It declared 70 million birr in losses in the first five months of production
City Admin subsidizes over a billion birr in first six months of fiscal year
Sheger Bread, an industrial-scale bread factory that has been closed for more than a month, incur 36.5 cents in loss on every loaves of bread produced, according to its managers.
The factory, which produces 750,000 to one million loaves of bread daily, loses up to 365,000 birr for every million it distributes to the capital and its neighbors at a lower price than other retailers.
Owned by MIDROC Ethiopia’s subsidiary Horizon Plantation PLC, Sheger Bread was inaugurated in June 2020 with a capacity to produce nearly two million breads daily in three shifts.
Residents of Addis Ababa were buying a 100 gram of Sheger bread at a price of 1.20 birr, compared to the 100g loaf of bread being sold for not less than four birr by other retailers.
Though the company has shouldered the burden of price inflation on low-income residents of the capital, Sheger bread has been plagued by a number of issues and was forced to halt production on multiple occasions.
A lack of adequate electric power supply, distribution vehicles and most importantly, a lack of wheat supply and a price spike have undermined the efforts of the much-anticipated factory to produce bread at an affordable rate.
The factory declared a 70 million birr loss in the first five months of production.
“Even though Sheger Bread is a licensed business, we regard it as a corporate social responsibility; there is no profit in it, we don’t even think about it,” Mekonnen Teshome, Communication and Advertisement Head at MIDROC Investment group told The Reporter.
According to Mekonnen, MIDROC is making the factory continue its operations by subsidizing it with profits drawn from other investments. Billions of birr have been invested in the factory, as a subsidy from MIDROC’s other profitable investments.
However, MIDROC is not the only one subsidizing Sheger bread. The Addis Ababa City Administration, which provides 100,000 quintals of wheat daily, has raised the amount subsidized on each loafs to 1.14 birr, after the price of Sheger beard increased to 2.10 birr this week.
The city administration has subsidized 309.3 million birr in the first six months of the fiscal year.
According to the city administration, it has disbursed a total of 812 million birr for wheat supply and directly to the factory to enable it resumes production, which had been halted for more than a month beginning in early February.
Shger, which received a nod for its retail price increase, continues to sell a loaf of bread at a lower price, even after nearly doubling its price.
“We understand that the public is bearing the burden, but it would be better if wheat prices stabilized and we stopped subsidizing,” Mekonnen said.