The Reporter (Addis Ababa)

Ethiopia: Industry Ministry Says Manufacturing Sector Too Sluggish

- Power outage, raw material deficiency among factors for weak performance The Ministry of Industry, which targeted over a billion dollars revenue, has reported that this year's overall performance was much lower than what was originally planned.

According to the ministry, the unresolved electric power cuts and low supply of raw materials for local factories have been the leading factors that pulled back the sector from achieving its goals. The Minister of Industry, Ahmed Abtew, who presented his office's ten-month performance report to HPR said that despite an extensive effort having been made to realize the ambitious plan reported in the Growth and Transformation (GTP) period, the manufacturing sector performance of the budget year was disappointing.

"The assistance that has been given to the existing factor to help them produce with all their capacity based on the plan was not able to make them fully operational and those projects that were in the pipeline were not able to go operational."

According to the minister, though it was planned to secure USD 825.05 million in the first 10 months of the budget year from the manufacturing sector, the actual performance registered only 324.3 million birr, which amounts to a mere 39.3 percent of the target. But the ministry was trying to consolidate the sector's performance of this year as compared to last year's performance of the same reported period, which he said was only USD 289.88 million. Meanwhile, the ministry's report recalled that the industry sector was identified as one of the pillars of the GTP. According to the GTP, over USD 1.5 billion was expected from the manufacturing sector, mainly USD one billion from the textile sector, USD 49.5 million from the leather and hide sector and USD 320 million from the food, beverages and pharmaceuticals sector.

However, out of a total of USD 324.3 million foreign exchange from the exported product of the manufacturing sector, the textile subsector could manage a share of 28.5 percent, while the hide-leather products subsectors and meat and dairy have shared 34 and 18.4 percent respectively. Similarly, the food, beverage and pharmaceutical subsector registered 15.8 percent as chemical and construction inputs subsectors and the metal sector have taken 2.6 and 0.6 percent respectively.

High shortcomings in raw materials supply both in terms of volume as well as quality is particularly the major impeding factor for the textile factories, Ahmed told MPs. As a mechanism to address the raw material shortage, Ahmed said efforts were made to help factory owners import raw material with tax exemption incentives. However, that did not bring the intended solution as the importing process took much longer, which in turn contributes to the low performance of the sector. The minister blamed similar problems on the hides and leather sector, saying, "On the leather industry side, the leather processing companies are facing problems because of chronic shortage of sheepskins and goatskins."

As part of addressing this challenge, the minister explained that it was attempting to encourage investors to import new material from abroad, apart from the effort to utilize locally available raw materials exhaustively. However, this effort still did not bear fruit fully, the intended results due to other bottleneck challenges such as financial supply problems and the complex nature of logistics as matters could not be solved on time. "Such factors are attributed to the factor which prevents factories from using their capacity, which results in low productivity and low performance of the export," he told MPs.

Power cuts, customs and logistic services are other challenges cited by the minister. The frequent electric power cuts and fluctuations were mentioned as critical problems which have caused a serious challenge for the poor performance of the sector. According to the minister, in February a total of 204 cases of power cuts were registered among eight textile factories and as a result an estimated 106 working hours were wasted. "Apart from wastage of production time, devastating impacts on electronic equipment that disrupt production and productivity occurred. The minister further indicated that although discussions have been conducted with power company repeatedly, this has borne no fruit. He added that four leather factories around Modjo suffered similar problems related to power cuts.

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