By Molla Mitiku @MollaAyenew
Addis Abeba – Frustration is growing among Tigray’s business community as financial hardships persist, despite Prime Minister Abiy Ahmed’s promises made seven months ago to resolve issues related to debt and accumulating interest stemming from the two-year war that began four years ago.
Amid this mounting disappointment, Tigray’s entrepreneurs are now calling for concrete action to address the ongoing economic fallout.
Divekulu Alem, President of the Adigrat Chamber of Commerce and a member of the regional business community board, was among those present at the meeting between Prime Minister Abiy Ahmed and Tigray representatives on 15 March 2024.
He recalled that during that meeting, the Prime Minister pledged to address the business community’s financial concerns through political means.
Prime Minister Abiy proposed the formation of a team consisting of the governor of the central bank as well as representatives from the ministries of finance and industry, along with a delegate from Tigray, to deliberate on the matter.
“If there is anything that we can do to resolve the issue, the government is committed to doing so,” the premier told participants.
A committee was formed in March 2024, consisting of representatives from the federal government, regional authorities, and the business community, according to Divekulu.
“This committee was established with the aim of addressing the financial challenges faced by businesses in Tigray,” he added.
Divekulu noted that the committee’s formation initially instilled hope for progress in resolving these financial challenges.
However, he remarked, “Despite these optimistic beginnings, no tangible results have been achieved to date.”
The business community in Tigray is urgently renewing its call for government intervention to alleviate the severe financial pressures they are facing. This includes the obligation to repay pre-war loans with interest, an especially heavy burden in the wake of the devastating two-year war.
Divekulu outlined the demands of the business community, stating that “they are seeking a complete cancellation of loans and interest, amounting to 60 billion birr.”
In addition, he noted, “They are requesting new, extended loans to support the reconstruction and rehabilitation of their businesses.”
In an interview with Addis Standard conducted in January 2024, Mehari Gebremichael, Deputy Head of the Tigray Industry Bureau, stated that during the war, some investors reached the end of their grace periods for loan repayments, resulting in increased pressure from banks to settle their debts. He noted that this further exacerbated the financial distress faced by these investors.
Despite optimistic beginnings, no tangible results have been achieved to date.”
Divekulu Alem, President of the Adigrat Chamber of Commerce
During the same interview, the Deputy Head articulated the region’s appeal to the federal government for various incentives, including, but not limited to, the waiver of loan interest and the provision of new loans at reduced interest rates.
Struggling for Survival
Fiseha Weldu, once a prominent investor in Tigray’s thriving construction industry and owner of the renowned Fiseha Weldu Cava Factory, has been left devastated by the war.
His once-prosperous business was completely destroyed, leaving him with nothing but mounting debts and a shattered dream.
The war not only destroyed Fiseha’s factory but also looted its valuable assets.
The devastation was so complete that he was forced to declare bankruptcy.
The financial toll of the war has been immense, with Fiseha facing exorbitant interest rates of up to 70% on his outstanding loans.
“I invested everything I had into the factory, including a significant loan from the bank,” Fiseha told Addis Standard. “The war wiped it all out. Now, I not only have to repay the original loan but also face crippling interest rates. It’s an impossible burden.”
In March 2024, Addis Standard published an in-depth article that highlighted the significant impact of the two-year war on Tigray’s industrial sector and the subsequent efforts undertaken for recovery.
Prior to the outbreak of the war, Tigray was home to 61 capital-intensive industries, most of which experienced either complete or partial destruction during the war.
Among the industries that were completely devastated are Almeda Textile PLC, Saba Dimensional Stones PLC, Ezana Mining Development PLC, and Sheba Leather Industry PLC.
In January 2024, the Tigray Industry Bureau reported that it had identified additional 78 medium industries in need of restoration. However, it stated that, “Despite having submitted this information to the federal government, the issue has not received the attention it requires.”
Huluf Nizgi, one of the businesspeople from Tigray, has found himself entangled in a web of financial hardship following the devastating war. Despite borrowing a substantial sum of one million birr to bring essential electric materials from Addis Ababa to Tigray, Huluf’s business was brought to a grinding halt due to the conflict.
The war not only disrupted Huluf’s operations but also led to the looting of his entire inventory. Undeterred, he sought to rebuild his business, only to be met with an unexpected challenge. The banks demanded he repay the interest accrued during the period his business was closed due to the war.
“I invested heavily in my business, hoping to contribute to the local economy,” Huluf explained. “But the war destroyed everything. Now, I’m being asked to pay an exorbitant amount of interest, even though I have nothing left to show for my efforts.”
Both Fiseha and Huluf have issued a desperate plea for assistance to the suffering business community in their region.
“We are not just fighting for our own survival but for the future of the region,” Fiseha stated. “The war has inflicted immense suffering on our community, and it is imperative that we receive the support we need to rebuild and thrive.”
Frustration Mounts
Gebremedhin Hailu, a prominent member of the Tigray business executive committee, has voiced his deep frustration over the slow pace of economic recovery in the region. He emphasized that the devastating war, coupled with the pre-existing economic downturn caused by the COVID-19 pandemic, has left Tigray’s industries in ruins.
“The war was a catastrophic event for our region,” Gebremedhin explained. “Businesses were forced to close, bank accounts were frozen, and vital infrastructure was destroyed.”
Gebremedhin expressed the pressure to repay bank loans with interest, despite the severe disruptions they faced during the war.
“The business community is under immense strain,” Gebremedhin highlighted. “The combined effects of the pandemic and the conflict have left us fighting for survival.”
Although the National Bank of Ethiopia (NBE) has issued directives to extend loan repayment terms, stakeholders report that many businesses in the region continue to face pressure for immediate repayment.
“It’s a completely unfair situation. Everyone knows that businesses were severely impacted by the war,” Gebremedhin explained. “The economic devastation was immense, and many businesspeople are still struggling to recover.”
To mitigate the financial difficulties faced by war-impacted businesses in the Tigray region, the NBE issued a circular in July 2023, mandating banks to restructure non-performing loans (NPLs).
The circular instructed banks to maintain a 50% provision for NPLs in Tigray. While the NBE did not authorize outright loan cancellation, it permitted refinancing, renegotiation, rescheduling, and gradual NPL repayment.
The Circular stipulated that loans in Tigray and Tigray-based businesses that incurred NPLs due to the war would receive relief from repayment obligations for one and a half years. During this period, banks were authorized to renegotiate with clients and reschedule loans based on the clients’ capacity and consent.
However, Gebremedhin asserts that these businesspersons have been left destitute, with their businesses destroyed and looted during the war.
Many businesspeople are still struggling to recover.”
Gebremedhin Hailu, member of the Tigray business executive committee
He criticizes the lack of substantial support from both the regional and federal governments in assisting traders with their recovery from the crisis over the past two years.
Gebremedhin noted that the debt has doubled due to accumulated interest during the war and the ensuing blockades. “This has led to many businessmen disappearing, disheartened by the lack of government support schemes and facing threats from banks to repay the loans with accrued interest,” he stated.
To underscore his point, Gebremedhin cited statistics that illustrate the escalating financial burden on the business community in Tigray.
“Before the war, the total accumulated debt and interest payment was 35 billion birr,” he explained. “However, during the period of no bank services and business inactivity due to the war, it doubled to 60 billion birr.”
Divekulu argues that the previous agreement involved three key stakeholders: the government, the business community, and the banks.
He asserts that banks are responsible for lending money, the government is tasked with creating a favorable business environment, and businessmen are expected to diligently utilize borrowed funds and repay loans according to the agreed schedule.
However, Divekulu noted the breakdown of this tripartite agreement, emphasizing the government’s negligence, the banks’ ineffectiveness, and the dire circumstances faced by businessmen.
To address the situation, Divekulu revealed that the business community in Tigray is once again seeking to reschedule a meeting with the Prime Minister Abiy in the near future.
In an interview with Addis Standard, senior managers from two private banks operating in Tigray, who wish to remain anonymous, acknowledged that the concerns raised by the business community in Tigray are valid.
They emphasized that, given the lack of a safe business environment and the closure of all banks during the war, it is understandable that businesses are questioning the accumulation of interest during those years. However, they stated that commercial banks are unable to address these concerns at the regional level, as they are bound by directives from their headquarters.
Until the issue is resolved, the senior managers indicated that they will continue to request that businesspeople in the region repay their debts, including both the principal and accrued interest, before availing any additional loans and support the recovery efforts of Tigray’s industrial and business establishments. AS
