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    BusinessSugar production drops as conflict spills-over

    Sugar production drops as conflict spills-over

    Date:

    Sugar supply halves compared to last year

    Enterprise plans to distribute 68000 quintal in one round

    Output of local sugar factories has dwindled following continuous conflict in surrounding areas where the factories are located.

    While sugar supply to the public declined by more than half, factories dependent on sugar have been already impacted by the shortage, while some are forced to operate way below their production capacity.

    Wenji Shoa, Metehara, Finca, Tendaho, Welkait, Omo kuraz and Kesem were operational but most fail victim to conflict, since they are located in remote parts of the country.

    “Local sugar production has been very minimal over the past three years. There has been no substantial production since 2019/20. Throughout 2020/21, sugar factories have been inactive due to conflicts where they are located,” said Reta Demeke, communication team leader at the Ethiopian Sugar Corporation (ESC).

    The last time the sugar factories produced maximum output was back in 2019/20, when the domestic sugar production reached four million quintals, which constitutes only 36 percent of the close to 11 million quintals of annual sugar demand, excluding industrial demand from the beverage industry.

    Beverage industries, who can directly import sugar for their industrial inputs, have also complained they are importing sugar only once a year, due to lack of Letter of Credit (LC) approvals by the central bank.

    ““One of the major challenges we as Coca-Cola Beverages Africa-Ethiopia faced in the year 2021 has been sugar supply and Forex shortage. We have been getting less than 50 percent of our sugar supply quota from Ethiopian sugar corporation for the last six months of the year and we are hopeful that in 2022 Ethiopian sugar corporation will be able to give us at least the full quota” said Nigus Alemu, Legal Counsel and PACS Director of Coca- Cola Beverages Africa- Ethiopia.

    The Ethiopian Industrial Inputs Development Enterprise (EIIDE), which is mandated to supply sugar to the public, either sources the commodity from domestic sugar factories or imports it, to quench the widening supply-demand gap. Apart from sourcing from local sugar factories, the Enterprise also imports an additional two million quintal annually, to supply for household consumption.

    According to the enterprise, the amount of sugar supplied to the public over the past six months, halved from the 200,000 quintals from last year’s same period.

    “The major reason for our supply declining this year is because local factories were not operational. Import of sugar was also delayed,” said Yeshimebet Negash, CEO of EIIDE.

    According to Yeshimebet, the state enterprise supplies sugar for the public every 45 days, through consumer association shops. And currently, the enterprise is preparing to dispatch 68,000 quintal of sugar worth 260 million birr, in one round of supply.

    Ethiopia’s consumer demand for sugar stands at 11 million quintals per year. Until 2019/20, the four million quintal produced locally and close to two million quintal in average annual imports, has been covering a little over half of the demand.

    The black market for sugar is also emerging as the supply-demand gap continues to increase. Currently, a kilogram of brown sugar is sold at 60 birr in the black market, twice the official price. The price goes up to 90 birr in supermarkets.

    In August 2021, after Welkait sugar factory stopped production due to the war in northern Ethiopia, the ESC relocated its employees to other sugar factories. 

    Another ten sugar projects in the pipeline have also been affected by the ongoing conflict. This comes just few months after government decided to privatize these projects and hired Ernst & Young to undertake the evaluation.

    “Sugar privatization is halted because potential investors and experts could not to travel to fields and visit the factories status due to the conflict in the country. It will continue with full force, as soon as the war is over,” Eyob Tekalign (PhD), State Minister of Finance, told The Reporter in his previous interview.

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