Hello. This is Addis Fortune with the week's significant business developments. Headlines include Addis Abeba's transition through a grand corridor development project, energy policy undergoing rapid evolution, mandatory domestic procurements across federal government institutions, logistics sector facing difficulties due to disruptions in global shipping routes and Hijra Bank's remarkable turnaround in the interest-free banking industry.

 

Residents gathered to receive compensation for displacement, as Addis Abeba transitions through a grand corridor development project, reflecting a mix of anxiety and hope for the future. Arada District Land Management & Administration Bureau was a hub of activity last week, as relocators faced the prospect of leaving their home in Piassa for a condominium on the city's outskirts. While hopeful for a new start, concerns about affordability and fitting her family into a smaller space lingered. Officials disclosed corridor development project aims to modernise the city, with plans for extensive infrastructure upgrades and beautification. However, it comes at a cost, with thousands facing displacement and communities uprooted. The project has sparked debate, with some praising its potential for urban renewal and economic growth, while others lament the loss of historical character and social disruption. Businesses, longstanding fixtures in Piassa, are also forced to relocate. While the project promises economic revitalisation, concerns remain about its impact on residents' livelihoods and the city's identity. Some experts suggest alternative approaches to urban development to mitigate the need for extensive demolitions.

Ethiopia's energy policy is undergoing rapid evolution, focusing on renewable energy and clean technology to meet growing demand and attract investment. The Ministry of Water & Energy aims to increase energy production annually by 30 percent through diversifying sources like solar, wind, and geothermal power. The policy aligns with the country's "Green Economy" strategy and seeks to attract foreign investment while reducing its carbon footprint. The Ministry calls for private sector involvement, particularly in expanding infrastructure for electric vehicles and charging stations. Despite concerns about the current electricity infrastructure's capacity to handle an increase in electric vehicles, there is a push towards green transport, including walking, cycling, and non-motorized mobility in urban centres. While progress has been slow, recent agreements with foreign companies and policy changes have created opportunities for private-sector investment in renewable energy. However, challenges remain, including inefficiencies in energy usage, limited access to clean cooking options, and regulatory hurdles hindering private sector involvement.

Ministry of Finance enforces mandatory domestic procurements across federal government institutions, marking a significant step towards promoting local industries and reducing dependency on imports. By prioritising local suppliers and raising price ceilings for domestic procurements, the government aims to stimulate economic growth and support domestic manufacturing. Key officials emphasise the importance of transparency, fair competition, and efficient resource management in driving this initiative forward. According to State Minister Eyob Tolina (PhD), the move aligns with broader economic strategies, such as import substitution and public property management, under the second Homegrown Economic Reform Agenda. While the initiative is welcomed by local manufacturers, concerns persist about potential compromises in product quality and fair competition. Government agencies' preference for foreign companies in procurement is often attributed to concerns about quality standards. Logistics and supply chain management experts advise maintaining a delicate balance between boosting domestic industrialisation and ensuring healthy competition with quality foreign products.

Ethiopia's logistics sector is facing difficulties due to disruptions in global shipping routes, particularly those passing through the Red Sea. These disruptions, caused by missile attacks and geopolitical tensions, have led to delays, increased costs, and logistical complications for Ethiopian businesses reliant on maritime transportation. Importers, exporters, and manufacturers are wrestling with extended shipping times, rising freight costs, and uncertainty surrounding delivery schedules. Coffee exports have been particularly affected, with 3,000 tones stranded in ports awaiting shipment. Other commodities like pulses and oilseeds are also facing similar concerns about losing customers to competitors in less affected regions. The crisis has glared the country's dependence on Djibouti ports for trade, prompting discussions about diversifying port alternatives, including ports in Kenya. However, transitioning to other routes comes with its own set of difficulties, including regulatory hurdles, increased costs, and logistical complexities. Ethiopian logistics experts emphasise the importance of maintaining diplomatic relations while exploring alternative logistics options to mitigate the impact on the country's economy.

The recent financial performance of Hijra Bank signifies a remarkable turnaround in the interest-free banking industry, demonstrating the potential for Sharia-compliant banking models to thrive in Ethiopia's evolving financial sector. Despite facing challenges during its inception, including a difficult economic environment and limited awareness of Islamic banking, Hijra has successfully rebounded from initial losses to report a significant net profit in its 2022/23 operation year. Key factors contributing to its success include a substantial surge in all income streams, particularly financing and investment income, fees and commissions, and other operating income. This revenue growth has been driven by a strategic expansion plan, with the opening of 31 new branches, bringing the total to 71. The Bank's focus on Murabaha financing, a common arrangement in Islamic banking, has contributed significantly to its income growth. However, the Bank also faced a marked rise in operational costs due to its aggressive expansion strategy. Despite these challenges, Hijra Bank's expenses remained lower than its competitor ZamZam Bank, allowing it to achieve a higher net profit.

 

That’s all for today. We’ll be back with more updates next week. 
May good luck and fortune always be with you.