ETHIOPIA: Trade and Transformation Business

ETHIOPIA: Trade and Transformation Business

The purpose of this study was to highlight issues related to trade competition among Ethiopian insurers. The insurance sector differs from other businesses in that it contributes to the development of the country’s economy by providing a sense of security, a means of risk sharing, an efficient risk management tool, and facilitating trade and investment. Because of this distinctiveness, it is a risky business whose failure could result in systematic risk and failure of the entire economy, necessitating strict regulation of the sector. During Ethiopia’s accession to the World Trade Organisation (WTO), competent domestic insurers must be developed in order to meet the trade competition challenges posed by large foreign insurers.

For the last thirty years, Sebeta Agro Industry Plc, the manufacturer and distributor of the “Mama” milk brand, has been doing business as normal until a few months ago.

Mama is one of the most well-known consumer brands that is still carried on store shelves in Addis Ababa and the surrounding areas. However, the Sebeta Agro Industry has lately encountered issues that have harmed both its reputation and its bottom line.

Recommendations from devoted consumers and data collected by its data staff alerted the business to the widespread distribution of subpar and small-batch milk products packaged under Mama’s name.

Mulugeta Yimer, CEO of Sebeta Agro-Industry, said, “Even the phone numbers and the contents of the packages are identical [to the original].” “We could only verify the authenticity of the product by examining the milk’s quality within.”

It wouldn’t be a leap to argue that it would have been hard for customers to distinguish between the fake packaged milk and Mama’s real product if the manufacturer was having difficulties doing so.

The leaders of Sebeta Agro Industry were compelled by the sabotage to redesign their packaging, and on January 13, 2024, the updated Mama milk was released to the public.

The classic green colour of the packaging has been replaced with a new blue tint, and barcodes are now included on every new item.

Mulugeta and his group are hoping that the revisions would help things get better. He revealed that following the branding change, sales volume had increased by 14%. Even yet, the business has come a long way from its heyday, when it used to sell up to 150,000 litres of milk per day. Its output has dropped to 60,000 litres per day due to a tarnished brand image, manufacturing cost and supply concerns, and the nation’s overall economic downturn.

Even though almost every sector in Ethiopia has issues with manufacturing inputs, Sebeta Agro sector may have been able to reduce losses from the duplication fraud with government assistance.

The CEO claims that even though the fake goods had been on the market for months, the business did not contact the Addis Ababa Trade Bureau or the Ministry of Trade. Muluget said that he was not very confident in the ability of the government to regulate.

He said, “We didn’t take the case anywhere.” Even if we did, there was no guarantee it would have resulted in the necessary change. Alternatively, we may insert barcodes and alter the logo.

Sebeta Agro Industry may have approached the Trade Competition and Consumer Protection Authority for assistance a few years ago. However, the Authority was later disbanded and its duties were divided among many government agencies.

The old Authority’s merger and acquisition and consumer protection duties were merged into the Ministry of Trade and Regional Integration after the October 2021 executive reorganisation. Additionally, a bench of judges from the Authority was moved to the Justice Ministry’s Arada First Instance Court.

Senior expert Ermias Tesfaye oversees consumer protection matters at the Trade Ministry. His agency is in responsible of reporting criminal matters to the Ministry of Justice and implementing administrative sanctions against illegal trade activity.

Since being integrated into the Trade Ministry, the Consumer Protection Desk has reviewed a few cases, some of which have included trademarks. A firm that violated anti-competition regulations last year was fined 17 million birr by The Desk. But according to Ermias, the Desk sees less instances than the Authority used to. He said that raising awareness and working in the enforcement line departments were the Authority’s primary responsibilities. “Most operations are now under the Trade Ministry, with the exception of the court, although I doubt the public is aware of this.
Ermias said that the Ministry’s caseload is decreasing. He believes that the public’s ignorance of the Desk’s Ministry affiliation is the root of the drop in tip-offs.

In the past, we handled up to 70 cases annually. However, we have worked on around 11 cases this year so far, resulting in arbitration and 381,000 birr in settlements, the man said. “Aside from those that are in court, our office currently has seven pending cases.”

Erimas notes that the decline in cases handled by his office is also a result of the Addis Ababa Trade Bureau establishing a consumer protection department. The Authority also used to handle matters under the jurisdiction of Addis Ababa.

Ermias talks about his two months of training with the Competition Authority of Kenya (CAK) in Kenya. He points to CAK’s broad reach and its prowess in upholding trade regulations.

Weak consumer protection laws and trade competition hinder business and endanger public safety | The Reporter | #1 Ethiopian News Updated Today
The French multinational retailer Carrefour was fined a record 1.1 billion Kenyan shillings (USD 7.1 million) by CAK last month for misusing its purchasing power. A few months earlier, CAK fined nine producers over 340 million shillings (USD 2.2 million) for their involvement in a cartel in the Kenyan steel sector.

Information on consumer protection, trade rules, and mergers and acquisitions in Kenya may be found on the CAK website in an easy-to-understand manner.

“We have to make sure that there is this kind of capable institute working on competition if we dream of more foreign investment in the country,” Ermias said.

Professionals with more than ten years of expertise in trade policy, including a judge on the bench of the old Trade Competition and Consumers Protection Authority, such as Biruh Gauge, share this opinion.

He emphasises that an impartial agency is necessary to regulate the market, particularly for a nation hoping to develop a market economy and draw in foreign capital. Given Ethiopia’s redoubled aspirations to join the World Trade Organisation (WTO), it is even more urgent.

Biruh supports the notion of an organisation capable of fully managing the responsibilities now divided across offices in the ministries of trade and justice, among other things.

He said, “They aren’t the custodians.” “I don’t see a lot of advocacy, education, or arbitration or negotiation being done. An organisation should be given complete responsibility for addressing them. I follow up since it was a requirement of my prior employment, but I’m not certain whether they’re making progress.

Independence, according to Biruh, is a vital component of any organization that protects commerce. He remembers that at the previous Authority, the Prime Minister designated the director, deputy-director, and judges, providing them a degree of autonomy in making decisions.

Million Kibret is a managing partner of BDO Ethiopia and a seasoned financial specialist. He feels that the problem is not given the attention it merits since the organization in charge of trade competition is integrated within the Trade Ministry.

Million contends that robust consumer protection agencies are necessary in capitalist nations.

“The government must find a way to protect consumers if the countries allow the market to run independently,” he said.

He believes that the market is being adversely affected by inadequate planning and execution, as well as by problems with awareness on the parts of the government, customers, and merchants.

When it comes to commerce and consumer protection, Million cited the problematic cement distribution network as an example of how the government often “engages in campaign-like activities.”

According to a recent report by The Reporter, BGI Ethiopia paid 64 birr to purchase Meta Abo, one of the oldest breweries in the nation. Details of the transaction were kept under wraps until recently, despite the fact that BGI and Diageo—the company that sold the brewery—made the agreement public back in January 2022.

For over USD 225 million more than ten years ago, the Ethiopian government sold Meta Abo to the international beverage company Diageo, which has its headquarters in London. Two years ago, it sold BGI Ethiopia more than 11.5 million Meta Abo shares for a total of one euro. The modest purchase price is allegedly due to significant tax obligations; despite the startling figures, the Trade Ministry has authorized the deal.

This reduces the total number of breweries in Ethiopia that are in operation to six. According to data, three breweries—BGI, Heineken, and Habesha—control a market share of more than 57%, with BGI holding a 31.8 percent share.

Million contends that sufficient data on every merger and acquisition deal ought to be disclosed to the public.

“The public has a complete right to know about these mergers since they can be of public interest. “The brand is widely recognized,” he said. “The merging parties are not free to decide what information to include and what not to include.”

Million is in favour of legislation that would make it clear which aspects of a trade agreement would be kept private and which would have to be made public.

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