Devaluation complicates billion birr rebar tender
One billion birr worth of rebar tender appears to be in limbo following the recent currency devaluation and rebar price hike in the international market.
The tender process which was undertaken by the Addis Ababa Public Procurement & Property Disposal Agency was meant to purchase 50,084 tones of reinforcement bars.
During the last round of the tender evaluation, Steely RMI, a notable rebar manufacturer in Ethiopia gave a total price of 1.23 billion birr for the total supply.
Steely, the only competing company in the financial evaluation stage, listed 25,916.47 birr, 24,150.97 birr, 23,647.05 birr, 24,097.47 birr, 24,773.1 birr and 24, 773.1 birr for one tone of 10mm, 12mm, 14mm, 16mm, 20mm, and 24mm reinforcement bars, respectively.
In a financial result notification letter issued by the Agency, the offers made by Steely to 10mm, 12mm, 14mm, and 16mm was accepted.
The Agency posted the financials results in its public board on October 9, 2017. The devaluation was then issued on October 11, 2017.
“Effectively, the devaluation came before we were even given the award,” Getenet Endazenew, marketing manager of Steely told The Reporter.
Following the financial notification, Steely issued a letter demanding for an adjustment in the initial price listed on August 4, 2017. The price which was listed by Steely was valid for one month.
However, this validity date expired before the award was given to Steely.
In such situation, the price of rebar in the international market has already increased and devaluation was introduced.
In a letter issued on October 13, and 20, 2017 by Steely, the company listed the reasons for its demand of adjustment in the prior price offers. The justifications include the 15 percent devaluation; the increase in transportation and logistics cost of imported raw materials; and the two percent rise in the deposit interest rate.
In addition, Steely has made a demand for the Agency to facilitate foreign currency access if the two agreed on the aforementioned terms.
All in all, the unexpected policy measures by the National Bank of Ethiopia which can be conceived as a force majeure will have an effect on our cost in the amount of 23 to 28 percent, reads the letter signed by Tefera Lema, General Manger of Steely.
In a response to Steely’s demand, the Agency maintained that though the devaluation is a national issue, the tender document does not allow us to make a price adjustment before contract signing.
It will be difficult for us to sign a contract and demand adjustment, said Getenet.
Getenet claims that at the moment Steely has no raw materials stock for the required supply by the Agency. It is yet to be imported if the two agreed on the issues.
These are a special standard reinforcement bars in the supply contract and we don’t have the raw material to produce them at the moment, he said.
According to an official at the Agency, Steely’s case will be reviewed by the Agency’s board, chaired by Deputy Mayor of Addis Ababa, Abate Sitotaw.
In the mean time, the Agency has decided to rebid the supply for 20mm and 24mm of 5,882 tons, and 8,689 tons of reinforcement bars, respectively, since the supply of 20mm and 24mm reinforcement bars were not awarded to Steely in the first place.
The tender was already floated in Addis Zemen Newspaper on October 23, 2017.
Established in 2004 by Ethiopian investors, Steely has the capacity of producing 360,000 tons of steel and wire rods annually.
Its factory located in Bishoftu employs more than 2000 employees.
Over the past one month, the price of steel bar has risen on the global market. According to the London Metal Exchange, on July 31, 2017, the price of steel bar was USD 460 per tons. It has now soared to USD 523. London Metal Exchange is a global platform for metal exchange and trading.