At the Hilton last Tuesday business people from the metal industry talked about the challenges facing them as they strive to meet the demands of the Growth and Transformation Plan that dusks in 2015.
Taxes, power, price hikes, the monopoly of the Ethiopian Shipping and Logistic Enterprise, scrap metal supply and capital shortages have led to a call from the Ethiopian Association of Basic Metals and Engineering Industries (EABMEI) for a public-private dialogue forum directly responsible to the Office of the Prime Minister to support the metal industry.
Scrap material is subject to five percent import duty while the finished product is imported on a duty free basis. Such a scheme hampers the competitive advantage of domestic industries because domestic products become expensive for prospective investors when compared to international prices. Participants argued that the government should lift the import duty or develop a duty drawback scheme for local industries.
A ton of scrap metal is traded internationally for around USD 400. This represents about seven birr per kg. The price of scrap metal and iron ore has surged both locally and internationally, argued Asegid Mamo, president of the association.
Engineering industries have to focus on the production of machine tools and machine building. Such an act of industrialization has a multiplier effect, deliberated the participants of the consultative forum.
“I researched the price of a machine that cuts timber. It costs about 380 thousand birr. The machine weight 170 kg. If you multiply its weight with the current metal price per kilogram, its cost is less than 2,000 birr. The balance of the cost is attributed to production and profit margin in the distribution chain. That is the cost we need to cut by producing it locally,” argued a participant of the consultative forum.
“Ethiopia’s industrialization effort means the metal industry is growing and we want more cooperation from the government,” a participant said.
“My ministry recognizes some of the problems raised. The main problem is not shortage of scrap metal but its supply. The centralization of its supply under the Metal and Engineering Corporation (MetEC) was purposeful. If that creates a problem, we are ready to talk with MetEC and solve it since for the normal functioning of any industry input is of paramount significance. Power supply has been a headache not only for the basic metal industry but also to all industries in the country. It has to be solved. Logistics are another important area that needs our intervention. It needs to be simplified in a manner that saves the cost of doing business,” said Tadesse Haile, State Minister of Industry.
The GTP envisioned boosting the efficiency of basic metals and engineering industries to 95 percent of their installed capacity which is currently operating a little over 50 percent on average. By doing so, the metal sector will earn more than 101 billion birr in revenue. Per capital metal consumption will be close to 35 kg. It also aspires to produce spare parts for different industries including leather (90 percent), textiles (35 percent), sugar (85 percent), cement (85 percent), agro processing (75 percent), construction (95 percent), and car body (85 percent).