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Alvima Import, Export and Manufacturing PLC, is a trade and manufacturing company that focuses on the manufacturing of flour and pasta. The company’s manufacturing plant is located in Adama and is built with an investment of half a billion birr. Alvima hopes to substitute the USD 40 million worth imported pasta that enters Ethiopia every year. CEO of the company Dirieh Ali spoke to Capital about the investment, what the company looks to achieve and how it handles challenges.
Capital: How did you decide to invest in Ethiopia?
Dirieh Ali: I was working in the family import and export business in Djibouti as well as Somalia. Then we jumped into Ethiopia around 2006-2007, a special agreement was signed between Ethiopia and Djibouti, allowing a Djiboutian to get the same privileges as an Ethiopian investor doing business in Ethiopia. We are the only foreign nationality that has this privilege. So I came to Ethiopia because of that agreement.
We continued to do the import, export business and we gained a lot of experience on how to do business in the country; we had some idea about the investment climate so we made the decision to make an investment.
We decided to focus on pasta production because we know that the country is already importing high quality pasta. There are some legal processes to be finalized, have already received approval from the Food, Medicine and Health Care Administration and Control Authority, there are some things that need to be finalized with the business license but the technical part is finished. There have been delays on importing pasta packaging, but other than that everything is on track.
Capital: Tell us a bit about the manufacturing plant; we know you have invested half a billion birr on it, what does it include?
Ali: It is my first time investing in the manufacturing sector. We want to produce the same high quality pasta that is being imported into the country currently. Our technology to produce the pasta is very innovative; we didn’t invest this much money to produce an average quality product.
Capital: It is said that Ethiopia currently imports 1 billion birr worth of pasta ever year. Will you be able to fully substitute that import, do you have the capacity?
Ali: The product that is being imported is high quality, so if we want to take a majority of the market through import substitution, we need to give the consumer either the same quality or better, at a reasonable price.
Capital: Would you say that consumers are more concerned about price and affordability rather than quality? Will your targeted consumers be hotels and other establishments where quality would matter more than the price?
Ali: I don’t agree that consumers are looking at price only; they want quality. If one billion birr worth of pasta is being imported every year, it’s not just the hotels and other establishments that are consuming it. The consumers are ready to pay the right price for a quality product. Of course we have to be very reasonable with the price as well.
Capital: How do you source your raw material? You work with farmers cooperatives?
Ali: The raw material is an important issue. In order to produce a quality product, the raw material has to be of a high quality as well. We accomplish this through contract farming because it enables us to ask for the quality we need from the farmers at a reasonable price. Currently we are working with four unions and cooperatives that represent 1,000 farmers.
Capital: What kind of wheat is needed for you to produce your pasta?
Ali: We are asking for Durum wheat which is really good for pasta making. Knowing how to produce this specific kind of wheat also needs to be looked at. That is why we work with research centers to get the right seeds to give to the farmers.
Capital: The country has been facing drought for a while now, will this be affecting your production quantity, how are you equipped to deal with a shortage of raw material?
Ali: Yes, no doubt that as manufacturers we have to have some kind of mechanism in place to deal with this, we are working with farmers so that when a specific location is affected by drought, we can source raw materials from other locations that have not been affected. We are working with the Bale Zone and East Shewa and a little bit in the Amhara Region, but mostly we work in the Oromia Region.
So we are trying to diversify locations of productions and we hope that they will not be affected too much by the drought. In case there is a very serious shortage of raw material, we could also resort to importing the material from outside.
Capital: You are now focusing on import substitution. Are you planning to export in the future?
Ali: As a company we have different phases. After some import substitution, depending on having enough raw materials, there is no reason why we can’t export. One of the challenges we have to look at is that it’s not only having high quality raw material, it has to also be competitive price wise. When you go into the international market, all your cost needs to be compared to what is produced in Turkey for example.
Capital: What does your plan of expansion look like?
Ali: If everything goes according to our plan, we would add short cut pasta or what we call macaroni. The other expansion possibility we are looking at is production of biscuits and animal feed, but we have not decided which one will be first. It is more or less an integrated business.
Capital: Tell us of some of the challenges you are facing right now?
Ali: There are a few challenges to sort out. One is the land issue for expansion. We have asked the local authorities to solve it for us. But the way we see it is that we have to fulfill our part first, we can’t expect the government to give us anything easily, especially land. We believe the land issue will be solved very soon.