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Analysis: With new proclamation in the making, Ethiopia aims to privatize six sugar projects in first quarter of 2020

The sugar policy is “changing the way the telecoms policy changed,” Eyob Tekalign (PhD)

Bileh Jelan

Addis Abeba November 29/2019 – Ethiopia’s State Minister of Finance, Eyob Tekalign (PhD), said Ethiopia was in the process of conducting evaluations including technical and social impact assessments and validation of factories covering all the thirteen sugar projects in Ethiopia with plans of privatizing six of them in the first quarter of the year 2020.

The Ministry has also prepared a draft Sugar Industry Administration Proclamation, which, among other things, establishes a Sugar Board of Ethiopia with tasks that include regulating the sugar industry and licensing and registering millers. (Please click here to download the draft proclamation.)

This was revealed at a day-long public consultation on the sugar industry was organized by the ministry on Nov 27 at Sheraton Addis. The event saw the presence of representatives of key government officials such as Eyob himself, Weyo Roba, CEO/Ethiopian Sugar Corporation, Beyene Gebremeskel, Director General/ Public Enterprises Agency and Dr. Brook Tayeb, Senior Advisor at the Ministry of Finance along with representatives of different stakeholders and local and foreign investors.

“As you know, the Ethiopian government is undertaking homegrown reforms where one of its agendas is to turn the focus on public enterprises,” Said Eyob and clarified that the purpose of the consultation was to inform, educate and consult the public about the reform process the sugar industry is undergoing. The sugar policy is “changing the way the telecoms policy changed,”he said.

The objectives “are to fulfill domestic demands, to generate exports and to create jobs,” he said, adding, “to attract investors and make the industry attractive so Ethiopia could reach its high potential, are important.”

Weyo Roba, the CEO of Ethiopian Sugar Corporation, complimented Dr. Eyob when he said, “our roadmap is to make our factories more efficient and reach our highest potential.”

In the introductory remarks given by Henok Assefa, Founder of Precise Consult International and Co-Founder of Angel Investors Network Ethiopia, said, “The sugar industry is a priority sector, and the government invested billions and billions of dollars in it.” Highlighting the goals of the consultation and explaining that an eco-system that sees participation from all stakeholders would “make the industry excel locally and compete globally.”

Dr. Eyob Tekalign in his opening remarks on the sugar industry privatization and government priorities made the point of explaining that the whole idea of homegrown reforms was to have better understanding and have better results. “The government is building on past successes while achieving and pushing for its own”, the state minister said. Speaking on the importance of homegrown reforms the state minister added, “Reforms should be family anchored and relatable to the Ethiopian socio-economic factors.” He added that through the reform process the government was aiming at seeing the sugar industry fulfill its potential, creating an inclusive environment for the private sector to take lead in the industry and having the country become the regional leader in sugar production.

A presentation by Dr. Tewodros Mekonnen on the sugar industry privatization, assessing policy and regulation highlighted that the industry is performing below potential, has an infant out grower schemes, is inefficient in logistics and distribution, is affected by low export competitiveness and high import demand and affected by the high excise tax that stands sat 33%. DR. Tewodros said “Estimates of sugar consumption in the country put it at 6-7 kg per capita, some estimates put it as high as 12 kg which is still below African standards,” he added, “Consumption will rise according to research in diet.” In his presentation he suggested separation of out growers development schemes from the sugar board, reasonable adjustment of the excise tax, adjustment to domestic and international trade policies and price stabilization could help push for positive results.

A presentation on sugar regulatory reform needs and key features of the draft sugar proclamation by Getahun Walegn followed. The presentation tried to answer questions raised about the need for a separate regulatory framework for the sugar industry. The product’s political sensitivity and importance to key industries such as food processing and pharmaceuticals, the peculiar characteristics of the industry, private sector interest, industry protection from global distortion and its role in jobs creation for rural communities were given as primary reasons. The presentation also discussed the Draft Sugar Proclamation that saw the establishment of both the Sugar Board and the Sugar Arbitration Tribunal and further discussed the technicalities of the Sugar Academy & Research institute.

Michael Hinge, a Senior Analyst at LMC International Ltd, gave a presentation on global, regional & domestic sugar markets and its implications on the Ethiopian industry. He discussed supply and demand in Ethiopia and put the official figure for sugar consumption at 5-6 kg per capita with 550-660 thousand tonnes produced annually from 8 functioning factories, which is below neighboring coastal countries where unofficial sugar inflow increases per capita consumption. He also put the unofficial inflow of sugar at 150-225 thousand tonnes in 2018/19 fiscal year and predicted that consumption will rise by 3-4% annually. On the supply and demand in export markets, Mr. Hinge noted “Ethiopia is located in a deficit region in Africa.”

A plenary Q&A session followed with Henok Assefa as moderator, Beyene Gebremeskel of the Public Enterprises Agency, DR. Brook Taye of the Ministry of Finance, Fasil Gebremeriam of the Ethiopian Sugar Corporation, Dr. Tewodros Mekonnen, the Country Economist at IGC, Getahun Walelgn and Michael Hinge of LMC International Ltd as panelists. Answering a question regarding the potential of job creation Beyene Gebremeskel said, “The industry currently employs 30,000 people. When all factories commence operations, that could increase 10 folds and indirect jobs created may surpass into the millions.” Dr. Book Taye, discussing the issue of who will have monopoly over the industry said, “We want to make sure nobody has monopoly over the sugar industry and no-one has monopoly over how the sugar board is structured.” Underlining the nature of the newly established Sugar Board, Fasil Gebremeriam said, “The board is not a regulatory board, it is a consulting body representing different associations and professionals in order to manage private and public interests.”

Responding to Addis Standard on delays in PM Abiy Ahmed’s promise to have factories on the pipelines begin to operate within six shortly after he assumed his premiership, Weyo Roba of the Ethiopian Sugar Corporation said, “When PM Abiy Ahmed took office only six factories were operational. The delay was due to old contracts terminations, technical issues and the re-evaluation process for some of the projects.” He added, concluding, “A factory will go operational in 6 months, other factories are under construction and the Omo-Kuraz plant will start construction in a month’s time.”

In October this year, Bloomberg News reported that Ethiopia was “investigating possible misappropriation of funds meant for the expansion of 10 state-owned sugar factories that are part of the industry now slated for privatization.”AS

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