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EFFORT emptied Development Bank of Ethiopia
By Abebe Gellaw | February 5, 2010
In mid-January, the ailing
Development Bank of Ethiopia (DBE) declared once again that it is in need of
rescue fund. The business weekly, Addis Fortune, reported that the bank called
on the National Bank of Ethiopia (NBE) to inject more capital
to
refill its empty cash registers.
Though the health of all state
banks has been in dramatic decline within the last ten years, crisis-ridden DBE
has been in much more serious trouble carrying a huge burden on its shoulders in
the form of non-performing loans. Much of these loans are taken out by crooked
“borrowers” like the Endowment Fund for the Rehabilitation of Tigray, which is
infamous for defaulting on the multi-billion birr loans it has been raking out
from state banks.
In mid-December, Addis Fortune
reported that DBE “loaned” a whopping 1.7 billion birr ($141.6 million)
to a privileged company,
Messebo Cement Factory, one of the many companies owned by EFFORT. Messebo’s
business plan was an expansion project, to build a second factory that will
extend its market monopoly in the cement business. “The money, 96 million in
euro [141.6 million dollars], has been obtained entirely as a loan from the
Development Bank of Ethiopia (DBE); only 15 per cent of this money was required
in local currency,”the paper reported.
“The civil work has been
completed. The machineries are now coming from China,” Brehanu Werede, acting
general manager of the project, boasted to the weekly.
But the interesting twist in the
story is the fact that while ailing DBE has been on the verge of collapse, its
incompetent management team and board, filled with TPLF loyalists and hirelings,
clearly flouted the basic rule of banking by approving EFFORT’s greedy loan
applications. As a result of its crisis, cash strapped DBE has been unable to
finance essential and relatively more productive entrepreneurial projects. It is
turning down loan applications from serious entrepreneurs that have little
political and ethnic leverage, while funnelling meagre resources to a borrower
that has been deliberately confusing loans with grants. Even more surprisingly,
it happened at a time when DBE has once again pressed the red button for rescue
injection from the national treasury. It doesn’t make sense to undertake such a
mammoth expansion project on the part of Messebo at a time when the cement
market is predicted to reach a saturation point with the opening of a dozen of
new factories including Sheik Mohammed Al-Amoudi’s Derba Midroc Cement Factory,
which is expected to start production at the end of this year.
When Emperor Menelik inaugurated Bank of
Abyssinia on February 15, 1906, he undoubtedly envisioned it to grow, multiply
and serve generations to come. That bank played a critical role to push his
modernization agenda. It is also credited for financing the construction of the
only railway line in Ethiopia, the Ethio-Djibouti railway, which currently finds
itself on the verge of extinction.
Emperor Menelik had also set up another bank,
solely committed to enhancing development and trade by providing badly needed
financial facilities, despite the fact that resources were extremely meagre. In
1909, the emperor launched the Societe Narionale d' Ethiopie Pour le
Development de l' agriculture et de Commerce (The Society for the Promotion
of Agriculture and Trade).
Since its establishment, the bank has undergone major restructuring and
re-naming at least eight times. During the reigns of Haile Selassie and Mengistu
Hailemariam, the bank did not register any dramatic growth nor faced critical
illness. After the fall of the Derg, the bank saw dramatic changes as its
non-performing loans had reportedly reached as much 94 per cent. In 2003, it was
re-established as the Development Bank of Ethiopia. In July 2009, the bank
declared that it completed the controversial Business Process Re-engineering (BPR)
which has been allegedly used to push the agenda of the ruling elite to tighten
its monopolistic grip on every key institution in the country.
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