Hello. This is Addis Fortune bringing you the week's biggest headlines including Red Sea rupture upending Ethiopia's trade lifeline, Tasty Foods- a snack's pioneer fall exposing painful foreign currency bite, Addis Chamber eyeing outsourced public sector services, Cooperative shake-up setting unions for potential dissolution and Hibret Bank turning silver jubilee into golden returns.
As a country heavily reliant on its imports, Ethiopia has its trading community worried about the potential impact of Red Sea waters that have turned into a geopolitical hotspot, as Houthi militia attacks send ripples across the global shipping industry. Though outwardly unfazed, Ethiopian Shipping Logistics faces uncertainties as international maritime operators scramble to reroute their vessels. Key logistics companies are gripped by heightened security concerns and delays, as the critical Bab al-Mendeb passage becomes a battleground. For experts, the strategic significance of this route, now under threat, cannot be overstated. Every sector feels the strain, from pulses and sesame to the vital coffee exports. Global shipping behemoth Maersk, a key player in Ethiopia's maritime trade, is witnessing a decline in share prices as it navigates these troubled waters. The company, along with others, is imposing surcharges and rethinking strategies to deal with this unprecedented security situation. As the crisis unfolds, federal officials are reportedly formulating contingency plans. However, a veil of silence from the Ethiopian Maritime Authority depicts the delicate nature of the situation.
Ethiopia’s snack industry pioneer, Tasty Foods Plc shuts down after 24 years, mirroring a harsh reality check for the manufacturing sector crippled by foreign currency shortages. Once a market leader with products like ‘Tasties’ & ‘Jolly Jus’, the company has succumbed to a lack of imports. The company had to pass through significant workforce reductions and a drastic decline in production capacity. From its peak in 2020, the production levels for Jolly Jus plummeted to just a fifth, and for the iconic Tasties snacks, to a mere tenth. Despite efforts to stabilise operations, the company had to cease production in June this year, with the last of its products shipped over the preceding two months. The abrupt end leaves 37 employees in limbo, embodying the country’s economic struggles. A major importer of raw materials, Tasty Foods primarily sourced maise from South Africa. However, attempts to switch to local produce two years ago faced severe setbacks. The foreign exchange crunch Tasty Foods faces mirrors the broader struggles within Ethiopia's manufacturing sector. The company will be one more addition to the approximately 450 of nearly 5,000 firms ceasing production due to the adversities.
The business landscape in Addis Abeba is on the verge of transformation as the City Administration takes bold steps to outsource public services in trade, revenue, transport, health and education bureaus while the Addis Chamber forms a four-person sub-committee to explore potential areas for engagement. The Chamber contemplates taking on the city's Trade Bureau outsourcing services, particularly licensing, with plans to evaluate other potential avenues of engagement. Inefficient services and outdated technology have been persistent challenges for businesses operating in Addis Abeba. Recognising the challenges posed by bureaucratic hurdles, outdated technology, service inefficiency, and poor quality of services, the Chamber aims to leverage technology to streamline processes and enhance public services that are poised for privatisation. This shift towards Public-Private Partnerships reflects a global trend where cities are increasingly leveraging the expertise and efficiency of the private sector to enhance service delivery. The outsourcing plans extend beyond trade licensing. Management of the four agricultural market centres at the entrances of the city would follow in the line, trailed by postal service management, digitisation of weight scales, and the operations of cooperative agencies supplying basic commodities.
One of the pioneers of private banking, Hibret Bank posts a jaw-dropping 111 percent surge in net profits, hitting 2.3 billion Birr amidst its 25th anniversary celebration. In an economy besieged with inflation and political unrest, the last fiscal year was a financial milestone for Hibret with a paid-up capital nudging 4.3 billion Birr and a robust equity base. Hibret Bank's total assets exceeding the industry average signal a competitive edge that defies its size. The Bank's President, Melaku Kebede, leadership, strategic branch expansions, and a focus on digitalisation illustrate forward-thinking. With profits soaring and a prudent approach to growth, Hibret Bank appears to be rebounding in an era where adapting and innovating are necessities. Though overshadowed by giants like Awash and Abyssinia in earnings per share growth, Hibret's emergence from a modest player to a noteworthy contender in the fierce banking battlefield is a tale worth telling. Analysts see the challenge for Hibret Bank as scaling its operations and maintaining profitability to pose an edge over the dominant players in the market. Its directors need to work to expand the assets and equity of the Bank, taking strategic growth initiatives, as the executives have to improve operational efficiencies.
Ethiopian Cooperative Commission embarks on reform with stringent criteria while primary unions face potential dissolution if they fail to meet the new requirements scheduled to begin in two weeks. The reform focuses on evaluating regional cooperative agencies based on their capital, number of transactions, labour force, and internal structure. The agencies with a score less than 25 on a scale of 100 will be subject to potential dissolution. Farmer unions play a critical role in the agricultural sector, managing the collection and distribution of fertiliser, while financial cooperatives have provided a financial lifeline to communities estranged from financial institutions. Some even managed to grow into banks as the financial sector opened up over the past few years. The cooperative reform is part of a broader effort to enhance the efficiency, accountability, and purposeful function of 106,000 primary unions, 402 cooperative unions and five federations engaged in various sectors, including agriculture and housing. Officials aim to align them with their stated purposes under the new model.
that’s all for today. We’ll be back with more updates next week.
May good luck and fortune always be with you.