insufficient for the community, especially if we were to remove about half of them.” Seyioum urged drivers to focus on saving and planning to replace their outdated minibuses with more efficient models. “Just like those whose homes were affected by corridor development received support, old minibus owners should be given similar assistance after years of service,” he added. However, Ayalew clarified that this support doesn’t mean the government should cover all costs; vehicle owners must also play their part. Siyoum suggested that during fuel shortages, minibus owners should be given priority over private car owners due to their crucial role in the community. He pointed out that with many people relying on their services, long lines of passengers form daily, making it essential for these drivers to have easier access to fuel. Ayalew also proposed that creating designated time slots for minibus drivers to refuel could help maintain their vital services without interruption. For many people, these transport services are lifelines, essential for daily commutes and connectivity. If minibus owners are forced to raise fares or reduce services, it could increase hardship for families relying on public transportation. Having served the country for over 25 years, they deserve substantial government support through improved infrastructure and regulatory frameworks. This includes promoting public-private partnerships to encourage investment in electric minibuses and providing incentives for local assembly and maintenance facilities. Additionally, minibus owners should collaborate to share best practices and innovate service delivery to enhance efficiency and customer satisfaction. Addis Insight’s attempts to contact the Ministry of Transport and Logistics and Addis Ababa Transport Bureau have been unsuccessful.