A USA based company receives a nod from the Ethiopian Sugar Industry Group to supply 200,000 metric tons of sugar, in the latest restricted bid.
From Capital’s reporting in recent weeks, the latest restricted bid that was opened on November 8 sees Osirius Group winning the bid over Agrocorp International and ED and F MAN who also produced technical and financial document for the bid.
The recent restricted bid was re-floated following the failure of the South African company, Millhouse International, which was awarded the bid to supply 200,000 metric tons of sugar, but fell short due to failure in coming up with a performance bond.
In the recent bidding, Osirius offered a highly competitive rate for the supply of the sweat, while the offer put in by Agrocorp was a bid higher for the supply of the strategic commodity on payment at sight whereas the offer of ED and F MAN was noted to be incomparable with the rate that the US firm tabled.
About two weeks ago, the Sugar Group called for the three companies to extend their price validity date for additional seven days of up to November 29 besides the original ten days that was mentioned on the bid documents.
As per the information Capital obtained from reliable sources, both ED and F MAN and Osirius accepted the extension.
According to the information heard this week, the Group has awarded the US based company to supply the commodity as per the schedule that the two sides agree upon.
In the bid documents, the Group expressed its desire for the commodity to be transported up to Djibouti through eight shipments at 25,000 metric tons each. However it has been stated that the first batch was expected to reach on the third week of November and the last one at the end of January 2023. However, there will be some adjustments on the arrival as experts opine.
On the FOB price offer, Osirius stated that it will supply the commodity on letter of credit (LC) at sight USD 545 per ton, USD 522 on 12 months differed LC and 18 months differed LC that means the payment will be settled in a year and half time. The bid winner cited that the loading port will be at Brazil.
The Singaporean company, Agrocorp, which is the company that won the last sugar bid which was opened more than a year ago, gave its offer on LC at sight and differed LC for 12 months. Based on that it offered USD 549.95 for payment at sight and 608.75 for 12 months differed LC.
ED and F Man- a British commodity firm, which is not a fresh face to Ethiopian markets offered USD 850, USD 900 and USD 1,100 per ton for payment at sight, 12 months and 18 differed LC respectively.
As per the information Capital secured, the Group has accepted the 12 months differed LC that Osirius offered to supply the sugar.
The offer that the company submitted for 12 months differed LC was lower by USD 23 than its offer for payment at sight. “Due to that the Group selected the 12 months differed LC,” the sector experts said.
“If the company maintains commitment to its words, the sugar shortage will be easily solved. However, if it disappears like Millhouse, then the Group must reassess its international bidding scheme,” experts added.
The awarded company is expected to come up with its performance bond by this coming week.
In the 2021/22 budget year, the Group had floated an international bid, but was unable to buy the commodity in the year.
US Company – Osirius Group wins latest sugar bid
MoTRI gives law abiding exporters the green light
The Ministry of Trade and Regional Integration (MoTRI) calls exporters to commence shipment of commodities already secured through contract and investment farming schemes. Traders voice out opinions stating that the recent move by the ministry on the trading of sesame will lead to an erratic business market.
It is to be recalled that MoTRI called exporters who are getting export commodities on contract farming and investment farming to come up with the required documents to register at the relevant regulatory body of the ministry.
For instance exporters who access the commodity through contract farming were supposed to submit their agreement entered with farmers, and for those who use the commodity from investment farming were informed to come up with the development license for the registration that will allow them to undertake the export.
Besides that, the standards and quality measurements were set to be conducted through the Ethiopian Commodity Exchange (ECX) to manage the export. Recently, MoTRI also called all exporters to bring in their six month export business plan.
Based on that, this week, the ministry announced that exporters who secured the commodity, which mostly includes oilseeds and pulses, from the two schemes, fulfilling the set conditions were given the green light for export.
Currently, this type of contract and investment farming has become popular and an alternative scheme for accessing exports of commodities besides ECX.
A week ago, Kassahun Gofe, State Minister of MoTRI, told Capital that the significant amount of export commodities are expected to come out from the country through the two alternatives in this season.
He said that substantial number of exporters had registered their agreements as per the Ministry’s call.
Experts in the sector said that the current harvest season is a heyday meanwhile there are several natural and manmade challenges in the country.
One of the exporters that Capital interviewed said that despite the challenges in the northern and western parts of the country, this year’s harvest were very good in terms of major export on pulses and oilseeds.
At the beginning of this harvest season, which mainly started in the middle of October, MoTRI also introduced a new scheme at the trading floor, ECX.
Based on the new scheme, the ministry has lifted the price cap that was imposed on the trading at ECX about a little over one year back.
It disclosed that the trading would be led through the market. Initially, the ministry imposed the cap to keep the export business profitable and to counter the under invoice and over invoice issues.
In connection with the foreign currency shortage, traders who mainly engage on import business were paying higher prices against the international market to get the export commodity in order to earn the much needed foreign currency for their other activities.
But ever since the ministry imposed a weekly price benchmark, traders have been limited by a cap to buy the commodities.
Buying commodities at higher price points against the international market have also been linked to hoarding.
However, early this harvest season, the ministry lifted the cap that was greeted by a price hike in the sesame seeds market at ECX. As a result, MoTRI reinstated the cap on the oil seeds which lasted about three weeks and later lifted the cap last week.
A week ago, Kassahun told Capital that the ministry is following a flexible approach led by the market.
“We have lifted the ceiling and we will take the market approach as per the evaluation of the parameters that we applied,” he elaborated, adding, “Our principle is similar and remains integral to ensure the smooth operations of the sector.”
He illustrated that when the cap was re-imposed about a few weeks ago, the price spiked to 12,000 birr per quintal for the Wolega type of the commodity and even higher price points for Humera.
Now traders and long established exporters are complaining about MoTRI’s new approach that they claimed the frequent move would make the market erratic and undermined.
They insisted for the government to follow sustainable regulation methods than frequent changes, “It is crucial to lead the sector in a healthy manner.”
One of the biggest exporters told Capital that currently some crucial exporters have decided to suspend taking the commodity from ECX because of frequent price fluctuations.
Kassahun said that he is confused by some traders who are buying the commodity at the current rate that is over compared with the global market, “I am wondering how traders are buying the commodity at this rate.”
In the past, exporters considered paying extraordinary amounts against international market since their major objective was to secure the foreign currency. But at the current stage most of the foreign currency is given to the government than the previous trend.
“As per the National Bank of Ethiopia (NBE) foreign currency surrender directive that was issued about a year ago, traders would not get more than 20 percent of the foreign currency they generated from export, while 70 percent must be sold for NBE but some traders are trying to buy the commodity with high value against the export rate,” he elaborates by adding that, “the government should follow the situation and NBE has to also control the under invoice mischief.”
Exporters have also expressed that the export sector must be a standalone business, which is effective and strong to benefit the country hence the imposition of price caps.
“It must also re-introduce the cap to not only sesame but also for other export commodities that are traded at ECX,” most of the exporters that Capital spoke to underlined.
At the trading held on Thursday December 1, the average price of Humera Gonder sesame seeds was 10,538 birr and 9,625 birr for Wollega type per quintal. It seems that the rate has shown some reduction compared with the preceding trading days.
For instance, on the trading held on November 23, the Humera Gonder sesame’s average price was 11,138 birr per quintal and 10,140 birr for the seeds from Wollega.
IPDC inks contractual agreement with three investors
Agreements to play a vital role in accelerating import substitution
The Industrial Park Development Corporation (IPDC) inks contractual agreements with three foreign and domestic companies to invest in three industrial parks.
As per the contractual agreement signed on December 2, 2022, a Chinese company by the name Long March Electrical Equipment manufacturing will receive a 3000 square meters plot of land in Adama Industrial park for the production of electric meters and materials with an investment of 240 million birr.
Besides creating knowledge transfer in the electromechanical field, the company is expected to create 250 jobs in its initial phase.
Warka Trading, which a local company has also signed an agreement to rent a 5500 square meters shed at the Hawassa industrial park to manufacture standard thread inputs for textile and apparel, with an investment of 24 million birr.
It is noted that the investment will enhance foreign earnings, job creation, and knowledge transfer in addition to creating resource linkages in industrial parks.
The third company is NK World Medical Equipment manufacturing, and with a total investment of 205 million birr in Kilinto Industrial Park, it is said to create 210 jobs.
As indicated on the agreement, the investments particularly that on medical equipment manufacturing will play a role in accelerating the national aspiration of import substitution.
During the signing ceremony, IPDC Chief Executive Officer Aklilu Tadesse said that the corporation is intensively working to enhance productivity and global competitiveness.
He added that the flow of Foreign Direct Investment which had been slow is now showing a promising revival.
The Ethiopian Industrial Parks Development Corporation was established in 2014, as one of the public enterprises. Since the establishment, the corporation has built 13 industrial parks across the country bringing several local and international companies and investors creating job opportunities, foreign currency and technology transfer.
Currently there are about 125 both foreign and local investors working in the parks, creating job opportunities for more than 81,000 citizens whilst generating 1 billion dollars in annual revenue.
Dashen Bank scoops international award for its digital revolution
Dashen Bank receives the most prestigious Bank of the Year Award 2022 for Ethiopia from the Banker Magazine, an affiliate of the Financial Times, the leading global business publication.
As indicated during the award ceremony, the award recognizes the bank’s progress in the digital sphere in particular; as the country’s national digital economy strategy ushers in unprecedented changes in the local banking and telecommunications landscape.
This has enabled the bank to identify and cement strategic partnerships with fintechs and with Ethio Telecom, the country’s largest tele-communications firm, prompting the development of value propositions catering to both middle- and lower-income customer segments.
Asfaw Alemu, CEO of the Bank, received the award at a glamorous event held in London, UK.
“We are exploring opportunities for sustained growth presented by emerging trends such as industry consolidation, foreign banks entry and establishment of capital market, and the entry of telecoms into the mobile money space, among others,” said Asfaw at the ceremony.
