Public Procurement and Property Disposal Service (PPPDS) introduced two envelops bidding process for the procurement of wheat that is highly appreciated by actors.
The Service that opened a financial bid document for 600,000 metric tons of wheat on Wednesday May 13, stated that based on the lessons learnt in previous bidding process it introduced new bidding process.
Tsewaye Muluneh, Director General of PPPDS said that the new scheme will accelerate the procurement process.
According to the new scheme PPPDS has opened the technical document few days before it opened the financial offer.
Based on the new scheme companies, who passed the technical evaluation, will participate in the financial process.
In the past both technical and financial documents will be opened at the same time, which was a challenge to conclude procurements on time.
A company representative that participated in several public procurements for several years highly appreciated the new approach introduced by PPPDS.
“This is very clean and transparent and the country is supposed to follow similar procurement process in the future,” he said.
He added that the scheme will clear corruption suspicions and is a perfect approach.
“Even the shipment approach is very clear that Ethiopian Shipping Logistics Services Enterprise (ESLSE) presented the port of loading price that will determine the winner of the bid,” he said.
The bid is undertaken under free on board (FOB) and the winner will be determined by the FOB price that ESLSE, the state owned shopping monopoly, offered.
The PPPDS bid document stated that the buyer (PPPDS) will ask the freight cost from each bidder’s loading port up to Djibouti from ESLSE and evaluate the price on C and F and award the least bid price. “However the contract shall be signed on FOB bases,” the document added.
The bid document for the procurement of 200,000 metric tons of milling wheat for instance indicated that bidders shall provide only one loading port for one lot and can provide only two different ports for the two lots on technical and financial documents.
Tsewaye said that this will make the state owned enterprise beneficiary.
Abeba Alemayehu, Procurement and Contract Administration Sector Deputy Director at PPPDS, told Capital that the previous one envelop system was not benefiting the government. For instance the price of wheat shall be low but the transport cost will be very high, which makes the total final price very escalated.
“The supplier offers FOB price and the government cover the transport cost but based on our study it costs the government; for instance the carriage cost for the wheat that comes from Black Sea and Argentina port does not have similar rates,” Abeba said.
She said that the new system will benefit the country.
On Wednesday the financial document was opened for two separate bids that resided for 200,000 metric tons and 400,000 metric tons of wheat.
On the first bidding process for the procurement of 200,000 metric tons on two lots seven companies; Ameropa AG, A Plus Importer, Besc Ltd, Okapi, Gemcorp Commodities Trading, Hakan Agro DMCC, and Hayton Inc have offered their financial proposal.
Gemcorp gives USD 204.97 per ton for the first lot that has 100,000 metric tons and USD 202.33 for second lot that has the balance the total 200,000 metric tons. Gemcorp’s offer for both lots is the least amount.
Other least prices for the first lot is USD 212.75 per ton Ameropa, USD 217 of Besc, USD 219 of A Plus, , and Okapi’s USD 219.97.
For the second lot Ameropa offered USD 209.75 a better price after Gemcorp.
For the bid to procure 400,000 metric tons of wheat five companies financial offer was opened at the hall of Ministry of Finance.
Hakan Agro DMCC, Agrocorp, A Plus Importer, Marthina Mertens Sampl and Olam International are the companies that participated in the financial offer.
Agrocorp, A Plus Importer and Marthina Mertens offered for all lots that have four with 100,000 metric tons each.
Marthina has offered USD 219.15, USD 219.35, USD 219.49 and USD 219.99 per ton from lot one to four respectively. From one to four lots Agrocorp offer has also offered USD 227.5, USD 229, USD 230.5, and USD 232, while A Plus offered USD 219, USD 221, USD 223, and USD 225 per ton respectively.
Olam International offered USD 212.7 for first lot and Hakan that participated on third lot has offered USD 229.17.
The Singapore based company Olam International’s offer is very low meanwhile it offered for a single lot (lot 1).
The German company, Marthina Mertens offer for all lots, has offered better price except first lot while the company is not known on such business not only for Ethiopia but in the world, according to experts.
The procurement for 400,000 metric tons of milling wheat has been undertaken in the past but due to claims from bidders it has been taken several periods to close the case. Following the board, who looks the claims, annulled the bid the Service has been refloated the bid late February.
Tsewaye said that the final result will be disclosed by next week.
The milling wheat is procured for Ethiopian Trading Businesses Corporation and Ethiopia National Disaster Risk Management Commission that will secure 200,000 and 400,000 metric tons respectively.
In the budget year PPPDS targeted to buy 800,000 metric tons of milling wheat and 200,000 MT has already been awarded to A Plus.
PPPDS changes bidding process for wheat purchase
Private banks helping their customers to mitigate the effects of COVID 19
To mitigate the damages of the pandemic on industries that have fallen as far and as fast as tourism, hospitality and the horticulture sector banks are taking different measures. This week Enat Bank, Wegagen Bank, Abay Bank and Dashen Bank decided to reschedule annulling or reducing interest rate and reschedule loan for sectors like hospitality, tourism and horticulture for three months and above.
Enat Bank has announced to cut interest rate for these highly affected sectors. Enat also decided to remove penalty on those who do not pay their loan on time because of the pandemic. As stated by the president Wondwossen Teshome so far the bank gave around 100 million birr loan for these sectors. The bank has also made some adjustments for international banking by slashing Letter of Credit service charge. Importers that import goods related to COVID 19 will get a 50 percent discount in the service charge and commission payment.
Abay Bank has also announced to cut interest rate and principal payment for three months. The bank has lifted interest rates from 0.5 percent to 3 percent depending on the sector. “This will cost the bank to lose more than 55 million birr income however to remain in the business we need to support our customers,” said Belete Dagnachew, Vice President of the bank. Abay’s revised rate will remain active until the pandemic is under control.
Wegagen Bank also announced that a 53 percent interest rate cut to hotel, tourism and tour operators and 39 percent cut for the horticulture sectors for three month.
Dashen Bank in its part also cut different kind of service charges and interest rates to those that are affected by Novel Coronavirus (COVID-19). The sectors include transport, manufacturing, hotel, tourism, horticulture and education sectors. As stated by the bank Dashen has cut off up to seven percent interest rate.
Starting from March 13 when the first case was reported in Ethiopia the overall economic activities of the country has been affected. Through then the government has been taking different measures to mitigate the risks. As one of the measures taken by the government the National Bank of Ethiopia has been calling banks to come up with their own initiative to mitigate the effect on their clients mainly for those who are highly affected because of the outbreak of the corona virus.
Based on that, banks have submitted their proposal on how to contribute to the mitigation strategy for their clients.
Bottlers request suspension of excise tax, VAT
Ethiopian Bottled Water, Soft Drink, Fruit and Vegetable Manufacturing Industries Association (EBSFMIA) ask Ministry of Finance (MoF) to suspend excise tax and value added tax (vat) for the time being.
In a letter the association sent to MoF stated that its members are highly affected because of the outbreak of coronavirus.
“As per our evaluation the sector particularly the bottled water business is significantly affected by the outbreak,” the letter signed by Ashenafi Merid, General Manager of EBSFMIA, states.
It added that the pandemic that follows by ceasing businesses at Hotel and restaurants has significantly dropped the sales of water bottlers business.
“Cancelation of mass gathering like conference, concerts, exhibitions and other meetings and suspending day to day operations at Addis Ababa based international and continental organizations and diplomatic missions have also contributed for market slowdown,” the association explained.
According the EBSFMIA, these effects has dropped the bottled water business by up to 85 percent and that forced them made them unable to settle the dues that were supposed to be paid for the government.
In its letter copied to the Ministry of Trade and Industry and Ministry of Revenue the association asked the government to cease the excise tax payment. Besides that it demands the lifting of vat for some period, but it did not state a given period.
EBSFMIA has also claimed to benefit from the loan interest rate relief and rescheduling of loan settlement period at banks.
“If such decisions could not be applied the sector will be in trouble to pay wages and continue its operation,” the letter states.
Since COVID 19 imposes challenges on the economy the government has been taking several measures for vulnerable sectors. At the same time financial institutions have also applied loan settlement reschedule for almost all who demanded, while they have also cut interest rate fully or partly for some sectors like hospitality, horticulture and industry sector for a given period of time.
Meanwhile vat payment has been rescheduled by the government. In this regard EBSFMIA would be the first that demands the annulations of such kind of taxes including excise tax.
The water bottling sector is responsible to collect 10 percent excise tax from sales. According to information Capital obtained from the sector, some big bottlers may pay up to five million birr per month as excise tax.
Ashenafi expressed his hope that the government will come up with good response to save the sector.
He told Capital that the sector has created about 50,000 jobs and rapidly growing.
“At least we need some relief to alleviate this bad situation,” he added.
According to the General Manager, the partial lockdown that suspend most activities particularly mass gathering has seriously affected the sector.
“Different meetings and conferences have been the major source of business for the bottled water industry that is currently fully abandoned all over the country due to COVID 19,” he says, “besides that different offices and the hospitality business are major users of bottled water but currently offices like international organizations have almost closed their offices and the business activity at entertainment areas also dropped, which directly affects us.”
He recalled that at the initial stage when COVID 19 case was reported in Ethiopia the market showed a boost because of the households, who were buying bulk of bottled water but it is now almost nil. “Households are not potential customers in the past,” he added.
The association has over 80 members from over 90 water bottlers in the country.
Gov’t buys 400,000 MT of wheat from Australia
Negotiating to add 200,000 MT more
Public Procurement and Property Disposal Service (PPPDS) has agreed with Australian government to procure USD 120 million worth high quality wheat, while the final go head will be approved by Ministry of Finance.
Early this year a delegation led by Eyob Tekalgne, State Minister of Finance, that include heads of PPPDS, Ethiopian Trading Businesses Corporation, and Ethiopia National Disaster Risk Management Commission visited Australia, Russia and Ukraine to conduct government to government (G2G) meetings.
On these visits PPPDS agreed with countries to buy strategic commodities directly by cutting out middle men to tackle challenges like high price and delays on procurements.
Based on that the Service strike a deal with the Australian government to procure 400,000 metric tons of durum wheat, which is highly quality than milling wheat with USD 120 million.
Tsewaye Muluneh, Director General of PPPDS told Capital that the price is a little bit higher than other conventional wheat products. Experts said that durum wheat is high quality than milling wheat and that is the reason the cost is a bit higher than the conventional product that the country currently imports.
She said that as per the agreement the amount of USD 120 million will be settled within a year time.
“We are not new to importing durum wheat from Australia,” an expert on the sector told Capital. In the past a pasta factory located in Dire Dawa was using this high quality durum wheat that is also called as pasta/macaroni wheat imported from Australia.
Tsewaye added that in relation with the COVID 19 outbreak the government is working with the Australian government to import an additional 100,000 metric ton wheat at the cost of USD 30 million.
Tsewaye said that the final decision will be given by the Ministry of Finance.
Currently Canada, United States, France, Ukraine and Australia are the top five exporters respectively.
The Director General said that to undertake similar moves from other countries is under process. “The bank to bank relation to commence similar direct procurement with Russia is on the process,” she says, adding that on this scheme the Russian Export Import (EXIM) Bank will represent the country and the state owned Commercial Bank of Ethiopia (CBE) will undertake the process on this side.
“This week CBE has come with its response that will put the process on another step,” she explained. The procurement from Russia would be 100,000 metric tons.
“We shall buy the grain on the G2G manner since we do on other procurements like fuel,” Eyob said few months ago about the decision to buy wheat from governments directly.
PPPDS believes that the direct procurement shall bypass long bidding processes.
The government allocates over half a billion dollar to import wheat. Currently the government is aggressively working to cut the import and introduce massive lowland irrigation scheme targeted to cut the import within three years as of this budget year.
