Forex crunch, feud with local communities impairs manufacturers’ productivity
- Livelihood of thousands of employees at stake
Investors engaged in the manufacturing sector presented their complaints over the critical challenges hampering their productivity to the federal government.
At a consultative meeting held on Thursday with investors engaged in the chemical and construction input manufacturing industry, owners and managers expressed their discontent over the dearth of foreign currency, erratic power supply and disputes with local communities. The consultative meeting was organized by the Chemical and Construction Inputs Industry Development Institute in collaboration with the Ministry of Industry.
The investors lamented that the critical foreign currency shortage is hampering their productivity significantly and putting the livelihood of thousands of employees at stake. Marble producers disclosed that they intensively use heavy duty machineries and they were unable to secure foreign currency to import spare parts for their machineries.
A representative from Horizon Addis Tire said that it was forced to produce only limited types of tyres due to foreign currency shortage. “While we are capable of producing agricultural and construction machinery tires we are compelled to only focus on light vehicle tires due to shortage of foreign currency,” he said.
Paint manufacturers revealed that they were unable to secure foreign currency required to import industrial inputs and this has reduced their productivity. Abraham Berhane, executive of Bright Paints, commented that there are a number of raw materials that are being imported for the manufacturing of paints adding that paint factory owners hardly get foreign currency. “Many paint factories are on the verge of collapse,” Abraham said.
According to Abraham, the problem is not only shortage of foreign currency but managing the limited resource. “We get foreign currency once in a year. If you give five million dollars for a small factory once in a year it will not be able to use it. But it may need 50,000 dollars now and then. The second problem is those who need five million dollars and 50,000 dollars are told to wait for one year.”
Abraham said that the National Bank of Ethiopia (NBE) does not allow factories to change pro forma invoice. “We present pro forma for the type of goods that we intend to import. After several months the price of the goods increases when we request to buy from another supplier due to the price surge the NBE does not allow us to do so. We are forced to buy from the same supplier from whom we first collected the pro forma for higher prices.”
Kiros Abraha, representative of Goda Bottle and Glass Factory, said that it has been more than a year since his company finalized preparation to launch production. “We are unable to commence production due to unavailability of foreign currency. We are squandering shareholders’ money. We would be very grateful if we could hear any solution from you,” Kiros asked.
Teshome Tessema, deputy general manager of Awash Melkassa Aluminum Sulphate Factory, said that factories that produce vital goods that substitute imports should be given priority in the foreign currency rationing. “For instance our factory produces water treatment chemicals. The drinking water that the populace use is treated by our chemicals and like pharmaceuticals we should be given priority,” Teshome said.
Some of the investors expressed their grievances on the erratic power supply. Belay Seyoum, representative of Addis Bottle and Glass Factory, said that his factory is producing and supplying bottles to the local market. “We produce day and night and supply large number of bottles especially to the local breweries. We are facing challenges with the recurrent power interruption,” Belay said.
The other major challenge that the manufacturers raised was disputes with youth particularly in the Oromia Regional State.
Belay said that his factory is facing challenges in transporting industrial inputs from its quarry near Babile town. “We hired the work force from the local community. But we are now facing challenges to mine and transport raw materials from our quarry in Babile. The youth demand payment per each truck. It is not clear whether its tax or royalty. There were incidents when our truck’s windshields were broken by the youth.”
Belay said that his company, which is jointly owned by Ethiopian and Chinese investors, is planning to build two more bottle and glass factories at a cost of 200 million dollars. However, he expressed his fear that these kinds of illegal actions by the youth may deter foreign investments.
Other investors voiced similar concern. Daniel Wondwossen, managing director of FAMU Industrial PLC, said that his company supports the Oromia’s endeavor to create job opportunities for the youth. However, Daniel said there are some irregularities noted in the youth activities. “We are the first gypsum board producers in this country. We have been saving foreign currency by substituting imported gypsum boards. But now our factory is denied access to its quarry for more than a year and we have ceased production. We are paying salaries to our employees though we suspended production for 13 months now,” he said.
Teshome Tessema of Awash Melkassa Aluminum Sulphate revealed that his factory will soon cease production due to shortage of input supply. The state owned Ethiopian Minerals Development SC supplies raw material called kaoline for the production of Aluminum Sulphate. The quarry of the enterprise was recently shutdown due to a dispute with the local community and administration. “We are now in short supply of kaoline and we will run out of stock after two weeks,” Teshome said.
A representative of East Cement Factory said that his company has suspended production last August due to a dispute with the local community. “There is a 25 km access road to our quarry. The local community complained about the dust and banned truck movements. It has now been six months since we stopped production,” the representative said.
Addressing the questions raised by the investors Samuel Halala, director general of the Chemical and Construction Inputs Industry Development Institute, said that the foreign currency shortage is a national issue. Samuel said the industrialists are part of the solution. “You are expected to generate foreign currency,” Samuel said. “We are trying to address the foreign currency shortage in consultation with the NBE. But at times it is beyond our capacity,” he said.
With regards to power interruption, Samuel said that Ethiopian Electric is trying the address the issue. “We constantly deliberate with the utility company on power interruption issue. We will persuade them to do more,” he said.
State Minister of Industry Alemu Sime (PhD) said that there is a critical problem with the trade balance. “We import more than what we export. The performance of the manufacturing sector is not satisfactory. We should play our role in resolving the problem by growing our exports and generating more foreign currency,” Alemu said.
He poised that the government should resolve the bottlenecks that challenge the manufacturing sector. However, he said, the industries should exploit their potential to the utmost and export their products. “Are you using your full potential? How many of you are searching foreign markets? Some of you are trying to export your products but others seem to be comfortable with the local market and do not aspire to export.”
Regarding the dispute with youth in Oromia, Alemu said that the youth raised justified demands. “They are demanding their legal right to employment opportunities. They want to benefit from the development. Few people related to government officials using their network are creating wealth while the mass is a bystander. Ethiopians told us that this does not work anymore,” Alemu said.
The state minister blamed some of the industrialists for backdoor negotiations with the youth and unfair staff recruitment. “Some of you make illegal deals with the youth and come to us when you quarrel with price. Some of you do not hire workforce from the local community. You rather bring employees from other areas; that is why I say you are part of the problem. As a government we take the responsibility for the unemployment problem that provoked the youth,” he said.
Alemu said that it is impossible to quell the youths’ demand by force. “We have deliberated on this issue in our party’s central committee meeting. The Oromia Regional State took appropriate measure in taking over some of the quarries away from brokers and gave it to the youth.”
However, Alemu admitted that there were some irregularities and unlawfulness unfolding in some localities. “In our party we have agreed that measures have to be taken to address these unlawful actions.”
Alemu said that the Ministry of Industry will organize a consultative forum in which senior leadership of the Oromia Regional State and local administration will participate. The forum will deliberate on the dispute with the youth, employment creation scheme and addressing illegal actions.
With regards to the closure of East Cement, Alemu said that he has visited the factory, the road and deliberated with the local community. “It is true that the local community banned the movement of trucks and they are right. I personal talked to the local residents and they told me that the dust is causing health hazard and ruining their farms. Their question is justified. They have lost their loved ones due to respiratory complications and their crops were damaged. They asked me if we value the lives of citizens or the factory.”
Alemu said that promises have been made that an asphalt road will be built and the community was waiting for nine years. “They waited for years and they were fed up of broken promises. So they banned the movement of trucks. So now we cannot quell the legitimate demand of the community. This issue has been presented to the Office of the Prime Minister and it will be dealt with accordingly. It is the government that should build the road. The company cannot build an asphalt road.”
The chemical and construction inputs manufacturing sector contributes 20 billion birr to the country’s economy. In the past six months the sector generated 13.9 million dollars from export, the lion’s share coming from the cement export. The target was to garner 26.8 million dollars.