Saturday, July 13, 2024

Edible oil producers’ plea for foreign currency backing


By our staff reporter

The edible oil producers association reveals that, despite its members’ claims of having sufficient capacity to meet local demand at a fair price; it is still waiting on government to take swift action with regards to providing foreign exchange for the speed up of production.

This week, the association wrote another letter pleading with the government to assist the industry, which is severely backtracked by lack of sufficient input.

The Ethiopian Edible Oil Manufacturing Industries Association, an organization that represents edible oil manufacturers, recently contacted the Ministry of Finance (MoF) to request for foreign exchange help for the industry. The interest group stated in a letter that although oil producers are about to run out of input, the government is taking the lead and setting aside millions of dollars to import finished goods.

In a recent letter dated Monday, November 6, the association requested a response from the MoF about the issue, which is similar to a request it had sent not too long ago.

The sector lobby group also mentioned in the letter that its members are unable to import crude oil for their manufacturing due to a lack of foreign cash. The statement read, “However, the Ethiopian Industrial Input Development Enterprise is importing millions of dollars worth of finished products on the issuance letter of credit scheme that is backed by the Commercial Bank of Ethiopia.”

According to the statement, the combined yearly production of six of its members requires over 1.15 million metric tons of crude oil. Fibela Industrials has a manufacturing capability of 300,000 and 285,000 metric tons for Shemu and Hamaressa, respectively, of the declared yearly production requirement.

The letter states that WA Oil Factory, Al Impex Business, Gifti Foods, and Packaging can process 135,000, 114, 816, and 27,375 metric tons of crude oil annually.

The association also noted in the letter it delivered to the MoF earlier this week that domestic edible oil prices would be reduced if foreign exchange was provided in accordance with the indicated production capacity.

“In addition to the drop in retail prices for customers, the foreign exchange charge incurred for raw materials is far less than that of importing finished goods,” the letter further states, “In addition to additional advantages for manufacturers and the economy as a whole, industries would generate more employment if they were running at their full potential.”

Recalling of the allocation for the previous budget year which was under the demand and capacity of the pressers, it stated, “Although we expressed the actual demand of our factories for the budget year, which started on July, the foreign currency is yet to be released.”

Speaking with Capital, oil pressers expressed optimism that the government would respond favorably to their request for foreign exchange to be allocated for the necessary purchase of crude oil and other parts pertinent to their sector. According to Shemu, a pioneer in the business and one of the manufacturers based in Dire Dawa, the industry is now manufacturing food oil at a low capacity.

An executive at the plant stated, “We are accessing foreign currency and raw material in different ways, at least to run the industry and hold employees.”

The official at Shemu explained that most of the foreign currency generated to import the crude oil is coming from the supply of detergent products that the company produces on the lines of its factories and supply to UNHCR.

He explained the issue to Capital, saying, “We are forced to operate at minimal capacity because we are running with very limited foreign currency.”

“We are facing a challenge in the interim, and we are hoping that the government will assist us in increasing our output by providing the necessary foreign currency,” he expounded.

Regarding the continuation of its operation, at least on minimal level, the official at Shemu clarified that the company’s supply of detergent goods, which it manufactures on-site and supplies to UNHCR, accounts for the majority of the foreign exchange earned to import crude oil.

Shemu is renowned for its line of cleaning products, which includes detergents and soaps.

Additionally, he said, “We are engaging to create alternative sources of raw material for sustainable supply, including from farms that we are acquiring.” The firm uses oilseeds as an input from recently acquired farms.

The industry lobby group stated, “Our members are in danger of having to manage their employees and stop production due to a lack of foreign currency allocation.”

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