A rift is emerging between the Ethiopian Sugar Corporation and sugar-dependent businesses such as candy, juice and biscuit factories since last month. It is due to the chronic high shortage of sugar in the domestic market. Currently, there are five state-owned sugar factories in Ethiopia, producing over 3.5 million quintals of sugar every year twice of what it was five years ago. Nevertheless, the boom does not help the government to give a long lasting solution for the shortage recurring for decades, reports BERHANE HAILEMARIAM and SAMSON BERHANE, FORTUNE STAFF WRITERS.
Founded 43 years ago, Nib Candy Factory Plc produces eight types of candies and 11 types of chocolates in the country. Having a capacity of producing 2,700qls of candy a day, the company has created a livelihood for over 400 employees in its manufacturing plant located inside Tatek Industrial Zone.
The company is amongst the 70 sweet producing factories that faced serious sugar shortages due to a decline in production.
“The problem is budding month-on-month,” said one of the Company’s managers. “This forced us not to buy sugar from the Ethiopian Sugar Corporation, raising our operational costs and adversely affecting production output.”
Over the past three weeks, many factories including Nib were disappointed after realising that they could not purchase sugar from the Ethiopian Sugar Corporation, which is entitled to import, produce and distribute sugar to the public.
Sugar-dependent businesses throughout the country experienced an inexplicable sugar shortage to a point where establishments had to turn away customers seeking their products. One of which is Nib Candy, which halted its production early September 2017.
“Initially, we were trying to cope with the shortage by buying sugar from other traders. But, finally, we ran out of stocks,” the manager said. “Hence, we can’t supply candies to our customers.”
Companies like Nib Candy cannot buy whatever amount of sugar they wish. Such establishments, however, have a quota set by the Corporation based on their request and the existing demand in the country.
Although companies like Nib are satisfied with the quota structure half-heartedly, they don’t complain as long as they manage to get their ration. But, the recent occurrence in the sugar market is an entirely different story.
Since mid-June, the Corporation halved the amount of sugar given to manufacturers. Even worse, it cut the supply earlier this month, forcing many companies to cease operation.
“All labourers are idle now despite being paid,” said the manager at Nib, whose quota stands at around 3,000qls of sugar a month.
Another manager who works at Royal candy has also faced a similar problem.
“We have paid over 400,000 Br to employees despite the zero production,” he said.
Not only Nib and Royal, but the situation was also replicated in almost all factories.
MOHA Soft Drinks Industry S.C, one of the country’s largest soft drink producers, has also given annual leave to 80pc of its 4,000 employees owing to the shortage of sugar.
The Company, whose quota is around 30,000qls of sugar a month, was unable to get even a kilo of sugar from the Corporation since September 8, 2017, according to an employee working at the company. This has pushed the giant soft drink processor to cease operation, exposing it to high costs.
Although the shortage is modest for consumers than factories, they are still amongst those who bear the brunt of the shortage.
In some areas, it is common to see customers stare at drained shelves. The outlets are filled with many expensive and inexpensive goods, ranging from candies, costing no more than 50 cents a unit, to drinks that cost as high as 100 Br.
But neither brown nor white sugar-one of the country’s main imports- is to be found. Although a price tag still wedged to the sugar shelf says 18.4 Br a kilogram, sugar is nowhere in sight including in the area where Tsehay Gashaw lives.
“I have been looking for sugar since morning,” she said. “I travelled all the way from around Semien Hotel to Merkato. But could not find any.”
Tsehay, who lives with her five relatives, consumes over four kilos of sugar monthly when the shortage is not a concern.
“Now, sugar is very critical to me than ever as I am supposed to make porridge for my sick mother,” she said. “But, the responses either from kiosks or consumers union’s shops is ‘No’.”
Since June 2017, following the shortage, the City’s trade bureaus instructed cooperative unions to sell sugar only to households registered by respective weredas. These families will be given a ration coupon after being recorded by the weredas. A family can take 10 kilos of sugar twice a month.
“This is to ensure fair distribution of sugar,” said Kassahun Beyene, director of Licensing and Regulation at Addis Abeba Trade Bureau. “Households can only buy from kiosks or unions where they are registered.”
Nonetheless, the response of the trade bureau does not appear to be a long-lasting solution for AbebechMekonen, a salesperson at a consumer union located in front of Yared Music School.
“It only solves the problem of individuals who own a house,” said Abebech, who was requested by over five individuals to sell sugar in just an hour. “Even though I know some people renting houses in this area, I won’t sell them a kilo of sugar as the new law has excluded them.”
In Ethiopia, the sugar industry has seen many ups and downs in the past five decades. Ever since the establishment of Wonji Sugar Factory- the first sugar plant, more than 13 sugar producing industries were opened in the country, of which five are operational whereas the remaining are under construction.
Wenji, Fincha, Metahara, Kessem and Arjo Dedessa are the existing operational sugar plants in the country, producing 3.5 million quintals of sugar in the past fiscal year- achieving half of the country’s demand. The amount is half a million quintals lower than the preceding fiscal year, which is three times higher than that of the annual sugar consumption of Addis Abeba.
Furthermore, the Corporation imports over three million quintals of sugar annually to fill the supply gaps that occur due to the recurring shortage. However, this approach does not seem a good way for the government, which failed to sustain the supply for the past three months.
No doubt, Ethiopia’s stocks of sugar have fallen below normal levels in the past three months, causing a creeping shortage in the market, adding new height to the widespread public debate over sugar supply.
This is the second time when sugar companies have faced a high shortage. Sugar-dependent businesses were forced to close their plants nine months ago due to the drain of sugar in the country. At that moment, in contrary to the current shortage, the primary reason was not low productivity, rather it was distribution.
The present steep drop in sugar stocks below the required levels is mainly attributed to the inefficiencies of sugar-producing plants, according to Gashaw Aychiluhm, head of communications at the Corporation.
“It is a usual problem during the rainy season,” Gashaw. “All of the active sugar producing plants will stop production in summer as they will be maintained and will run out of sugarcane.”
This, however, does not seem convincing to Kassahun G.Giorgis, chief secretary for the Ethiopian Sugar & Sweet Producers Association.
“Maintenance of the factory machines and the muddy nature of sugarcane farms are usual reasons forwarded by the corporation whenever shortage comes,” he said. “They should have stored adequate amounts of sugar if the Corporation knows the problem will come as summer approaches.”
To tackle the shortage, the Corporation is currently finalising the construction and maintenance of Omo Kuraz, Omo Kuraz II and Tendaho sugar factories. These plants will start operation before the conclusion of this year, raising the total production of sugar to seven million quintals, according to Gashaw.
“Trial production has already undertaken in Omo Kuraz II and Tendaho sugar factories,” he said. “Besides fulfilling the local demand, we will be able to export to the international market.”
The corporation has exported 44,000tns of sugar to Kenya recently.
For an industry insider, who has stayed in the sugar-related business for two decades, the promise of the corporation’s director does not hold water.
“The same promise has been made for the past four years,” he said. Instead of giving hope, the Corporation should work on ensuring transparency and apply stringent control mechanisms in the projects, or the government should stop overstretching its plan.”
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