Friday, June 21, 2024
BusinessEdible oil giants Shemu, WA forced to halt production for over six...

Edible oil giants Shemu, WA forced to halt production for over six months

Major edible oil factories have been forced to halt production for months, causing significant disruptions in the domestic processing operations.

This production standstill is primarily attributed to a combination of factors, including a scarcity of foreign currency, shortages of essential inputs, and heavy taxation burdens.

The Reporter found that prominent processors such as WA Oil Factory and Shemu Edible Oil Factory have not produced oil for at least the past six months. Employees, factory managers, and local and federal officials have confirmed this information.

WA, situated in Debremarkos town, Amhara region, requires an annual budget of USD 203.6 million. Of this amount, nearly USD 131 million is designated for the import of crude oil, USD 53 million for the import of other chemicals, and USD 19 million for the import of packaging materials.

With a daily production capacity of 1.3 million liters of edible oil, this crude oil processing plant cost a staggering 5.2 billion birr.

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Unfortunately, WA is unable to access the necessary foreign currency to import the vital production inputs, according to reliable sources.

Owned by renowned investor Worku Aytenew, WA was only able to import these inputs once since its inauguration in June 2021. The investor is reportedly staying abroad, according to information obtained from WA staff and officials at the Ministry of Industry, Trade, and Regional Integration.

Another factory that stopped production for nearly seven months is Shemu Edible Oil Manufacturing Share Company, which falls under the umbrella of Shemu Group, encompassing multiple enterprises.

Sources reveal that Shemu has completely ceased oil production, but employees continue to receive payment without coming to the factory. Only 900 out of the 1500 workers under the Shemu Group are currently active, while the remaining employees are not reporting to the factory but still receive their salaries once every two or three months, according to The Reporter’s sources.

Last year, Shemu Edible Oil Factory requested USD 325 million to import crude oil and process it locally, but it was only able to access a much smaller amount.

However, according to Hassen Mohammed, the State Minister of Industry, Shemu currently faces difficulties in meeting tax obligations rather than resource shortages.

Shemu was compelled to halt production because tax authorities demanded a total tax payment of 1.9 billion birr from the Shemu Group. Unlike WA, which suffers from a lack of hard currency, Shemu’s problem primarily stems from tax-related issues.

Hassen stated: “In line with our campaign to replace imported edible oil with local processing, we are striving to resolve the challenges faced by local edible oil factories. We are communicating with Shemu to facilitate the resumption of their production.” However, the State Minister refrained from commenting on WA’s situation.

The Ministry’s efforts include accessing USD 25 million from the World Bank, which is intended to assist edible oil factories in importing raw materials.

Other edible oil factories in the country, such as Hamaressa Edible Oil SC and Belayneh Kinde’s Phibela, are also experiencing similar difficulties.

Last year, Phibela, Hamaressa, Shemu, Al-Impex, and Gifti Foods collectively requested USD 930 million.

The request was based on the Ministry of Trade and Industry’s assumption that edible oil factories operate at 40v percent of their installed capacity. However, the NBE only allocated 5.4 percent of the requested amount, according to documents obtained by The Reporter.

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