Welcome to Addis Fortune's weekly digest of the major economic and business news. This week's headlines feature a bold bet on affordable housing facing skepticism and financial roadblocks, private agency workers walking on a wage wire, fertiliser procured with pride but being delivered with peril, anxious investors left with Purpose Black's promises and Nyala Insurance thriving despite a storm of claims and regulations.

The federal government is incorporating thousands of "affordable housing units" through a new public-private partnership within the "Chaka Satellite City" project. Consultant firms are under review to conduct a feasibility study, a process that comes amidst the re-tendering of a separate pilot public-private partnership  housing project due to low developer interest. The Prime Minister's Office targets nearly 10,000 housing units across 14 projects in the Chaka and Tiyit Bet areas. The Office proposes a structure where developers retain 70 percent of the units built on nearly 4,000hct to recoup investments after project completion. The Chaka Project is a massive undertaking that plans to include artificial lakes, recreational halls, and greenery in the Yeka and Lemi-Kura districts. Hundreds have been paid with compensations to resettle around the Kotebe area. The Ministry of Finance, with a part of 4.43 million dollars in funding from the African Development Bank, invited prospective bidders to submit an expression of interest two months ago to produce a feasibility study. The deadline to submit documents was closed last month. The feasibility study's results, along with financing, scope, and options, will impact the project's implementation. The selected firm is expected to show value for money and risk transfer for the project through the study, which should be completed four months after commencement.

 

A court ruling has ended the dream of a massive 115-storey skyscraper in Mexico Square, planned by Purpose Black, a company that sold shares to over 1,700 people with the promise of apartments in the building. However, the Federal High Court ruling has ended the legal battle between BGI-Ethiopia and Purpose Black, marking the end of property acquisition. Under the terms of the court ruling, BGI refunded the earnest one billion Birr payment to Purpose Black. The latter has agreed to leave the property, dropping its plan to finance the construction of a residential apartment on the site. Executives of the brewery intend to float a bid and sell the property to another buyer. Meanwhile, prospective apartment owners who bought shares have been growing anxious by the day, amid the protracted real estate deal. According to Tefera Alemayehu, assistant to the CEO of Purpose Black, funds would not be returned to shareholders. He says it has secured land for a different affordable housing project and will hold a meeting to discuss options with shareholders. Legal experts who were sceptical of Purpose Black's initial marketing scheme, believe investors may be entitled to take legal action.

 

In a year marked by remarkable growth, Nyala Insurance surged ahead with impressive gains in investment income and life insurance while defying conservative critiques, with its executives steering a rise in gross written premiums. This was despite economic headwinds evident as its liquidity soared and paid-up capital climbed, positioning Nyala as a formidable contender against competitors like United and Nile insurance firms. Yet, the sharp rise in claims paid, driven by soaring costs, proved relentless in the insurance industry. However, the company netted 273.31 million Br in profit, a 23.9 percent growth from the previous year. This positioned it among competitors such as Nile Insurance's 298.3 million birr. Incorporated in 1995 with a seven million Birr paid-up capital, Nyala Insurance has expanded its six founding shareholders' base to 66 as of last year. During the general assembly meeting in December at the Sheraton Addis Hotel, these shareholders celebrated a 5.67 percent surge in Earnings Per Share, translating to 35.4 percent, nearly three percentage points higher than the industry average for private insurers.

 

A recent regulatory change that removed the wage requirement for workers under private employment agencies, is sparking concerns about exploitation and a potential violation of worker rights. The law requiring agencies to pay workers at least 80 percent of the salary received from the client company was revoked four months ago. This decision stemmed from a disagreement about the Ministry of Labour & Skills' authority to set wage rules. Labour unions and worker advocates fear exploitation. An ILO study found existing issues like unsafe work environments and unfair contracts, and these might worsen. The Ministry acknowledges a gap in oversight and is collecting data to make informed decisions. Addis Abeba authorities already faced issues regulating agencies, and the new ruling might make it harder. However, the lack of action on appeal and postponed meetings with unions raise concerns. Agencies argue the 80/20 rule restricted their service fees and created financial burdens, while experts call for a new legal framework that protects workers' rights while considering the needs of employment agencies.

 

With the impending planting season, lawmakers' focus shifts to the distribution of fertilisers during the Ministry of Agriculture's nine-month performance report. The conversation has shifted from purchasing to distribution this year. While officials were content with the historic success of importing more than double the amount of fertiliser compared to last year, members of Parliament had concerns about the delivery. Ethiopia imported double the amount of fertiliser this year compared to last year. However, there are concerns about distribution reaching farmers in time for the planting season. Lawmakers are urging the Ministry of Agriculture to improve distribution channels to avoid past frustrations. The Ministry is defending its efforts and highlighting challenges like security concerns and illegal markets. Despite increased wheat production, food insecurity remains a concern due to poor market linkages and a lack of proper storage facilities. The government is looking to improve mechanization and private sector involvement to address these issues.

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