As Ethiopia enters the new year, Addis Fortune brings you the five biggest stories of the week. Topping the headlines is the banking sector, which is on the verge of transformation with plans to unify the exchange rate and attract more remittances. Meanwhile, business leaders continue to express concerns over power outages, excessive taxation, and outdated regulations while a new directive hopes to integrate over a million refugees into the workforce, though challenges remain in implementation. The online marketplace is also seeing growth, but the transition to true e-commerce is hindered by infrastructure and logistics issues. African nations, including Ethiopia, are reassessing the financial toll of credit rating agencies that have cost the continent billions.

The banking industry steps into the new year with expectations of increased remittance flows and reforms set to liberalise the foreign exchange market. The authorities plan to unify the exchange rate, reducing the cost of transactions to attract almost five percent of the GDP in remittances. The World Bank shows the importance of remittances in supporting developing economies, and Ethiopia is no different. Remittances account for a 76 percent of total foreign exchange transfers. However, a large part of these funds bypass official banking channels. Ethiopia has received over 15 billion dollars in remittances in the past three years, with the most contributors being Ethiopians in North America at 30 percent, and Asia at 29 percent. The industry is gearing towards digital solutions, with officials launching "unite.et," a digital platform allowing Ethiopian residents and non-residents to open foreign currency accounts remotely. This move, along with the central bank's "Debo Campaign", seeks to encourage Ethiopians abroad to use official banking channels, boosting foreign exchange reserves and reducing poverty.

A recent UNDP report revealed that 74.5 billion dollars in financial and development costs were incurred due to subjective ratings by African countries. The credit rating industry, long a subject of both influence and controversy, has drawn government officials and experts from across the African continent together to discuss its impact. Representatives from various African countries, including Kenya, Tanzania, Uganda, Ghana, and Ethiopia, gathered in Addis Abeba to assess the current credit rating system. Dominated by giants like Moody's, Standard & Poor's, and Fitch, credit rating agencies have faced scrutiny and controversy from researchers and officials from African countries. 

Leaders of the business community are vocal about the difficulties they face, including power disruptions, excessive taxation, security threats, and outdated laws. They say these factors are greatly hindering their operations and economic growth. Government officials acknowledged the difficulties facing the country's businesses. However, they have expressed optimism about the future and highlighted their efforts to address these issues through peace, security, private sector strengthening, and macroeconomic reforms. Economists such as Arega Shumete (PhD) warn that the trade sector could remain stagnant without decisive action. He emphasises the need for coordinated efforts to boost productivity, address domestic issues, and diversify export commodities to reduce reliance on international price fluctuations.

Ethiopia has taken a step to integrate refugees and asylum seekers into its formal economy with a new directive aimed at unlocking employment opportunities for over a million displaced individuals. The directive grants refugees the right to engage in diverse commercial activities, including agriculture, industry, and small enterprises, while restrictions remain on sectors such as border trade, security, and government jobs. Ethiopia is currently home to over 1.1 million refugees and asylum seekers, primarily from South Sudan, Somalia, and Eritrea, making it the third-largest refugee-hosting country in Africa. Gambela Regional State hosts the largest portion at 37pc, f percentlowed by the Somali Region at 33 percent, and the Benishangul-Gumuz Region at 10 percent.

Online business is steadily gaining traction, with social media platforms serving as the primary marketplace for aspiring traders and established businesses alike. True e-commerce platforms should facilitate transactions between buyers and sellers, offering services such as refunds and connections to banks. Ministry of Trade & Regional Integration has issued over 100 e-commerce licenses, but they operate under a service provider model rather than as a full-fledged e-commerce platform. Most online platforms operate at a promotional level, displaying products but lacking integrated sales or payment systems. Inadequate digital infrastructure, logistical hurdles, and limited access to payment systems are among the main roadblocks. 

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