Yet another company has been victimized by the hard currency shortage. Prominent aluminum cookware manufacturer Kaluworks Ethiopia Plc, has shut their doors. Despite being in business for two decades they were recently doomed by lack of inputs.
The hard currency shortage has significantly affected general industry and particularly heavy industry.
A source told Capital that, Kaluworks, who was producing non-ferrous metals, has been closed for the past several weeks and to unable to run production which damaged them economically. Experts said that the problem at Kaluworks is an example of how serious the forex problem is.
Solomon Mulugeta, General Manager of the Ethiopian Association of Basic Metals and Engineering Industries (EABMEI), said event though the company is not a member of the association, they have information about the challenge it faces.
He said that the closure is a big indication that the entire manufacturing sector is faces an alarming problem. “We have recommended that the gaps seen in terms of giving priority to foreign currency. Every sector needs hard currency but needs to give priority and quotas to some of the significant sectors,” Solomon said.
Many sectors are interlinked, according to the association head. Forex policy must address this fact another expert said.
The manufacturing sector actors claimed that there is not clarity in terms of hard currency allocation. They stated that the government needs to have a clear process about the approval of letter of credit (LC).
Even thought the National Bank of Ethiopia (NBE), issued a directive that private banks must allocate 40 percent of their hard currency for manufacturing industry experts claimed that it is not clear in terms of priority within the manufacturing industry itself.
Furthermore, a few months ago NBE amended the directive no. REL/05/2002, ‘external loan and supplier’s credit directives’ that only allow foreign based companies to import input on credit. The local based industries have strongly criticized the decision that they claim goes against the government’s policy to boost local investment.
Recently representatives from Ethiopia’s manufacturing industry claim that a shortage of hard currency has led them to produce under their capacity which has caused a chain reaction where production costs have risen, prices have increased and the economy has slowed down.
The nation’s Forex shortage over the last few years has seriously affected private sector activity. This has not only negatively affected import businesses in all areas, but especially the manufacturing sector with its small scale businesses and heavy industries.
In the past, to address the problem the state owned financial giant Commercial Bank of Ethiopia (CBE) allocated a limited amount of hard currency so the manufacturing industry could import inputs and spare parts.
In March CEB allocated USD 300 million to the manufacturing sector, which is very small. In March 2017 CBE released about USD 1 billion which is still very limited but better in comparison with the current year’s allocation, according to industrialists.
The metal industry, which is a major employer with 100 thousand jobs needs about USD four billion per annum for optimum production, according to the Ministry of Industry.
Lemma Teklehaimanot, partial owner of Kaluworks declined to comment but  according to sources, the owners are looking to sell the property.
Kaluworks Ethiopia is owned by Kenya’s Kaluworks and Lemma’s Lica plc. It used to be a major employer. It was also the oldest with 21 years of operation and the biggest company in the sector.
Sources at the company said that production capacity has grown to 150 tons per month, but just to sustain itself it should produce from 70 to 80 tons per month. “However this has not been happening consistently,” a source said.
“The hard currency problem that has been going on for around three years has caused companies to  consume their own capital,” a source explained.