Thursday, July 25, 2024
BusinessHarari officials at odds over cement distribution

Harari officials at odds over cement distribution

Officials from the Harari Enterprise Development and Industry Bureau and the region’s Trade Development Agency are at odds over who should have the right to distribute cement in the regional state.

On August 16, 2022, the Agency selected three private companies and the Ethiopian Industrial Input Development Enterprise (EIIDE) as the only cement distributors in the region.  However, the Bureau sent a letter on August 19, 2022, ordering the Agency to revoke the selection and distribute the cement only through youth associations, which the agency refused.

The Bureau insisted that the Agency is violating the Cement Resource Distribution Directive, which was ratified by the Ministry of Trade and Regional Integration (MoTRI) and effective since last month. The directive allows regional states to select trusted cement agent distributors. These include cooperatives, youth associations, and state enterprises.

“Since these four distributors are chosen by the region legally, we did not breach the MoTRI directive. We will send back a letter response to the bureau that we will not reverse our decision,” said Bushra Alye, head of the Agency. “We will establish youth associations for the future.”

After the new directive is enacted, Afar, Somalia, Gambella, and Benshangul requested MoTRI that they have no youth associations that can meet the cement distribution requirements, which needs a warehouse and adequate capital.

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“Though Harari is not among the regional states who requested us, the region can select private distributors if it trusts them. But they must be well-known traders. However, the region must have the capacity to adequately control the private distributors. The selected private distributors also must meet the obligation to submit a compiled report every week to the regional trade bureaus. The new directive is enacted to control the embezzlement in cement market,” said Hassen Mohamed, state minister of MoTRI.

The number of private distributors requesting the agency to distribute cement is disproportional to the amount of cement Harari is getting.

The MoTRI, which allocates quotas on how much cement each regional state should get each month, allocated only 2,000 quintals of cement for Harari daily. The amount is the smallest of all regional states. It is much lower than the actual cement demand in the region.

The Harari regional state requested for 7,000 quintals of cement daily, considering the growing construction demand in the region.

The cement is basically supplied by the Pioneer and Ture Cement Factories, located in Dire Dawa. But the regional state requested the MoTRI to include the National Cement Factory as well to supply the cement to Harari.

The Ministry has been struggling to bridge the gap between cement supply and demand. Currently, only around 6.3 million tons of cement is being produced, while the actual demand is more than double the amount. Though the 13 existing cement industries have a 15.4 million ton installed capacity, performance remained at 6.3 million tons throughout the 2021/22 fiscal year due to power outages, lack of forex to import spare parts, and coal scarcity.

The cement market is also complicated by sophisticated corruption.

Cement distributors cannot make more than four percent of their profit margin, according to a new directive issued earlier this year.  Currently, the price of cement per quintal stands at 879 birr in Addis Ababa and 760 birr in Harari. These prices have just doubled from last year.

Yet, these prices are for cement supplied by EIIDE and Ethiopian Trade Works Corporation, state enterprises. The price of cement supplied by private companies reaches up to 1,100 birr per quintal.


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