By Omer Redi, Addis Fortune
ADDIS ABABA — The state-owned Commercial Bank of Ethiopia (CBE) may not claim a pioneer place in the introduction of the electronic banking card system to Ethiopia. But, it is trying to catch up with those ahead of it – the private Dashen and Wegagen banks.
Electronic banking cards give depositors 24-hour access to their money from their local or overseas accounts using Automatic Teller Machines (ATMs).
Six IT firms responded to CBE’s international tender issued in mid 2007: AT, M2M, Xiamen Longtop Systems Co. Ltd., Fintech (Kenya) Ltd., Paynet and ACI, an American company entered into a bid in partnership with the local Moti Engineering Plc. Three have been short listed since then, whose technical and financial offers are under review by CBE’s bid committee, chaired by the Vice President for IT.
However, a consortium of companies from Ethiopia and Kenya had been informed two months ago to begin contractual negotiations, before being given the green light to start work on the deployment of the banking solutions, a source told Fortune. CBE has not officially awarded the project yet.
“They [the CBE] concluded the tender process fast, but there seems to be a slight delay due to the negotiations that followed,” a source closely following up on the tender disclosed.
Though CBE seems interested in awarding the project, worth a little less than 50 million Br, to the consortium formed by Oratech Consulting, an Ethiopian technology company which is also partner to the US based Oracle, and Technology Associates (TA), a Kenyan based IT firm, the bank wants negotiations on some arrangements, according to the source, who requested anonymity.
The painstaking issues that kept the process from entering the next phase – installation – are differences over the duration of guarantee offered by the consortium and the CBE; the bank claims the bid document submitted reads three years, as opposed to the one year TA believed it had offered. The latter, however, wrote to the CBE expressing agreement to provide the three-year guarantee, but at the same time requested the client to revise payment arrangements.
TA requested about 30pc be paid as a down payment. The remaining amount would be spread over a one-and-a-half-year period, with the final payment being made at the end of this time. The period would begin after the system went operational – an arrangement meant to evaluate whether the IT solutions the consortium provides is durable.
CBE has not yet expressed whether it agrees to the conditions the consortium requested in the form of payment arrangements.
If awarded, it would be TA’s second project in the Ethiopian banking industry; it was awarded a similar contract earlier this year by Wegagen Bank, whose deal has yet to be signed after three years of floating the tender. Delay has a price to pay, according to industry observers.
In the current trend of price fluctuations, and currency depreciations of both the Birr and the dollar, any delay may affect the deal and require a further price revision, according to current prices of software and hardware.
“Experiences show that the price mostly goes up,” said an IT expert familiar with the project. “The fact that the transactions for this technology demand hard currency create another unpredictability.”
Ongoing negotiations between Wegagen Bank and Oracle is a good illustration. Although Wegagen floated a tender to procure the solution in 2005, it has yet to become the second Ethiopian bank to enter the electronic banking system market. In the meantime, Oracle has reportedly requested the bank to revise the originally offered price. Industry observors see the possibility of Wegagen losing its second place to the CBE, if the latter strikes a deal faster and speeds up installation.
Better yet, a new runner is around the corner: Zemen Bank, whose series of pledges to launch operations did not materialize last week, has hired a Chicago based IT firm to install technology solutions, which its managers promise will transform the way banking is practiced in Ethiopia.
In the interim, Dashen remains the sole player in the field of electronic banking since 2006. In the last Ethiopian fiscal year, Dashen, a pioneer in introducing international electronic payment systems in partnership with, and using VISA, generated close to 31 million dollars, a little over a quarter of what the country earned from the export of flowers during the same period.
Established a little over a decade ago, with an initial capital of 50 million Br, Dashen Bank has achieved remarkable advances in its applications of technology. Deploying close to 20 ATMs, the bank provides its clients with access to many of its 47 branches and four Forex bureaus, including Awassa, Adama (Nazareth), Bahir Dar and Mekelle.
Dahsen, a bank worth less than 10pc of CBE’s capital, leads the industry in terms of harnessing this advanced banking system. This maneuver on the technological front made it effectively snatch the pioneering role the CBE had maintained for over half a century, beginning in 1942.
If CBE strikes this deal anytime soon, Oractech – the Ethiopian company established in 2001 with a registered capital of 100,000 Br – and TA, the Kenyan company that has been building technology infrastructure in sub Saharan Africa for the past decade – will provide IT solutions to the state-owned bank, which has 205 branches across the country, and registered assets worth 49 billion Br in the fiscal year that ended in June, 2008.
Oratech’s partner, Oracle – a recognized IT giant in database technology and applications in enterprises throughout the world – will provide the database, while TA will secure the software and equipment from European companies, according to informed sources. Wincor-Nixdorf, a Germany company, will provide the Automatic Teller Machines, each estimated to cost an average of 10,000 dollars, while TeiTonator, a Latvian based technology company active in Europe, will provide Point of Sale (PoS) machines.
CBE officials were not available for comment,as they were conducting the bank’s annual meeting at the time Fortune attempted to get hold of them.