Hey crew, here’s to another week of cutting through the noise and focusing on what actually moves financial minds forward.

No buzzwords, just the stuff affecting wallets, business & the economy:

👴 Relax, Papa Is Here

🏢 High-rises Can Be Misleading

Here’s to the 123rd weekly edition

Let’s dive in.

When billionaires put their mind to something, they usually follow through.

Usually.

Aliko Dangote got tired of dependence when it comes to cement.

So he went ahead and built an empire.

Now, he wants to tackle another critical input that Africa has always needed but was mainly forced to import: Oil🛢️.

Uncle Dangote has stepped up and shown that Africa can be an exporter not just a consumer. 

And Ethiopia is well aware of his accomplishments, so much so that Dangote himself came to Ethiopia to break ground on a fertilizer factory to reduce the country’s dependence on imports.

News recently broke that his planned oil refinery in Kenya is selling a 30% stake, and guess who’s at the door?

እምዬ Ethiopia.  

Here are the numbers for context:

Ethiopia joins Rwanda at the door.

If all three countries split the 30% stake equally, $1.5B going into the project (that’s based on Kenya’s valuation)

Now, on paper, this is great.

But projects tend to overrun, timelines get extended and uncontrollable factors can suddenly create jitters.

And on top of that, where is Ethiopia going to come up with the money?

We’d love to help but $500M is a bit of stretch for ፍራንክ Digest’s current finances (Sorry guys, we tried 🤷‍♂️).

There will be some financing to finance the financing.

If that makes sense.

Basically borrowing money to give to Dangote. 

It’s also foreign currency and the Birr has not been doing too well even next to its African brothers and sisters. 

Some Euro bond coupon payments might be restructured.

The government could also issue its own bonds, like they did for the GERD.

Basically taking a reduce expenses, accelerate money collection approach

Overall, this opportunity stands just below the need for a port for Ethiopia. That being said, this might be a significant turning point!

Now, it’s all nice and dandy to live in ‘Assumption Land’ but, we don't know what this would practically mean for the Ethiopian population.

Lower fuel rates?

Accrued investment interest pumped back into the economy?

Higher Self-esteem?

All assumptions at the moment but the fact of the matter is, oil is the liquid that keeps economies moving (quite literally).

Having a say on the production is a great power that comes with great responsibilities 🕸🕷🦸🏻‍♂️

Walk through Addis Ababa and the story seems obvious: Ethiopia is building.

Apartment blocks are rising, commercial buildings are replacing older structures and construction remains one of the most visible forms of investment.

But the question worth asking is: Does more construction necessarily mean more productive investment?

Not always.

Productive investment expands production capacity, exports, substitutes imports or broadens economic diversity.

Real estate can create jobs, provide housing and support businesses. A factory, warehouse, hotel or office building can also be a highly productive asset.

This leads us to question if scarce capital being used to build could be doing a better job elsewhere. That is the idea of opportunity cost.

Consider an entrepreneur with 20 million birr.

One option is to invest in an apartment building and generate rental income. Another is to establish a manufacturing operation.

The property is tangible. It can provide rental income and may help preserve wealth during periods of inflation. The factory, meanwhile, comes with operational risks: unreliable inputs, foreign-exchange constraints, shortages of skilled workers, competition and management challenges.

It is easy to understand why the entrepreneur chooses property.

The entrepreneur is making a perfectly rational decision. But if many entrepreneurs make the same decision, what does that say about the incentives in the economy?

Productive businesses often require long-term capital and working capital while facing considerable uncertainty. Real estate, by comparison, can appear simpler and more predictable.

If capital consistently flows toward assets that protect wealth rather than businesses that expand production, the economy can accumulate more physical assets without necessarily increasing its productive capacity at the same pace.

That doesn't make real estate the problem. It makes capital allocation the problem.

It would be tempting to conclude that Ethiopian banks are simply financing too much construction and too little productive investment.

The data doesn't support such a simple conclusion.

National Bank of Ethiopia's latest lending figures show that in the second quarter of 2024/25, new bank lending went primarily to domestic trade, international trade, manufacturing and agriculture. Building and construction accounted for only 4% of new loans during the quarter.

So the issue isn't simply that banks are flooding real estate with credit.

Businesses in productive sectors usually complain they can’t obtain the right type of finance, at the right cost and for long enough to invest and grow.

Agriculture illustrates the problem particularly well.

NBE's agricultural-finance roadmap highlights several barriers to financing agriculture and points to potential solutions, including land certification, greater use of movable collateral, targeted interest-rate arrangements and financial-literacy extension services.

These measures matter because productive investment is not always held back by a lack of entrepreneurial ambition. Sometimes the financing system simply struggles to accommodate the risks and characteristics of the business.

The answer isn't to discourage real estate.

Instead, policy should make productive investment more attractive relative to simply holding capital in assets.

That means improving access to long-term finance, reducing the risks associated with investing in manufacturing and agriculture, improving infrastructure and logistics, expanding access to foreign exchange for productive investment and designing incentives around the economic value an investment creates.

A commercial building that enables hundreds of businesses to operate may be highly productive.

A warehouse that improves logistics can increase efficiency.

A manufacturing plant can substitute imports, create skills and potentially generate foreign currency.

Modern agriculture can raise productivity while creating income across a much wider part of the economy.

Ethiopia needs more housing, offices, warehouses, hotels and commercial infrastructure as its economy grows.

But a construction boom should not automatically be interpreted as evidence that capital is being allocated efficiently.

Every birr invested in one asset is a birr that cannot be invested somewhere else.

A country becomes more productive not simply by accumulating more buildings, but by building the capacity to produce, compete, export, substitute imports and create value.

The real estate boom may be a sign of economic activity. But it may also be a signal that Ethiopia needs to make productive investment a more attractive destination for capital.