Welcome to Addis Fortune's weekly digest of major economic and business news. This week's headlines feature Ethiopia's escalating debt issues, Addis Abeba's eagerly anticipated land auction, efforts by Tigray's authorities to combat counterfeit fertilisers, the Roads Authority's enforcement of truckload capacity regulations, and Nib Insurance's emergence as a strong competitor in its 22-year journey.

Ethiopia's domestic debt has surpassed the trillion Birr mark with 1.2 trillion birr, igniting a heated debate in Parliament. Finance Minister Ahmed Shide faced rigorous questioning from the Standing Committee for Planning, Budget & Finance over debt management strategies. From 2019/20 to 2022/23, external and domestic borrowing increased by 1.02 percent and 2.12 percent respectively. However, the country's debt remains within sustainable limits for low-income nations, with external debt at 17.5 percent of GDP, below the 40 percent cautionary threshold. The government has shifted from borrowing directly from the National Bank of Ethiopia to alternative financing methods, such as Treasury Bills and bonds. According to Ahmed, these measures aim to manage the budget deficit and reduce reliance on external debt. The debt-to-GDP ratio now stands at 40.2 percent with high debt servicing costs posing major risks to the economy. Minister Ahmed emphasised the need for debt restructuring and economic reforms, including a medium-term tax strategy developed with international financial institutions' support. Efforts to diversify funding sources include establishing the Ethiopian Investment Holding and a Capital Market, reducing dependence on external loans. However, concerns persist about the long-term sustainability of these strategies and the potential impact on essential public services.

The highly anticipated land auction in Addis Abeba saw hundreds of developers vying for prime plots, marking a major event in the capital's urban development. Over 53 percent of the auctioned plots were in Nifas Silk Lafto, making it a focal point for future urban development. Other allocations included Akaki Qaliti (18 percent), Kolfe Qeranyo (10 percent), and Addis Ketema (9 percent). The remaining 10 percent of the plots were distributed among districts such as Qirkos and Arada. The auction aligns with Addis Abeba's 48Km corridor development project, which aims to create new plots from recently cleared areas, further transforming the city. Developers bid on 22 plots in the recently cleared Piassa area in the Arada District, with 295 bidders competing, though 40 bids were disqualified and two plots withdrawn due to insufficient interest. The auction drew substantial interest from established companies, including banks, insurance firms, and real estate giants. Awash Bank secured a 977 Square metre plot for 311,000 birr per square metre, and Ethio Reinsurance obtained a 1,585 Square metre plot for 102,213 birr for square metre, planning to build their branches and headquarters respectively. The city administration anticipates a lease income of 140.4 billion birr over five years, with an initial revenue of 56.2 billion birr from upfront payments. The process was facilitated by online documentation and the use of the Tele Birr mobile payment platform, streamlining the bidding and payment processes. It also saw a shift in payment policies, with bidders now required to provide 40 percent of their bid upfront, and the remaining balance payable over five years, moving away from the previous 20-year payment period.  

 

A troubling discovery of counterfeit fertiliser in Tigray Regional State was revealed by the region's Agriculture Bureau during an inter-regional performance report last week. Eyasu Abraha, head of the Bureau and former Minister of Agriculture, reported finding four trucks carrying plastic disguised as urea. He condemned the involvement of individuals or businesses outside cooperative unions in fertiliser distribution, highlighting the environmental harm caused by introducing non-biodegradable plastic into the market. He disclosed all trucks carrying the fake fertiliser were intercepted, and an awareness campaign has been launched to prevent farmers from engaging with unauthorised vendors. The presentation marked Tigray's first progress report to federal authorities in four years and was attended by senior officials, who expressed surprise at the discovery. This alarming incident comes as the region struggles to recover from a two-year conflict followed by a severe drought that destroyed nearly two-thirds of the region's 15 million quintal production last year. Tigray continues to face agricultural challenges, including a shortage of vaccines and medicine, unpaid staff salaries, and crop damage from the red-billed quelea bird. Despite these issues, the region officials remain optimistic about meeting agricultural targets of 24 million quintals this year, with improved water collection methods.  

A two-year-old regulation limiting truckload capacity on roads is set to be enforced in Ethiopia by the Ethiopian Roads Administration within two months. The regulation aims to reduce road damage and aligns with the Tripartite Transit & Transport Facilitation Program. The regulation imposes fines of up to 65,000 birr on truck owners exceeding weight caps. Administration officials met with freight and truck transport owners to discuss the regulation's enforcement, emphasising the need for compliance. Industry players express concerns over potential implementation gaps, fearing increased overhead costs and room for corruption. Weighbridge reinforcement and stricter control measures are planned to ensure compliance. However, currently, only eight out of 14 weighbridges in the country are operational, highlighting the need for infrastructure improvement. Transport infrastructure experts suggest revenue generation through fines to fund road maintenance, as heavy trucks cause significant damage. 

Celebrating a monumental milestone in its 22-year journey, Nib Insurance has emerged as a formidable contender, straddling the space between established giants and newcomers. The company surpassed the billion-birr mark in Gross Written Premiums last year. The performance reflects a 55.8 percent increase in gross premiums to 1.1 billion birr, alongside notable gains in investment and commission revenues. Zufan Abebe, the CEO of Nib Insurance, attributes this success to meticulously executed strategies, leading to a major improvement across key performance metrics. Net profits soared by 58.8 percent reaching 245.82 million birr, placing it in a strong position relative to its competitors. Incorporated with equity raised from 658 founding shareholders over two decades ago, Nib Insurance has doubled its shareholder base to 1,207. They were asked to surrender nearly half of their retained earnings to cover the increased costs. The ongoing construction, with nine floors completed out of the planned 18, has cost 150 million birr for structural work so far. Zufan attributed the decision to retain half of the net profit for share recapitalisation to a general assembly resolution. Despite challenges such as increased claims and escalating costs, Zufan remains optimistic, leveraging the company's robust capital and strategic initiatives to navigate through uncertainties. 
 

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