man4139m_14029907

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Non-profit organization for literacy development in Ethiopia

Jabez Zinabu

MAN4139M

December 9, 2015

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Table of Contents

Executive summary…………………………………………………………….....2

Introduction…………………………………………………………………………..3

Investment Patterns…………………………………………………………….....3

Protection measures ……………………………………………………………...4

Competitive advantages needed by BAB…………………………………..5

Exchange regime risks in Ethiopia…………………………………………....6

Political risks/implications BAB might encounter……………………..6

Ways to reduce political risks…………………………………………………...8

Recommendations and conclusion…………………………………………….9

References………………………………………………………………………………..11

Non-profit organization for literacy development in Ethiopia | Jabez Zinabu

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Executive Summary

This report describes the plans for a United States based non-profit organization, Books

Across Borders (BAB), to begin a literacy development project in Ethiopia. The

Organizations focus is on Primary age children, building libraries and donating books to the

local schools. Before investing in the project, BAB must understand the many regulations

and risks associated with the non-profit industry in Ethiopia. Compared with neighboring

countries, Ethiopia has a low number of charities, which may in part be because of the high

risks and many barriers in place for charitable organizations. Recent years in Ethiopia have

seen increased accusations of human rights violations and corruption, which has led to

decreased trade and foreign aid between the U.S. and Ethiopia. However, the United States

is still the biggest foreign aid contributor to the country. The report will explain the political

and exchange regime related risks with operating in Ethiopia, as well as a detailed account

of the actions BAB can take to minimize such risks. In the final section, the recommendation

of whether or not to operate in Ethiopia will be discussed, as well what could have or will be

used to overcome any risks and succeed as an organization.


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Introduction

Books Across Borders (BAB) is a United States based non-profit organization that

focuses on literacy development in underdeveloped nations with extreme illiteracy

rates. BAB builds libraries in primary schools, trains teachers, and donates and

publishes books for the children in those schools. The organization is in its third

year and has been able to help over 1 million children with their literacy

development program. BAB is interested in establishing a program in Ethiopia,

which has one of the highest illiteracy rates across Africa with over 40% of youth

between 15-24 years old who aren’t able to read (Walker, 2015). The charitable

organization regulatory agency in Ethiopia updated its policies in 2009, tightening

regulations on foreign societies attempting to organize in Ethiopia (Icnl.org, 2015).

Investment Patterns

The United States is the largest donor country to Ethiopia, with foreign aid totals in

2009 of over $916 million (USAID, 2015). The amount of aid has decreased since

2009 however, to $513 million and $586 million over the following 2 years (USAID,

2015). The two countries are also strong trade partners, with the U.S. exports

totaling over $1.2 billion in 2015, and U.S. imports from Ethiopia reaching $259

million for 2015 (Ethiopia.usembassy.gov, 2015). Recent accusations have risen

toward the Ethiopian government for human rights violations. Ethiopia has long


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been considered in the bottom of the world rankings for corruption, ranking 90th out

of 150 countries in 2014 (World Audit Corruption, 2015). The Ethiopian

government was accused of using foreign aid to belittle democracy in the country,

which is a reason for the decreased aid provided by the U.S. Despite the countries

developmental needs and economic troubles, Ethiopia has a surprisingly low level of

charitable organizations operating within the country. It only has 4000 charitable

organizations in the country, which when compared to neighboring country Kenya,

who has less than half the population but over 75,000 charities (Habte Gemeda,

2015), puts into perspective the issues of operating as an NGO or charity in the

country.

Protectionist measures

For organizations to perform trade in Ethiopia, there are a number of regulations.

The organization must be registered with the ministry of trade and industry, and

obtain an official trading license. For foreign companies to conduct business in

Ethiopia or with local firms, the foreign organization must have agents represent

their products in the country. There are also protective tariffs in place to sustain

local businesses, with stricter guidelines on items such as textile products, leather

goods, etc. (Icnl.org, 2015). The Ethiopian government has recently made changes to

lessen the strict customs duties and import policies, and to encourage more FDI

within the country. Reductions on sales taxes on imports to 12% and plans to

reduce tariff rates from the previous range (0 to 50%, average of 20%) to a

maximum 30% rate with an average of 17% by 2018 (Icnl.org, 2015). Though the


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changes to promote FDI within Ethiopia are encouraging, the non-profit industry

however has a different set of problems that have yet to be addressed.

Competitive advantages needed by BAB

For foreign non-profit organizations to succeed in Ethiopia, they must have certain

competitive advantages that are unique to the country. Most non-profits must have

most or all of the following advantages:

numbers of donors sponsors staff volunteers partnerships experience (Randle et al. 2013)

In Ethiopia however, many of those ‘advantages’ can actually hurt or even be the demise of

an organization. As previously stated, the Ethiopian government has strict regulations on

foreign charities, limiting the freedom to pursue and promote certain activities. Foreign

charities as opposed to local charities, are those which have more than 10% of their

funding provided from any country outside of Ethiopia (Icnl.org, 2015). Competitive

advantages specifically needed to be successful in Ethiopia include local sources of

funding/sponsoring, alternative business operations for support, and local staff. The local

staff must be familiar with and able to function within the foreign charity regulations, if in

fact the charity is receiving more than 10% funding outside of the country. Finding local

donors or having an alternative for-profit business operating within the country,

depending on how successful, can be used to fund the charity and receive status as an


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Ethiopian charity, which comes with many benefits, most of which are crucial for BAB to be

successful in Ethiopia.

Exchange regime risks in Ethiopia

There are a number of risks associated with exchange regimes if BAB is to enter

Ethiopia. As stated previously, the Ethiopian government is seen as one of the most

corrupt governments in the world, and the US government has cut foreign aid

funding to the country by nearly half, and reduced its militant support to include

only anti-terror support, until the human rights issues improve, which is critical as

Ethiopia is considered a country with a high terror threat. (Gov.uk, 2015). Also, the

IMF and World Bank have proposed a devaluation of the Ethiopian currency to give

Ethiopian commodities, including coffee, maize, sesame seeds, and wheat, a

competitive advantage on the world trade markets (Gov.uk, 2015), which would

directly affect BAB’s sources of local funding if it is to operate as a local organization.

To reduce the risks associated with the devaluation of the currency, BAB would

need to find ways to cut operational costs and increase local funding to battle the

depreciation of the country’s currency. Launching a local for-profit business related

to the non-profits operations could cut costs while generating additional funding to

support BAB during the currency devaluation period.


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Political risks/implications BAB may encounter

There are certain political risks and barriers that BAB may encounter which we

anticipate will have the biggest impact on operations in Ethiopia. The Ethiopian

government requires all charitable organizations to register and if the organization

is foreign, they must show a letter of recommendation from the Ethiopian Ministry

of Foreign Affairs (ICNL.org, 2015). Such barriers can have certain effects on BAB

including a delay in operations, which can be detrimental to the time sensitive

nature of the services offered. Delays can cause loss of volunteers, funding, and

future project developments. Barriers related to operational activity create a new

type of political risk, which may be more apparent for the services BAB bases the

organization upon, educational equality and development. The CSP article 14-n has

restrictions on activities that advance ideas of human or democratic rights, equality

among nations, genders, religions, children’s rights, and conflict resolution.

(Icnl.org, 2015) CSP article 14-n will be an issue as the nature of our services

promotes educational equality among genders, social classes, and the promotion of

continued learning. The CSP also allows the agency almost unlimited authority over

foreign charitable organizations, giving themselves the ability to (Icnl.org, 2015):

Require inquiries at any time without notice, on any issues they decide upon

Require the charity to provide documents on ‘any information’ they request for

The CSP can prohibit organizations receiving more than 10% foreign funding from

virtually all human rights activities including those noted above. They can make it

more difficult for organizations to receive resources, and make it more difficult to Non-profit organization for literacy development in Ethiopia | Jabez Zinabu

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have communication with any international contacts when they deem suitable. Only

Ethiopian charitable organizations are allowed to promote human and democratic

rights, which refers to those organizations receiving less than 10% of funding from

foreign funding (Icnl.org, 2015), thus the status of local organization is key to the

success of BAB.

Ways to reduce political risks

With such stringent barriers related to charities and non-profit organizations

coming into Ethiopia, the task of working around the political risks to achieve our

aim will be a key focus as part of the overall strategy. As a foreign charitable

organization, we must be respectful to the regulations set by the CSP, and operate

without promoting any rights that are prohibited. To do so, our team of volunteers,

staff, and leaders should be locals, who understand the custom, and have experience

within the highly regulated system. We will work with local publishers or authors

who are willing to donate to the libraries, in the native language. This not only helps

students learn to read in their own language, but is a way to contribute to the local

economy and learn how the publishing industry works. To stay under 10% foreign

funding, the company can launch a local publishing company, which will not only

help fund the non-profit, but provide cost-efficient tools to help fill the libraries. This

also gives BAB the option of what gets published and by whom. As a primary age

focused project, the publishing company can work with local children’s books

authors to create books to help with the development of literary skills as well as

appealing to the children. Starting a local publish company can again support the


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local economy, provide jobs, while also supporting the main mission of BAB, and

have further outreach abilities as an organization in creating opportunities to hit the

main goal, literacy development. The volunteers who construct the libraries will

work alongside local members of the community, who may be motivated to provide

new opportunities for their children, help design it in a way to suit their customs,

and also have their own impact. We will incorporate the local community in the

projects to not only save cost, but engage them with the development, which

hopefully adds a sense of pride which transfers to sustainability. We believe

allowing the adults and older members of the community build the libraries, they

will be more willing to push children in and make sure it is taken care off. By taking

a hands-off approach to the construction, we can focus on growth and new ways to

make our operations more efficient.

Recommendations and conclusion

In conclusion, based on the clear need of our services in the country, and our pledge

to contribute to the elimination of educational inequality around the world, my

recommendation is for BAB to engage in operations in Ethiopia. Despite the many

barriers and regulations, which are especially stringent among the non-profit

industry, the strategy we’ve developed, including the for-profit business model and

local community involvement, could prove to be ultimately successful. It is crucial to

the success of the project for BAB to gain status as an Ethiopian organization

however. The limitations on foreign charitable organizations, such as not being able

to promote gender, religious, or basic equality is the part of the underlying agenda


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of our operations, and without such rights there would be no way to successfully

operate in Ethiopia. To gain status as a local organization, BAB could follow the

above recommendation and launch a for-profit publishing company allowing BAB to

save costs, donate more books faster, and be in control of where and how far the

organizations success can go. More importantly, the right to promote educational

and gender equality would be granted, and if this can be achieved, the organization

could move forward and have a huge impact on the country. Also, the amount of

experience gained from learning to operate in the heavily regulated industry of

NGO’s in Ethiopia, if successful, will only improve the organizations morale for the

future, and prepare BAB for new, more difficult projects that bring us closer to the

company’s mission, a literate world.


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References:

• Ethiopia.usembassy.gov, (2015). Offices and Departments - Economic/Commercial Office | Addis Ababa, Ethiopia - Embassy of the United States. [online] Available at: http://ethiopia.usembassy.gov/doing_business_in_ethiopia.html [Accessed 5 Dec. 2015].

• Gov.uk, (2015). Overseas Business Risk - Ethiopia - GOV.UK. [online] Available at: https://www.gov.uk/government/publications/overseas-business-risk-ethiopia/overseas-business-risk-ethiopia [Accessed 5 Dec. 2015].

• Habte Gemeda, S. (2015). Doing Business via Non-Profits: Lessons from the US for Ethiopia. [online] Central European University. Available at: http://www.etd.ceu.hu/2015/habte_sisay.pdf [Accessed 5 Dec. 2015].

• Icnl.org, (2015). Ethiopia - NGO Law Monitor - Research Center - ICNL. [online] Available at: http://www.icnl.org/research/monitor/ethiopia.html#top [Accessed 5 Dec. 2015].

• Randle, M., Leisch, F. and Dolnicar, S. (2013). Competition or collaboration? The effect of non-profit brand image on volunteer recruitment strategy. J Brand Manag, 20(8), pp.689-704.

• "U.S. Agency for International Development." U.S. Agency for International Development. USAID, n.d. Web. 29 Nov. 2015.

• Walker, A. (2015). Giving Literacy, Learning Literacy. Read Teach, 69(3), pp.299-306.

• World Audit Corruption. 2015. World Audit Corruption. [ONLINE] Available at: http://www.worldaudit.org/corruption.htm


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