Despite the coffee sector attaining an extraordinary performance in the ended budget year, sector actors argue that the performance of other agricultural exports is at an alarming condition to which government ought to emplace corrective measures swiftly. However, the Ministry of Trade and Regional Integration (MoTRI) ridicules the argument.
In the ended 2021/22 budget year, the country achieved USD 4.12 billion which is an increment of half a billion dollars. In the year, the export performance of the industry sector and horticulture was promising and over the target respectively. Both sectors attained an additional USD 100 million each compared with the same period of last budget year.
Similarly, coffee earnings rose by half a billion dollars compared to the budget year that ended July 7, 2021.
In the past years, the country had introduced different reforms to boost the export sector. Measures had been undertaken on policies, strategies and structural adjustment to improve the home grown economy to uplift the export volume and value, diversity and quality.
The ministry stated that these measures have shown success in the past and the just ended budget year.
However, exporters and sector actors argued that the year’s success was shaded by the shinning of few export products. They said that the year concluded with weak performances mainly on oilseeds and pluses export, which are some of the top hard currency sources for the country.
An exporter that Capital spoke to regarding the issue said that his performance for the year was not good on his business. He said that it was difficult to access oilseeds and pulses as the past.
“In my view, in the year the product was limited besides some other challenges like transporting commodities from production areas,” he said regarding the commodity he exports.
One of the biggest exporters told Capital that in the ended budget year the country was supposed to generate huge sums from oilseeds and pulses export, since the global demand was very huge.
“The trading of pluses in the global market is up to 2.6 million metric tons, worth billions of dollars, to which we have better chances in the market,” he said.
“But in my view, the country is not working on productivity to scale up its benefit, and secondly the market system has become distorted from time to time,” he argued.
Previously, there was a contract administration that was bandaged with regulation, weekly reference prices have also been emplaced to keep the market aligned with the global rate. Now there are distortion behaviors in the market.
Experts said that besides that contract farming, which is a very important concept, has become very dangerous and abused by traders who buy commodities against the trading system.
Experts claimed that some traders produce falsified documents as if they secured commodities through contract farming schemes, but in actual sense they bought it from primary markets at even higher rates from international market.
“The regularity body, MoTRI, should strengthen its controlling mechanism to tackle such illegal acts and keep the sector contribution for export earnings,” they said.
They recalled that the price reference that is uses as a reference for the global market in the trading at Ethiopian Commodity Exchange has become implemented as of a week ago, which they appreciated.
But they said it has affected the export earnings in the past season since the controlling was at a loss that allowed illegal actors to abuse the commodity market.
“Those who bought commodities from informal market mostly bought the commodity higher than the global market, which makes them and the country losers,” one of the exporters said, adding, “that is why they hoard commodities on the hope that the international market shall increase, but the country is not getting the foreign currency that it was suppose to get on time. I think the government is already informed that is why it is forcing exporters to export their commodity as soon as possible.”
Security issues have also been stated as one of the challenges by exporters and experts for lower performance for oilseeds and pulses.
“For example sesame that comes from Welega is not available unlike the past. It is similar for some other commodities as well,” an exporter said.
One of the spice exporters agreed that the security issue affects the sector in terms of production and productivity. He said that some spice commodities that are produced on the southwestern part of the country did not get harvested properly, “mostly daily labourers who collect the product were coming from other part of the country but the instability has affected their movement.”
He said that some of the long established and experienced suppliers, who provided products for exporters, in different corners of the country left their places due to security issues.
The other issue raised as a challenge for the weak export performance for agriculture sector is the access to finance.
They said that the government should enforce financial institutions to provide export finance like pre shipment export credit facility. “Banks’ appetite has eroded provision of such kinds of finance, rather collateral based approach is leading the access to finance, which is a major challenge for the export business.”
They added that the foreign currency retention directive is also the other challenge that affects the export. The National Bank of Ethiopia retention directive that was revised in January gives the government access to 70 percent of the hard currency earnings and 20 percent for exporters and 10 percent for banks.
“Some exporters prefer putting a hold on their shipment on the hopes that the government may revise and ease the directive,” experts said.
On the other hand, one of the major exporters on the pulses industry said that the country must focus on productivity to attain success which is being observed on the coffee sector.
“Agriculture is a simple resource in which any country can utilize the same to tap in to its full potential and as a result expand its export,” he said.
Most of the exporters insisted government to strengthen its controlling mechanism on the trading system.
Kassahun Gofe, State Minister of MoTRI, said that the government target was ambitious but regarding the performance of volume and value, the year was very good for the oilseeds and pulses, “unless otherwise why did they attain results beyond their target like coffee, horticulture and some other sector export items.”
He argued that ample production was performed in the past budget year and even transported properly, but he added that there were some sort of hoarding on some oilseeds and pluses commodities.
“For instance today 166,000 metric tons of oilseeds and pluses, which are a product of the past harvest season, have been stored in four towns; Adama, Gelan, Burayu and Aqaqi. So the issue is not production shortage or availability,” he explained, adding, “the main problem is that traders buy products without the consideration of global rates and exporters’ are similarly reluctant to ship commodities on time.”
Kassahun strongly said that the government is taking measures on those who are involved on such commodities hoarding.