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During a meeting between top government officials including those from the Ministry of Trade (MoT), National Plan Commission, the National Bank of Ethiopia, many steel manufacturers and steel importers, the government insisted that those in the steel industry must bear the burden of the recent birr devaluation.
At the half day meeting at the MoT hall held a week ago, government officials claimed that the sector actors imposed a high price increase on steel products.
The meeting, chaired by Bekele Bulado (PhD), Minister of MoT and attended by Yohannes Ayalew (PhD), Chief Economist and Vice Governor of Central Bank, Yinager Dessie (PhD), head of the Plan Commission discussed the issue for the first time since Prime Minister Hailemarimam Dessalegn at his recent press conference accused the steel manufacturers and importers of hiking prices up to 37 percent.
Sources who attended the meeting said that the price increase of the steel product that occurred after the birr devaluation is from 5 to 40 percent.
The government representatives have pushed the sector actors to reduce the price. “Bekele told us to manage the problem on our own,” a source said. “They said we need to support each other,” a source added.
The steel manufacturers claimed that the foreign currency shortage is a bottleneck for their operation.
According to sources, at the meeting the officials said that the sector actors are responsible and provide the product at a reasonable price.
Manufacturers have claimed that the information disclosed by the PM is not correct. They have met with relevant government officials at MoT and Trade Competition and Consumers’ Protection Authority via their association a day after the press conference to claim that they did not increase the price as much as that stated by the head of the government.
At the time some of them told Capital that maybe the information that the PM said is not correct.
They said that the price increase after the devaluation did not exceed seven percent and some of the manufacturers lowered the price to the same as before the devaluation after the meeting at the association which included relevant government officials.
The participants were also asked to disclose the company that increased their prices, but the officials rejected it. “They told us ‘it is impossible to mention the name since we are under further investigation,’” a sector actor who preferred to be anonymous told Capital.
According to sources, at the meeting the manufacturers claimed that they did not produce as much as they could because of the raw material shortage. They told Capital that their production is only one shift, but it has to be three shifts a day.
“Due to the hard currency crunch the local sector that has a capacity to produce more than the country needs is unable to be competitive,” they claimed, “While the imported steel is securing hard currency to import the product.”
Meanwhile it was not mentioned at the meeting they claimed that a latest bid opened by Army Foundation floated an international bid for the purchase of steel against the circular signed by the then Minister of Finance and Economic Cooperation, Abdulaziz Mohamed that ordered governmental projects to procure rebar from local manufacturers.
During the Army Foundation’s international bid to procure 25,000 metric tons of different sizes of rebar international participated. There was only one local company.
The steel manufacturing industry in the country has been growing in the past few years dramatically. The local steel demand is at a surplus. One reason for this is that local manufacturers, who joined the sector in the past couple of years, have been producing more. The sector actors asked that how the Army foundation decided to float an international bid.
“Currently the local steel manufacturers; East, Abyssinia, C and E, Sino, and Steely RMI have a capacity to produce more than three million metric tons of rebar per annum and in the coming six months an additional 2.2 million tons production capacity will be added by the expansion of the existing and new manufacturers,” experts in the steel industry explained.
They claimed that the process to procure steel on the international market is against law.
The head of the Ethiopia Metals Industry Development Institute, which is under the Ministry of Industry, declined to comment about the issue.