By any calendar, the end of the fiscal year of banks and insurers means increased business for firms providing goods and services in preparation for their annual general meetings. This mandatory assembly of shareholders, directors and managers is the highest decision making body of the firms when officers report to owners, giving an account of annual performance. After the serious business of reporting, there is, traditionally, a celebration: an opportunity to thank customers and entice clients. Though not partying with the bankers, SOLIANA ALEMAYEHU, FORTUNE STAFF WRITER, finds out just how much other business is generated by the general assemblies.
“Bank events are the wildest,” said Danny, a bartender, shaking his head in amazement, as he poured amber liquid into a sea of glass tumblers at a launch event. “They celebrate like they have a score to settle.”
He is speaking of shareholders at annual general meetings held by every private bank at this time of year. Danny, whose name has been changed, is usually on duty at banquet events in the hotel where he works, and has a front row seat to the unguarded actions of the investors that come to him to refill their glasses.
Having completed the more serious business of going through annual reports and voting on changes in Board membership and directives, the merry-making starts at the cocktail parties usually held afterwards. Large amounts of both food and liquor are consumed.
In the months of October and November, all private banks and insurance companies are required to report their annual performance to their shareholders. These meetings are accompanied by cocktail parties in the evenings.
Conference room bookings, report publication, and, in the case of some, gift items are some of the components that make up these events. Private banking and insurance companies regularly spend at least one million Birr on a single day of reporting followed by merry making.
“It’s not just about making shareholders happy though,” said an employee of an insurance company. Invitations to the cocktail parties are given not only to investors, but also to big customers as well as to prospective clients, he added.
“It is a show of power, of accomplishment,” the employee continued. “We must impress our clients, both current and prospective, so they will be better inclined to expand, or to bring their business to our doors.”
He explained that compared to the business generated from the clients invited, the cost of these events is minimal.
Businesses that supply services related to these events, such as auditing firms, printing companies, and hotels, benefit from extra revenue generated during this season. In the hotels frequented by these financial institutions, the months of October and November, are peak conference hall rental seasons.
Hilton Addis, which hosts the majority of the financial industry’s shareholder events, admits that though the peak season differs year after year, these months are indeed consistently busy. They are so busy, in fact, that the venue for the upcoming year must be booked at the end of the current year’s event, 12 months ahead of time, the hotel said in a written response to Fortune.
The hotels are chosen for a host of reasons that rarely change. Hilton Addis is a popular choice because of what the brand represents, and also because of its central location, extensive parking facilities, and accessibility to users of public transportation.
Hilton provides a thousand guests with facilities for a half day conference, and a cocktail party for the rack rate of 2.2 million Birr, although annual customers report benifitting from substantial discounts.
Lion International Bank, an institution with over 7,000 shareholders, is first and foremost concerned about the size of the venue. “The only ones that can cater to our need for space, without compromising our need for a refined image is either the Sheraton or Millennium Hall,” said Daniel Gebregziabher, head of marketing. Lion chose Sheraton and it has used that venue for the past eight years.
The meetings are legally required and mandated by NBE directives,“but we choose to do the dinners,” he added.
Banks tend to go back to their venue of choice annually. In return, the venues offer them discounted rates. While the rack rates for a full day conference at the Sheraton stands at almost one thousand Birr per person for such meetings, excluding the cocktail parties. In Lion’s case, that would amount to seven million Birr; yet no bank reported spending more than two million Birr on these events.
Hotels are not the only businesses whose takings are boosted by the yearly events.
Though there is not much change in the institutions’ choice of venue, the same cannot be said about options for printing and publishing the annual reports. These comprise the Board of Directors’ Reports as well as the Auditors’ Reports, both of which comprise the annual reports constituting these companies’ accountability to their shareholders.
When the fiscal year ends in June, banking and insurance companies, after finishing their internal audits, hire external ones. These auditors finish their work sometime around September. Once the reports are in their hands, the banks must then publish them.
The printers and the auditors are chosen through the collection of pro forma, open tenders, or selected bids. The active competition means the chances of retaining repeat customers are very few. But this is where the similarity ends.
Auditors claim this kind of competition has ruined the quality of annual reports, and that both the audit and banking industries suffer as a direct cause of unrealistically low prices.
“We work at a loss,” says Tewodros Hailu, partner at Degefa Lemessa Authorized Auditors Limited Partnership, “only benefitting from the reputation that comes along with it.”
The auditing of banks requires industry-specific know how, extensive time, and the best professionals possible.
“Depending on the size of the bank, it could take 17 professionals and up to three months to do it well,” says Tekeste Gebru, partner at HST consulting, “but you can only get what you pay for.”
Printing companies, on the other hand, though participating in similar procedures for selection, actually gain from this process because quality is the deal breaking determinant.
Master Printing Press, one of the reputable publishers preferred by banks, prints around 10 annual reports, according to Rahel Antwan, deputy manager of the company.
These months are busy seasons for the printing industry. However, the peak in market activity is experienced in the weeks approaching the Ethiopian New Year, where 60 to 70pc of their business takes place. A similar outlook is maintained by Beminet Printing Press, which also serves a substantial number of banks and insurance companies.
Printing of calendars, diaries, and other paraphernalia, all of which are due at the same time, makes the weeks leading up to September the busiest of all. As may be expected, major clients in that rush, come from the banking and insurance industries.
Calendars and diaries aside, the viability of the impact of the post-meeting parties as marketing opportunities for potential clients is improbable, opined Alazar Ahmed, a lecturer and marketing expert with over 15 years’ experience in the field. Banks are largely monotonous, and offer similar products. So, a client would change institutions only if something concrete was on offer. Clients bargain their deposits in exchange for access to foreign currency, loans, or letters of credit, he added. And the bottom line for shareholder satisfaction is the level of their dividends.
However, as banks have thousands of shareholders, the annual meetings offer the most convenient choice to disseminate the performance reports, adds Alazar. Until the feasibility of video conferences and live online streaming take root, these trends are not likely to change. Banks are not the only the only drivers of business in this season. Non-profits and other types of organisations whose budget year follows the Gregorian calendar, also allocate budgets specifically for events and workshops, said Seifemichael Alemu, a hotel consultant and event organiser, who had worked in various hotels before opening his own firm. As the end of the year approaches, they make use of all remaining funds meant for this purpose by organising corporate events.
These events are held in the last months of the year, because the organisations do not want to run the risk of finishing their budget earlier in the year. One of the newer hotels that so far has not hosted financial industry events, admitted to hosting five or six events a month; around October and November that goes up to 30 to 40 events.
With a reformist administration in charge of the executive, there has b...
The new electricity tariffs that became effective on December 1, 2018,...
Who it is that midwifed the rapprochement between E...
Egyptian companies are about to sue the federal government over their i...
A recent photo between Prime Minister Abiy Ahmed (PhD) and George Soros...
The future is bleak. Millennials and younger generations who will inher...
There is heated debate on the propriety, decency and morality of breast...