Hello, this is Addis Fortune with the biggest business stories of the week. Headlines include central bank's skepticism about Melaku Fenta's bid to retain Amhara Bank chairmanship, housing plans in Addis Abeba building frustrations instead, Awash Insurance dominating with profit surge, taxing flavours squeezing "juice" industry and fuel desperation at the pump sparking industry concerns.

The appointment of board members to Amhara Bank is met with controversy as regulators at the National Bank of Ethiopia withheld approval for two of the nominees, including Melaku Fenta, its founding board chairman, citing the need for further investigation. While 10 other nominees were approved three weeks ago, they are set to undergo training before officially assuming their positions. Tewodros Yeshiwass, a significant shareholder in Gomeju Oil, also faced scrutiny for allegedly using a loan disbursed to Quara Manufacturing Plc to cover half of his subscribed capital in Amhara Bank, despite denying ownership of shares in Quara. Melaku faced allegations related to a criminal conviction six years ago during his tenure at the Ethiopian Customs & Revenue Authority, raising questions about his eligibility to serve as board chairman. Although the National Bank of Ethiopia's reluctance to approve these nominations has not stalled Amhara Bank's functions, ongoing investigations into the allegations have caused uncertainty. The approved board members are preparing to begin training, and standby appointees are ready should the authorities decline certain nominations.

 

The ambitious cooperative housing initiative has encountered legal, logistical, and bureaucratic hurdles, delaying progress and frustrating stakeholders. The initiative launched by the Addis Abeba Housing Bureau two years ago aimed to address the city's severe housing shortages by enabling residents to build their own homes through cooperative unions. Nearly 4,500 residents organised into 54 unions were granted access to six sites in Kolfe Qeranyo and Aqaqi Qality districts, but none of these unions has commenced construction due to right-of-way disputes, lack of essential infrastructure, and court injunctions that have stalled progress. Legal experts point to systemic issues in the way land disputes are handled, emphasising the need for better enforcement and adequate compensation for affected landowners. However, officials defend their efforts, citing multiple rounds of discussions and compensation payments made to affected residents. Unresolved issues related to plots assigned to cooperative unions and disputes with local mosques and nearby developers further complicate the issue. Prospective homeowners express frustration over inadequate road infrastructure, which hampers progress on soil testing and design.

 

Amidst economic challenges, Awash Insurance continues to dominate the private insurance sector, surpassing its competitors with robust profit growth. Its net profit of 509.12 million birr marked a significant 52.5 percent increase from the previous year, outshining United, Nyala, and Oromia insurances. However, while Awash's earnings per share increased modestly, its capitalisation strategy impacted earning per share growth compared to its rivals. The company's aggressive capitalisation strategy, raising its paid-up capital by 47.5 percent to 1.41 billion Birr, contributed to the dampening earning per share growth. Awash Insurance's profit surge was primarily driven by substantial increases in investment returns and underwriting profit, supported by a rise in gross written premiums and a drop in the amount ceded to reinsurers. The company's management was praised for adept handling of investments and maintaining strategic dominance in the general insurance market. Awash Insurance's plans include further expanding its asset base by constructing a 32-storey building in the capital's financial district.

 

Ethiopia's juice manufacturing industry is in financial crisis after the reclassification of their products as flavoured beverages, subjecting them to a 25 percent excise tax levy. This decision followed research conducted by the Ethiopian Food & Drug Administration at the request of the Ministry of Finance. It concluded that all juice manufacturers in the country were producing flavoured drinks rather than juice, as defined by standards requiring a minimum of 30 percent fruit pulp. Subsequently, officials at the Ministry of Revenues have sought back taxes and penalties from 10 manufacturers dating back four years, leading to concerns and protests from industry representatives. The Association of Ethiopian Beverages Manufacturing Industries has urged the relevant ministries to reconsider the reclassification, arguing that meeting the requirement is impossible due to input shortages and limited access to foreign currency for imports. Officials from Ethiopian Food & Drug Administration defend the reclassification. They accuse manufacturers of misleading consumers by falsely representing flavoured drinks as juices.

 

A nationwide fuel shortage attributed to various factors, including reduced supplies due to inefficiencies at Djibouti's ports, is causing long lines and frustration at gas stations. Daily fuel deliveries have been reduced, by half a million litres for benzene and 1.5 million litres for diesel, out of the demanded 2.5 million litres and 8.5 million litres, respectively. Addis Abeba faces another predicament with 11 percent of its supply dwindling, as it coincided with an ongoing corridor development construction that wiped out seven of its key fuel stations. Officials say they are implementing short-term measures to address the shortage, including accessing fuel from depots near the Sululta area to alleviate the shortage. However, experts emphasise the need for long-term solutions, such as diversifying import routes and strengthening the domestic fuel sector. Adding fuel to the fire is a recent controversy surrounding a new quota system for fuel distribution. The system which was previously allocated based on market share now takes storage capacity and number of stations into account, aimed at fairer allocation among 49 fuel companies. It was met with resistance from industry leader National Oil Ethiopia.

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