Fertilizer project delay blamed on forex crunch

The Metals and Engineering Corporation (MetEC) claimed that lack of hard currency is causing a slowdown of mega projects including the long delayed Yayu Fertilizer Complex.
The management of MetEC, who appeared at the meeting with the Public Enterprises Standing Committee of the House of Peoples Representatives on Wednesday November 15, said that the hard currency shortage is the reason the projects have been delayed.
“We have processed a letter of credit (LC) to get hard currency for the Yayu project, which was scheduled to be finalized during the previous Growth and Transformation Plan (GTP I), but it is has not been released yet,” representatives of the corporation told the parliament standing committee.
“We have not mentioned it to the public but we have to tell you that for the last 7 months we have been waiting for the approval of the LC,” he added.
The corporation has been waiting for a long time to import equipment for the fertilizer factory, according to Tigabu Feleke (Brigadier General).
The standing committee members have pointed out that as per the agreement with the Ministry of Public Enterprises the performance of the fertilizer project was expected to achieve at least 3-4 percent per month but the actual achievement is very weak.
Accordingly in the first quarter of the budget year the fertilizer project performance improved by 0.28 percent compared with the end of the past budget year.
According to the document the Yayu project registered an accomplishment of 43.66 percent, which was 43.38 percent at the end of the past budget year.
The project is located at Yayu Wereda, Illuababora zone, Oromia Regional State, 600km West of Addis Ababa.
The client who owns the factory, Chemical Industry Corporation, recently expressed its frustration about the fertilizer project. They claimed that the delay has been putting the chemical corporation in debt. The state owned Commercial Bank of Ethiopia had provided 10.6 billion birr for the project. Ministry of Public Enterprises recently told the standing committee that the chemical corporation has been forced to pay a 2.3 billion birr loan and interest to the bank.
The corporation also claimed that payments for international suppliers at the project, Great Ethiopia Renaissance Dam are also delayed. “The LC for the same project has also been delayed, while it is a priority for the government and the country,” they complained.
“We cannot speak loudly since it is the country’s issue,” one of the managers of MetEC said.
It is a challenge to go with the projection due to the hard currency scarcity.
The committee has criticized the corporation in its report.
“You have to indicate reasons for the delay clearly,” a member of the committee said.
At the discussion in parliament MetEC officials claimed the problem was with clients and the sugar issue.
In its quarter report the corporation stated that the sugar project at Omo will be transferred in the coming month for the Sugar Corp.
“Beles I will be transferred to the Sugar Corp at the end of the budget year,” according to the report.
At the Yayu project the corporation targeted to test the thermal power plant and install and finalize the Urea principal units for test until the end of the budget year.
“They asked why they are not part of the evaluation,” one of the leaders said.
One of MetEC officials said that the problem is not between Sugar Corporation MetEC, and the regulatory body has to solve the problem.
The committee member stated that MetEC has to be competitive with other companies engaged in similar projects.
About 12 years ago, the government set up a Coal Phosphate Fertilizer Complex Project Office who studied the potential of a fertilizer factory at Yayu. For over ten years, the office conducted feasibility studies including socioeconomic impacts, geological and environmental studies with a Chinese company, Ging Sion Explorer and China National Complete Plant Import and Export Corporation (COMPLANT).
The 12 million birr study from COMPLANT reported that around 100 million tons of coal was found in the Yayu area.
The coal has the potential to produce 300,000 tons of Urea, 250,000 tons of Dap fertilizer, 20,000 tons of ethanol and 90MW of electric power annually.
This would cost close to USD 730 million, although the report was conducted in 2008 and prices have likely gone up.
The project that will rest on 129 hectares is expected to be finished at the end of the GTP.
MetEC manages the construction and implementation of dozen of mega projects but almost all of them are delayed.