9 September 2012

Ethiopia: Imported School Commodites Rising Demand and High Prices

While Local Manufacturers Are Crying for a Market, Imported School Commodities Are Facing Rising Demand and Logistic Complications. Ironically, Parents Continue to Complain About the Ever-Rising Price of Imported Commodities and Do Not Consider Local Products As Alternatives.

Turbulent School Commodities Market Worries Players:

All arranged exercise books seen in the picture are products of Indonesia with a brand called Sinerline which dominated the market being is sold at an average price of 87Be per a dozen at Shola market, the second largest open market next to Merkato.

Indris Ali, 55, a traditional jeweler who came from Kemise, in the Amhara Regional State, was in Merkato, on Tuesday, September 4, 2012, to sell his hand made bronze and bead jewelries to souvenir shops.

As only six days were left to celebrate the Ethiopian New Year, Indris, a father of seven, three of them already married, has bought some new clothes for the remaining children who still attend school. He did not have in mind buying exercise books in Addis Abeba, until he got a call from his children.

"They told me that a dozen of 50-leaf exercise books were selling for 100 Br in our town," he said.

He did not quite remember the type his children had asked him as he walked between stores at Bomb Tera in Mercato, but the one brand that dominated the market was Sinar Line, an Indonesian product imported by around seven companies including Radical Plc, Al-Sam, Get-As Trading, GED Trading and Al-NUR. Among these, Radical also imports limited quantities of the Radical brand.

Local brands, such as Habesha and MAMCO, are barely seen despite their lower prices.

"We do not have them in stock, since many people did not ask for them," Fetiya Nuru, owner of a store in Bomb Tera, said.

These brands go to the regions.

Omer Mohammed, Administration & Finance Manager of MAMCO Paper Products Factory Plc, a subsidiary of MIDROC, asserts that his company has not been able to compete in Addis Abeba.

"The government did not extend any protection for local manufacturers although we have quality product," he said.

MAMCO has repeatedly asked the Ministry of Industry (MoI) for tax imposition on imported brands, Omer said, but the Ministry has told them that it is a policy issue to be addressed by the Ministry of Finance & Economic Development (MoFED).

Currently, local manufacturers are required to pay customs duty of five per cent when they import rolled paper, while the importers are subjected to 15pc duty for the finished product. Omer wants more to make up for labour and machinery maintenance costs. "We should be allowed to import the raw materials duty free for us to compete."

Indris was indeed attracted by the lower price of the product as a 32-page MAMCO exercise book was sold at 3.32 Br while the 50-page was sold for 4.35 Br, before VAT. Habesha, produced by Indian investors in Ethiopia, was sold for 56 Br a dozen, including VAT, about 4.67 apiece.

That low price, however, was not enough to beat the more expensive Sinar Line books which had a plastic coating. A dozen sold for 87 Br and Indris bought four, one each for his four children, two of whom have just passed to ninth grade. He was happy with the bargain he had, as he would have bought each for 100 Br in Kemise. He saved 52 Br from the four dozens. But this did not stopped him from trying to convince Fetiya to give him a discount, but she would not budge, telling him that the price is fair and would only go up as he delayed making his purchase.

Fetiya says that prices are good this year, as the coated exercise books sold for 90 Br a dozen last year, when the government had introduced price caps in January 2011 on 18 commodities including exercise books and pens to curb inflation that had reached 17.7 per cent.

Fifty-leaf exercise books were decreed to be sold at 4.20 Br and pens at 2.20 Br across brands. The cap was lifted in July 2011.

The traders did not import much until the cap was lifted, says Fetiya, which led to the higher prices once it was lifted. In 2010/11, 8,942tns of exercise books worth 10.4 million dollars were imported mainly from China and India. The imports in 2011/12 were 12,035tns, worth 15.5 million dollars, showing a 35pc increase compared to the previous year in terms of quantity. Sinar Line dominated with 4,879tns worth 6.8 million dollars.

"I did not see any supply shocks this year," Fetiya claimed.

However, the importers do not agree with Fetiya's conclusions.

"This is not the right time to tell whether there is a shortage or sufficient supply as the market was slow for the past weeks because of the passing of Prime Minister Meles Zenawi," Abdurazak Mohammed, general manager of Radical Plc said.

Merkato, which is estimated to cover an area of 114 hectares and is visited by around 200,000 peoples from various regions on a daily basis, according to Addis Abeba Culture & Tourism Bureau, has been uncommonly quiet for the past two weeks, according to most of the traders that Fortune talked too.

"Regional traders started to arrive just today as there has been a sense of fear among the traders," Zinash Zeleke, an employee at GED Trading whose wholesale shop is located at Bomb Tera told Fortune on Tuesday, last week. "This was the time that we do not even get the time to breath as we used to be so busy."

The shop had availed 225 cartons of has also marginally added the price of these items.

"There has been a five to six per cent increase due to increase in labour cost and the cost of materials," Ahmed Amin, manager of the factory told Fortune.

Depending on such prices, a single small-sized uniform outfit with pants and sweater will cost Sosena 310 Br. The cost of a shirt may add another 50 Br to her total uniform expenses. Prices are bound to increase, for students that need larger-sized uniforms.

The price of getting ready-made uniforms from garment outlets is also expensive. Evolution Garments which produces uniform shirts, sweaters and uniforms for students starting from size two, in popular colours that are worn by most schools, sells a full outfit including a trouser or a skirt, shirt and sweater for 460 Br if the items come in sizes between two to fourteen. For sizes greater than fourteen, the same items will cost 530 br.

Thirty-two year old father, Aklilu Mekonnen, hoped to get a complete uniform made at millitary terra having a budget of only 140 Br for his 11 year old daughter, Christina. The first and last time he had to buy a uniform was when she joined first grade. By grade three, she had outgrown her first uniform; however she was able to get a hand-me-down from an older girl at the school.

The metal shop worker had just moved his daughter, now moving into fifth grade, to a cheaper school. The old school had increased the monthly fee it charged from 300 to 370 Br, and the books it required it students to buy, says Aklilu, cost more than his salary.

The fabric he picked to get his daughter's uniform tailored cost 115 Br a metre. And he needed a metre and a half of the fabric. The tailor would also ask for 65 Br to make the uniform. That was way above his budget.

His entreaties for a discount were to no avail.

Retailers in Military Terra claim that they only make a 15 Br to 20 Br profit from a metre of uniform fabric. Usually, the small retailers buy merchandise by the rolling yard, known locally as Taka, which are swaths of fabric usually measuring 22.85 meters is rolled around a wooden stick.

There is scarcity in the supply of uniform materials, according to retailers in Military Terra. Thus, because of the high demand, suppliers sell the little merchandise they have in stock at a higher price, these retailers allege.

But suppliers are usually wary to give any information to those that make inquiries.

"Last year (2010/11), we were forced to increase prices because of an increase in the tax rate and also because of the devaluation of the Birr," an anonymous retailer who used to import and distribute uniform textiles until last year, told Fortune.

He says he stopped importing materials because there were heavy duties imposed on textile imports making the sector unprofitable.

"There are many like me who have stopped supplying textile materials," the anonymous trader claims. "There are now only around 10 to 15 suppliers that distribute uniform merchandise to the whole of Military Terra."

This year, it is scarcity of materials that is given as a reason for the price jump. The recent backlog of imported contrainers created after the Ethiopian Shipping & Logistics Services Enterprise (ESLE) encountered a glitch in its recently launched multi-modal system, has also helped create a shortage of textile materials, according to some suppliers.

There is a lot of merchandise stuck both at Djibouti and at Modjo Dry Port, claim these suppliers.

Comparing the import data from the Ethiopian Revenues & Customs Authority (ERCA) for Polyester materials shows that there is indeed a decrease in imported uniform fabric.

While in 2010/11 Ethiopia had imported 7, 505tns for 15.7 million dollars, this has decreased to 5,578tn worth 13.5 million dollars in 2011/12, about 75pc of the earlier quantity for about 85pc of the dollar value.

It is these imports that supply a large market in Military Terra, and straining the wallets of parents like Aklilu. Refusing to adjust his budget, Aklilu had decided to browse for cheaper material or a retailer that sells at a lower price. With his budget, an affordable choice would be a cheap material called Mancini or local Polyester blended products.

Although local Polyester blended products suitable for uniforms are cheaper, selling for as low as 50 Br a metre, these are hardly to be found in Merkato's Military Terra.

Retailers claim that they do not carry these products because there is a low demand for them. In addition, customers tend complain that the material is too coarse to be made into uniform for children, according to these retailers.

Garment factories that make school uniforms also prefer to buy imported merchandise.

"There is hardly any availability of locally made Polyester products, and the quality is just not the same," Berhanu Yedneb, owner of Edget Garments, a separate entity from Edget Sweater Factory.

Though currently involved in making uniforms for employees, he used to take large orders for school uniforms after being contracted by a foreign Non-Governmental Organisation, Children & Family Foundation (CFF), which supplies these items.

"It is still a sector that is at the budding stage," he told Fortune.

Although the local textile sector, for which the Ethiopian government has high hopes aiming to increase export earnings from it to one billion dollars by the end of the Growth & Transformation Plan (GTP) in 2014/15, boasts around 88 medium and large scale factories, it is only a handful that produce locally blended polyester materials.

Al-Asr Textile in Dukem, Hawassa Textile in Hawassa, and Al-Meda in Adwa currently produce these products Fortune learnt.

Hawassa used to be a major fabric supplier during the military regime which established it. Now a private company, it faces a challenge from imported products.

"Once the market opened up, demand shifted to imported goods," according to Goshu Negash, owner of Vitcon Plc, which he established 10 years ago after 20 years experience in the textile sector.

Hawassa still manufactures Polyester-cotton blends, although due to machines wearing down production capacity has decreased.

"Although it used to produce 75,000 metres a month for school uniforms alone, it has only produced 20,000 metres since July," Etenesh Mamo, marketing head, told Fortune.

The school uniform fabrics from Hawassa are usually purchased by traders from regional towns, according to Etenesh.

"Now that the factory is privatised, we will bring in more machines and produce at a higher capacity," Etenesh said.

The local Polyester cotton blend available for uniforms does not use extra synthetic materials unlike the import, and is thus less shiny than foreign products, explains Goshu who used to work at Hawassa Textiles for 12 years.

"It also needs maintenance, so people are drawn to imported materials, even though the larger share of cotton in the blend may make local fabrics more durable," he told Fortune.

Sweater factories fare better as they can manufacture the products themselves, but raw materials are still imported making the prices vulnerable to fluctuations in input costs.

Edget sweater factory has so far been using local suppliers that import acrylic fibre and dye it. The cost of acrylic fibre is dependent on the price of propene, produced from fossil fuel, which it uses up in its preparation process.

"Last year, we were forced to increase prices because the price of fuel had gone up making acrylic more expensive," Ahmed from Edget told Fortune.

However, a recently established textile factory, Saygin Dima, is providing an alternative supplier of input, Edget told Fortune. The factory established in 2007, by Turkish investors in Alemgena area produces acrylic yarn locally.

"Starting from last month we have started procuring acrylic fiber from this factory," Ahmed stated. "This will give us more options and help us source our raw material locally."

In the near future, the factory also plans to produce Polyester blend material suitable for uniforms.

As the sector moves towards building up capacity so that it can meet its export targets, local factories may be able to produce quality materials and more investors like Al-Asr and Saygin Dima may be attracted. Until then parents like Sosena,Abay and Aklilu will have to reach deeper into their pockets if price trends for imported uniform continue on an upward course.

Copyright © 2012 Addis Fortune. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.