Hello. This is Addis Fortune rounding up significant business developments over the week. Headlines include a landmark move of federal legislators to transform the residential tenancies market; officials taking a step back on housing valuation rates; details on the microeconomic bluebook released last week; Shabelle Bank's twirl from microfinance to full-fledged interest-free bank and ministries at odds over hide exports taxation.

Federal legislators have enacted a sweeping law to transform the residential tenancies market, introducing measures to protect tenants from eviction threats and rent hikes. It mandates lease periods of at least two years, caps rent increases and imposes taxes on vacant properties to discourage vacancies. Supported by 241 votes in favour, the law aims to stabilise the housing market characterised by short-term leases and unpredictable rent hikes. While critics argue for addressing broader economic factors contributing to the housing crisis, proponents assert that the law is a crucial step towards more equitable housing policies. Regional states are delegated autonomy to enforce the law, with exemptions provided to stimulate the housing supply. However, real estate experts warn of unintended consequences, including exacerbating housing shortages and short-term rent increases. Authorities defend the law as part of a broader strategy to address the housing crisis, including initiatives for public-private partnerships and housing schemes.

Addis Abeba City Administration officials have reversed a house valuation increase implemented less than a year ago, aiming to revitalise a sluggish real estate market. The initial surge in valuations had led to a decline in customer traffic due to the resulting high fees associated with land transfer services. The decision, articulated through a directive signed by key officials marks a shift in the land management and taxation approach, with updated rates reducing fees and stamp taxes by up to 34 percent. It follows a comprehensive study attributing a sharp drop in service uptake to the increased rates introduced under the previous administration. While the move initially boosted revenues, it also sparked a rise in customer complaints and a dramatic decline in service uptake. Real estate experts and professionals have welcomed the decision, hoping it will stimulate activity in the housing market, which has been adversely affected by prohibitive transfer fees.

Ethiopia's leather industry is at a crossroads as government ministries debate the removal of rawhide and skin export taxes which has stirred a policy debate. Officials at the Ministry of Agriculture advocate for the removal to support struggling producers, arguing that it would stimulate demand from regional countries and provide an alternative plan for slow leather exports. However, those at the Ministry of Industry contend that removing taxes would strain local manufacturers and contradict import substitution efforts, fearing adverse effects on local manufacturers. Leather Exporters Association warns that exporting rawhide and skin without value addition could lead to the collapse of the industry's potential which remains untapped due to high production costs and declining export markets. Stakeholders, including tanneries and hide suppliers, express concerns about declining demand, subpar quality, and inadequate storage facilities. Experts caution against a full removal of export taxes, suggesting instead targeted interventions to support domestic leather manufacturers and promote value addition in the industry.

A recent survey by First Consult reveals that two-thirds of small and medium businesses in Ethiopia have no plans for new hires in the next year, indicating a cautious outlook amidst economic uncertainties. The survey, which included 312 companies across four cities, highlights challenges such as chronic foreign exchange shortages, high inflation rates, and limited access to loans. Businesses are forced to navigate these hurdles, with many resorting to the parallel foreign exchange market where rates are significantly higher. The burden of inflation is also felt by consumers, who are adopting coping mechanisms such as purchasing lower-quality food items. Despite these challenges, there is optimism surrounding Ethiopia's implementation of its Homegrown Economic Reform Agenda 2.0, with experts believing that increased private sector participation and technological advancements could drive economic transformation. However, challenges such as depleted foreign currency reserves and a decline in the number of employees during the reporting period underscore the need for thorough implementation strategies and inclusive reforms. For Nebil Kellow, managing director of First Consult, the importance of adapting to emergent phenomena and ensuring that reforms benefit micro, small, and medium enterprises, ultimately building a system that works for all segments of the economy.

Initially a microfinance institution, Shabelle Bank marked its transition to a full-fledged commercial bank with its inaugural year facing a slight dip in performance. Net profits declined by 1.4 percent, trailing industry peers Hijra and ZamZam banks. Increased expenses overshadowed performance, with the Bank struggling with substantial expenses and a rise in profit taxes. However, Shebelle Bank executives remain optimistic about its prospects, having opened seven branches to expand its reach. Concerns linger about liquidity levels and the need for transparent financial reporting. The Bank reported growth in income from financing and fees, leveraging its unique market positioning. Shareholder engagement and strategic milestones are crucial for its evolution, with a dominant stake held by the Somali Regional Government. Shabelle saw growth in total assets and mobilised deposits. Its executives remain optimistic about its growth trajectory, focusing on aligning operational practices with market demands and Sharia-compliant banking principles.

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