With the goal of allowing private investors to play in the sugar business the government has drafted new rules including creating a board to manage the sector.
Agencies like the Ministry of Finance (MoF) and Sugar Corporation facilitated a consultation on reforming the Ethiopian sugar industry at Sheraton Addis on Wednesday November 27 to talk about upcoming changes to sugar policy.
The country will soon privatize its sugar factories. MoF has already shortlisted ten companies including Ethio Sugar Manufacturing Share Company.
The draft ‘Sugar Industry Administration Proclamation’ that is expected to be ratified before the some sugar factories privatize, magnifies the establishment of the Ethiopian Sugar Board and its operation.
The board will have nine members; three from sugar millers or the Millers’ Association, and one each from growers, out-growers or the Out-growers Associations, Ministry of Trade and Industry, Ministry of Agriculture, Ministry of Finance, National Bank of Ethiopia, and Chamber of Commerce and Sectorial Association.
Experts said the transitional board should be formed first, made up of state organizations. “At the current point the members of the board by default will be government representatives since all sugar production is under government control, there will be a mechanism managing the transitional period,” Bitew Alemu, General Manager of Ethio Sugar Manufacturing Share Company, commented at the consultative meeting.
Some other action steps under consideration are to adjust the excise tax to make domestic sugar production more competitive. The current excise tax is 33 percent. Several participants expressed enthusiasm with this move.
Currently, MoF is revising the excise tax proclamation. Some products will see an increase while others will see a reduction, sugar producers are hoping their taxes will be reduced.
Some experts pointed out to missing issues in the new rules. They wanted incentives for agricultural input products and sugar investors to be included in imports like edible oil investors.
“The policy should emphasize the development issue which may improve production,” Bitew told Capital.
They also noted that the policy focuses on sugar and byproducts but the sugar industry potentially could create about 33 production chains. The draft policy states that the Sugar Board of Ethiopia is empowered and will determine the minimum and maximum industrial price for sugar and sugar products.
“It is acceptable to set the price of sugar or sugar cane since the sector is a political commodity,” Bitew said.
However, he argued that the draft document has extended the role of the board allowing it to set prices for molasses or other byproducts, which is unfair. “In some cases, the millers would get a profit from byproducts since the price of sugar will be set by the board,” the General Manager at Ethio Sugar Manufacturing added.
“Rules like this discourage potential investors,” someone interested in getting into the sector said.
Participants also asked about affirmative action for local investors noting that the policy doesn’t address them.
In his response Brook Taye, Senior Advisor at Ministry of Finance, said that when the Prime Minister announced this policy the task was given to MoF to look into multiple modalities and encourage domestic participants in sugar and other types of business.
“There are local outfits currently working on mobilizing resources to take part in the transition, so I would encourage that kind of activity to continue but in terms of our role we are [working on encouraging local investors and communicating that properly],” the Senior Advisor at MoF, who is also at the forefront of the mega privatization process, explained.
“So, it’s not by policy, we have some responsibility to make sure that there is full participation of everybody including the locals,” Brook said.
Beyene Gebremeskel, Director General of Public Enterprises Holding and Administration Agency, also stated: “we should be looking into it again and make some concessions.”
The policy stated that the Sugar Board will regulate the industry, administer licensing and registration, promote the industry, prescribe a minimum and maximum industrial price for sugar products, participate in the formulation of policies, plans and programs of the industry, facilitate equitable access to the benefits and resources of the sugar industry, facilitate administration and settlement of disputes, and perform such other functions that are necessary to discharge its functions.
Government representatives said they would listen to suggestions made at the meeting and would implement some of them during the drafting process. There will also be more opportunities for this in the future.
Some factories will be privatized by the fourth quarter of this fiscal year.