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:

🌹 Roses Are Red, Some Taxes Are Weird

🫆 Fayda Has A Business Plan. Does it Include Competitors?

Here’s to the 120th weekly edition

Let’s dive in.

This year, ETB 380 Billion is scheduled to leave Addis residents' pockets through taxes.

Fair or not, the city has its sights set and we’re just here reporting live from the headquarters of ፍራንክ Digest🎙️

Now, taxes are as old as brown sandals.

Love them or hate them, they are the government’s favorite cash collecting pot.

Some pots are bigger than others.

This got us thinking: taxes are collected on goods and services, right?

You produce (a salary, an investment gain) or buy (a car, groceries, get your brakes fixed), taxes look at you like the way ants look at a strawberry syrup covered apple. Delicious.

Addis’ massive tax bill might need to be paid in more ways than one.

So how about we look at some of the weird ways taxes were levied in the past:

18th century England was...how do we put this delicately…bizarre.

Hats were a status symbol at the time and the goal was to tax the rich, who owned many fancy hats.

The move was also a way to balance out social status imbalance.

Fail to pay your tax and you might just lose not just your hat but your head with it. Ouch!

Next time you’re having fun in Kansas, make sure to read the tax code first.

17 years ago, Kansas looked at the hot air balloon and decided that there was some moolah 💸 to be made there.

If you’re not attached to a rope on the ground while floating in the air, that’s considered transportation and is tax-free.

However, if you’re tethered to the ground with a rope, that’s amusement and your day a the fair will be subject to a tax of 6.5%.

3. Gassy Livestock Tax (Coming 2030)

Yes, cow gas will be taxed. 

That’s according to Denmark. 

Starting from 2030, farmers will pay a premium on cows, sheep, and pigs flatulence due their high content of methane (a greenhouse gas…code for ‘not safe for the environment’)

Addis might have fewer farm animals on the streets these days, but if this gets implemented, here, it might end being a stinker

So What’s The Deal Here?

Collecting taxes is tough in its own, collecting taxes in Addis? That’s like trying to drive a car without a steering wheel.

The main issue is that the tax laws are not very coherent despite multiple attempts to restructure the format.

For Addis to reach its ambitious milestone, it needs to provide confidence to the private sector and demonstrate realistic ROIs on those collections.

To that end, putting systems in place, offering better digital filling and advertising tax credits (yes, where you pay less…counterintuitive but encouraging) could help Addis avoid what Denmark, England and the US did to solve their own tax problems.

If not, you could be featured on here, Addis. Just saying 🤷‍♀️

Fayda had one relatively straightforward job:

Prove that you are you.

Turns out, this was not sufficiently ambitious.

Ethiopia has transformed the National ID Program into FaydaVerse, a state-owned enterprise under Ethiopian Investment Holdings, with reported authorized starting capital of…wait for it…. ETB 10 Billion!

It will not merely register residents and authenticate identities.

Its proposed offerings include a digital wallet, payments, e-government services, systems integration, security consulting, enterprise software and even “Talent-as-a-Service.”

And so it goes, Fayda has gone from issuing the key to building the house, furnish it and advising you on how to live in it.

The ambition kinda makes sense, but also follows a path we’ve seen from other state-owned enterprises…which makes it a bit troubling.

A reliable digital identity could allow Ethiopians to open bank accounts, sign documents, make government payments and access services without physically having to show up everywhere.

That’s great news, and we’re all for it.

FaydaVerse also plans to make money from authentication, eKYC, credentials, convenience fees and software.

It even says several African countries are interested in its technology.

Ethiopia exporting digital infrastructure would be genuinely exciting.

We have traditionally preferred exporting coffee and the good people capable of building such digital infrastructure.

But FaydaVerse’s upcoming product catalogue raises a familiar Ethiopian question:

What happens when the company controlling essential infrastructure also begins competing with the companies that need it?

We have seen a version of this film before.

Ethio telecom provides the network on which much of Ethiopia’s digital economy depends.

It operates Telebirr, competes in payments, has an e-commerce platform, offers loans, sells devices, provides cloud services, offers business-critical software from core banking systems to ERP systems, to name but a few.

Basically, it is one strategic plan away from eating everyone’s lunch.

For obvious reasons, competing with Telebirr is not quite like competing with another fintech.

Just ask Safaricom, or the many e-commerce websites that have folded since Zemen Gebeya came online.

FaydaVerse could create a similar tension.

Banks, fintechs and technology companies will increasingly depend on Fayda authentication.

Yet FaydaVerse could also compete with them in wallets, payments, software and integration services.

FaydaVerse says it will work through joint ventures, open-source technology and partnerships with local companies.

WHEW!😅 How reassuring!

But let’s be real, partnership can occasionally mean the private sector is welcome to compete, provided it does so from the passenger seat.

The real question is whether FaydaVerse will become the foundation of Ethiopia’s digital economy or its most privileged company.

Because the company authenticating every customer’s ID should be careful about becoming the company selling everything to them.

Building the roads is public infrastructure.

Running your own buses on them is business.

Deciding who else gets to leave the station is something else entirely.