The river is flowing under the dam
The third millennium for Ethiopia has been a historic opportunity for modernization and social transformation, with the possibility of setting up a new political, social, and economic order.
The government is carrying out good performance in domestic resource mobilization, taking various measures to boost savings in financial institutions. To this effect, the Grand Ethiopian Renaissance Dam (GERD) has been playing undeniable role in enhancing the saving cultures of the society and the overall national economic development.
Recently, Office of National Council for the Coordination of Public Participation on the Construction of the Grand Renaissance Dam held a Consultative Workshop on the theme: "The Role of Grand Ethiopian Renaissance Dam for the Ethiopian Renaissance, and enhancing saving cultures in Ethiopia."
Scholars from Bahirdar, Jimma and Civil Service Universities presented their studies for discussions with stakeholders. The studies mainly focused on the trend of total revenue generated through different self-financing strategies, and the role of domestic and Diaspora community contributions for the GERD financing.
In this regard, Minister of Communication and Information Technology and Coordinator of Finance and Economy cluster with the rank of Deputy Prime Minister Dr. Debretsion Gebremichael said that GERD has been a ground for improving the saving culture and the route for the national growth.
He added, "GERD is a place where our fingerprint has been put and an agleam for our renaissance." The government of Ethiopia is partially financing the GERD through domestic resources mobilization and attracting Diaspora.
In this case, explaining his research output, Jimma University, Business and Economics College Dean Dr. Wondaferahu Mulugeta said that the government is financing the GERD through domestic resources mobilization and attracting Diaspora.
Over the past four and half years a total of nearly 7.6 billion Birr or 410 Million USD has been raised from employees' contribution through the Commercial Bank of Ethiopia (CBE), Development Bank of Ethiopia (DBE), and 7 Micro-finance institutions (MFIs) in the country.
Of these, about 3.46 billion Birr was raised from employees' contribution and 4.02 billion Birr from direct bond sale at home and abroad.
Thus, the CBE remains the major financial institution in terms of mobilizing finance from employees' contribution and direct bond sale. This amount is small compared with the required fund to build the GERD while it is anticipated to cost 4.7 billion USD.
According to him, the highest amount of finance for the project is 2845.33 Million Birr which accounts 37.62 percent of the total revenue mobilized in the year 2011/12 alone. However, project finance mobilized in 2012/13 and 2013/14 declined drastically to 1516.63 Million Birr and 1188.28 Million Birr respectively.
The decline in revenue is mainly triggered by huge decline in revenue from direct bond sale at home in subsequent years. But this decline showed a sign of recovery in 2014/15 to 1474.38 Million Birr.
Of the total finance mobilized for the project, much of the figure, about 6.96 billion Birr or 377.52 Million USD was generated from domestic sources while about 0.6 billion Birr and 0.092 Million Birr were obtained from Diaspora community and donations respectively.
This shows that the country could not mobilize one billion Birr from a single source identified for financing the GERD.
On the other hand, Dr. Wondaferahu explained that the share of finance generated by the MFIs for the GERD showed significant increment overtime from only 1.33 percent in 2012/13 to 14.1 percent in 2014/15. The total face value of bonds issued for the GERD by seven MFIs has increased significantly from 18.29 Million Birr in 2013 to 72.8 Million Birr in 2015.
All together, the MFIs, in the country has mobilized about 174.79 Million Birr from direct bond sale to the rural community.
According to him, the top four largest MFIs, such as Amhara, Dedebit, Oromia, and Omo credit and saving institutions have mobilized about 167.7 Million Birr for the GERD at the end of 2014/15.
Of these, the Amhara MFI alone has generated a total of 132 Million Birr (75.52 percent) from bond sale. It was followed by Dedebit MFI and Omo MFI, which mobilize a total of 17.30 Million Birr and 12.09 Million Birr respectively. Likewise, the finance mobilized by Amhara MFI has shown an increasing trend from 7 Million Birr in 2012/13 to 70 Million Birr in December 2015.
With regard to the role of GERD financing on saving mobilization, Dr. Wondaferahu noted that Ethiopia has put in place different policies to mobilize finance for its mega energy project. Revenue generated through different financing mechanisms for the GERD financing has reached 7.56 billion Birr between 2011/12 and December 2015.
Similarly, Bahirdar University Assistant professor Dr. Ermias Ashagre explained that GERD introduced new ways of mobilizing domestic resources such as Diaspora bond, Renaissance Dam bond and Cell-phone compatible lottery system (send A to 8100) to participate citizens in the development process. The GERD has also established a sense of self-confidence among citizens for this potentially rewarding project.
He also believed that the dam has introduced new work culture where workers are engaged for 24 hours in the construction work under three shifts that is not available in other projects undergone in the country. The people has also learned the possibilities for change and the power of a single contribution to achieve common goals.
Likewise, Civil Service University Income Tax and Customs Administration Institute Assistant Professor Dr. Abdu Muhammed explained that employees played the lion share in financing GERD through bond purchase.
Their contributions accounted over 46 percent of total collection, 240 percent of business unit, 580 percent of Diaspora and 12 fold of farmers, he added.
Today, the GERD is a rallying point where there is an explicit shared vision among the population and potential investors. The government is drawing fund from multiple sources of financing; that is from local people contribution, Diaspora donations, and government revenue to build this symbolic dam.
But, the fund mobilized from the Diaspora community showed decreasing trend from 2011/12 to 2014/15. This implies that the resources mobilized from those means became unsustainable.
Therefore, it is essential to strengthen and promote the growth of financial institutions. It is also significant to strengthen transparency in the use of funds generated through bond sales, donations, and build accountability to national residents and Diaspora community.