The Ethiopian government has lifted the ban imposed on foreign investment on the local cement industry.
Following the construction of dozens of cement factories by local and foreign investors the government has restricted foreign firms not to build new cement factories for fear of market saturation and price war in the local cement industry. However, after studying the local cement market the government noted that there is shortage of cement in the local market and the price of cement was rising drastically. This has prompted the government to lift the ban imposed on foreign investors.
Samuel Halala, director general Chemical and Construction Inputs Industry Development Institute, told The Reporter that the Council of Ministers has decided to lift the ban on foreign investment up on the recommendation of the institute and the Ministry of Industry. “We thought that there would be excess capacity on the local market and imposed the ban but when we see the market now there is actually shortage of cement and price hike that negatively impacts the construction sector,” Samuel said.
The article that allows foreign investment in the local cement is incorporated in the revised investment proclamation which was endorsed by the House of Peoples and Representatives.
According to the Chemical and Construction Inputs Development Institute, the country has an installed cement production capacity of 17.1 million tons of cement per annum. The demand for cement is 12 million tons per year. However, the local cement factories are producing only 8.9 million tons of cement.
According to Samuel, the Institute secured EUR eight million grant from the EU for alternative fuel research and development so as to reduce carbon emission from cement factories.
“The cement factories are not using their production capacity not more than 50 percent due to various constraints,” Samuel said. Erratic power supply, shortage of foreign currency and spare parts are the major contributing factors for the low productivity.
These pressing challenges were reflected by industry players at a consultative meeting organised by the institute on Thursday. Industrialists engaged in the production of chemicals and construction inputs voiced their concern of shortage of foreign currency and power fluctuations.
A representative of Sika, a Swiss construction chemical manufacturer, said that her company is has built and factory in Ethiopia and supplying high quality construction chemicals. However, the representative from Sika said the company is facing dire challenges in accessing foreign currency to import raw materials. The other challenge she raised was quality standard certification. “We cannot get quality standards certification from local organizations. The Ethiopian Conformity Assessment Enterprise does not have standards for our products. We have certifications for our products produced in Europe but we can get certifications for our products that we produce in Ethiopia,” she said.
A paper roll manufacturer complained the country is wasting used papers. “We are recycling paper products to produce large paper rolls. Universities, government offices and other organizations are not disposing paper products in a systematic way. We are unable to collect adequate amount of used paper products because they are not produced properly,” the company representative said.
Samuel said that the institute is holding discussions with the National Bank of Ethiopia to address the forex issue. With regards to the quality standard certification Samuel said the company should submit its specific request to the institute so that the institute would consult with the Conformity Assessment Enterprise.
Samuel said the Ethiopian Electric Utility has resolved most of the challenges with power supply. “They are replacing the aging power distribution lines with new ones but the problem is not solved completely. There are still problems with power fluctuations and interruptions,” he said.
Delay in customs inspection and approvals at the Ministry of Trade and Industry is the other major challenge raised by the industrialists. “Some manufacturers are eating their working capital due to these delays and forex shortage,” a company executive said.
Presenting its six month performance report to stake holders the Chemical and Construction Inputs Development Institute planned to fetch 23.4 million dollars from the export of chemicals and construction inputs but managed to garner only 5.6 million dollars. Samuel said the sector failed to achieve the target due to the sharp fall in cement export. Cement accounts to 60 percent of the export of chemicals and construction inputs. “Following the power rationing last year there was a critical shortage of cement in the local market and there is a price hike. So the cement manufacturers prefer to sell the cement in the local market to exporting it to neighboring countries, Samuel said.
According to him, shortage of foreign currency and spare parts, erratic power supply and instability are the major impediments to the sector. Samuel said some manufacturers are facing challenges in transporting raw materials from quarries to their factories due to instabilities in the regions. “They also face difficulty in transporting their products. Some are paying salaries to their employees even if they are not working properly due to security related issues.”