Newbie to Ethiopian market secures biggest wheat supply contract
The Public Procurement and Property Disposal Service (PPPDS) has awarded two companies, GEM CORP Commodities Trading SA and AGRO CORP International PTE LTD to supply 600,000 metric tons of wheat at the price of USD 116.53 million (3.38 billion birr), The Reporter has learnt.
Accordingly, a large chunk of the wheat contract goes to GEM CORP where the company is awarded to supply 500,000 metric tons from the total bulk of 600,000 metric tons at a price of USD 97.07 million; whereas, the remaining 100,000 metric tons is awarded to Agro Corp for USD 19.4 million.
Thelatest purchase is the biggest to be awarded under a single supply contract, so far this year. It is to be recalled that last week, GEM CORP was also awarded to supply 400,000 metric tons at a price of USD 78.5 million which brings the total supply contract award to GEM CORPto 900,000 metric tons.
Given the size of the award and the status of the awarded companies, industry sources fear that the government is taking a high risk especially considering the volume and the actual track record of the company in Ethiopia or the lack thereof.
“It is very clear that it is very difficult to handle such a big quantity, especially for a first timer in Ethiopian wheat market,” said industry source whose name was withheld upon request.
“It may not be easy especially for GEM CORP to supply the 400,000 metric tons of wheat in two months’ time and again another 500,000 metric tons in another two months,” he said.
It can be recalled that,the country was suffering from a wheat shortage following the lethargic procurement process and supplier’s failure to deliver wheat as per their contracts.
The wheat is purchased on behalf of the National Disaster Risk Management Commission and will be used to assist those who are in need of humanitarian assistances. It can be remembered that according to a latest report released a couple of months ago,there are around 8.3 million Ethiopians in need of relief in food and cash, as well as non-food assistance.From this, 8.13 million people are in need of food assistance.
The humanitarian crisis in Ethiopia seems to remain unchanged despite a better climate condition in comparison to last year. This is, however, due to conflict induced mass internal displacements across the country which affected millions of Ethiopians.
In a related news, Wifag, which a few months back was awarded to supply 400,000 metric tons of wheat with USD 108 million (3.04 billion birr), has finally managed to submit a performance guarantee, this week.
It is to be recalled that Wifag was awarded and had signed a contract to supply the wheat but failed to submit a performance guarantee worth USD 10 million. This has delayed the whole tender process and forced the contracting entity, the Ethiopian Trading Business Corporation, to complain to the PPPDS.
The aforementioned delay in the procurement process and the fact that the government is now expecting to get 1.4 million metric tons of wheat in the coming few months, is feared it is going to cause a congestions in the port of Djibouti where sources are saying it might be difficult for the awarded companies to perform their contract.
“If the aforementioned wheat contracts are going to fail, the country will be in a more dire wheat shortage crisis in the coming few months,” another industry source said.