Trade ministry offers new plan
The Ministry of Trade and Industry (MoTI), which recently has a disappointing record in the export market, sat down with exporters to inform them about a new process of exporting agricultural commodities.
During a meeting held on Tuesday April 2 at the ministry hall, the disappointed leaders of MoTI told exporters that they came up with a new package regarding the export process.
The ministry met several times with pulse and oilseed exporters in the past few months saying that the government would take action against illegal traders.
Previously, the ministry claimed that close to 100 exporters were buying products from primary markets instead of the Ethiopian Commodity Exchange (ECX) trading floor, which is the major market location for export items like coffee, sesame seeds and pulses; which are the products that Ethiopia gets a lot of its hard currency from.
MoTI also claimed that exporters have defaulted attempting to export products because they are buying products, particularly sesame seeds, at very high prices on the international market.
During the latest meeting, chaired by Fetlework Gebregziabher, Minister of MoTI, participants claimed that transferring the exclusive trading of soybeans and mung beans to ECX without solving problems at the trading facility and improving its capacity was a problem. Wondemagegn Negera, CEO of ECX argued that ECX is capable of handling the new products. Sources who attend the meeting said the CEO argued the trading floor was improving its capacity by adding standard warehouses, bettering grading systems and quality ratings, and enhancing weight bridge accuracy.
Fetlework claimed that exporters are affecting the country’s hard currency earning by buying products for a high price at ECX and exporting them at a significantly lower rate, which affects the country foreign currency revenue. “Under invoicing is affecting the country. You are only considering your personal benefit at the cost of the country,” she said according to sources who attended the meeting.
She said that the government is forced to impose a new approach because exporters are unable to change the illegal trade trend.
“We are now developing a package that forces all export items to pass through MoTI,” she said.
She said that in the near future it will be applied. Currently all sorts of exports except coffee have to be registered with any of the commercial banks, only the registration for coffee remains at the National Bank of Ethiopia (NBE).
Experts in the sector explained that coffee export contracts are initially registered at NBE before when to banks get permits. The new system that the ministry proposed is possibly similar to the coffee export procedure.
“This may also allow the government to follow the trading rate at ECX like coffee. The price of oil seeds and pulses would be in line with the international price,” expert at the sector told Capital.
Exporters that Capital interviewed are expressing their frustration with MoTI, for failing to correct mistakes with marketing sesame seeds and white pea beans, despite warnings.
Even though, MoTI was expected to take actions against illegal activity regarding sesame seeds and white pea beans, businesses have complained that the ministry has not taken any steps, and that this has affected the health of their trading.
Early in December 2018 the ministry wrote a letter warning those trading the two crops illegally. Officials of MoTI met twice with the crop traders a few days before the official letter and the second time about three weeks ago.
Exporters were expecting big changes because MoTI often said it would prosecute those trading the crops illegally. However, the ministry has not taken any action to improve the situation. As a result, the illegal activity is continuing and their businesses and reputations with international clients are suffering.
In November, 95 people suspected of illegal trading met with Misganu Arega, State Minister of MoTI. He told them the ministry would begin taking legal action.
According to exporters, the price of sesame seeds at ECX has skyrocketed to 5,000 birr per quintal, while the export rate is up to USD 1,600. They wonder how such a difference can be covered by importing whatever products are being sold from abroad.
“The current meeting indicated to me that the government is unable to solve the problem and penalize the illegal actors,” one of the exporters, who claimed that their business is affected by those exporting products under invoice, told Capital.
The ministry also suspended an unspecified number of exporters who buy mung beans and soybeans, which were exclusively traded at ECX but now are informally being sold at other markets.
Sources told Capital that in the coming week MoTI is expected to issue a directive that allow exporters who bought the products against the market rule to export the products since they settled the charges that were supposed to be paid to ECX if the products were bought from the electronic trading center. The government is now attempting to obtain the hard currency from the export of those suspended from exporting, according to the sector expert.
Sources at the Ethiopian Pulses, Oilseeds and Spices Processors-Exporters Association told Capital that the association called members, who bought mung bean and soybean from primary markets before ECX commenced the exclusive trading a few months ago, to disclose the volume that they stored to transfer the document to the ministry.