EDITORIAL

One major drag to Ethiopia’s growth aspiration is perhaps the central bank and those we are in charge of the nation’s monetary policy affairs. At the helm of the National Bank of Ethiopia (NBE) are individuals who are passionate with inaction, despite volatility in the macro economic front. Their reluctance to use monetary policy tools, the preserve of central banks across the world, is simply legendary.

Nothing displays their reluctance and inaction better than their complacence with the status quo in the foreign exchange front. The Birr has been under assault lately, with its values plummeting against a basket of major currencies. Central bank’s inaction in safeguarding its value has consequences; depressingly though, no one appears to be held accountable for the opportunity cost this brings on the economy.

As of late, the Birr exchanges at a little less than 23 Br against the US Dollar at all banks in the country, a rate determined by the central bank. The same Dollar is however being traded at close to 27 Br in the underground market, a parallel market the state cracks down on to no avail. Ironically, it is the latter that shows the approximately real value of Ethiopia’s currency.

It is not unprecedented for the Birr to fall under such volatility. But a gap of nearly five Birr between the official and parallel market is a rare occurrence. There are a couples of factor driving the speedy depreciation of the Birr against major currencies. Although a widening gap between supply and demand could be the classic explanation, what drives the sudden surge in demand is where the story lies.

The market has now turned to a seller’s market. To the delight of property brokers, people who are with assets on offer for sale has gone up lately, a development fuelled by uncertainty over the country’s fate in a midst of alarming political crisis. Those who have succeeded in changing their physical assets to cash are unsurprisingly on a shopping spree for dollars and euro, currencies hard to come by from the banks. Although difficult to substantiate, the demand for housing in North America, generated from Ethiopia, has increased in recent weeks.

The deduction from this is that Birr is partly a collateral damage to the ongoing political turmoil Ethiopia has been going through for almost a year now. Partly though, the problem is deeply structural. Close to 70pc of the nation’s expenditure is on strategic goods, covering the bills for oil, fertilizer, wheat, and capital goods. Revenues from exports, which was at 2.8 billion dollars last year, is simply no much to over 20 billion dollars in import bills. The share of exports to the GDP has been on a decline since 2011, reaching a new low in 2015/16, according to the World Bank.

Revenues from remittance, grants and loans can only go as far as generating less than 10 billion dollars, leaving the economy to trail with massive deficit in the trade balance.

This has put Ethiopia in the league of countries such as Armenia, Cuba, Myanmar, Samoa, Uzbekistan, Venezuela and Zimbabwe, each of which is an economy in need of renewal and where there is strict exchange rate control regime in place. The IMF has in fact a name for them. It is an agreement made to allow emerging economies to exercise control over their exchanges in banning the use of foreign currencies within their territories; illegalizing citizens from possessing foreign currencies; restrict currency exchanges only to government approved agencies; limiting the amount of currency that could be imported and exported; and fixing exchange rates.

All of these are limitations imposed in Ethiopia, and enforced, albeit haphazardly. There are both opponents and proponents of such exchange rate regime with equally persuasive rationales. The latter would argue that relaxing control on the exchange front is simply passing a death sentence on an economy that is deeply flawed as a result of structural imbalances. Considering only financial variables in policy making could lead the economy to contraction and inflationary beast, a form of undeclared tax on the majority with fixed income.

For exchange controls give countries greater room to ensure economic stability due to volatility in currency movements, lifting these very limitation exposes them to crises, thus turmoil. The experience of Iceland, after the global financial meltdown of 2008, is a case proponents often raise in defense of their cause. It is legitimate.

But such crises should and can be managed with prudent deployment of policies. Rigid exchange rate, capital controls and limiting the import of goods are not the ingredients of a good economy, says Thomas Greenfield, an American economist, who recently reflected on the Nigerian experience. He argued that capital controls that limit access to foreign exchange rewards only insiders and undermines the stated goals of increased domestic production.

As the real exchange rate in Ethiopia surged by over 80pc, the Birr has become over valued and Ethiopia’s export competitiveness has been reduced drastically. The real effective exchange rate has appreciated in the past years, it has reached a record high of 179; the second highest at 148 was recorded in 2008.

By no means should this be taken as pleasant news. Ethiopia’s economy, which aspires to graduate as an export-oriented group, has lost its competitiveness to countries close and afar such as Kenya and Vietnam. Complacence in the face of loss and inaction where the worst is come is not a hallmark of prudent yet policy making.

A limited access to foreign exchanges engineered by the government will only move the country backwards, not forward. Ethiopia is no longer a society that competes within itself, but the world. The supply and demand mentality is what will inject entrepreneurships, free enterprise and drive its economy to a better destination. A free market economy is one, whose actors come, not within government, but from the ideals of free-market values.

Indeed, the call by the World Bank and the IMF for policy intervention in devaluing the value of the Birr may sound outlandish, considering the fear of contraction and inflation. It is also true that drop in export comes not from volume but value, indicating that the issue may have little to do in the inability to sell more, as Yohannes Ayalew, deputy governor of the central bank, argued last week at the Sheraton, when the World Bank presented its latest update on Ethiopia’s economy.

While speakers said that the contraction in the economy was not as bad as it was originally feared, and complimented the administration of Prime Minister Hailemariam Desalegn on the economic fundamentals, they said that the exchange front was seen as battle ground.

Both sides could, however, find a middle ground to work out the challenges and overcome the status quo. The country should not continue be held hostage to the impossibilities but its leaders should dare to experiment with what is possible in the interest of helping entrepreneurship expand and let foreign direct investments keep flowing.

A better future is one based on an economy driven by the ‘demand and supply’ dynamics, not one that is limited by state interventions. On the supply side, the Administration can continue to pursue its desire to diversify and boost exports; encourage the stream of remittances; and promote foreign investments. But it can only travel on this road as much. It can work on the demand side too.

Ethiopia’s growth should not be held back by an over cautious perception of what is called impossible but by striving to attain what is most certainly possible.

Ensuring political certainty to restore confidence among citizens compelled to speculate can take the country a long way. This takes bold political moves to be inclusive of voices and their representatives in the political process. Abandoning the dogmatic outlook of hyper expenditures on public infrastructure can also help address the constraint on the demand side. Not everything needs to be completed now; prioritizing mega state financed projects should be an option on the table, in the interest of easing the pressure on the Birr.

The Administration should follow the managed floating exchange rate regime to introduce some degree of competitiveness. This should not either be taken as something new, for the economy experienced such a market back in the 1990s. Sucking any form of competition out of such a valuable commodity as a currency is and acting business as usual while the Birr is battered should not be a legacy the Prime Minister should want to be remembered for. It begins with holding his officials at the central bank accountable for their inaction to date.

Highly taxed raw materials used in tanneries make local made leather products uncompetitive in the market.

This was said in Dar es Salaam yesterday by Ital Show Factory Manager Mr Novat Kaijage at the Industry Expo taking place at the Julius Nyerere Trade Fair Ground along Kilwa Road. He said for example footwear made locally are of high quality but its price is higher compared to imported shoes thus rendering them uncompetitive.

“High taxes in some chemicals used in the tanneries remain to be a challenge that affects directly the end prices of the footwear in the local market,” he said. He said it was high time for the government to intervene and reduce taxes on the raw materials to make the prices for leather products affordable particularly for low income earners.

He said local manufacturers were capable of meeting the demand for footwear in the country but continued imports of cheap footwear hold back their efforts to grow. He said currently the leather industry’s contributions to the economy is still minimal due to low investments and uncompetitive business environment that has been favouring cheap imports.

Should conducive business environment be created, Tanzania has huge potentials to become a giant exporter of leather products and ultimately boost the sector’s contributions to the national economy.

Tanzania is second in Africa after Ethiopia with highest livestock population of more than 22 million cattle, 16 million goats and seven million sheep as per 2015 statistics.

EDITORIAL

Something needs to be done urgently to arrest the runaway coffee theft that has caused farmers huge losses in several counties.

As we report elsewhere in this edition, growers have lost at least 50,000 kilogrammes of the product worth an estimated Sh50 million in recent months.

It has been extremely puzzling how the daring thieves go into factories and make away with hundreds of bags right under the noses of guards and the police.

Many theories have been advanced to explain the wave of theft.

Some fingers have been pointed towards the police, some suspect a role by cooperative society officials, private estates and millers.

Farmers have also questioned the silence of government regulatory agencies in the face of this rampant theft.

It is time for the authorities to step in and take action.

This is, first, a law and order issue. It is utterly unacceptable that these crimes have been unfolding with hardly any of the criminals being arrested.

The police in the areas where this theft is occurring, particularly in Nyeri, Kirinyaga and Murang’a, need to prevent the crimes or be held to account for their inaction.

Society officials also need to take preventive action to ensure the coffee that farmers entrust in their care is well guarded.

Ultimately, though, policy action needs to be taken.

The rampant theft of coffee probably reflects the fact there are too many private millers with a licence to sell the produce but not enough coffee to meet their demands.

What appears necessary is to rationalise the issuing of these licences and to carefully monitor the activities of these millers to ensure they do not resort to crime to secure coffee.

The Agriculture Cabinet Secretary Willy Bett also needs to do more.

His silence on this serious problem is puzzling.

The extremely low profile he keeps raises questions as to whether that critically important ministry has the right calibre of leadership.

Coffee was once one of the country’s top foreign exchange earners and a critical product that sustained tens of thousands of livelihoods.

It cannot be right that farmers lose produce worth millions while key government officials sit on their hands.

By Eronie Kamukama

Kampala — As government moves towards the production phase of oil from the Albertine region, insurance companies in Uganda have announced that they will jointly cover risks in the oil and gas sector.

Addressing journalists at Kampala Serena Hotel on Wednesday, the chairman of the oil and gas sector at the Uganda Insurers Association (UIA), Mr Azim Tharani, said the risks associated with the sector are enormous.

The consortium will enable the insurance service providers to handle oil and gas risks within Uganda.

“There are complex and difficult risks that require huge amounts of money and therefore as an association, we felt that it was better for us to combine our capacities,” Mr Tharani said.

Dodoma — Tanzanians have been encouraged to exercise farming and bee keeping at the same time due to the fact that the business has many advantages including environmental protection.

Speaking to youth who visited former Premier Mizengo Pinda’s farm bees, the officer in charge of the farm, Mr Singu Mayaya said investing on bee while farming pays. He told The United Nations Youth Forum that by having such kind of a farm people would enjoy benefits and increase productivity within a limited area.

“If you look at where we are, you can understand what I mean. We have mango trees and beehives in the same area. This common field makes use of bees operation to produce honey, pollinating mango flowers” he said.

He insisted that by having such kind of farms, the farmers get more yields annually. He however, cautioned that, in order to benefit from the business, farmers are advised to build racks under the shades for the beehives.

He advised that grass thatched shades are cheaper and recommended. He added that rack guarantee security to bee and beehives. “In most cases, bees are attacked by enemies, therefore it is important to take precautions,” he said.

Shamba Consultant, David Kamara said the former premier move to have such kind of a farm aimed at challenging other people to change attitudes towards agriculture. He said the former Premier wanted to help other people to learn best farming skills. “Many people are coming here to learn.

We are inviting youth to learn and practice this kind of agriculture, this will help them to change their lives,” he said.

A resident of Gasabo District died after a casseterite mine caved in on Sunday.

Rwanda National Police (RNP) yesterday identified the deceased as Seleverien Minani.

He was illegally mining casseterite in a closed concession in Nduba Sector, and died after he tampered with a weak cliff causing landslide, according to police.

The body of the deceased was exhumed shortly after the incident after a resident, who had witnessed the accident, reported it.

Police appealed to the general population, especially communities residing near mining sites, to desist from illegal mining activities, which in some cases result into disasters and loss of life.

Supt. Emmanuel Hitayezu, the Police Spokesperson for the City of Kigali, said: “These are unfortunate incidents that are preventable. In most cases, people who go in these concessions for illegal activities have no knowledge of the status of the site. There is always a reason as to why some concessions are temporarily or permanently closed, which include the health or life risks foreseen.”

“This concession, for example, had been closed by its owner to give way for its upgrade to the required standard and to avert such risks,” Supt. Hitayezu said.

The concession belongs to Crystal Mining Trading Company.

Supt. Hitayezu further noted that such illegal activities also have their effects on the environment and water pollution in particular, and have also contributed to soil erosion.

“Mining is not something that is practiced by anyone; it requires skills and knowledge, if it is done wrongly, a lot is at risk, including people’s lives. It’s a profession that requires expertise,” said Supt. Hitayezu.

“These illegal miners also do not put in place any measures that will safeguard them from taking risks like dust, smoke and landslides. With the fact that the illegal miners are mostly unskillful, they also operate with no protective gears.”

He appealed to residents to always report to authorities people who engage in such unlawful activities to prevent likely loss of life and illegal mineral business, which also has an impact on the economy.

By Staff Reporter

MINES permanent secretary Francis Gudyanga this Wednesday escaped being slapped with contempt of parliament by a whisker after he dared the mines committee chairperson to recuse himself on grounds of conflict of interest.

Gudyanga, who was appearing before the committee to answer to multiple allegations of abuse of office, said he would not answer to questions on the operations of Zimbabwe Consolidated Diamond Company (ZCDC) until the chair recused self.

The committee alleges that Gudyanga unjustifiably dismissed the evaluators who were working in the Marange fields only to replace them with his friends at a higher cost in return for kickbacks.

“One company was providing services to Marange, we had issues with it and you chairman you are one of the principal directors of that company and it’s a matter that I feel you presiding puts me in a difficult position. I would expect you to recuse yourself,” said Gudyanga.

A fuming Shumba accused Gudyanga of constantly trying to annoy the committee each time he appears. While admitting Marange still owed his company, he emphasized that his questions were impersonal as he had since stopped providing services to Marange.

“I have never dealt with Marange since 2012 and I was elected to this house in 2013. I may find him in contempt of parliament because of his fugitive avoidance of the question. I declared everything to parliament. Unless I was providing the service today,” responded Shumba.

“I have asked him a question on the company he appointed, for which it is alleged he is getting a commission, he did not go to tender. He should not come here to play games with this committee.”

Legislator John Holder had to mediate demanding that Gudyanga sticks to questions asked and stop reducing the sitting into a personal clash.

Gudyanga then described his dealings with an agriculture firm, Pedstock, used as a conduit to pay South Africa’s Glamel for border control services from MMCZ funds where he is the sole board member as security matters which cannot be shared with parliament.

It is the committee’s case that the secretary used part of the funds to bankroll the installation of irrigation equipment at his farm.

The parliamentarians based their assumptions on the un-procedural nature in which the funds were handled and the fact that the transaction coincided with the installation of the equipment at the farm.

Also, his evidence contradicted Pedstock’s narrative which claimed that Gudyanga had paid for the $50 000 worth of service in cash.

By Jamie Miller, President & CEO of GE Transportation

In Egypt, Lake Nasser is perhaps the country’s most important lake. It manages flooding, ensures a steady flow of water to the Nile River Valley and generates electricity. But there’s a new kind of lake that will become increasingly important to Egypt’s economy – the data lake.

Data lakes  are enormous linked databases of information that, when analyzed on a historical or real-time basis, can deliver powerful insights into all types of large and complex systems. These insights can improve efficiencies and system performance, availability and reliability.

In our manufacturing processes at  GE Transportation , we are using data lakes to identify potential faults in locomotive software nearly three months sooner than we could have before. And we’re building on those insights to diagnose root causes in parts and entire locomotives, leading to quicker factory fixes and the identification of quality failure indicators.

For customers such as the  Egyptian National Railways (ENR) , better manufacturing processes mean better locomotive performance and reliability. That’s vital given that ENR  carries 6 million tons of cargo  across the country, helping drive economic activity.

As a partner to ENR, GE supports nearly one-fifth of ENR’s total operating fleet with 110 GE locomotives in service, accounting for the maximum hauling capacity in ENR’s fleet.

Among these tractors are 81  Evolution Series locomotives  that produce the same 4,400 HP as their 16-cylinder predecessor, but with less fuel. The Evolution’s turbocharged engine provides efficiency, fewer emissions and lower maintenance costs, alongside dramatically improved reliability and the ability to incorporate future increases in power and efficiency.

All of these GE locomotives can benefit from our use of data lake technology – in both the production and maintenance of these locomotives in Egypt and around the world.

A powerful example of the proven capabilities of the data lake is what we’ve achieved with GE Aviation jet engines. Last year we launched a new service called the industrial data lake in GE Aviation that ingested full flight data for 25 customers, including Air Asia and Eva Air, and over 3.4 million flights.

When a jet engine spikes a temperature, the system can dive into the digital lake to look for past instances of similar behavior involving the same make, age or service history. The result allows operators to make adjustments to achieve a 10-fold improvement in cost reductions, reduced unplanned downtime, increased productivity and lower fuel costs.

But it’s not just in direct manufacturing processes or maintenance that data lakes make a difference. Last year, GE as a company began using data lake technology to provide real-time visibility across our industrial direct materials sourcing. Since then, we’ve connected dozens of sourcing systems and we’re now going deep within a business to connect engineering with manufacturing with supply chain with services.

We’ve dramatically improved the quality of our supplier data and payment term data. We’ve also identified significant cost savings opportunities.

Clearly the technology is leading-edge, but the basic concept isn’t rocket science: Connect data to drive value and solve problems.

We are doing this at GE, as we remake ourselves as a digital industrial company and create the architecture for our future. There’s no doubt that this transition will play a critical role in our success.

But we also are working with our customers globally and in Egypt to leverage the tremendous power of digital industrial solutions. With solutions such as data lakes, we are helping customers achieve efficiencies and improvements to processes, systems and equipment. This is good for these companies but it’s also good for the broader economy in areas such as reduced fuel consumption and lower emissions

By Bernard Chiguvare

“Malaicha” explain that prices include cost of bribes

Zimbabweans working and living in South Africa are getting around the ban on imports of some goods into Zimbabwe by using the informal “malaicha” delivery services.

Malaicha are Zimbabweans offering unregistered courier services from South Africa to Zimbabwe.

Zimbabweans interviewed say the service is expensive yet convenient. But, says a malaicha courier, the costs are reasonable because they have to cover bribes to police and immigration officials.

“My costs may seem unrealistic but the expenses I incur are high. I have to pay toll fees, fuel and bribes all the way. At times I end up using my own money. But customers never believe me,” says the courier, who did not want to be named.

Domestic worker Noma Gombedza, who has used this service twice this year, says, “I send my stuff by malaicha because it is convenient for me. Malaicha come straight to my doorstep, collect all the goods I want to send home, and deliver to the doorstep.”

Gombedza, 48, says she bought groceries worth R1,200 in August and paid malaicha services R600 for delivery from Cape Town to Masvingo, in south-eastern Zimbabwe.

She says the price depends on bargaining. “Most of the time malaicha win, because they propose very high charges before negotiations. In my case for these groceries they had asked R800,” she says.

Since earlier this year, Zimbabwean law restricts the import of some goods, including blankets.

According to Gombedza the malaicha couriers charge R300 to deliver a blanket that costs R600.

“I sometime gave bus drivers my groceries, but it inconvenienced my children [back in Zimbabwe]. Bus drivers often do not honour their promises … At times, my children had to spend the whole night awake at the bus stop waiting for the goods.”

Another Zimbabwean, who wished to remain anonymous, says she will never use malaicha services again, because a secondhand table and set of chairs that she had struggled to buy and then send by malaicha services were all broken by the time they reached Zimbabwe, and she was not refunded.

The furniture cost R1,500 and the courier service cost R1,000 from Cape Town to Harare.

“Because of the border restrictions on imports, if I am to send groceries or any other stuff home, I prefer using malaicha, because I am sure the goods will not be confiscated at the border,” says another domestic worker. “Malaicha guys negotiate with immigration and police officers.”