The Ethiopian Construction Works Corporation (ECWC) announced that its rebar dumped at Djibouti port for almost half a year is now being moved to the country.
It has been stated that there were high amount of rebar and wire rod raging from 6mm to 32mm stored in the port area at Djibouti, because the corporation was unable to access finance for the settlement of customs duty and transit.
Tinfu Muche, Public Relation Head of ECWC, said that transporting the product from Djibouti was delayed because the state owned corporation was unable to pay the duty and maritime transit fee.
Meanwhile Tinfu did not give confirmation, sources said that the Corporation had asked the Ethiopian Customs Commission (ECC) for credit service to import the product, but ECC denied the request.
Tinfu told Capital that now the Commercial Bank of Ethiopia disbursed the long awaited 500 million birr loan to settle the stated clearance fees and now the product, which will be an input for developmental projects that the corporation handles, is being transported in the country.
“The product and loan disbursement impediment have been also known by the Office of the Prime Minister and now the rebar that is 15,400 metric ton is being transported from Djibouti,” he added.
“We expected the product that consumed USD 8.5 million will be transported in a month time,” he said.
Tinfu said that such kind of volume would not be available locally and on the aim to solve the rebar scarcity and improve the system ECWC imported the bulk product. “The product will cover the project demand for the coming two years,” he explained.
Initially the corporation awarded the supply of about 10,000 metric ton for local manufacturer, Steely RMI, in 2018 but the company was unable to import the product on time due to lack of foreign currency to import billet which is used as a raw material.
About a year ago the corporation has again floated and awarded the bid to a Turkish company. At the time there were a claim that the foreign currency that would be paid for the foreign suppliers can be used to import raw material for local industries, that can supply the product for ECWC.
The sector actors argued that the local manufacturers have over capacity compared with the local demand; however the foreign currency shortage forced them to run significantly under their capacity. On the other hand rebar users are still accessing the foreign currency to import the finished material at the cost of local producers who holds tens of thousands of labour.
Bekele Desta, Basic Metal Technology Development Directorate Director at Metals Industry Development Institute (MIDI) told Capital that the steel industry has 8 million metric ton production capacity per annum; and the rebar sector took the lion’s share and stood at 5 million metric tons.
“Even though the capacity is very high because of lack of input the actual rebar production is limited to about 400,000 metric tons, which is less than 10 percent from the actual capacity,” he added.
Bekele said that currently the country’s rebar demand is 700,000 metric ton per annum, “the finished product imported per annum is equal with the local production.”
In an evaluation meeting held on Thursday August 27 on MIDI’s last year performance and strategy for the current budget year the issue was raised by the institute.
At the meeting unfair LC allocation at banks is stated as a major challenge for the manufacturing sector.
“It is well know that the local rebar industry has huge capacity that can compete in the continent not only on quantity but quality level, but finished good importers have better access of foreign currency than industrialists,” Tilahun Abay, Planning, Policy Study and Information Management Directorate Director at MIDI said.
“In real terms the manufacturers should get attention and support but on the ground they are neglected from accessing foreign currency to import raw material,” he told Capital.
In the last budget year rebar importers have secured USD 303 million from banks and they imported 529,000 metric tons, “meanwhile local manufacturers accessed only USD 141 million in the same period, which is less than half of the amount that finished product importers secured,” Tilahun said.
“It is very disappointing,” he added.
Tinfu stated that the foreign currency is secured by an approval from the National Bank of Ethiopia.
Tinfu declined the claim that the Corporation is formed for profit, “if there is a problem on the procurement process there is a space to file the case for Public Procurement and Property Administration Agency, a regulatory body for federal government procurement, so far there is not any.”
The Public Relation Head argued that the bid was international, under the country regulation and locals participated, while the foreign bidder won the bid.
In the current budget year ECWC has awarded projects worth 20.7 billion birr that needed the supply of ample material to run under schedule, “totally we have a project worth 47.7 billion birr that needs massive supply.”
Regarding local suppliers he argued that they have got a chance but were unable to meet the timeframe, while local industries refute the argument and said that they were performing properly if the foreign currency was available properly.
“Beside that there have been different problems like volatile price and slow supply faced when we buy products from local sources on limited volume. On the aim to alleviate the problem the management of ECWC evaluated the situation and tabled the solution for relevant government body for approval,” he explained.
“Based on the direction of the government we have introduced bulk procurement that will feed projects without gap,” he added.
ECWC is established in 2015 with the amalgamation of Ethiopian Road Construction Corporation, Ethiopian Water Works Construction Enterprise and Ethiopian Prefabricated Building Parts Production Enterprise.
Corporation starts moving rebar from Djibouti
RETHINKING RESET
‘Reset’ is a word that is thrown around by dominant interests to express their desire to retard or even stop the accelerating collapse of the modern world system. The project is intended to begin with its main pillar-the global economy. At this juncture in history, we don’t think ‘reset’ is the appropriate word, as it connotes going back to previous arrangements after clearing/cleaning some operational glitches here and there. In reality, the major problems of the world order are essentially structural in nature. Without dealing with these protracted problems honestly and bravely, the current status quo cannot be maintained. In fact, the potential global disruptions can easily trigger widespread civilizational collapse. On this point at least, we agree with the Davos cabal! See the article next column.
Initial perusal suggests the proposed ‘reset’ project is going to have two major shortcomings. It seems the ‘reset’ undertaking would still like to continue the perennial and deeply flawed regime of unequal exchanges. Since the 18th century, the degree of polarization between the core countries and the periphery has become intractable. Two hundred years ago, the ratio of a typical African’s income, compared to that of a typical European’s was only one to three. Today the average ratio is more like thirty-to-one! This sits at the heart of global structural inequality. Unless this exchange regime that is forcefully and systemically imposed on the peripheries is not discarded, the ‘reset’ plan will not go very far in addressing global inequality. The second thorny issue is associated with the various secular trends of the world system. These are not cyclical in nature. Moreover, they are, by and large, irreversible. They include, amongst others things; climate change, ecosystem destruction, resource shortages, the increasing demand of modern labor/citizens (free education, health, housing, clean water, etc.,) compared to earlier phases of capitalism. It is obvious these cannot be ‘reset’, so to speak. For example, the ‘New Green Development’ is a mere ploy to extend the tenure of the current dehumanizing and wasteful order. It is the likes of ‘de-growth’, ‘de-centralization’, de-consumerism, devolution, etc., that should be the vocabularies of the future world system!
Current sectorial situations can better illuminate the depth of the problem the world is facing. In the OECD countries for example, the retail business sector has been declining for decades. Instead of facing the problem honestly, the managers of the world system started to pump money (to consumers) via credit/debts to encourage increased and wasteful consumption. They reckoned this was necessary to sustain global production enterprises. When this failed, the states themselves became consumers of many unnecessary products. For instance, the military-industrial complex cannot survive without the largesse of the states. In late modernity, financialization took the imagination of the elites and replaced real economic activities with financial engineering in a universe of unearned ephemeral phony money. Valuations of companies stopped being correlated with potential income and franchise value. All the useless statistics/indexes became important because of distorted paradigm emanating from financialization!
The travel industry, which is by far the largest sector in the global economy, had to be subdued or even frozen to avoid catastrophic collapse. Almost all airlines in the world operate in red, propaganda aside. This is because of competition and the resultant revenues decline. When total available rooms runs in the tens of thousands while tourist arrival is hardly a thousand per day, (in a particular city/location), this clearly shows the lunacy of late capitalist modernity! On top of this, we now have ‘Airbnb’ (the hosting business), muscling in the hospitality sector. All these were made possible because of easy finance/phony money not grounded on something real. For example, Kenyan tourist arrival has been declining (due to many factors) for years and is now only in the few hundreds of thousands per annum. Yet, the luxury/tourist hotels that are sprinkled all over the country were intended to accommodate few millions of guests per annum. This phenomenon is now given a name, ‘overtourism’!
Housing is another of the global problems that must be tackled squarely. In China alone, there are close to 90 million dwelling units without occupants. Yet, these properties are expected to go up in values, even though they have been empty for decades and decaying. This problem is widespread and is not unique to the Chinese economy. What is frightening about the case of China is; the sector is a USD 52 trillions affair! It is such gross distortions (creating inequality) that are seriously threatening the world order. A rethink not only a reset is in order. The auto industry is another sector where it is absolutely jammed in overproduction. Capacity over and beyond demand is close to one hundred million units per year! The story is more or less the same in the other economic sectors of the world economy. The imbalance that prevails in the financial sector is probably the worst of them all. If one of the so-called ‘system critical banks’ fell, (like the Deutsche Bank, which has been a prime candidate for a long time) the world will be in a real fix!
Only 20% of the global labor power is needed to produce the current global output. Therefore, in a capitalist world economy where 80% of the sheeple (human mass) is considered redundant, how is income to be distributed? With what are we going to replace the stupid idea of unlimited growth that is embedded in current capitalism? How can the world build a more resilient existence, within the healthy confines of the natural ecosystem? We believe a new paradigm away from the old, is urgently required. The Davos jamboree is expected to address these global problematic, come January. Of course, they would like to deal with these massive/deep problems in their own ways. This time around, we believe, dominant interests must concede to the basic demands of the large majority of the global sheeple, which comprises over 90% of the planet’s human population, per force! Otherwise, the future is going to be hard going, mostly for the parasitic elites. The B***S*** must stop. “Liberty is meaningless if it is only the liberty to agree with those in power.” Ludwig von Mises. Good Day!
Maneuvering the cement shortage crisis
In an attempt to solve the chronic shortage of cement in the market in a sustainable manner the Ministry of Trade and Industry has prepared a guideline that will go into effect starting from Monday August 31st, 2020.
Eshete Asfaw, State Minister of Trade and Industry told Capital that the guideline is mainly prepared to sustain the supply chain, and also will allow the private sector to be involved in the supply of cement. “Previously the Ministry had decided that only governmental organizations would supply cement directly from the factories.”
Guna Trading House Plc, Ambasel Trading House Plc, Biftu Adugna Business S.C., Ethiopian Industrial Input Development Enterprise, and the Ethiopian Trade Works Corporation were authorized to exclusively wholesale but now this has been extended to include private sector enterprises.
According to Melaku Alebel, Minister of Trade and Industry, the shortage of cement is mainly due to lack of spare parts, power outages, lack of inputs, lack of leadership and professional skills, security problems, supply of raw materials, and other pertinent issues.
According to Melaku, the Ministry has prepared three types of solutions; short term, middle term and long term. As he said in a short term solution the ministry has decided to import 3 million tons of cement in the coming three months to solve the current problem. Also the ministry has allowed companies which have foreign currency accounts to import cement to sustain the market.
According to Melaku as a long term solution the ministry is working to increase the production capacity of factories which in return has increased the production capacity of the factories to 63 percent. Beside the government has allocated 85 million dollars to alleviate the shortage of spare parts in the factories.
“Based on the guideline by supporting the factories the ministry is planning to reach up to 85 percent production capacity of factories” said Eshete.
There are about 12 cement factories in the country with 345,000 tones of production capacity per day – of which most of them are operating under their capacity.
In an attempt to solve the problem related to shortages and sky rocketing prices the Ministry authorized five governmental development enterprises and selected private distributers to directly purchase and distribute cement from factories to the open market.
Different stake holders in the sector have pin pointed that the price hike had been caused majorly by the rise of illegal brokers and the inefficient control of the government on the market.
In previous years, as a result of the construction boom, the construction industry, through massive public investment and infrastructure projects have consequently led to a high demand of cement consumption.
According to the Ministry, in the retail market cement is sold around 350 birr per quintal but currently it soars up to 600 birr. The country has a capacity to produce 17.1 million quintals of cement per annum.
DBE doubles performance of loan collection
The state owned financial firm the Development Bank of Ethiopia (DBE), in the past financial year, has successfully been able to double its loan collection capacity despite having a rocky past few years. This has resulted in a significant drop in the Non-Performing Loan (NPL) ratio.
In a webinar evaluation of the past financial year, DBE announced that it secured close to 7.4 billion birr revenue with 111% achievement.
Haileyesus Bekele, President of DBE, described the result as historical for the bank that was in crisis in the past years due to the growing of NPL.
The bank’s revenue has also been boosted by 31 percent compared to the prior year’s performance.
In the 2019/20 financial year the policy bank has secured close to 1.3 billion birr gross profit before tax, while the net profit after tax stood at 1.13 billion birr. This is a first in the history for the bank to register a billion birr profit.
According to the report, the bank approved a loan of 10.4 billion birr with 76 percent of its target during the year. At the same time in the stated period it has disbursed 8.54 billion birr, which is 71 percent compared with the target set for the end year.
The bank has also collected 7.7 billion birr loan from clients in the past year that is 98 percent from its target during the fiscal year.
The loan collection is stated as a big result as it is badly required to reduce the NPL. DBE’s NPL had reached 40 percent about two years ago, while it has reduced it to 34 percent for the 2019/20 financial year.
“Particularly, the bank’s annual loan collection almost doubled as compared to the previous year’s performance and its historical average performance,” the bank stated.
Currently, the bank has a total loan portfolio of 55.67 billion birr, which is a 9 percent increase from the previous year’s amount of 51 billion birr. The NPL’s ratio has also decreased by 4.6 percent in comparison to last year’s performance.
The Bank also sold Grand Ethiopian Renaissance Dam bond which amounted to 616.43 million birr during the budget year.
Haileyesus also echoed that these achievements would be replicated in the next year by reducing NPL’s through collection of loans and aggressive participation in bond sales.
In 2020/21 fiscal year, the bank targets to approve 10.09 billion birr loan, disburse 10.03 billion birr and collect 8.24 billion birr as well as reduce the NPL ratio to 25 percent.
In May this year the Council of Ministers approved to increase the authorized capital of the bank to 28.5 billion birr.
