Wednesday, June 19, 2024
NewsManufacturing exports slide despite surge in financing, industrial input supply

Manufacturing exports slide despite surge in financing, industrial input supply

 Parliament urges minimum wage for factory workers

A sharp uptick in the import of industrial inputs and access to credit has not translated to growth in manufacturing exports, which have fallen markedly over the first three quarters of the fiscal year.

Domestic conflicts, logistics problems in the Red Sea and the Horn of Africa, and Ethiopia’s delisting from a US preferential trade program were some of the factors cited by Melaku Alebel, minister of Industry, when he presented yet another disappointing performance report to Parliament this week.

Ethiopia generated 60 percent of the USD 336 million Melaku and his team had targeted over the first nine months of the financial year, to be generated of export products from the manufacturing sector. It reflects a 24 percent decline from last year’s performance while the 107,000 tons of exported manufactured goods is also a 14 percent drop from what Ethiopian industries managed to ship out last year.

The weak performance is at odds with a two-million-ton surge in industrial input supply recorded over the period. Increased input supply has resulted in diminished exports, while inputs such as salt for leather and brewing industries continue to fall short of demand.

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The government managed to supply less than 200,000 quintals of industrial salt to these manufacturers over the nine-month period, much lower than demand estimated at 280,000 tons. Fluctuations in salt supply continue as the Afar regional administration, the sole provider of industrial salt in the country, raises equitable beneficiary issues over the salt trade.

The manufacturing sector is also enjoying increased access to finance, with large-scale manufacturers receiving nearly 17 billion birr in financing over the reporting period, representing a whopping 74 percent increment from last year. Medium-sized manufacturers received nearly 900 million birr, up 22 percent.

The sector received a forex supply of USD 274 million over the last nine months, more than triple what manufacturers got over the same period last year, according to the Ministry’s report.

“Due to the conflicts in the country, it has become difficult to move products from one place to another. Raw materials are unable to reach factories from agricultural corridors due to the conflicts. The Amhara region, which had a significant contribution to the export of textiles, food, beverages, chemicals, and construction inputs, is unable to export due to the situation there. Following the delisting from AGOA, exportable commodities are saturated at manufacturing industries in Ethiopia. Due to the unpredictable measurements taken by Djiboutian authorities, logistics has become problematic. Following the Ukraine and Middle East conflicts, global buyers’ appetite has dropped. The security situation on the Red Sea and in the Horn have also made logistics expensive and unpredictable,” reads the report.

It reveals the textile industry managed just USD 92 million in exports over the nine months, significantly lower than the USD 154 million the authorities had expected. Food and beverage exports fared slightly better at USD 80 million, or close to 75 percent of the target. Leather continues to struggle with earnings of USD 20 million, less than the USD 35 million goal set by the Ministry.

The export of chemicals and construction inputs, as well as manufacturing technology and engineering products, also fell far short of the targets, bringing in combined revenues of USD 9.5 million.

The report reveals that no manufacturing industries in the country are utilizing more than 60 percent of their installed capacity, while some, such as vehicle assembly plants, are struggling to utilize more than 40 percent of capacity.

Manufacturers have previously complained that Djibouti’s customs procedures, which include a minimum container size limit and an ever-changing documentation delivery system, as well as logistical issues related to the Red Sea presented challenges to their ability to export their goods.

The Ministry pointed to the same factors when presenting its report to lawmakers. Melaku and his deputies also cited inflation, growing logistics costs, decline in global demand, and transportation issues for the shortcomings.

The Ministry reported that purchase production orders for the AGOA market have significantly slowed down, which has led to an accumulation of various manufactured goods in industries. The Ethiopian Investment Commission has permitted businesses based in industrial parks to offer up to half of their products in the domestic market as a compromise, but that has been met with limited success.

Led by Amarech Bakalo (PhD), Parliament’s Industry and Mining standing committee instructed Melaku and his deputies to focus on import substitution and urged them to introduce a minimum wage for factory workers. Lawmakers see limited manpower uptake in the manufacturing sector as a result of the absence of a minimum wage.

[speaker]
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