Welcome to Addis Fortune’s latest business and economic digest. In this edition, we cover Djibouti's criticism of the World Bank's port rating, the dramatic turnaround of a policy bank amidst controversial policies, Oromia's new land lease rates boosting flower farming, Parliament's scrutiny of the Transport Ministry over the fuel subsidy program, and Global Insurance's successful venture into Sharia-compliant insurance.

The World Bank's latest Container Port Performance Index is criticised by the Djiboutian authorities after their port performance plummeted from 26th to 379th globally. The report reveals systemic issues, outdated equipment, and inadequate training, leading to major delays and inefficiencies. The decline in Djibouti’s ranking poses economic risks, as port operations are crucial for national revenue. Djibouti's Ports & Free Zones Authority expressed "profound indignation," pledging modernisation efforts to improve infrastructure and logistics. Officials criticised the report as misleading, asserting their ports' service quality and strategic importance. External factors, including regional security issues and shifting global trade dynamics, further complicate Djibouti’s situation. Attacks in the Red Sea and changing supply chain patterns demand enhanced operational efficiency. Efforts to digitalise procedures show promise, but industry veterans stress that substantial reforms are needed to meet global shipping demands. Other ports showed better performance, with Berbera ranking 103rd and Conakry 208th. The Ethiopian government is exploring alternative ports like Berbera and Lamu to boost logistics. 

Five years after facing a crisis due to high levels of non-performing loans, the Development Bank of Ethiopia has staged a major recovery, senior executives revealed to federal legislators. The state-owned policy bank now boasts a capital base of 39.7 billion birr, second only to the Commercial Bank of Ethiopia . Key to this turnaround was a 28.5 billion birr capital injection approved by the Council of Ministers four years ago, along with a central bank mandate for commercial banks to purchase Development Bank of Ethiopia-issued bonds. This lifeline allowed Development Bank of Ethiopia to raise about 39.04 billion birr from mandatory bond sales over the past three years. The annual report shows revenues of 8.5 billion birr and a net income of 1.2 billion birr, with total assets of 95 billion birr and total equity of 20 billion birr The bank’s return on assets improved from negative one percent five years ago to 4.9 percent, and the return on equity from -34.5 percent to 21.9 percent last year. The non-performing loans ratio dropped from 57.6 percent to 7.8 percent, surpassing the central bank’s requirement. Development Bank of Ethiopia's disciplined loan management, with no rescheduling of repayments or capitalisation of interest, played a crucial role in reducing non-performing loans. Challenges remain, such as regional cooperation issues over land allocations and the use of project assets as collateral.

Oromia Regional State President Shimeles Abdisa has unveiled a new land lease directive for flower farm investors, looking to boost urban agriculture. The directive categorises the region into six areas based on proximity to city centres, setting lease rates from 1.84 birr to 4.04 birr for a square meter. With payments spread over seven years and a 10 percent down payment upfront, the directive came into effect following a three-year study by the Oromia Land Bureau. Key cities like Bishoftu, Batu, and Holeta are expected to benefit from the lease rates that will be revised every 15 years to account for inflation and market value. Officials believe it will enhance regulation, revenue collection, and investment in the floriculture sector, with nearly 70 percent of the country's horticulture exporters located in Oromia. They say it addresses long-standing issues in the floriculture industry, aiming to attract more foreign direct investment and improve the business environment. Members of the Horticulture Producers & Exporters Association support the change, anticipating it will strengthen land-holding rights and boost investments. However, concerns remain about environmental impacts and bureaucratic inefficiencies.

Global Insurance has demonstrated a strategic shift towards underserved markets, particularly through its venture into Takaful offerings — an insurance system compliant with Sharia law. Despite holding a small overall market share, Global Insurance's Takaful business, branded “Ahli Takaful,” has captured the largest market share in this niche, showcasing promise and positioning the company as a pioneer in the interest-free sector. Global Insurance increased its paid-up capital by 18.6 percent to 242.16 million birr The company also reported growth in fees and commissions, reaching 34.33 million birr, an 84.5 percent rise from the previous year. However, its investment income fell by 5.9 percent to 25.04 million birr, attributed to reduced interest income on savings and time deposit accounts, partially due to funds allocated for constructing a nine-story building near Africa Avenue. The company’s net claims paid and provided for increased by 68.9 percent to 108.48 million birr, indicating a conservative underwriting culture. Underwriting expenses climbed to 48.93 million birr, marking a 17.5 percent increase, while other operating and administrative expenses rose by 30.3 percent to 26.44 million birr

Parliamentarians expressed frustration over inefficiencies in fuel distribution and subsidy management during the Ministry of Transport & Logistics performance report last week. The Standing Committee for Urban Infrastructure & Transport Affairs criticised the effectiveness of penalties for misuse amid ongoing illegal market activities. Minister Alemu Sime reported that the government spent 29.2 billion birr on fuel subsidies in the past nine months, with a total transaction volume of 86 billion birr Over 103,000 vehicles were banned from the program for improper use. The national Fuel Stabilisation Fund's spending has decreased due to gradual subsidy removal, aligning with government budget cutbacks. Currently, only 2,862 vehicles, mainly cross-country and public buses, remain subsidised. MPs raised concerns about removing subsidies amidst public transportation issues, citing long queues for buses and taxis. Stakeholders in the fuel supply chain identified problems undermining legal channels. Committee members also inquired about the rising fuel costs and the failure of the Ministry's digital payment system to curb black market activities.

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