Five Big Stories Vol. 25, No. 1295

Football Clubs on the Brink as Spending Outpaces Sense

The Ethiopian Premier League is facing a serious financial crisis due to mismanagement, overspending on player salaries, and dependence on inconsistent government subsidies, as outlined in a new study.Many teams struggle to attract private investment and lack diversified revenue streams, leading to instability and vulnerability. The Ethiopian Football Federation is attempting to address these issues through a new Club Licensing Policy aimed at increasing accountability and transparency. Experts suggest clubs need to reduce expenses, invest in youth development, and implement structured financial strategies to ensure long-term viability. A revised sports policy shifts the focus to youth development and infrastructure, proposing the creation of a sports fund to pool public and private resources.

AliExpress Enters Local Market, Regulation Remains Uncertain

AliExpress is set to begin accepting Birr as payment, a move intended to expand its e-commerce presence in the country. However, the payment settlement mechanism between the Birr and Yuan remains unclear, with the National Bank of Ethiopia awaiting further details and a finalized currency swap agreement with China. Despite regulatory uncertainties, AliExpress has partnered with local tech and financial firms to facilitate logistics and transactions, including banks like Dashen, Abyssinia and Hibret, as well as Telebirr and M-Pesa, to integrate payment systems. While the government supports e-commerce growth, concerns exist among local businesses about competition and the potential for increased trade deficits, as well as customs tariffs.

Cheap Imports, Tax Burden Weaken Demand, Choke Cotton Industry

The cotton industry is in a struggle due to rising costs and the introduction of Value-Added Tax (VAT). Producers are also struggling with escalating land preparation, irrigation, machinery, ginning, and transport expenses, leading to unsold cotton stockpiles. To cope, producers are exploring export markets, although industry stakeholders suggest that policy should focus on supporting the local textile sector and promoting value-added exports, rather than exporting raw cotton. The government acknowledges the need to connect farmers with manufacturers, while tax experts suggest VAT exemptions could stimulate local demand. As a result, some farmers are considering shifting to other crops because cotton production is no longer sustainable.

Pharma Manufacturers Push for Tripartite Loan Fund to Boost Production

Pharma manufacturers are facing financial struggles due to high operational costs and difficulty accessing foreign exchange and are requesting loans and seeking a tripartite agreement with the Ethiopian Pharmaceuticals Supply Service (EPSS) and the Commercial Bank of Ethiopia (CBE) to secure raw materials and boost production. However, banks are hesitant due to past payment failures, while manufacturers struggle with securing unconditional bank guarantees and exchange rate fluctuations. The EPSS is trying to support local producers with advance payments and increased market share, but supply gaps persist. A recent study aims to create a sustainable domestic supply chain, but liquidity shortages and insufficient investment hinder progress.

Bunna Bank's Asset Surge, Credit Jump Cloak Profit Squeeze During Inflation Strain

Bunna Bank's 15th-year performance reveals a mixed financial landscape. While assets and deposits saw substantial growth, profitability declined due to rising expenses and regulatory constraints. This decline is reflected in dropping earnings per share, though some shareholders prioritize long-term sustainability over short-term profits. The bank faces challenges related to its reliance on interest income, high loan-to-deposit ratio, and concentration in international trade financing. To address these issues, the bank is focusing on digital transformation, strategic partnerships, and a customer-centric approach under its five-year strategic plan. Despite these challenges, Bunna Bank maintains a relatively low non-performing loan ratio and exceeds regulatory capital adequacy requirements.