Welcome to Addis Fortune's latest business and economic digest. In this edition, we cover the electric vehicle push leaving investors in the lurch, rising pasta prices straining small businesses under the weight of VAT, construction authorities betting on a price adjustment manual to tackle delays, a study revealing a higher education quality issue, and the Ministry of Technology unveiling a 40 million dollar e-governance strategy.

Ethiopia's ambitious plan to promote electric vehicles is leaving investors in a state of uncertainty, with a lack of a comprehensive regulatory framework to guide the sector. Investors who rely on tractors, trucks, and field vehicles for commuting, transporting commodities, and farming have their vehicles stranded at the Djibouti ports, following a policy shift by the federal government banning the imports of vehicles that are not electric-powered. Although importers of these vehicles have raised concerns with the authorities, no satisfactory response was provided until two weeks ago, when the Ethiopian Investment Commission intervened. Two weeks ago, Commissioner Hanna Arayaselassie wrote to Alemu Sime (PhD), minister of Transport & Logistics, asking for clarification and discussion of the pending concerns. Domestic and international investors see the decision, targeting urban pollution and promoting sustainable development, lacks clear legislation and effective enforcement mechanisms, creating operational issues and uncertainty for businesses. Hanna is also concerned about business disruptions if immediate intervention from the authorities is not forthcoming. According to her, foreign and domestic investors have been bewildered by the lack of clear policy.

The price of pasta has seen a surge, alarming consumers and businesses alike with a sharp increase in the prices of pasta and macaroni by an average of nearly 12 Birr across markets. The spike comes days after the ratification of an amended Value added tax proclamation, forcing domestic producers to pass on the new levies to consumers, resulting in a 10 percent increase for a pack. Small family-run businesses are particularly affected. Over the past two weeks, prices for most locally produced pasta varieties have soared by an average of 180 Birr a box, as the tax is known as a consumer tax. Indirect taxation accounts for 24 percent of the federal tax revenue target of 502 billion Birr, with Value added tax expected to contribute around 100 billion Birr. Eyob Tekalign (PhD), the state minister for Finance, defended the Value added tax levy during the final parliamentary hearing last month, arguing that nearly 60 percent of household income is expended on food. According to Eyob, funds for financing mechanised agriculture could only come from revenues generated through taxation, with exemptions on food restricted to essential commodities.

The Ethiopian Construction Authority has introduced a new price adjustment manual to address persistent delays in public construction projects. This manual aims to standardise the process of adjusting contract prices in response to market fluctuations, reducing disputes and ensuring timely project completion. Construction delays have been a major issue in Ethiopia, often resulting from disagreements over cost variations due to inflation, material shortages, and currency devaluation. The price adjustment manual provides clear guidelines on how contractors can request price adjustments and how these requests will be evaluated. This transparency is expected to lower conflicts between contractors and project owners, facilitating smoother project execution. The manual also includes provisions for periodic review and updates to reflect changing market conditions.

A recent study has unveiled a crisis in the quality of higher education, prompting urgent calls for comprehensive reforms. The 70-30 policy, which channels students into natural and social science streams based on labour market priorities, stands out as a major flaw. The study points out the lack of alignment with actual market dynamics, student capabilities, and university capacities. Implemented without sufficient research, it has led to high unemployment rates among graduates. University enrollment has surged from 60,000 nearly two decades ago to 600,000 last year. However, the report also criticises the current emphasis on theoretical knowledge over practical skills, leaving graduates ill-prepared for the job market. To address these issues, the study recommends several reforms, including increasing investment in higher education, improving faculty qualifications through continuous professional development, and updating curricula to align with industry needs. It also suggests enhancing partnerships between universities and the private sector to provide students with practical training opportunities.

The Ministry of Innovation & Technology launched a 40 million dollar e-governance plan for five years. The strategy focuses on digital literacy, skills development, and legal frameworks but excludes infrastructure costs, which will require additional finances. Developed over a year by 12 consultants and funded by the European Union, the five-year strategy outlines functionality, capacity, and finance as critical points. Officials see this as a crucial step towards addressing hurdles in data management, governance, and enterprise architecture. Minister Belete Molla (PhD) lauded the new strategy as a major pillar for digital transformation. His Ministry's performance audit recently captured Parliament's attention, taking much of the blame for failing to complete projects on time — such as science cafes and digital transformation — resulting in public losses of 43 million Birr and 277 million Birr, respectively. Despite several digital strategy revisions since 2006, Ethiopia's e-government ranking according to the UN remains around 179th out of 193 countries until 2022. While the country fares better in e-participation, ranking around 163rd, the overall score suffers due to limitations in the reliability, accessibility, and consistency of its e-government services.

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