Steel companies conduct study to determine duty free effect

Alemayehu Tegenu, Minister of Cabinet Affairs of the Office of the Prime Minister
Alemayehu Tegenu, Minister of Cabinet Affairs of the Office of the Prime Minister

 

The Ethiopian Association of Basic Metals and Engineering Industries (EABMEI), which is mostly made up of local steel manufactures, has begun a detailed study to provide insight into the government’s new policy on steel.

Samuel Mulugeta, Board Member of the association told Capital that EABMEI decided to do this after a member of the association met Alemayehu Tegenu, Minister of Cabinet Affairs of the Office of the Prime Minister a couple weeks ago.

They met with the Minister to discuss the Office of the Prime Minister’s decision to eliminate duty free incentives for steel imports. This was a reversal of a decision previously made by the Ethiopian Investment Commission.

“Our discussion was focused on the basic metal producers which largely manufacture steel, work in engineering or materials and spare parts,” he explained.

“When it comes to making steel in Ethiopia we are concerned because even though there are ample local steel producers, the product continues to be imported. This takes up a lot of hard currency,” Samuel said.

In October the National Export Coordination Committee (NECC) chaired by Prime Minister Hailemariam Desalegn determined that local manufacturers were capable of meeting local demand and found that  steel traders had organized to pressure local steel manufacturers.

After the committee published their findings the Ministry of Industry (MoI) issued a letter outlining a strategy that government agencies should follow in the future.

One of the recommendations was for the Investment Commission to lift duty free incentives for steel imports.

The letter issued on January 2 and signed by Alemayehu also revoked a previous letter from MoI saying it did not follow the proper procedure.

Alemayehu told Capital that the duty free incentive was ratified by the Council of Ministers, which, according to regulations, could not be suspended or revoked by directive from MoI.

“The incentive should be revoked through another regulation from the Council of Ministers’ proclamation,” he added.

“This is the reason for suspending the letter issued by MoI,” he added.

“We have spoken with the Minister about the situation and how it is affecting local manufacturers,” Samuel said.

They have reached a consensus to alleviate the problem through rules and regulations, he added.

“If the government provided duty free incentives for investors when they buy the product locally they would not import the product,” experts said.

The proclamation allowing investors to use local products with incentives was ratified four years ago, but it was not applied since detailed regulations and directives have not been issued.

Currently the existing steel factories have a production capacity of two million metric tons of steel per annum, while the actual demand is about one million metric tons per annum.

Steel imports have continued as usual and half of the local market is covered by imported items. More than 160,000 metric tons of steel arrived at Djibouti recently, according to sources.

People in the steel industry would like to see the government treat them like the cement sector.

“There is ample cement production in the country because the government does not give duty free incentives for cement imports,” experts said.

“The cement experience should be applied to the steel sector,” they added.

After reaching consensus with the Minister we have started to undertake a study supporting the government’s new steel policy.

“There is now enough local steel production that we are now looking to the regional market to begin legally exporting the products beyond the current border trade,” Samuel said.

“In the coming week we will begin visiting regional countries to evaluate the market to increase exports,” he added.