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AviationEconomyEthiopiaTransportation & Logisitics

Ethiopian airlines urges government to triple paid-up capital to 3000 billion birr

by Radarr Africa
written by Radarr Africa

Ethiopian Airlines has requested the government to raise its paid up capital to 300 billion birr, a three-fold increment from the current 100 billion birr. The group’s fast-growing asset and transaction volumes have already surpassed the existing threshold, forcing the request for a capital raise.

If approved, ET will have the third largest capital, next to the Liability Asset Management Corporation (LAMC), which was established with 570 billion birr capital last year, and ethio telecom, which is armed with a paid-up capital of 400 billion birr.

“We are awaiting the approval very soon,” Mesfin Tassew, the CEO of Ethiopian Airlines, told The Reporter.

The Airlines have requested the capital raise mainly in a bid to back the ambitious targets unleashed by the new CEO. The airline’s assets and the volume of transactions the airline is handling have increased substantially and are already much higher than our current paid up capital. ET has generated five billion dollars in revenue during the 2021/22 Ethiopian fiscal year.

The other factor behind the new capital raise request is the “debt to equity’ ratio.

A proportionate debt to equity ratio is essential in a bid for us to get loans. For instance, we are purchasing new aircraft, and when we do so, our loan portfolio increases. Because the aircraft are purchased with credit, it increases our loan stock. Our creditors can also not provide finance for us. So unless the authorized capital is increased, we cannot have the right financial flow,” added Mesfin.

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Officials at the Ethiopian Investment Holding (EIH) confirmed to The Reporter that the board is evaluating ET’s request for a capital raise. EIH is Ethiopia’s first sovereign wealth fund, established with a whopping 100 billion birr capital in January 2022. EIH now has well performing SOEs like ET under its wing.

Ethiopian Airlines is one of 27 state-owned enterprises (SOEs) whose management has been transferred to EIH since last June. Previously, these SOEs were governed by the Public Enterprises Holding and Administration (PEHA), which is accountable to the Ministry of Finance (MoF).On the other hand, EIH is directly responsible for the PM.

Ethiopian Airlines is the leading and most successful national carrier in Africa. The airline is regaining its pre-COVID-19 performance two years ahead of the industry forecast. This year, ET has served 8.8 million passengers, a 72 percent increase over last year. With more infrastructures and market expansion in the pipeline, the group has embarked on its ambitious vision for 2035.

SOURCE: The reporter

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AfricaAFRICA NEWSBusinessInsuranceNewsNigeriaWestern Africa

Tony Elumelu proposes N50m capital base for insurance brokers

by Radarr Africa
written by Radarr Africa

Chairman of Heirs Holdings, Mr Tony Elumelu, has proposed N50 million as capital base for insurance broking firms operating in Nigeria.

Elumelu, who is also founder, Tony Elumelu Foundation, said this yesterday at the 60th Anniversary Colloquium of the Nigerian Council of Registered Insurance Brokers (NCRIB) with the theme, “60 Years of Insurance Broking: Redefining the Practice and Practitioners.”

He said it has become necessary to recapitalise the insurance brokerage industry in the country as N5 million was not enough capital base.

“I recommend a minimum of N50 million as capital base; we need to adequately capitalise the brokerage sector.

“The insurance is very important to the economy, so also is the quality of governance, institutions, and practitioners of the sector.

“Insurance is recognised as a technical business that requires special expertise.

“This, therefore, makes it difficult for most people to make the right choice on insurance purchase and also requires professional assistance when claims occur,” he said.

According to him, members of NCRIB have over the years facilitated insurance businesses in hundreds of billions of naira, delighted millions of Nigerians with their professional insurance services and ensured that claims are duly settled.

Elumelu noted that expertise of an insurance broker was crucial, as intermediaries between the insurance consumer and an insurance company.

He charged NCRIB’s leadership to enforce strict adherence to corporate governance by all its members and weed out non-registered and non-compliant members from its fold to maintain its integrity.

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He emphasised that in redefining the practice and practitioners in the insurance broking profession, NCRIB should lead the war against unethical practices that had been the bane of the industry for years.

Elumelu listed some of the unethical practices to include premium rate cutting, delayed premium remittance, unremitted premium, overloading of premium, returned premium, fake documents and fraudulent claims.

He also mentioned collusion to defraud, mis-selling, unhealthy competition, misrepresentations, manipulation of policy conditions, self-enrichment methods disguised as marketing expenses, among others.

Source: Leadership

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Banking, Finance & InvestmentEconomyEthiopiaInsurance

Central bank of Ethiopia raises minimum paid-up capital for insurance company

by Radarr Africa
written by Radarr Africa

The National Bank of Ethiopia (NBE) raised the minimum paid-up capital of insurance firms by six-fold. The revised ‘Minimum Paid-up Capital for Insurance Company’, which is effective as of September 15, 2022, replaced the existing threshold introduced in 2013.

The new capital requirement to obtain a general insurance license is 400 million birr, up from 60 million birr. The minimum capital for long-term insurance licenses was also raised from 15 million to 100 million birr. A company needs to deposit 500 million birr in a closed account to obtain a license for both, which was 75 million birr under the old directive.

Existing insurance companies whose paid-up capital is below the new threshold are given a five-year window period to meet the new minimum threshold by the end of June 30, 2027. However, these insurers are required to submit an action plan to the NBE by October 16, 2022.

“There is plenty of time to fulfill the requirement. The minimum requirement was very low from the outset,” said Zafu Eyessueswork, a veteran in the industry and founder of United Insurance and Hibret Bank. 

Fikru Tsegaye, an insurance profession known for his commentaries in the sector, also welcomed the decision. “The inflation has been eating the capital of insurers. If you compare capital of insurance companies against dollar, it was declining, so the amendment is a step in a right direction,” said Fikru.

Out of the 18 existing insurance companies in the country, only seven have capital of more than 500 million birr, according to NBE’s report. The insurance industry has been struggling with low market penetration and declining premiums in a stiff competition for the limited market niche.

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However, the old directive remains active for new insurance firms in the pipeline until September 15, 2023. This means organizers of new insurance firms can attain a license under the existing directive in the next year. A discussion is underway to adjust license fee required to acquire new license and renew existing ones. The fee is expected to be adjusted by 2000 percent, though that is still under discussion.

The new directive states that insurance companies in the process of share subscription that successfully collect a minimum paid-up capital of 60 million birr for general insurance business, 15 million birr for long-term insurance business, or 75 million birr for both, and submit a final application to NBE within one year after the effective date of the new directive, shall get the license.

Industry players called the new directive “hair-raising,” as the insurance industry’s growth remains nascent. “Raising the minimum capital from 75 million to 500 million birr at once is very difficult. The new directive is inconsiderable to the difficulties the industry is facing. The industry has achieved very little capital growth in the past 20 years due to the nascent environment. The NBE itself has contributed to the weakness of the industry,” said an insurance consultant speaking to the reporter regarding the new directive.

“The NBE was never giving appropriate attention to insurance, as the central bank was primarily occupied with banks. We have been requesting the government for the insurance industry to be regulated by a commission, authority, or agency separate from the NBE. We believe this will help the insurance industry to get better support and better attention,” the consultant explained.

SOURCE: The reporter

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Banking, Finance & InvestmentNigeriaWestern Africa

Fidelity Bank to raise new capital which allows for issuance of 3 billion shares

by Radarr Africa
written by Radarr Africa

Fidelity Bank is on the verge of sourcing new capital allowing for issuance of over 3 billion shares, the tier 1-aspiring lender said Wednesday, a move that could further expansion plans and shoot its outstanding shares above 32 billion units.

It will take the route of private placement whereby a limited number of individuals, usually high-net-worth, and institutional investors are allotted all the shares and the transaction itself is conducted away from the open market.

To hit the starting point, the capital raising requires the sanction of shareholders, including their need to “waive their pre-emptive rights in respect of the 3,037,414,308 unissued ordinary shares of 50 kobo each,” according to a regulatory filing seen by PREMIUM TIMES.

Fidelity Bank’s board of directors hope to obtain approval for other resolutions at an extra-ordinary general meeting coming up on 29 September after which attention will turn to regulatory authorities to endorse the deal.

As the regulatory approval process for private placements is often less stringent compared to initial public offerings, the transaction could launch not long after the meeting is concluded.

The financial institution announced last week a binding pact with Nigeria’s second oldest lender Union Bank for a full buyout of the latter’s United Kingdom subsidiary, easing the path to its first ever operation outside Nigeria.

The bigger picture is its quest for a place among the cohort of  teir-1 lenders by 2025, a group distinguished by banks with enormous capital base particularly derived from assets like disclosed reserves and robust equity capital.

ALSO READ: Fidelity Bank posts N25.1b H1 profit, proposes 10k interim dividend

That aspiration is the pet project of CEO Nneka Onyeali-Okpe who, after taking office last January, unveiled the course of action for joining the Big 5 banks – FBN Holdings, United Bank for Africa, GTCO, Access Bank and Zenith Bank.

Fidelity Bank, Nigeria’s sixth biggest lender, has assets worth N3.7 trillion, setting it miles away from the smallest of that group, GTCO, whose own valuation is N5.7 trillion.

Source: Premium Times

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Banking, Finance & InvestmentBusinessSouthern Africa

Tymebank to acquire SME leading funder

by Radarr Africa
written by Radarr Africa

Digital banking service Tymebank has announced plans to acquire Retail Capital, a leading fintech funder of South African small and medium enterprises.

According to a statement by African Rainbow Capital Investments, Retail Capital will become a division of the bank and will form the foundation of its expanded business banking offering.

“The proposed transaction will support TymeBank’s offering to its business banking clients. It will also see Retail Capital’s lending expertise being combined with TymeBank’s deposit base and operations to serve a broader customer base,” it noted.

Retail Capital lowers the barriers to funding for SMEs through a three-step online application process. It has provided funding of more than R5.5 billion to more than 43 000 business owners in SA since it launched in 2011, making it the largest SME funder in the sector.

TymeBank currently has over 5 million individual customers and more than 100 000 business banking customers.

The transaction cost is undisclosed.

Palesa Mofokeng is a Moneyweb intern.

Source: Moneyweb

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