Business Bureaucracy Bind

The renewal of business licences always causes chaos, but this year is worse with the addition of numerous other sectors. With so many new processes in place for small businesses, many are worried that they won’t be able to survive, reports BEWKET ABEBE,FORTUNE STAFF WRITER.

As the deadline for business licence renewal fast approaches, the usual hustle and bustle by business owners to push things along before the deadline on December, 2013 was last week’s scene inside the ground floor of the Ministry of Trade (MoT) on Marshal Tito Street

To make things worse, however, this year a few additional businesses have to fulfil the requirements set by the MoT, which is to present competence certification.

Business owners, like Fekade Gezahegn, who runs a barbershop are required to provide a competence certificate to the Ministry for the first time since the ratification of the trade bill in 2010.

Fekade – previously a member of the military – had to close his small barbers, located around Sidist Kilo, last Wednesday, November 13, 2013, in order to get a competency certificate from the Addis Abeba Health Bureau.

However, after spending half a day at the Bureau, Fekade, could not succeed in achieving what he aimed to do.

“I failed to get the competency certificate because I could not fulfil all the requirements,” he told Fortune in frustration.

He also tried to explain the problem he is facing to the officers at the MoT last week, but to no avail. To get the certificate, barbershops like Fekade’s must have a toilet, which is impossible for the majority of them.

“My barbershop is rested on nine square metres of land, which is difficult to accommodate three barber chairs not to mention a toilet,” said Fekade.

Renting a small room from the Kebele administration back in 2012, he started the business with an initial capital of about 8,000 Br. For Fekade, who had been jobless before 2012, following his graduation from Jimma University in Sociology, opining a barbershop was the only way out at the time.

“When I started the business, things were almost ‘safe’, as there was no one forcing me to fulfil all of these criteria,” he explained.

In addition to building a toilet, Fekade is required to provide a tax identification number (TIN), a permanent address and a capital confirmation document from the Bank.

“I do not know why they insist that we fulfil all of thiese things this year,” Fekade said.

What Fekade did not know was all the requirements were put into place two years ago, although the MoT failed to enforce it due to having a limited capacity.

On February 8, 2011, the Commercial Registration & Business Licensing Proclamation was issued, requiring all businesses to reregister. In addition, international business classifications and criteria have been added to the new licence registration process for businesses to become more specialised and to trace transactions and illegal activities.

For the consecutive three years, the MoT allowed most trade license-holders to renew licenses even if they did not provide the competency certificate.

This fiscal year, however, Fekade and Aida Geremew – a young lady who owns an internet café around Sarbet, in Nifas Silk Lafto District – were not shown any leniency from the Ministry.

Aida is also expected to get a competency certificate from the Ministry of Communications & Information Technology (MoCIT).

According to the standards set by the MoCIT, which was put into effect last January, internet cafes are expected to consist of a professional who holds a diploma in the field of communication and technology or related fields of studies.

In addition, hiring an accountant is also required from Aida, who has been covering all these duties by herself. This is given that she has no other job and she thinks she can handle the entire workload.

“Am I expected to hire an accountant to run such a small business?” Aida asks.

The standard also demands that an internet café has an internet account from ethio-telecom, a browser, one printer and a machine that shows the duration of time the customers use.

Including the barber and internet cafe businesses, currently there are about 1,200 business sectors in Addis Abeba that have full-fledged standards, according to the available data at the MoT.

However, the implementations of the standards are challenging the authorities, since most of the owners are not ready to make improvements on their existing businesses.

For Fekade, making the changes require him to expand the room he works at. However, this is not possible because he only rents the house from the kebele.

“Even my colleagues and I use the toilet at the nearby restaurant,” he said.

Similarly, to hire a casher and accountant is difficult for Aida, who claims that she will find it difficult to expand her business if she has to pay a monthly salary to others.

“To hire the said professionals I will have to waste at least 1,500 Br, which is difficult for people like me whose revenue is unpredictable,” she claims, “If I have to expand it, I have to save every cent by doing all the works myself.”

In addition, the standard set by the different government offices failed to specify measurable standards. For instance, the standard formulated by the MoCIT keeps silent with reference to the outlook of the internet cafe. It simply says, “enough and  suitable place which can provide the service”.

The criteria ‘enough’ and ‘suitable’ are mainly defined by the inspector, which makes internet café owners like Aida  confused.

“Getting the certificate is subjected to the personal views of the inspecters,” she claims.

The standards’ openness for interpretation is also creating an open space for ‘deals’ between inspectors and the business owners, the majority of the respondents Fortune talked to in different sectors claim.

“I know that if I give a bribe to one of the inspectors, I will gain the competency certificate easily,” Fekade stated.

The situation for the 1,323 sub sectors that need to have standards is, however, a little bit different from the already existing ones.

To formulate the standards and enforce the existing ones, the MoT called upon all the 34 offices to sign a Memorandum of Understanding (MoU) with it.

To date, the MoT signed the MoU with 29 offices that are given the authority to issue certificates.  Among the 34 government organisations, which include authorities, offices and ministries, the six, are either preparing standards or refused to do so. This is although the task of renewing business licenses is expected to be completed by the end of December.

Among the offices that bitterly refused to prepare a standard to certify competencies, the Ministry of Industry (MoI) is one, according to an expert at the regulatory division of the MoT who preferred to remain anonymous.

“They told us that they will not prepare the standards needed for the business under their administration,” the expert told Fortune.

The discussion among the two was also not fruitful and thus the case is brought to the Prime Minister’s Office, said the expert. Until a consensus is reached between the two, however, the MoT has taken over the task of setting standards for businesses under the MoI.

While the discussion seems to be fruitless, the MoT, which has not set standards for the sectors it follows, is working on those under the MoI. These include standards that demand technicalities, both from the one who sets the standards and from the one who approves the certificates.

On top of this problem, the technical assistance the MoT is receiving from the experts at the MoI is becoming a challenge, according to Nuredin Mohamed, advisor to the state minister at the MoT.

As per the proclamation, the MoT is allowed to set standards for those sectors that the sectoral offices failed to set.

Surprisingly, the MoT itself has not yet completed standards for the businesses that are meant to be controlled by it. This is despite the fact that business licenses are expected to be renewed after the competency certificates are issued.

“Because of the fact that we are working on the standards of ours and those of the MoI, we could not finalise even our own,” said the expert at the MoT.

“We do not want to go back to cumbersome bureaucracy and we clearly told them (the MoT),” Tadesse Haile, state minister of Industry, told Fortune.

While the disputes between the MoT and sectoral offices is still unresolved and the subjectivities in the process of issuing the certificate continue to be a problem, Fekade and Aida still do not have any idea how to proceed, in order to protect their only way of making money.

“All I can say is that I am not ready to fulfil these demands at this time,” said Ayida. “If they decide not to renew by license, I have no choice but to close my business once and for all.”


Published on Nov 17, 2013 [ Vol 14 ,No 707]



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