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BusinessTrade Ministry decision to reopen warehouse sparks optimism

Trade Ministry decision to reopen warehouse sparks optimism

Oilseed exporters had reason for hope as officials at the Ministry of Trade & Regional Integration decided to reopen 26 warehouses that had been closed due to suspicions of engaging in hoarding activities.

The shutdown followed the Trade Ministry’s alleged discovery that some traders were engaged in hoarding activities as a result of the central bank’s new rule, which reduced the amount of forex retained by exporters to only 20 percent, with banks surrendering 70 percent to the central bank.

The warehouses are located in Addis Ababa, Adama, Burayu, and Gelan cities and were closed after the Ministry allegedly found traders hoarding more than 235,000 metric tons of oilseed and pulse crops destined to the global market, largely to China.

The ministry reopened the warehouses this week following the expiration of the period of closure imposed as a penalty on exporters. After ensuring that the crops stored in warehouses meet the export standards, exporters will be allowed to ship them out, according to Kumneger Ewnetu, the Ministry’s Communication Head.

During the last fiscal year, Ethiopia exported goods worth USD 4.12 billion, of which 72 percent came from the agricultural sector. However, the year’s target for oilseed and pulse output was not met because exports of both cash crops fell 69 percent short of the mark.

The government accuses exporters of hoarding export harvests, even though the conflict and bloodshed in several regions of the country are mostly to blame for the underperformance. Major producers of oilseed in Ethiopia include the war-torn regions of Tigray, West Wollega, and the Amhara region. However, because of the fighting in these areas, growers were unable to harvest their crops, which had an effect on exporters.

The Ministry also accused dealers of exploiting the situation to stockpile their supplies. The Ministry examined exporter warehouses in April 2022 on suspicion of crop stockpiling. According to its inspection, there were noticeably more grain and oilseed crops stored in warehouses in Gelan, a city on the outskirts of Addis Abeba, than in any of the other three cities.

There were 57,274 metric tons of oilseeds and 177,514 metric tons of pulses discovered in Gelan. The amount of stockpiled in warehouses in Burayu, Adama, and Addis Abeba followed in that order.

Officials cited different reasons for the stockpiling of export crops. They began by accusing traders of trying to hoard crops in order to profit from the windfall gain brought on by the rise in the price of oilseed on the international market.

Additionally, in the hopes that the FX retention law would soon be changed, the traders likewise stockpiled export harvests, according to Kassahun Gofe, State Minister of Trade and Regional Integration.

In a press conference held last week, the state minister slammed exporters for seeking to profit from forex gain rather than the actual export revenue.

“There will not be any adjustment to the share of forex retained. The government passed the decision in the light of the country’s forex demand and gain,” he said.

A price board chaired by the Ministry examines the weekly trend of the international market on 20 exportable cash crops and determines a weekly price reference. The board meets every Friday.

However, Kassahun accused exporters of under invoicing in an effort to obtain more foreign exchange to pay for imports of other goods.

“A real businessperson cannot assert that he will import iron and make money out of it with the dollar he makes from exporting. When someone declares they are going to export sesame, they should only think about the profit they will get from the shipment of the sesame,” said Kassahun.

The Ministry is waiting till exporters can find customers for the stockpiled cash crop.

“But they should have to make the crops to an export standard. They cannot export a crop that was stored in a warehouse for three months, the ministry’s communication head, Kumneger, said.

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