Welcome to Addis Fortune's weekly digest of the major economic and business news. This week's headlines feature Capital Market Authority telling banks to play by the rules, the Irrigation Ministry ailing to deliver with dreams dragging in design ditches, diverse investments pay off for United Insurance outpacing rivals with a stellar profit jump, Agriculture Ministry sowing seeds of hope with a new policy, and central bank clamping down on exports to fight missing millions.

The Ethiopian Capital Market Authority is cracking down on commercial banks engaging in securities brokerage without proper licensing, as part of a broader effort to tighten financial regulations and protect investors. Banks selling shares without approved prospectuses are facing enforcement actions, emphasising the importance of transparency and accountability in public share sales. The Authority aims to fortify the financial sector's infrastructure and ensure compliance with an updated commercial code. Companies exploiting banks' networks to sell shares directly to the public are also being targeted, with the Authority mandating prior approval for all share sale advertisements. Failure to comply could result in legal consequences. Commercial banks, which have facilitated public share offerings for nearly three decades, will need to reevaluate their strategies due to the new licensing requirements. Some banks under formation are exploring alternative capital-raising strategies, including mergers, to meet regulatory and capital requirements. While the new regulations pose challenges, they also offer opportunities for banks to diversify revenue streams through brokerage services, potentially enhancing competitiveness in the financial services industry. However, prudent risk management is crucial to navigate regulatory compliance, market fluctuations, and conflicts of interest associated with brokerage services.

Parliament demands a federal government review of the Ministry of Irrigation & Lowlands, citing consistent disregard for warnings and advice during a scathing performance review last week. Despite agriculture's contribution to GDP, employment, and exports, the sector remains hindered by subsistence farming and traditional methods, exacerbating food insecurity. Challenges such as a lack of national irrigation standards, poorly researched feasibility studies, and a shortage of trained personnel have hindered progress. Minister Aisha Mohammed attributes some issues to a backlog of poorly designed projects inherited from the previous administration and budgetary constraints. However, the justifications are met with scepticism, especially concerning underperforming projects like the Omo Curaz V sugar project. The committee expresses disappointment over the absence of drought resistance and flood response plans amidst the El Nino drought affecting millions. State Minister Birhanu Lenjisso cites contractor shortcomings, mineral discoveries, and security issues as causes of delays, but MPs remain unconvinced. The situation underscores the urgent need for comprehensive reforms and effective management to address Ethiopia's agricultural challenges and harness its agricultural potential for sustainable development.

A new agriculture policy has made its way to Parliament, signalling a shift towards a market-driven approach aimed at revamping the sector. Spearheaded by Minister of Agriculture Girma Amente (PhD), it aims at empowering smallholder farmers in terms of land rights and access to financing is crucial for boosting productivity. His proposal to allow farmers to use their land as collateral for loans is seen by officials as a step towards addressing this longstanding barrier. The proposed policy focuses on capacity building, mechanisation, improved seed supply, and cluster farming to enhance productivity. Livestock and crop insurance are also part of the reforms to mitigate risks faced by farmers. While some express concerns about past policy failures and stress the importance of effective implementation, others believe the shift aligns with broader economic reforms and will address long-standing sectoral issues. Agricultural economists such as Abebe Dagnaw (PhD) warn that past policy failures stress the need for effective implementation. He suggests a reformed land policy and a greater focus on horticulture production as alternatives to the current cereal-centric approach.

Ethiopia's private insurance industry saw United Insurance emerge as one of the leading players, reporting growth in net profits and earnings per share, trailing only behind Awash Insurance. The company's success is attributed to its focus on retaining premiums, diversifying income streams through investments, and maintaining a steady profitable pace despite economic challenges such as inflation and foreign currency shortages. While United Insurance's robust financial performance is commendable, it faces challenges such as surging expenses, particularly in direct underwriting expenses and claim payments. The company remains competitive in the industry and continues to expand its branch network and workforce while maintaining a strong capital base and liquidity. Management is cognisant of difficulties in volatile sectors like marine and motor insurance, particularly regarding foreign currency shortages and price fluctuations in spare parts markets. However, they remain optimistic about its growth prospects and is exploring further diversification, including agricultural insurance, to leverage its expertise and continue its upward trajectory.

The National Bank of Ethiopia restricts the use of Cash Against Documents for exports to Sudan and Somalia to safeguard exporters. Instead, advance payments or letters of credit are mandated payment methods for these destinations. This decision follows concerns about discrepancies between exported goods' value and repatriated foreign currency, which left sellers vulnerable to delayed or defaulted payments. Efforts to address non-settlement of payments include exploring legal action against exporters and collaborating with industry insiders to explore solutions such as minimum export prices and training exporters on international payment mechanisms. However, concerns remain about the effectiveness of the central bank's decision, with questions raised about mispriced invoices and difficulties in recovering funds if exporters are defrauded. Stakeholders support the central bank's decision, acknowledging the risks associated with Cash Against Documents transactions and advocating for transactions only with reliable clients. Meanwhile, export volumes to Sudan and Somalia have increased, despite declining earnings, prompting the Ministry of Agriculture to consider introducing price floors for exports to address discrepancies.

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