Hello. This is your weekly episode from Addis Fortune bringing you the latest business news headlined From Broadcasting to Trading, Europe's Green Crusade Brews Bitter Cup for Ethiopia's Coffee, Tax Tsunami to Hit Finance Sector, Berhan Bank's Bittersweet Balance and Regional Chambers Snooze Assembly Calls.

Ethiopia is poised to launch its first-ever securities trading floor in a historic 12-storey compound on Churchill Road, with Ethiopian Capital Market Authority, Securities Exchange, and Investment Holdings at the helm of this venture. The bidding for an advanced electronic trading platform and a multi-asset market surveillance system is underway, marking a significant milestone in Ethiopia's integration into the global financial markets. Repurposing a building with a legacy, from the Ethiopian Coffee & Tea Authority's headquarters to the Ethiopian Broadcasting Corporation's hub, into the centre of Ethiopia's securities trading makes it a landmark of both historical and economic significance. Located in the financial district near the National Bank of Ethiopia, the new trading floor represents the clustering of key financial institutions, promising enhanced efficiency and collaboration. The relocation of the Ethiopian Capital Market Authority from the Flamingo area and the sovereign wealth fund from the Arat Kilo neighbourhood marks a new chapter for these institutions; as experts say, the move shows the importance of geographical proximity in influencing stock market dynamics.

 

The latest European Union’s deforestation regulation is sending shockwaves through the global coffee market, set to take effect in December 2024. This landmark policy demands that imports, including coffee, are not linked to deforestation post-2020, a game-changer for coffee exporters in developing countries like Ethiopia. With nearly half of Ethiopia’s coffee exports traditionally bound for Europe, the regulation could redefine the future of a beverage deeply intertwined with the country's economy. As European buyers begin reducing orders in anticipation of the new deforestation rules, Ethiopian exporters are facing a hard time adapting or losing a 40 percent market. Ethiopia’s coffee industry, dominated by smallholder farms, faces compliance with the EU’s regulation requiring detailed mapping and certification of farming practices, a formidable task given small scale and fragmented cultivation. Adapting to this new reality involves exploring alternative markets and enhancing supply chain quality which is symbolic of the broader challenges developing countries face in navigating the complexities of modern trade regulations that intertwine with environmental and social governance. As the deadline for the EU’s deforestation regulation draws near, the decisions made by authorities, exporters, and the EU itself will have lasting implications. 

 

A pandora's box has opened where banks and insurance companies are facing potential billions in taxes, after the landmark ruling against Tsehay Industries over dividend taxes. The judgment redefines how dividend taxes are interpreted and enforced, with the Tax Appellate Commission in Mexico Square becoming an arena for the unfolding legal drama. Ethiopia's financial behemoths, including Awash and Abyssinia banks, alongside insurance firms like Nyala and Nib, are bracing for the unpleasant surprise. The controversy lies in how shareholders of Tsehay Industries managed profits and shares without paying dividend taxes - a move that stood unchallenged until a recent court ruling. The judgment triggered rigorous audits and hefty tax bills for the entire sector, putting their liquidity at serious risk. This contentious ruling has not gone unchallenged. Leaders of the Association of Ethiopian Insurers described it as a "tax storm," with potential back taxes from 20 million birr to 130 million birr for each company. Banks, wrestling with credit caps and diminishing liquidity, view these tax demands as a severe threat to their survival. The financial sector's leaders are threatening to fight back, with some ready to take their case to the highest court, despite the heavy financial cost of appeals.

The ended fiscal year report highlights a critical juncture in Berhan Bank's journey with marginal growth in profits and earnings per share despite a robust asset base of 33 billion birr, reading a gap in its operational efficiency and income generation strategies. In an industry where asset size does not always equate to profitability, Berhan Bank's recent financial results raise important questions. The disparity signals a need for more strategic asset utilisation and operational efficiency. Berhan Bank's annual general meeting was a hub of animated discussions, reflecting the Bank's tepid growth in net profits - a modest 6.3 percent increase. The performance starkly contrasts the previous year's 146 percent growth rate and is significantly lower than its peers. Shareholders demanded the urgent need for strategic improvements in its financial operations. With a looming central bank capital threshold requirement and shareholder discontent, the Bank's future hinges on strategic improvements. Experts cautioned the Bank to bolster its efforts in deposit mobilisation, loan disbursement, and operational efficiency. Its current capital inadequacy and the modest increase in share earnings show the urgency of these challenges.

Members of the regional and city chamber of commerce and sectoral associations have less than a week to convene a general assembly before the three-week window given by Teshale Belihu, former state minister for Trade & Regional Integration expires. A couple of months ago, the anticipated meeting of the Ethiopian Chamber of Commerce was cancelled by the Ministry, as only a few of its member constituents had managed to gather for their respective annual meeting before the given date. A host of particular reasons are forwarded by the regional chambers for the postponement of annual general assemblies this year. The 18-year-old Tigray Chamber has been dealing with the ravages of the two-year conflict that swept in the northern part of the country even failing to identify the status of the 42 city members under its umbrella. On the other hand, the 200-member-strong Dire Dewa City Chamber pinned the delayed meeting on a court battle with the city administration over ownership of a three-floor building. Only a few have complied and set the date to have their general assembly. Headed by Mesenbet Shenkute, the lively Addis Abeba Chamber of Commerce & Sectoral Association is breaking the ice, calling its members this week at the Inter-Luxury Hotel.

That’s all for today. We’ll be back with more updates next week. 

May good luck and fortune always be with you