Written by PASTRES PhD researcher Masresha Taye
‘The rulers in Showa [Borana pastoralists term for people in the capital Addis] love consuming meat but do not recognize where it comes from and how their actions [policies/regulations] impact pastoralists’ (A livestock trader in Dubluq livestock market in Borana).
On the 14th September, just three days after Ethiopians celebrated their new year, the Office of the Prime Minister unveiled new notes to replace the country’s existing currency. The announcement took almost everyone in the country by surprise and came with a couple of regulatory measures that created confusion.
With the stated aim of curbing corruption, inflation and money laundering, the Prime Minister announced that soldiers and other regulatory authorities should confiscate cash, particularly in areas around the border. He said ‘We do not want the money. They [the defence forces and federal police] can use the money to strengthen their respective institutions’ capacity’.
Following the announcement, there were reports from some parts of the country of regional and federal police confiscating cash. This goes against the directive of the National Bank of Ethiopia in May 2020 (Cash Withdrawal Limit Directive No. FIS/03/2020), which fixes the amount of cash to be kept by persons and companies outside of financial institutions at Ethiopian Birr (ETB) 1.5 million (USD 41,000).
It was further announced that money would be confiscated from people who enter Ethiopia, and citizens should change their cash at home worth ETB 150,000, with the deadline of one month (15 October 2020). Despite the directive restricting daily cash withdrawal to ETB 200,000, in practice individuals were limited to withdrawing ETB 50,000.
Like other similar policies in the past, such significant changes in the country ignore the pastoral population, who mostly live and move around the border areas of Ethiopia. Pastoralists have a close connection to border communities. Close to 85% of pastoralists in Ethiopia live near a border between them and other pastoralists of the same ethnic group but with different citizenship. These pastoralists are Somali, Afar, and Borana. There is a strong social, cultural and economic bond among these pastoral groups, despite the difference in ‘official’ citizenship between them.
What has changed?
What are the impacts of the new currency notes and related directives on pastoralists? Before diving into the challenges, it is worth listing the major directives that have come into place since May 2020:
- Prohibition of keeping cash worth ETB 1.5 million outside financial institutes.
- Limiting daily cash withdrawals at ETB 200,000 for individuals and 300,000 for businesses.
- September – regulations related to the new currency notes:
- Cash exceeding ETB 150,000 kept outside financial institutions to be changed within one month.
- Daily cash withdrawal limited to ETB 50,000 (this was later decreased to ETB 10,000).
- Individuals who wish to change more than ETB 5,000 to a new currency must first deposit the money in their bank account.
- If there are many wire transfers to single accounts, the government will monitor the accounts of individuals on the receiving end.
- Any amount of money being transported from neighbouring countries to Ethiopia should be confiscated.
These measures have all had negative consequences for pastoralists in a number of areas. In this blog post, I will focus on the major challenges faced by the Borana pastoral communities of Ethiopia.
Borana pastoralists live in the Southern part of Ethiopia and in Northern Kenya. There is a strong social, cultural, economic and sometimes political connection among the Borana pastoralists residing in the two countries. Their major trading hub is Moyale town, 800 km from the capital Addis Ababa. Although several items, including manufactured goods, are traded in the town, livestock is the major trading activity. Immediately after the announcement of the new currency notes, three new checkpoints – in addition to two existing checkpoints – were established on the road from Moyale to Yabello (Borana zone capital), which spans a distance of 200 km.
Five challenges for pastoralists:
The first challenge has to do with the disruption of trading activity. Exacerbated by the border closures due to COVID-19 which hampers overall mobility, pastoralists have faced challenges in day-to-day trading with their counterparts in Kenya for several reasons.
The new currency notes have not been circulated in pastoral areas and traders in Kenya are often refusing to accept the old notes. Even when they agree to take them the prices are unusually very low, giving pastoralists no option of bargaining unlike in the past. The reason they give is the difficulty or risks of transporting the old Ethiopian notes. In rare cases, if they agree to trade, they offer Kenyan shillings with a lower exchange rate than the official rate.
2. Difficulties of changing money
Some individuals who run foreign exchange businesses (between Ethiopian Birr and Kenyan shillings) on the streets around the Ethio-Kenyan border have either decreased their activity, or have stopped altogether, due to their uncertainty over how the Ethiopian authorities would react. This means that after taking the Kenyan shillings, pastoralists are finding it almost impossible to exchange them for Ethiopian Birr.
3. Checkpoints and cash seizures
The other challenge is the frequent checkpoints on the main road. After the announcement that cash from outside Ethiopia would be confiscated, local militias and regional special forces have harassed (and at times confiscated) cash from traders and pastoralists. The justification provided is that the money has arrived from Kenya. Neither party can provide evidence, but those with rifles win. This has eroded confidence among traders and pastoralists to move freely. At times, the security personnel claim that traders or pastoralists are taking the cash to the guerilla fighters operating in the Borana zone and confiscate whatever money they find.
The fourth challenge is related to local cooperatives and financial institutes. Banks are very few and far between in the Borana pastoral region. There are only four banks – brands with a total of fewer than ten branches distributed across Borana. The per capita distribution is close to 100,000 people per bank.
However, each kebele (the lowest administrative structure in Ethiopia with an average population of 1,000 households) has credit and saving or consumers’ cooperatives. Some of these cooperatives are active both in trading and other financial services. However, they have been afraid to go to the nearby bank branch to deposit the cash they have saved or gained from trade. In particular, cooperatives who are involved in livestock fattening businesses have been hit hard.
During September and the first week of October, close to 80 cooperatives normally collect premiums by selling livestock insurance to pastoralists. They serve as commercial agents to Oromia insurance company, the sole agricultural insurance operator in the region. However, all of them have declined to come to a nearby town to deposit the premium collected from pastoralists to the insurance company, as they are afraid the security personnel will confiscate the money.
As a result, the insurance company has had to secure a letter from the central government and move around each kebele to collect the cash and bring it to areas where there is a bank. This has not only cost the company to mobilize the available resources to collect premiums but the employees have also been operating in fear of their safety, as they were travelling without the accompaniment of security personnel.
5. Livestock trade and cash transfers
The fifth challenge is associated with livestock trading in Borana, which has been severely impacted by COVID-19 and the other challenges mentioned above. Now that there is a series of regulations concerning the new currency notes – some unclear and confusing – traders are not able to bring cash to Borana from their hubs in the capital. An alternative option, using bank transfers to move the money, has serious challenges.
A decade ago, when livestock trading was booming, traders from central Ethiopia used to issue cheques to pastoralists in Borana. Unfortunately, since the pastoralists have limited financial literacy, the cheques that were issued by the traders were either fake or unknown to the banks. A livestock trader and pastoralist, Golicha Galgalo, 64, explained the situation back then:
‘In one of the most unfortunate days of my life, I sold 50 cattle in one market day and received a cheque of ETB 700,000 [by that time USD 40,000]. I remember it was Sunday and the trader told me I could take the money tomorrow. I cherished with my friends and family; everyone was congratulating me for gaining that amount of money in one day. When I went to the bank the next day, I was told the cheque was fake, and they do not know a trader of that name in their bank. My life flipped upside down. It took me more than five years to recover.’
Golicha is not the only person who went through such an experience: many other local livestock traders have similar stories. As a result of shocks like this, most livestock traders in Borana hesitate to accept bank transfers.
Livestock traders like Golicha are now in a stalemate. They have to work with uncertainty regarding the financial regulations, which is also exacerbated by the stresses related to COVID-19 across the country.
The timeframe set by the government to change all available cash ends on the 13th of December 2020. However, the government has not yet recognized the challenges presented above, or the other associated hurdles that are having impacts on pastoralists’ livelihoods and plans. In this period, and for some time after, pastoralists will continue to suffer under the systemic and structural problems created by the central government. Just as in the past, the rules created by the central government show little consideration of the needs of Ethiopia’s pastoral population.
Photo Credit: Masresha Taye
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