Ayalew Zegeye, president of Addis Abeba Chamber of Commerce & Sectoral Association (right) raising its concerns about the meeting that was co-chaired by Mulu Solomon, president of ECCSA and Kebede Chane, minister of Trade.
Despite an influx of praises in making it to the fastest growing economies of the world, registering an average of seven per cent growth rate, surpassing the 5.6pc average growth rate sub-Saharan Africa, according to the International Monetary Fund (IMF), Ethiopia was ranked at 127th place in terms of ease of doing business out of 185 countries evaluated, according to the latest World Bank’s Ease of Doing Business Report, 2013.
One of the indicators that the Report evaluates in ranking countries is assessing how easy it is for businesspeople to start a business. Evaluating the number of procedures, time, cost and paid-in minimum capital requirement that the country laws and regulations demand,Ethiopiais only better than 20 countries out of the total.
“This is a caution for the country that needs to attract foreign investment for economic growth,” Abebe Abebayehu, a senior consultant at the secretariat of the Public Private Consultative Forum (PPCF), a discussion platform managed by the Ethiopian Chamber of Commerce & Sectoral Association (ECCSA), says.
This happens despite the government’s effort to reform business registration by enacting a new commercial business registration proclamation, aiming at integrating the registration process to beget economic development, in 2010.
After one full year of operation, however, the new law seems to have failed to achieve the anticipated outcome. It has even become a point of discussion, chosen by the ECCSA as a pressing issue that needs policy discussion, at the third PPCF held last week.
The Consultative Forum came to the scene before two years after a signing of a Memorandum of Understanding (MoU) between the ECCSA and the former Minister of Trade & Industry (MoTI) in July 2010.
The third forum that focused on the bottlenecks that businesspeople experience during business registration and licensing was conducted on Tuesday, October 29, 2012 atDesalegn Hotel,Cape VerdeStreet, with the presence of Mulu Solomon, president of the ECCSA and Kebede Chane, minister of Trade (MoT).
The secretariat of the Forum managed by Teshome Beyene presented a 21-page detailed study that identifies nine areas of concerns to the private sector on trade registration and licensing. The study, dubbed a ‘position paper’, detailed the snags and proposes possible ways out.
One of the concerns that the position paper identified as ‘irrelevant’ and “time-taking” is the yearly renewal of trade license. Requesting businesses to renew their license every year is like requesting a person to renew his birth certificate every year, reconfirming that she actually was born on that day, said Abebe, to the amazement of the over-100 attendants.
The private sector, thus, requested the government to eliminate the renewal procedure. There is no reason why a business must be required to renew its license unless it undertakes significant changes in it, such as change of management or address.
“To date, the only benefit, if any, that the renewal process would have is the renewal fee paid for the Ministry yearly,” argues Abebe.
Nonetheless, such an argument seems to hold no water for the senior government officials who attended the Forum. “We can negotiate on the period of renewal time,” Kebede told the attendants, “but eliminating the renewal process altogether is impossible.”
“This is a tool that we check even whether the business is still functioning or not,” Nuredine Mohammed, adviser of the minster and head of business registration at the MoT, told Fortune.
Attendants from the private sector, however, did not stop to voice their displeasure about the criteria’s that the ministry wants them to fulfill for renewal.
A company should come up with document from the Ethiopian Revenues & Customs Revenue (ERCA) that certifies that the company has paid all the necessary types of taxes and municipality services, according to the new law.
“Are we supposed to do our business or going around government offices?” a member of the Chamber whom Fortune talked to complains.
However, both Nuredine and Kebede countered on the idea of dissociating tax payment certification and business renewal saying that it has been tried in a pilot project in Amhara Region but has failed. Only 15pc of businesses were found to comply under the pilot project, the officials disclosed, disproving the claim raised by the private sector.
However, both the private sector and government agreed up on the need of having a modern trade registration system that will enable the Ministry to be networked with relevant federal institutions like the Ethiopian Revenues & Customs Authority (ERCA) in order to access important company data to confirm whether a certain company has fulfilled its tax obligation or not.
“It will not be fair to mention financial incapacity as a reason to install such a system since other countries that have comparable economies, like Rwanda, have own one,” Abebe noted. Agreeing with the complains, the officials affirmed that the Ministry is installing an infrastructure that will allow businesses to register online together.
The other issue that the study identifies as a bottleneck for doing business is the requirements of professional competence that a typical company should acquire from a relevant government agency before issuing trade license. Most of the attendants from the private sector complain that most of the agencies delegated for such a purpose did not even have a directive that set the criteria’s of certification yet.
There are around 34 sectoral agencies identified by the Ministry to give certification. However, it is only nine of them that are giving the certification service with full capacity, according to the Ministry.
“Because of these reasons, many people are not engaged in business having the license,” the study reads.
The officials admit the existence of such a problem and promised to rectify it soon.
Such kinds of admissions seem to have created caution in the private sector, however.
“Things will be exciting only when the issues agreed up on are implemented on the ground,” Getahun Besha, owner of Get Fam, told Fortune.
The attitude was shared by most of the attendants of the forum that Fortune talked to who have concerns on the capacity of their own representative at the Forum, the ECCSA, in following up the implementation of the issues agreed in the forum.
But executives at the ECCSA, on the other hand, seem to be unhappy about the slow response of the government in addressing the pressing problems raised in the subsequent forums.
According to the MoU agreed between the government and the ECCSA back in 2010, the federal government is obliged to attend the two federal public-private sector forums as well as another four forums through its officials from different ministries.
The chamber has only conducted three forums including last weeks’ and one sectoral meeting in Bahir Dar. This is because the Secretariat was not fully operational in terms of human resource and finance, hence did not able to conduct all meetings, according to Abebe.
Even then, the participation of members of the Chamber is itself not satisfactory as the small number of participants in the last week’s forum could show.
Regardless of turnout and implementation of promises, both sides think that it is too early to comment on the success of the Forum.
The forum, the first to be conducted after the death of the late Prime Minister Meles Zenawi, has seen a consensus between the private sector and the government over seven of the nine issues indentified as pressing in the study presented by the ECCSA.
What is supposedly uncertain is the implementation of the consensus on the ground. Implementation of changes is what will largely define the ranking of the nation, praised for its economic growth, in Ease of Doing Business, most pundits agree.
Leave a Reply