Five Big Stories Vol. 25, No. 1280

Welcome to Addis Fortune's digest on critical business and economic issues of the past week. Ethiopia's financial landscape is bracing for a period of significant change, with the leadership of Ahadu and Wegagen banks preparing their respective shareholders for emerging opportunities and challenges. Meanwhile, Berhan Bank has demonstrated a remarkable financial turnaround, posting impressive profit numbers. Controversially, the government's proposed law to seize assets acquired through "unexplained means" has sparked parliamentary debate, raising concerns about potential overreach and human rights implications.

The Customs Commission has increased efforts to regulate duty-free steel imports, seeking to balance investor incentives with the protection of domestic industries. On the economic front, the IMF acknowledges Ethiopia's reform progress but projects a slow recovery, emphasizing the need for sustained fiscal discipline.

Under Pressure, Shareholders Begin Talking Mergers to Fortify Against Rivals

#BankMerger

Ethiopian banks, particularly Wegagen and Ahadu, are facing pressure to consolidate due to expected competition from foreign banks and regulatory capital requirements. Shareholders of both banks are discussing potential mergers and acquisitions, as well as strategic partnerships and capital raising to meet these challenges. The National Bank of Ethiopia is supporting these moves by drafting new directives on mergers and acquisitions, recognizing the need for consolidation within the domestic banking industry.

Fed Targets Hidden Fortunes in Sweeping Legislation

#AssetRecoveryBill

Parliament is considering a new bill that would give the Ministry of Justice broad powers to seize assets acquired through "unexplained means," aiming to combat financial crimes and recover illicitly obtained wealth. However, the bill has sparked debate and concerns about potential government overreach and human rights violations with critics arguing that the bill's provisions, such as bypassing privacy laws and freezing assets for extended periods, could be misused. Legal experts and officials have raised concerns about the constitutionality of retroactive investigations, the burden of proof placed on individuals, and the concentration of power within the Ministry.

Customs Tightens Duty-Free Steel Import Rules to Curb Abuse

#DutyFreeSteel

Authorities are tightening duty-free import regulations for steel to combat abuse and protect domestic manufacturers. The new rules require investors to deposit cash equal to the duty amount, which is only released upon verification of legitimate use. This change aims to address concerns that duty-free steel, intended for construction projects, is being diverted to the local market at lower prices. While officials believe this measure is necessary to stabilize the steel market, some investors, particularly in Tigray's post-war reconstruction efforts, find the new requirement disruptive.

IMF Acknowledges Reform Progress, Prescribes Cautions on Economic Recovery

#EconomicReforms

The International Monetary Fund (IMF) projects slow economic recovery for Ethiopia despite ongoing macroeconomic reforms. Inflation is expected to peak at 29pc in 2025. However, the IMF acknowledges progress, particularly the significant narrowing of the gap between the official and parallel exchange rates. The report highlights both positive developments and challenges, such as persistent operating losses in state-owned enterprises and critically low tax revenues. Experts urge the government to prioritize investments in key areas and implement prudent fiscal policies to ensure sustainable growth. The IMF emphasizes the need for sustained discipline and accelerated reforms for revenue generation and economic stability.

Berhan Bank Makes Stunning Comeback with Soaring Profit

#Banking

Berhan Bank has made a significant financial comeback, reporting a 134.3pc surge in profits, reaching 1.19 billion Br in fiscal year 2023/24. This impressive growth is attributed to the strategic decisions made by the new management, led by President Ermias Tefera. Key contributors to this success include increased revenue from both financial and non-financial activities, a substantial reduction in provisions for loan and asset impairments, and a deliberate effort to contain costs. While operating expenses did increase, particularly wages and benefits, the bank demonstrated a prudent approach by limiting asset growth and maintaining conservative lending practices.