Flooding due to climate fluctuations have led to the displacement of more than 600,000 people in East Africa, and international watchdogs warn that further heavy rains could pose serious threats in nine Ethiopian regional states in the coming weeks.

Harsh weather conditions brought on by El Nino have affected at least a quarter of a million people in neighboring Kenya, with close to 200,000 displaced as a result of flooding. Another 179,000 people in Burundi, 127,000 in Somalia, and 126,000 in Tanzania have also been affected, according to the UN.

A report released by the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA) last week states the rainy season set to last until May in parts of the region has already had devastating effects, and warns the situation could soon grow worse.

“Heavy rains and floods have also damaged infrastructure, including homes and schools, and destroyed crops and farmlands,” reads the El Nino impact snapshot report.

The agency’s Ethiopia situation report for April 2024 forecasts that at least nine of Ethiopia’s regional states are at risk of further flooding during the Belg rainy season set to last until the end of the month. It warns that over 1.2 million people in the Somali Regional State alone are vulnerable to the effects of flooding, and estimates that more than 770,000 will be displaced as a result of heavy rains.

The four regions in the country’s south – Sidama, South Ethiopia, Central Ethiopia, and South West Ethiopia – are also expected to see some 145,000 residents affected, according to the report.

UNOCHA cautions that a further 421,000 people in parts of Oromia, 83,000 in Afar, 45,000 in Amhara, and 4,000 in Tigray could also face flooding.

On May 8, 2024, the International Organization for Migration (IOM), expressed concerns that weeks of heavy rainfall and flooding have caused massive displacement in six countries including Ethiopia. 

The IOM report revealed that the organization is providing support to over 70,000 flood-struck residents in the Somali and Oromia regions. The assistance includes the provision of emergency shelters, essential items, and cash assistance.

The Intergovernmental Authority for Development (IGAD) has also warned of the impending danger relating to heavy rainfall in several of its eight member nations.

IGAD’s weather forecast report states that “very heavy rainfall is expected in central to eastern Ethiopia as well as central and north-western Somalia” and predicts it will lead to flooding in flood-prone areas.

Flooding claimed the lives of at least four people in Addis Ababa two weeks ago, while parts of the country’s east, including Dire Dawa and its environs, have also faced flash floods in recent weeks.

At least 238 people are thought to have died in the heavy floods affecting two-thirds of Kenya’s 47 counties. A shortage of potable water in the country and the closure of several health facilities have also led to renewed fears over water-borne diseases, with at least 44 cases of cholera reported in the last few days.

Abdurehman entered the civil service at a young age, after studying economics at Jimma University and later Haromaya. He began his career at the Somali Bureau of Agriculture before moving on to the Bureau of Capacity Building.

In 2010, he began an eight-year hiatus from government service, coinciding with the return to office of former regional President Abdi Mohamed Omar (Abdi Iley). In 2018, Abdurehman returned to the political stage as a member of Mustafa Muhumed Omer’s cabinet. He held several posts in the regional government, including stints in charge of TVET institutes, irrigation development, and urban development and construction.

In September 2022, Abdurehman was appointed Deputy CEO of the newly-established Ethiopian Investment Holdings (EIH). He took the post at the country’s sovereign wealth fund serving under founding CEO Mamo Mihretu.

Four months later, he took the helm at EIH after Mamo was named governor of the National Bank of Ethiopia (NBE). He now oversees 26 state-owned enterprises (SOEs) under the wealth fund, including giants Ethiopian Airlines, Ethio telecom, and the Commercial Bank of Ethiopia.

Abdurehman answers to a board chaired by recently appointed Deputy Prime Minister Temesgen Tiruneh. The Prime Minister used to chair the board, which includes the ministers of Finance and Education, as well as the CEO of Ethio telecom.

Samuel Bogale of The Reporter caught up with Abdurehman for an exclusive look at EIH. EXCERPTS:

The Reporter: It’s been more than two years since EIH was legally established, and it took control of SOEs in July 2022. What has EIH been doing differently? And have there been any milestone achievements?

Abdurehman: EIH is divided into two parts: portfolio management and the investment side. EIH is very different from the institution that used to manage the SOEs. EIH owns very significant SOEs that have a huge impact on the overall economy, and at the same time on certain sectors they are involved in. The number of SOEs today is close to 40, and 27 were transferred to EIH. But one, the Land Bank and Development Corporation, has been liquidated. 

The economic growth in Ethiopia over the past few decades was mainly state led, and the SOEs played a crucial role. The government used them to implement the larger projects it was working on at the time. But the problem was with the way the government was treating both the SOEs and the projects. It wasn’t business oriented.

The projects weren’t given the sense of being commercial, but the SOEs were commercial entities. Whatever they do, they must have returns. The government was treating them as any other government agency that implements government projects. You don’t expect a project implemented by the Ministry of Water and Energy to be business oriented, because it is a kind of service that the government wants to provide to the public. But it can’t be like that for the SOEs; you expect cost recovery. This wasn’t the mentality, so it created a problem. 

The main mandate given to EIH was to inject some level of commercial discipline into these SOEs. They need to leave behind the mentality of working like any other government agency. They are commercial entities, and whatever they do they should make a profit. In that regard, they should strengthen and modernize corporate governance and professionalize management. These were the kind of mandates that were given to EIH.

Once the companies were transferred to EIH, one of the priorities for the first year was to at least understand the situation these companies are in. What do we need to do In order to make them more commercial-oriented? What are the challenges? We have finalized designing a transformation programme which we are planning to launch in early June. The portfolio companies’ performance has significantly improved, at least in financial terms. In terms of revenue profitability, we are currently in a position where that has jumped by at least 30 percent.

Is it accurate to attribute the changes at SOEs to EIH? Are the performances better than in the years before the EIH came on to the scene?

A quantifiable thing you can look at is the financial results. How is the revenue doing? How are the profits? A number of these companies are undergoing reform, making changes to the way they do business. These companies couldn’t perform and, rather than provide support to whatever the government was doing, they became a burden. This is why the government had to establish another corporation to soak up the debts [the Liability Asset Management Corporation].

We had to make sure that these companies improve their efficiency level so that they don’t become an additional burden on the government. Their financial results have significantly improved in terms of the revenue they generate and profitability. The year-on-year change in terms of the overall profitability of the 26 SOEs under EIH jumped from 80 billion to 112 billion at the end of last fiscal year. This is about a 40 percent year-on-year change.

In terms of individual enterprises, there were five or six companies which were in financial difficulties. However, the last time we conducted the performance review during the first half of this year, we had only one company that has recorded losses, which is the Ethiopian Minerals Corporation.

The remaining 25 SOEs all recorded profits last year? How many of them came out of the financial trouble they were in during the fiscal year that ended June 2022?

Yes, they have all made some level of profit. The profit levels vary; some were very good and some gained very small profits, but at least they are out of the loss situation they were in. A number of them recorded losses in 2022, including the Ethiopian Sugar Industry Group and Ethiopian Pulp and Paper. There were some that were coming out of the difficult situations they were in and, of course, the current security situation is affecting their operations. But, apart from that, the companies’ situation has improved for now.

Scores of SOEs expressed their opposition to coming under EIH during the onboarding back in June 2022. They were concerned about losing decision-making power and the government’s close eye on them. Are they content now? Have they come to an understanding with EIH?

I wasn’t there for that. But it was a complete misunderstanding from their side. The way EIH is structured is completely different from the previous institution, which was a supervisory institution. EIH is itself a company; it isn’t just a government institution. It was established through commercial law as a holding company that owns these enterprises on behalf of the government. So we own them. It is meant to improve decision making on behalf of them.

In the past, if an SOE wanted to, let’s say, change its name or capital, it would go to the supervisory body, which would direct it to the Ministry of Finance, which would then have to take it to the Council of Ministers for adoption. Today, the SOEs only require a decision from the EIH board to make these changes, to establish subsidiary companies, to merge, or even to liquidate. Liquidating the Land Bank and Development Corporation was a simple decision from the board, for example.

This is meant to facilitate quick decision making for the SOEs. They have benefited in a big way. We have helped a number of enterprises gain approval on issues that were pending for two years because of the quick decision making process. The SOEs have, of course, come to an understanding now because they are benefitting from it.

EIH has signed investment partnership agreements with several foreign companies, including Toppan Gravity. How many have been signed thus far? How are these joint venture agreements going?

As part of the EIH investment mandate, we are expected to work as a co-investment platform for foreign investors. It is expected to become one of the country’s investment vehicles. In Ethiopia, there are at least two investment vehicles: the Industrial Parks Development Corporation, which encourages foreign investors who want to establish manufacturing plants, and the public private partnership scheme under the Ministry of Finance. EIH is like that.

It will take on risk for foreign investors. EIH will facilitate all kinds of things that need to be done when foreign investors decide to work with it. Even though we are trying to improve the ease of doing business as a country, we are not still in a position where we would say everything is easy. It is very bureaucratic and very challenging for foreign investors. EIH will improve foreign investor confidence because they know they would be partnering with a government owned entity that will facilitate for them. EIH is expected to act as a co-investment platform. We are also going to come up with our own capital and take part in that investment. This is the whole idea.

For the last year and a half, there has been progress in terms of the engagements we have with foreign investors, some of which came through government-to-government engagement. A good example is the agreements we have signed with companies from the United Arab Emirates (UAE). EIH was among the entities who signed three agreements with UAE firms in August 2023.

What are the terms of the investment agreements with UAE firms?

The main one was the establishment of fuel depots. One of the country’s challenges is the limitation of storage facilities for fuel. So we want to improve that. We are planning to install them in two places – the main one in Dire Dawa and another in Dukem. Negotiations are still ongoing.

Can you tell us more about other EIH investment partnerships?

Some of the investments, such as Toppan, came through EIH outreach. We are engaged in negotiations with foreign investors in a number of areas, starting with the hospitality sector and government-owned hotels like Hilton and Ghion. In terms of establishing a company, the Toppan deal is the only one that has made it past the shareholders agreement stage. We are on the verge of finalizing agreements for the hotels.

We also have agricultural investment projects that are progressing. One of the areas that were considered for the agricultural project is Tana Beles. Most of the negotiations have been finalized but because of the security issues, we are trying to wait until things improve. We will probably sign the final agreement by late May. The plan is to farm on 20,000 hectares. We also considered Omo and Maji.

What is the status of negotiations concerning the hotels? Who are the foreign investors?

We are working on four hotels [Hilton Addis, Ghion Hotel, Spa Service Enterprise (Filwuha), and Genet Hotel] and engagement with investors is progressing for all but Genet Hotel. You will learn who the investors are when the time is right.

What was the agreement EIH signed with the government of Djibouti in its first year of operation?

That one was a Memorandum of Understanding (MoU). We’ve actually signed a number of MoUs. This specific agreement with the Djibouti government was for them to construct a fuel port terminal. It is a new facility. Not the one we currently use.

We wanted to have a stake in the facility, because we are the main customer – we are the only customer. Rather than using the service like we are doing now, we needed to invest in something that would give us some confidence and decision making power as a country. The negotiations haven’t yet been finalized.

How many MoUs and investment agreements has EIH signed?

I don’t have a specific number but the number of investment projects that we either initiated or are related to our companies is more than 20. We signed MoUs for at least half of them, while engagement is still going for others. Once we have something tangible that works for both parties, it will then proceed to MoU level.

Toppan, the company, has been established, and it has been functional for the past few months. It is the only one that has passed the final agreement and establishment threshold. The other company established with EIH is the Ethiopian Securities Exchange (ESX). The government owns 25 percent  of the Exchange through EIH. The rest is owned by various foreign or domestic private investors.

When EIH acquired a 25 percent stake in ESX along with four of its subsidiary SOEs, how and why were those SOEs chosen?

Those four SOEs [Ethiopian Shipping and Logistics Services Enterprise, Ethio telecom, Ethiopian Insurance Corporation, and Berhanena Selam Printing Enterprise] were included only due to a rule that there have to be at least five entities to establish a share company. Most of the funding came from EIH, but the SOEs were given a minor stake to fulfill that regulatory provision.

The Commercial Bank of Ethiopia (CBE) was not on the list but has since been added on as the fifth SOE to acquire the stakes in the Exchange with EIH. How come it was not part of the list in the first place?

We just made that decision. For CBE, if they wanted to come in, they would come with significant investment as they have now. At that time, we just needed four more entities to establish ESX with us. We’ve also decided that the SOEs that will be listed on the exchange are the first four on the list. Ten percent of Ethio telecom will be listed, as already announced.

What percentage will be floated to the public for the other SOEs? Are there any other enterprises selected for listing?

We have not decided with what percentage or amount the others will be listed. Some could likely see majority stakes floated. The Education Materials Production and Distribution Enterprise and the Ethiopian Tourist Trading Enterprise are the two additional SOEs to be listed. The last two aren’t investors in ESX, but they are among those we decided to list.

Through support from foreign partners, we recently conducted an assessment on the readiness of the enterprises to be listed. There are stringent criteria they need to fulfill to list. The assessment gives us an idea of what needs to change with these SOEs so that they are able to list. EIH will establish a unit that specializes on the capital market issue. This unit will assist the SOEs in preparing for listing.

Is listing CBE a possibility?

No. Not now. It might be in the future, but not currently. If we partially list Ethio Telecom, I don’t think we need CBE. Ethio telecom is huge, EIC is the largest insurance firm in Ethiopia with 50 percent market share, ESLSE is a massive enterprise and the only entity in the industry, and Berhanena Selam is the largest printing company in Ethiopia. These are already huge businesses.

One thing we’ve improved with many of our SOEs is their financial reporting. The smallest thing the capital market requires is to disclose your financial report statements. That culture wasn’t there in Ethiopia. I think we’ve managed to have 18 of our enterprises, including CBE and Ethio telecom, disclose their financial statements. The only company that used to disclose was Ethiopian Airlines.

There are initiatives to partially or fully privatize some state-owned enterprises. What consequences do you foresee privatization will have on EIH and its ownership stake in some of these SOEs?

The government has privatized several SOEs in the past few years. The main engine for the economic growth of Ethiopia was government investment, but a certain level of private sector investment is necessary for the economy. There are also enterprises that would be more efficiently managed under private ownership.

Is it going to affect the ownership of EIH? It is definitely going to affect ownership. EIH owns the enterprises on half of the government, so this is ultimately owned by the government. Our intention with the sugar factories was to fully privatize them; once we sell them we don’t own them. If we sell a minority stake, we are still a majority owner and we will still be able to make major decisions.

Do you think investors would be happy to invest in an SOE knowing that the government will control part of the investment?

Why wouldn’t they be happy to have the government with them in the investment? A good example can be the Ethiopian Securities Exchange. They know the government is going to own 25 percent but they came, and now it is oversubscribed. Why do you think they came? The government wants everyone to have an even playing field in business. In a way, it gives them more confidence. if the government is involved.

Why didn’t Ethio Telecom’s partial privatization process materialize? Did potential investors lose their interest?

They didn’t lose their interest. The government prioritized the 10 percent take first. Foreign investors will also invest significantly in the SOEs. Once we finish the transfer of the 10 percent to the public, it will then hopefully be initiated.

EIH lists six thematic areas, and claims to avail 24 investment opportunities on its website. Can you explain how you prioritize sectors? Also, how do you assist your enterprises to work in these sectors better?

EIH gives consideration to certain issues in terms of prioritization. The first thing is the national development plan. When the government establishes a commercial entity, the intention is not always for commercial objectives. There are other goals that the government has in mind for those commercial entities. One is that they play a crucial role in terms of whatever the government has planned to do for the country. We look at the national plan and we prioritize projects that would have significant impact in terms of achieving those objectives. Those areas you mentioned are what the country has prioritized in the national development plan.

The other consideration for EIH is the needs of our SOEs. A strategy for optimizing the existing companies is through investment. We prioritize companies that need immediate support. One of the mandates given to EIH is to approve loan programs for SOEs. The loan these entities are taking should be for a project that is commercially viable and that they will be able to repay. It is not to restrict them, but to make sure that we don’t fall into the traps of the past.

In the past, CBE was given orders from the government to provide credit to this entity or that entity. It isn’t like that today. We have granted full independence to the CBE to assess for itself any proposal from an SOE. If CBE doesn’t think it is commercially viable, it doesn’t give out the loans. Our idea is that if you have a bankable project, you just go deal with them directly.

But the SOEs might desperately need the loans to enhance their capacity. How does that work?

Since some of our SOEs can’t take on debt on their own, they really need capital injections. We then need better know-how from people with better understanding of how to manage these things. That could come through partnership with foreign investors. One of the things we are trying to prioritize for SOEs that aren’t doing very well is to incentivize foreign investment in them. We conduct an asset valuation so that we own whatever our asset value is and they will own whatever investment they bring in.

A good example is the hotels. We are trying to partner with investors who can come in and invest. Our share is going to be the value of the current asset, and their share is going to be whatever the investment they will bring. In that way, investment is becoming one of the strategies we use to optimize the companies we already own.

The distinction between EIH and the Public Enterprises Holding and Administration (PEHA) is confusing to many. Is it performance, debt sustainability, or something else that determines whether an SOE is placed under EIH or PEHA?

At the time, the decision was to close PEHA and bring all the SOEs under the Ethiopian Investment Holdings. There was a national committee formed to establish EIH, so a decision was made that it might not be an ideal solution to bring all the SOEs at once since EIH was new. It was decided to do  it through a gradual process, to bring in the 27 enterprises now. I can understand why people ask that, because the companies are the same.

The Development Bank of Ethiopia (DBE), which is a  commercial entity, is under PEHA. Even the Ethio Engineering Group is very much improved and they are making profit now. It is true that Ethiopian Electric Power (EEP) has the largest debt, but that is the mentality of looking at the debt side of things. When you look at the other side, EEP has the most valuable asset in the country, the Grand Ethiopian Renaissance Dam (GERD), and it’s under PEHA. Only the Ethiopian Electric Utility (EEU) is under EIH. Under EIH today, there are around five enterprises whose audits are yet to be finalized, because they have a huge audit backlog of a number of years.

Is there a plan to transfer SOEs under PEHA to EIH in the future?

There isn’t a specific plan. The government has decided to follow this centralized holding company model, which is very much different from the role that is played by supervisory institutions. Once the situation is fully improved, the decision might be made one way or the other.

Is there anything you would like to add?

We have finalized designing a transformation programme, which looks to improve the situation of SOEs under EIH. It will be launched in early June. It is a programme designed to transform the enterprises to achieve the objectives of the reform. EIH itself is an outcome of the reform the government started three or four years back. This reform does not stop by establishing EIH. The idea is to impart the objective of reform to the enterprises themselves. It will take time to transform the companies, so the programme is going to be a framework that will guide them in the right direction.

The sovereign wealth fund is eyeing cooperative investment ventures with foreign investors in agriculture, hospitality, manufacturing, and infrastructure development, according  to Abdurehman Eid, CEO of EIH.

He told The Reporter that EIH is looking for investors with “better know-how and understanding” in managing certain businesses, including underperforming state-owned enterprises (SOEs) under its wing. Abdurehman says the fund is seeking to attract investment in existing businesses as well as new investment.

“We conducted an asset valuation so that we own whatever our asset value is and they [foreign investors] will own whatever investment they bring in,” the CEO said. “A good example is the hotels. We are trying to partner with investors.”

Hilton Addis, Ghion Hotel, the Spa Service Enterprise (Filwuha), and Genet Hotel are four state-owned hospitality establishments in the heart of Addis Ababa that EIH would like to solicit foreign investment in. Abdurehman says negotiations for investment in all but Genet Hotel are in progress, but declined to name the potential investors.

EIH is also considering investment partnerships on agricultural projects on 20,000 hectares in the Tana Beles area of the Amhara region, but security issues are a serious concern.

“Most of the negotiations have been finalized, but because of the security issues, we are waiting until things improve,” the CEO said. He foresees a final agreement this month, although the armed conflict in the Amhara region has shown no signs of de-escalating.

He disclosed the fund has signed preliminary agreements with firms based in the United Arab Emirates (UAE) for the construction of oil depots in Dire Dawa and Dukem, as well as other projects. Negotiations, however, are still going, according to Abdurehman.

The CEO says the fund has signed agreements for more than a dozen co-investment projects, but a printing enterprise deal with a Japanese firm is the only one that has achieved anything tangible so far. EIH signed an agreement in December with Toppan Gravity for the establishment of Toppan Gravity Ethiopia, a security printing company.

EIH and five SOEs under its wing have also acquired a 25 percent stake in the upcoming Ethiopian Securities Exchange (ESX).

The CEO of the Ethiopian Airlines Group says a shortage of spare parts for aircraft maintenance and “unethical business practices” in the supply chain have forced the flag carrier to ground part of its fleet.

“I have to admit we are suffering from a shortage of spare parts. It’s created a great burden on all airlines, including Ethiopian Airlines,” said CEO Mesfin Tassew during a three-day aviation trade show in Addis Ababa this week. MRO Africa 2024 saw attendants from all over the globe.

Mesfin revealed the airline had grounded some of its aircraft because of spare parts shortages during a question and answer session. The CEO told local media last month that at least three Ethiopian Airlines jets are grounded while the carrier awaits the delivery of engine parts.

The unavailability of parts, delays in delivery, and price gouging are among the problems facing the airline, according to Mesfin.

“We don’t get the spare parts when we request them, so we want our suppliers to work with their supply chain aggressively to find innovative solutions and improve their parts delivery,” Mesfin said on Wednesday. “Whenever we order parts, we expect our suppliers to ship them out in the shortest possible time.” 

The CEO defended his claims that some of the carrier’s suppliers were overcharging for their goods.

“I have to say that some suppliers would like to take advantage of the shortage to harvest undeservedly high prices,” he said. “Parts sometimes cost three times more than the usual prices. It is an unethical business practice. Prices are increasing because of global inflation and we accept that, but it has to be reasonable,” said Mesfin.

Ethiopian operates a fleet of close to 150 modern jets from Boeing, Airbus, and Bombardier Aviation. Last month, it struck a USD 11 billion deal that could see the carrier acquire nearly two dozen B777-9 aircraft from Boeing over the coming decade.

Agency heads admitted that weakened border control has allowed illegal migration to and from the country to flourish.

Etsegenet Mengistu, chair of the parliamentary standing committee for Legal, Justice and Democracy Affairs, said the committee has noted that people come into the country to claim passports even though they are not Ethiopian.

“This illustrates that border control isn’t being carried out properly. ICS oversees borders but it isn’t doing enough,” said Etsegenet.

Assessments conducted by the committee found an alarming lack of use of technology in border control, where agents far and wide still depend on physical inspections and documents for identification at checkpoints.

“What is being done to improve the issues at the borders? What are you doing to solve these problems?” Etsegenet asked. “I think the borders don’t get enough attention, and the responsibility should be with the management of the institution.”

Immigration’s director general, Selamawit Dawit, acknowledged the issues arose on the border controls. 

“We have to improve. Ethiopia has the potential to do better than this,” Selamawit responded to the MPs.

The Service has requested a supplementary budget to improve border control systems, which the Director-General said is over two decades old and has several flaws. Selamawit also called on neighboring countries to cooperate in border control.

ICS oversees 18 border checkpoints as well as three airports and train stations, according to the Service’s nine-month performance report. It has serviced close to four million people crossing the border at these checkpoints over the period.

“We control all border checkpoints except the Metemma checkpoint, which isn’t being covered due to the recent issues,” said the ICE representative.

Under the leadership of Prime Minister Abiy Ahmed (PhD), the Ethiopian Investment Board has guardedly enacted a law that permits foreign participation in the import, export, wholesale, and retail trade businesses.

The Board has approved a directive that outlines commodity restrictions and other prerequisites for import and export trade.

Foreign businesses looking to get a coffee export permit will need to present evidence of having procured at least USD 10 million worth of coffee each year for at least three consecutive years leading up to the permit application.

The threshold goes down to USD 5 million a year for oilseed export permits, and USD one million a year for khat. The directive does not outline requirements for livestock exports.

Dagato Kumbe, deputy head of the Ethiopian Investment Commission (EIC), says more details will be disclosed in the coming week.

“There is a huge amount of interest from foreign investors. [The directive] will bring massive change in the trade system,” he said.

The liberalization is part of the second Homegrown Economic Reform Agenda (HGER). Dagato says the decision was not an easy one to make.

“We paid attention to how we can balance the sector for local investors as well,” he told The Reporter. “We have a strategy to govern the implementation process.”

Manufacturers or official agents representing manufacturers will be able to attain import permits for their products, while firms that already have an export manufacturing business in the country can also apply for import permits.

The import of strategic products such as fertilizers and petroleum products, however, will remain strictly under state domain.

The directive also sets out floor area thresholds for foreign retail businesses looking to open supermarkets in Ethiopia with 2,000 square meters as the minimum.

Tadesse Lencho (PhD) is a prominent law expert and managing partner at TBeST Law LLP, a firm providing corporate and commercial legal services across several sectors. He sees the pending liberalization as a positive game changer.

Tadesse predicts foreign firms, especially in the coffee industry, will be lining up for export permits.

“I think this will be good for the country’s economy as it invites competition in the sector,” Tadesse said. “The international market is more interested in engaging with the international trade system than locals. The horticulture industry flourished because many of the exporters and buyers in the international market are foreign investors. Market access is very important here.”

Tadesse expects to see the changes reverse harmful trends in the country’s international trade.

“We know that Ethiopian exporters aren’t making money from exports; they just want the forex to make profits from imports. This has been undermining the country’s economy,” he said.

The National Bank of Ethiopia (NBE) is considering the introduction of legislation that would place credit limits and restrictions on “large borrowers.”

Governor Mamo Mihretu is mulling the inclusion of a clause in the upcoming bank business proclamation which would limit how much a business or individual can borrow from a bank, as well as restrict the number of banks that can extend credit to a single borrower, according to an anonymous source at the NBE.

There are borrowers with hefty lines of credit at as many as 18 commercial banks, according to the source.

“There are companies taking loans from every bank. If business doesn’t go well for these companies, the whole banking system would be stuck,” said the NBE official. “The twenty largest depositors and borrowers are the same at many of the banks.”

The concentration of credit in the hands of a few is an issue that has not received enough attention from regulators, says the source.

“Very few businesses are making good use of banking,” he told The Reporter.

The phenomenon was described as “shocking” by the NBE Governor during an event at the Skylight Hotel last week.

“The Ethiopian financial sector is characterized by concentration. It is amazing how concentrated the sector is,” he told a gathering of people in tech and finance. “There is concentration in terms of focusing on urban areas; there is concentration in terms of focusing on particular sectors.”

Loans and advances from the banking industry are “concentrated in the hands of a few large borrowers,” according to an NBE Financial Stability Report released on April 11, 2024.

The report disclosed that no more than 10 borrowers accounted for 23.5 percent of all loans and advances from the entire banking industry in 2023. The figure was 18.7 percent the year prior.

The report, however, fails to disclose the identity of the borrowers.

“These borrowers are most probably a handful of state-owned enterprises and government agencies. The report obscures a lot of facts. It should at least provide credit exposure based on ownership, size of bank, and other factors,” said Abdulmenan Mohammed, an experienced financial analyst.

The NBE report reveals the banking industry had 1.9 trillion birr in outstanding loans and bonds at the end of 2022/23.

Abdulmenan notes the credit exposure of the state-owned Commercial Bank of Ethiopia (CBE) is likely much higher than the private banks.

The NBE source disclosed the central bank is looking to enforce credit restrictions akin to limits on equity. The NBE limits bank ownership to five percent for a single shareholder, and any shareholder with more than two percent in equity in any commercial bank is barred from investing in another.

“We will do the same thing on credit for borrowers,” the source told The Reporter.

Abdulmenan warns this could be “problematic for the borrower as well as for the banks.” He urges regulators to focus on single borrower limits, which would enable businesses to open lines of credit at several banks based on a percentage of their capital.

“This means the amount banks can lend to a single borrower is anchored to its capital,” he said. “I think this approach has been working well. If there is a credit risk posed to the industry by a small number of borrowers, revising the single borrower limit seems appropriate.”

The source at the NBE admits a blanket credit cap could choke off access to finance for businesses, but argues it is “the only way to mitigate the risks of credit concentration.”  

“It would be difficult to check whether the businesses are investing genuinely or not,” he said. “NBE doesn’t do intelligence works. We can also set rules.”

The rules are set to be included in the banking business proclamation, which is under revision to accommodate the entrance of foreign players. The draft is under review by stakeholders such as the International Monetary Fund (IMF) and the World Bank before being tabled to the Council of Ministers.

The proclamation will also address insider trading and whistleblowers, according to the source.

The past few years have been hectic for humanitarian agencies and workers in Ethiopia on the frontlines of a pandemic, droughts, floods, and war.  But aid partners are increasingly strapped for cash, hampering their crucial operations and endangering the lives of millions still in desperate need of help across the country.

Still-reverberating economic shocks from the COVID-19 pandemic, conflicts in Ukraine and Gaza, and an increasingly polarized world are choking off humanitarian funding for countries like Ethiopia. The UN says it only raised a third of the USD four billion it required to assist millions of Ethiopians in need in 2023. The organization needs USD 3.2 billion this year.

The funding shortfalls and changing economic and political landscapes require a new, innovative approach to humanitarian response, says Ramiz Alakbarov (MD, PhD), UN resident and humanitarian coordinator in Ethiopia.

Alakbarov was a physician in his native Azerbaijan before embarking on a three-decade career in policy making and humanitarian response. He has since served in different capacities at various UN agencies, including as UNFPA programme officer covering Sudan and Somalia, and a humanitarian officer in Afghanistan and Palestine. He was appointed to his post in Ethiopia last August.

The Reporter’s Samuel Bogale sat down with him for an update on humanitarian response efforts in Ethiopia, as well as his take on the future of humanitarian assistance programmes and funding.

The Reporter: There are many problems in Ethiopia and it must be difficult for humanitarian agencies working to prevent them. What are your observations?

Alakbarov: I found out that we have a very mixed situation in this country. You have some areas which are affected by pockets of conflict, by protracted droughts, floods and mixtures of climate shocks. Because of the combination of these factors, including the COVID-19 global economic downturn, I would say it creates a considerable level of humanitarian burden. You also have a considerable level of development work going out throughout the country as well. It’s a large country.

Do I find working here more difficult compared to other places where I was? I don’t think so. In terms of humanitarian work, definitely not complex. It is a difficult situation, and the major difficulty we are experiencing right now is related to the fact that we don’t have resources. In the 2023 humanitarian appeal, we received about 35 percent of the total funding needs in the country.

Obviously we have a global economic downturn, we have the Gaza situation, we have Ukraine, and in general there is overall less availability of resources. We are facing an acute shortage of resources. For this year, the needs are around USD 3 billion, but we are now asking for USD 1 billion in a prioritized request to address the effects of climate change and particularly the drought in parts of Tigray, Amhara, and Afar, where we need it specifically focused. But it isn’t only in those areas; it is actually throughout the country. On April 16, we have an event in Geneva where we will be asking for these resources. The key issue for us at the moment is the availability of resources or lack of it.

How does the UN prioritize its operations in Ethiopia?

It is absolutely clear that for us to move forward, we need to address the root causes of the problems. The root causes of the problems are lack of inclusive and sustainable development in all areas. The priority is to focus on the root causes of the humanitarian needs and to eliminate those needs by creating durable solutions. That means focusing on developing agro food systems. We need to have quality agricultural inputs, which are seeds, fertilizers, tools and machinery required for the farmers to do their work, and make sure that these people can produce enough and link these people to the markets by creating a value chain. Right now, we are importing some nutrients and things like baby formula and baby milk from other countries. We need to find a solution to produce them here.

I will give you very simple solutions on how we need to refocus. In the areas where we are doing water tracking, we will need to prepare water wells. Then we make sure that these water wells are using solar power and have sustainable supply of water to the communities as well as to the hospitals. In the areas where we do distribution of food, we should organize ourselves better to start local production of food. That means backyard gardening, rearing poultry, and development of climate adaptation technologies. This is the way forward for climate adaptation. Of course, it cannot happen in one night.

The problems in Ethiopia are not limited to climate change and natural disasters; peace is deteriorating and there are many man-made catastrophes. What solutions do you suggest for these problems?

First of all, I would like to recognize and welcome all efforts on building peace in the country. The role of the UN in the peace processes is to offer a peace dividend. That is directly related to our projects, which are implemented with support of the United Nations Development Programme (UNDP) and some other partners. We support programmes such as the Disarmament, Demobilization, and Reintegration (DDR) for ex-combatants. We have another one, a peace support programme for northern Ethiopia covering Tigray, Amhar and Afar to create livelihoods, to create jobs, to provide people with alternative opportunities.

Those who take up arms, they often do so because they lack economic opportunity. They lack development opportunities. So we are working on that. This initiative being implemented in the north is one example of what we are doing. Another one is our recent support again in Tigray to the democratization and local governance improvement, in terms of how to support the ongoing process to make local governance structures more professional and better able to offer better services to the people. Those things are the contribution we can bring as the UN office in Ethiopia to the table, in support of fundamentally the national and African Union driven processes.

The UN is often accused of being late to resolve problems. Do you believe the UN is doing enough to push conflicting parties in Ethiopia to the negotiating table?

I believe that we have been extremely clear about where we stand regarding peace. Peace is an absolute must. Peace is the prime responsibility of all of those who have a stake in the process. When it comes to our ability, it is an African Union led process. It is a government of Ethiopia and a nationally driven process. Our role is to provide a peace dividend, and in that we have mobilized ourselves to the extent possible.

Our ability to leverage more, let’s say, to demobilize more ex-combatants and do it quicker, directly depends on availability of the resources. We cannot do it by ourselves and we’re trying to be innovative to find the solutions where we can connect people to the existing programs, where we can integrate them to the ongoing projects.

Considering that the availability of funding has been dramatically less than the years before, these challenges are becoming more complex. It requires a solution of innovative nature. It requires private sector involvement. It requires availability of resources from those sectors we traditionally have not worked with. Moving at a faster speed in this environment would be a challenge, but we are doing everything possible.

Again, I would like to recognize all ongoing efforts on peace and emphasize that there is no other alternative to peace. All problems should and must be resolved in a peaceful manner. Ethiopia needs peace. Ethiopia needs opportunities for youth and Ethiopia needs economic development opportunities. These are the cornerstones of all other progress.

The genuineness of the Pretoria peace deal is being cast into doubt amid growing fears of renewed conflict and incomplete disarmament. Are you afraid humanitarian efforts and progress made so far will have been for nothing?

I am not afraid. I am not pessimistic. I am not optimistic. I am determined. It is not my job to express views of fear, optimism or pessimism about the process. The only feeling I have is determination. We have to do it. We must do it, and we will do it. That is how I look at it. The alternatives implied in your question are not the ones we need to focus on. We need to focus on solutions and getting these solutions on the table by all means possible.

If conventional donor funding is not available, then we have to find economic solutions dealing with the private sector, or innovative solutions. But we need to provide these people with alternative means of living. When you look at it, the fundamental driver of any conflict in any country is economic disempowerment. Theroot cause of all of these problems is economic. A poor person will never take up the guns in his hands if he has an opportunity to work, if the youth have an opportunity to educate themselves, and if they have a future. It is when you are not feeling the future and the opportunity that you would like to go and do something else. So this is what we need to eliminate, and create the opportunity for the youth to say: ‘I have an opportunity to have a prosperous life. I have an opportunity to develop. I have an opportunity to study. Why do I need to go and do other stuff?’ This is where the fundamental point of emphasis is, and where we need to bring more opportunities for young people.

What about holding perpetrators accountable?

That is very important. Impunity is the root cause of this enchantment, and it cannot be allowed. All of those who have perpetrated crimes: crimes against humanity, abuse of women, abuse of civilian population, have to be brought to justice. There’s no question about that. We have been very clear about it as the UN. No crimes will go unpunished. Civilian population isn’t a target, and we can never accept for these things to happen.

Do you think enough has been done to bring perpetrators to justice thus far?

We have seen a lot of effort in that field, and more can be done. Until all the perpetrators are held accountable, we will not lay down our arms. We will work with national courts, with the Justice Ministry, with the NGOs, with the human rights defenders, with the National Human Rights Commission, and all of those involved. None of those cases should be left unattended to, and should not be left uninvestigated and not responded too.

There are allegations that humanitarian agencies pay more attention to crises in northern Ethiopia, particularly Tigray, than to problems elsewhere in the country. What preconditions does the UN set when providing humanitarian aid?

From my day one being here, I have maintained the point that we have humanitarian situations in all the regions, not just in Tigray. We have to attend equally to all regions where the problems are, and that is what we are doing. Then it comes to the preconditions or any conditionality. Any assistance in the areas of health, social development, empowerment of agriculture, development of agricultural system, creating of opportunities for farmers, for women and youths should be free of any conditionality. I always publicly speak about it, free of any conditionality except the basic requirement of transparency accountability.

Politicization of the humanitarian aid or aid sector in general should not be allowed or tolerated. The UN is an impartial and independent organization working on the principles of humanity to provide assistance to the people. That fundamentally is the point of us and that’s what I tell all partners with funding. I do not accept or advocate for any conditionality for those sectors beyond basic standards of accountability.

Tigray was the center of the war in northern Ethiopia. Is it within this understanding that whenever senior UN officials visit Ethiopia, they make frequent travels to Tigray?

Let me clarify. As the UN resident and humanitarian coordinator, I visited all the regions. Of course, Tigray had experienced the war but I wouldn’t characterize the needs in other regions as less. In fact, there may be even more in some places. I visited certain parts of Afar, parts of Amhara, and Gambella. I have seen a lot of difficulty, some of which could be characterized as even worse. So I don’t want to compare.

Why the officials are visiting there: of course a little bit more attention has gone to that place because of the war. And there is a very active diaspora who is mobilizing a lot of people around the world with certain messages. My constant message to everyone who is coming to visit the country is to pay equal attention to all regions and to work in the most inclusive and organized manner. If you would see where we are sending our money, where we are making our investments and how we organize ourselves, there is no prioritization of authorization for any region compared to another.

How does the diaspora’s influence work in this situation?

I think when the people from outside come here, they often come with information they receive from global media, from the parliaments in their own countries or members from the diaspora groups. Many of them are very active, specifically with their attention to the problems in the north. They are not necessarily speaking about all of the problems.

When I receive a visiting delegation, obviously, they often come and ask me the first question about Tigray. I say to them: ‘Yes, let’s talk about Tigray, but please let us also talk about all of Ethiopia. Let’s talk about the needs and let’s not see it only from the humanitarian crisis.’ That is all because we will always continue to talk about humanity. This is not to downplay the problems in the north. This is just to say that we must and will continue to be very fairly engaged in all parts of the country.

In every region, there are people who need us. Our focus would not be just on humanitarian needs. Our focus will be more and more on development.

Does the pressure from the diaspora affect humanitarian work on the ground?

I actually appreciate what the diaspora is doing, because they raise awareness. They bring attention to certain problems. Depending which part of the country they come from, they may put more attention on some, but in the end it is attention to Ethiopia. They are helping the participation of the citizen. We are very happy about that and let them continue to do so. It is just that we need to correct sometimes and paint the full picture of what the situation on the ground is, and describe it not just from the perspective of one person. If you are originating from that particular region, you may talk to your parents or to your colleagues and they will tell you what’s happening in that particular place. You may not necessarily know what else is happening there.

Let everybody mobilize, but mobilize it in a positive way and tell the truth. The truth is that everyone is trying to resolve these issues in a positive manner. We don’t need conflict. We don’t need contradiction. It isn’t that one place is having more at the account of another. It is not that anyone is being deprived of food because of ethnic, religion or any other principle. We sometimes see these types of things being manipulated in social media. Let me assure you, the distribution is very fair. On the government side as well, we work very closely on the Ethiopian Disaster Risk Management Commission. It’s influenced by objective needs assessment. I can assure you of no bias, no preferences, and no influences of the diasporas or media.

How difficult is it to provide humanitarian support in areas with active conflict?

Where there is a place with military clashes or a pocket of some sort of activity which involves gunfire, obviously you cannot deliver assistance to the people. For this situation, we have a conflict mechanism, which means that we are not going to the areas where the clash is happening. At such times, we then inform everyone that we will be providing medical assistance or will be delivering food not to get into any sort of crossfire. I worked in many places before. I must admit that I have not seen any deliberate targeting of any humanitarian workers in Ethiopia to date.

Weren’t attacks on humanitarian workers a major issue during the war?

I was not here in 2021 and 2022, so I cannot comment on that one. But I can tell you that if I were to compare the situation in those conflict areas you’re talking about to the places I have worked in, there’s no comparison. I think everybody [here] understands that humanitarian work is not a target. We had a few cases where the people were caught in crossfire, but it was not a deliberate targeting of anyone.

So we have those mechanisms in that respect, and we are still delivering in every region. They may not be delivering it on particular days or week, and something could be happening in certain places and space. But, we have not withdrawn from any region and we continue to deliver in every place.

Food assistance was paused for several months due to allegations of theft before resuming last November. What mechanisms did the UN introduce before resuming aid programs?

The World Food Programme (WFP) can make a very detailed presentation of the vulnerability based targeting process. Together with the partners, we have developed a joint vulnerability-based targeting process. With this process, the community itself identifies people who are most vulnerable. There is a local committee composed of the officials, the priest, the elected members of the community, and representatives of all elders and youth, to identify those based on the assessment. There is also a complaints committee also composed of the similar.

There is a digital ID being given to those beneficiaries. There are a lot of innovative methodologies that have been introduced, including bar coding and tracing of all the supplies. There was a lot of effort. It probably is the most advanced distribution system in the world I have seen. Honestly, I have not seen anything like that anywhere else.

The problem now is overall availability of the product for distribution, and the overall availability of funds. Trust me, we will not be receiving the same amounts as in the past. Gone is the era of massive food distribution anywhere in the world. The world has changed. The aid is less. We need to be more self-reliant and more self-dependent. That’s why our focus is bringing the seeds and the agricultural inputs, and starting more self-dependent agricultural production.

How do you evaluate the Ethiopian government’s efforts to attain food security?

Actually, the government is putting the equivalent of about USD 250 million [in Birr] towards the purchase of wheat and food for the vulnerable communities. This is the reason why our humanitarian resource planning (HRP) is joined with the government. This is the only country where we are doing it jointly. The way national systems have been used here was very much celebrated during the world humanitarian summit in Istanbul, Turkiye, back in 2016.

The Horn of Africa is one of the most unstable regions in the world. What is it like to be a humanitarian coordinator in the Horn, particularly in its largest country?

Well, I am not necessarily responsible for the situation in the Horn, except that we receive refugees from countries like Sudan. We are worried about Sudan. Our hearts bleed for our brothers and sisters who have been in an extremely difficult situation. There is no other solution to this problem, but the solution of peace. I must admit that Ethiopia has been very generous to receive the Sudanese and other refugees in the region. We have been hosting quite a high number historically, and we continue to host them. In terms of cross border and getting supplies, the supply chains have been interrupted by what is happening in the Red Sea. The conflict in the Middle East has affected the supply chains and the transportation and delivery of goods now takes more time. We are coping with it, but the most important thing we need is peace.

Do you think Ethiopia would have received more support from donors if it weren’t for the crises in Gaza and Ukraine?

Every place, every humanitarian, and every development station in the world would get more attention and more support. Of course, these big conflicts are taking away the resources, the attention, and the world is stretched. Don’t forget we entered this right after the COVID-19 pandemic, which created a huge problem for the entire global economic outlook. The global value chains are disrupted. We urgently need restoration of peace everywhere around the globe. We need multilateralism, more engagement, and that multilateralism is the only way forward.

Do you think that donors, countries with higher income, are more focused on Ukraine and Gaza than anywhere else? For example, more people died during the conflict in Ethiopia than in both places combined.

Definitely the attention has been in the major crisis places in the world. This hasn’t served well for the rest of the world, including for Ethiopia. I come here from Afghanistan, and before that I was in Haiti and South Sudan. The acute big conflict tends to attract more attention and resources. About USD 1.3 billion was short of our expectation last year in this environment, but I must admit that it doesn’t mean the donors have abandoned Ethiopia.

We need to find ways of managing aid differently. The aid sector we know, the aid sector of classical model where you have a donor who is giving money and implementer at the national level, is the model which is being phased out. We need a model which is based on domestic financing in partnership with the private sector.

Companies looking for a listing on the main board of the upcoming Ethiopian Securities Exchange (ESX) are required to hold at least half a billion birr in capital, according to a newly-published rulebook.

The draft prepared by legal experts at the Exchange introduces two boards (main and growth) where companies are to be listed. The 259-page document stipulates that companies must have been in operation for a minimum of three years prior to listing. It also obligates them to have no less than 300 shareholders and to have declared profits after tax at least once. 

Companies are required to float equity valued at no less than 15 percent of their capital to list on the ESX main board, while those with more than two billion birr in capital will be required to float a minimum of 10 percent.

Tilahun Esmael (PhD), CEO of the Exchange, observes that establishing standards and requirements is a key part of the ESX foundation.

“Whether we like it or not, the capital market will attract investors, and investors are very interested in profitable, reliable, transparent, and liquid security,” said Tilahun.

“Let’s say, for example, that an entity has 10 million birr in capital with great corporate governance and financial reporting. The capital isn’t liquid enough as a small number of investors would swallow it up,” Tilahun told The Reporter. “That’s why we are trying to get on board those with at least half a billion in capital, to ensure participation of many people.” 

Companies with a capital of at least 100 million birr will be able to list on the ESX growth board. These companies are expected to have been in operation with 50 shareholders for at least two years, over which time they must have recorded a minimum 20 percent revenue growth. They are required to offer at least 10 percent of capital upon listing.

The CEO says companies listed on the main board are expected to be profitable and reliable.

“It’s difficult to bring a company with no profit, no records and small capital, to the main market,” Tilahun said. 

Abdulmenan Mohammed (PhD), a seasoned financial analyst based in London, observes the requirements are tight – maybe a little too tight.

“The listing requirements can be fulfilled mainly by institutions operating in the financial sector, which have a track record of strong capital, public share ownership, profitability, relative transparency, and good corporate governance structures,” said the expert.

He argues the large majority of successful private businesses in Ethiopia are family-owned and characterized by their secrecy.

“They are unfamiliar with sound corporate governance practices and rely on banks for financing,” said Abdulmenan. “I don’t think these companies would be interested in listing.”

The analyst argues the Exchange is unsuitable for small businesses and startups, who would struggle to fulfill the requirements.

“This indicates the ESX will most likely be a platform for transacting the shares of financial institutions, a few state-owned enterprises, foreign companies, and government securities,” Abdulmenan told The Reporter. “The experience of many African countries substantiates this. The majority of security exchanges in Africa have less than 50 listings.”

Prime Minister Abiy Ahmed (PhD) recently confirmed that state-owned giant Ethio telecom would be listed on ESX, offering 10 percent of shares to the public.

The Exchange wrapped up its own share offering this week after raising more than 1.5 billion birr from 48 investors, including 16 of the country’s commercial banks and 12 insurers. Three foreign investors – the Trade and Development Bank (TDB), FSD Africa, and the Nigeria Exchange Group (NGX) – have also acquired stakes in the upcoming capital market. 

The Trade and Development Bank Group (TDB), the financial arm of the 21-member Common Market for Eastern and Southern Africa (COMESA), has acquired an unspecified stake in the maiden Ethiopian capital market.

The African Development Bank (AfDB) and the Arab Bank for Economic Development in Africa (BADEA) are among TDB’s largest shareholders.

FSD Africa, which has been heavily involved in the establishment of ESX, and the Nigerian Exchange Group (NGX) are the other two foreign investors.

Domestic ESX shareholders include 16 commercial banks, 12 insurers, and 17 private firms, alongside five state-owned enterprises under Ethiopian Investment Holdings (EIH).