Among the renowned Ethiopian public figures who stamped their foot print on the financial sector is found Zafu Eyessuswork Zafu. His friends and colleagues describe Zafu : “A man of decision”, “ A rational thinker” and “A dedicated and a farsighted person.”
Without any hesitation, Zafu has been contributing a lot for the burgeoning of the financial sector. The long serving Zafu still works as a Chairman of Directors’ Board and Advisor to the United Bank. He recently spent few hours with the Ethiopian Herald. Excerpts;
Herald: Could you mention some points about the financial sector in Ethiopia?
Zafu Eyessuswork: Pertaining to the development of financial sectors in this country the first credit, of course, goes to EPRDF. Starting from 1994 G.C, the establishment of financial institutions was allowed to private companies. That was the very dramatic departure from the past when there was only one Commercial Bank and one insurance company operating for years. Since 1994, the early years of EPRDF, certain liberalization steps, albeit limited, were taken.
And that was the time when two landmark proclamations took effect. Firstly, proclamation No 84-1994 allowed the establishment of private commercial banks in the country. Secondly, proclamation 86 -1994 allowed the establishment of insurance banks in the country. I came back to this country when a door was opened for the establishment of banks and insurance companies. Otherwise, I would not have come back to work in my native land.
Herald: How do you see the legal and policy environment of financial sector in Ethiopia?
Zafu Eyesuswork: Well, up to now, the period was meant for experiment. The government has allowed developmental state regimes by way of a paradigm shift. Previously, there was a very tight supervision of the private sector including financial sectors. As such there was a belief that the government was playing the role of the business person by establishing banks and insurance companies. The government has maintained insurance companies for almost 28 years now.
Still Bank of Ethiopia and Ethiopia insurance cooperation are there. It is not that I have basic involvement in that. When the government runs its own bank and commercial insurance companies a fair competition could not take place because the government will establish its own insurances, banks and institutions. As a matter of fact, this was a policy which was stated especially 10 and 20 years ago.
The policy emphasizes that in the involvement of governmental institutions and companies in the given sector, government-related transactions regarding those particular services and products will have to be produced with the government companies. In other words, this means the government considers itself as the only investor and consumer. It assumes itself as the sole economy engine.
If you take out the transaction of the government from the industry there will not be possibilities left for the other banks to flourish. Secondly, as my opinion justifies, we are in a period of experiment. Obviously, one of the problems of our country’s financial sector environment has been like the ones seen in many other sectors. The government was prepared well and it was the major player. And the politics was really link pink that detected whatever happened in the country.
In other words, if you take the national bank which was supposed to be the supervisory authority, it cannot be impartial. Unfortunately, because the country had been a monopolized market with one commercial bank .We had not produced that many Banks or professionals in the field of finance. So, the National Bank of Ethiopia is supposed to revise the financial sector.
We do not have enough qualified individuals and experts in general. So, government appointees have become essentially supervisors.
Herald: How do you assess the government’s commitment pertaining to handling the financial sector?
Zafu Eyessuswork: Government posts are seen filled by appointment and sometimes by competence. No doubt the latter based on knowledge is better. So, the National Bank has to be on the toe to tune to what was the best for the financial sector. The case is similar to the one seen in other sectors like politics. Observably political leaders are seen as the know alls.
They do everything that they thought the population wanted. They do not consult people. Even if they do so, they would not listen to the people. The problem was getting entrenched over the years. It has now become the main reason for the kind of change that we have in the country. So, in a way the financial sector was opened up by EPRDF. But practically the working environment remained what used to be. It did not allow the financial sector companies to grow to the expected level. The supervision of the industry must not be oppressive.
Herald: Would you tell us things on the informal financial sector?
Zafu Eyessuswork: That is not important anymore. There is no researched output or data anymore on non- formal finical institutions. They cannot really be taken as institutions.
Herald: What do you suggest about the role of the financial sector in Ethiopia?
Zafu Eyessuswork: One factor accountable to the lopsidedness of the financial sector is imputed to irontight supervision. It is not really based on expertise. In spite of that, the very closed and restricted follow up of the industry has prevented what could have unfolded otherwise. In other words, the idea banks could have built insurance companies has failed.
Universal Insurance Company is among the insurance companies that failed. It was one of the best companies, which were closed. In any case, it was not allowed to operate. Mainly Bank and insurance companies continued. They had to be practicing a very unethical competition’’.
But at least, we have almost a quarter of a century history in building banks and insurances companies. I think we have to give them credit for that. Time has come to change such staffs. In any case, the wind of change is blowing over the country. It is not limited to politics alone. The wind of change is bound to affect the financial sector as well. So, hopefully, most of us in the financial sector have not got due recognition as per the effect the financial sector would be given. Steps would be taken to make sure that those financial sector companies that have been established.
They will have a trading environment characterized by a fair competition, which means same rules of the game and a level playing field. These are the issues that people mention when they talk about competition. And we have to follow suit not only because of the internal pressure but also because of the external one. We still keep a closed financial market in the country.
Herald: Do you think it is the irontight supervisions of the government in the financial sector that impede us from surging ahead?
Zafu Eyesusswork: This will not continue because Ethiopia has been trying to be a member of WTO. It has also signed continental free trade area agreement. The implication is that there would be reciprocity in opening up markets. Meaning enterprises and companies of member countries would get green light to operate in all countries. Like the European Union, one has to register one’s companies in member countries of EU.
It is assumed to register all the member countries. So, a company established in Ethiopia will be able to trade in all member countries’ continental free trade area. The market has to be open. Ours too has to be open. There would be no favoritism exercised by the government. That is what I would like to see happen.
Herald: Have you detected discriminatory and favoritism acts in the financial sector industry?
Zafu eyessuswork: Right now, in Ethiopia we still exercise conspiracy theory .In other words, one sees Banks that are established by people from the same ethnic identity. There are Banks that are established by political parties. This is actually against the law of the country because political parties are not supposed to engage in the activity of business. But those strong political parties or those under the wing of EPRDF believed that they have the right to do so. First, they become shareholder with other neutral companies.
One cannot do that. And they create the pretext of endowment and what have you? . Nevertheless, they metamorphosed into giant merchants. It is not only the sophistication of the rule of the game in financial sector but also the cut-throat completion. We are in the era of consumable goods. Therefore, down the road, anything and everything could be unfortunate. But, in course of time I hope when the people become mature enough, consumers will be more discriminative. In other words, they will develop discerning eyes.
The irresponsible get out of the game and discriminated by the very provider of the services. So, time will cure the illness. Then if we want catch-up with what is going on we have to be creative and innovate to emerge competitive. There will be no leaving things. Solutions will evolve. I would like to say that in the near future, the financial sector will have a salubrious trading environment.
Herald: What are the undercurrent reasons that handicapped the private sector in the involvement of Africa financial market?
Zafu Eyessuswork: We are not allowed to do business beyond the perimeter of our country. When countries open up their market across the region and beyond, we may be eligible to get into Africa market. If the other countries are not allowed to operate there, we will not be allowed to operate there. What goes around comes around. It is reciprocal.
Herald: How do you see the National Bank’s mandate in monitoring the financial sector?
Zafu Eyessuswork: As I already mentioned, I do not believe the financial sector is supervised by the government. Of course it has to be supervised. But the body and the law of supervision must be much more enlightened and modern. National Bank that discharges the task of supervision must itself have the capacity to undertake that kind of supervision. In other words, they have to change the outlook of the National Bank of Ethiopia. We need more professionals there. The supervision will have to be a professional one.
Not because I try to prevail on the authority appointed to do this. Things have to be that way. So, enlightened supervision is always needed in the financial sector. We do not have to believe in the capitalists system which is a laissez faire. Epitome ideology does not exist in any part of the world.
Hence, I know many times, political leaders have been telling and characterizing us in enlightened supervision. They tried to brand us by saying “The government must not be involved in anything. It must be totally out!” It is not what we are saying. The government can carry out to conduct supervision but it must handle tasks wisely and professionally. That is all. The government has to slowly but surely withdraw from the financial sector.
Herald: Do you have a way forward?
Zafu Eyessuswork: The way I look at it now is as follows. At least younger more dynamic forward looking professionals are attracted to the leadership of the prime minister and many government institutions. The young generation is coming up with innovations, ideas etc. I would like to think that the future is much brighter. Things will not change simply because somebody wants to do something for the financial sector.
I think it is because the country is cornered and We cannot continue in the outmoded fashion. The economy is in a doldrums. Even domestic resources like metal and chemicals are not supplied unless the government allows. The rate of inflation has created chaos.
The government has to collect more taxes than it is doing now. I know there are many in the country who loves to evade taxes. The government has been concentrating only on the tax sources instead of trying to embrace more people into the tax net. It is concentering on the tax that suffered a mismatch. I can sight some of the tax regulations that sued traders. They do so to strip the rich of their spines. The idea should be to take aboard more to the tax net.
The Ethiopian Herald, Sunday Edition May 12/2019
BY MEHARI BEYENE
