22 June 2019

Ethiopia: Dangote's New PP Bag Factory Unable to Roll Due to Forex Shortage

opinion

Cement production line put on hold

The PP bag manufacturing plant built by Dangote Cement Ethiopia at a cost of USD 20 million is unable to start rolling due to shortage of foreign currency required to import raw materials.

The Dangote Cement Ethiopia built the cement PP bag manufacturing plant in front of the cement factory 80km west of Addis Ababa in Adaberga Wereda. Originally, Dangote Cement Industries planned to build a PP bag manufacturing plant which can produce 120 million bags annually. The PP bag would be used to pack cement by Dangote and other local cement factories. However, the plant capacity was reduced to 60 million bags per year due to the shortage of foreign currency and electric power.

Danilo Trugillo, Dangote Cement Ethiopia PLC Country Manager, told The Reporter that even though the construction of the PP bag manufacturing plant was completed in April 2018 the factory could not start running due to shortage of foreign currency required for the importation of raw materials. "We need one million dollars to import raw material every month. But the government cannot allocate the foreign currency to us. So we cannot start production," Trugillo said.

According to Trugillo, if Dangote Cement Ethiopia can secure one million dollars every month it can start running the PP bag factory within 45 days. "The PP bag factory is a game changer for us. It is ready for commissioning. But we need foreign currency to get it up and running."

Trugillo said that if the PP bag plant can get one million dollar for the import of foreign currency every month it can save 1.4 million dollars spent on the import of PP bag. He said the plant does not only save foreign currency but it will also create job employment opportunity for the local people. "We at least need 165 key workers and will create more than 100 indirect jobs," he said.

"The Chemical and Construction Inputs Development Institute has been cooperative to us but the government did not consider it as a priority area," he added.

Trugillo said Dangote Cement Ethiopia has requested the National Bank of Ethiopia (NBE) to allocate the required foreign currency but the bank has been unable to provide the foreign currency till now. "We have been communicating with the bank and the Ministry of Finance. We also asked the Ethiopian Investment Commission to help us convince the government to allocate the required foreign currency to us. But so far our effort has not been successful. The unemployed youth in the area are asking me every day when the PP bag manufacturing plant would start operation but I cannot give them a definitive answer."

According to the manager, the PP bag plant is a modern technology built by an Australian company. "The PP bag would not only benefit Dangote Cement but we will also supply the PP bag to other local cement factories."

The Dangote Cement factory was built by Dangote Industries at cost of more than USD 600 million. The factory, which started operation in June 2015, has the capacity to produce 2.5 million tons of cement per annum.

The company had planned undertake an expansion project. The company was contemplating to build a second cement production line with an outlay of USD 600 million. The second line would have an installed production capacity of 2.5 million tons of cement. Dangote Industries signed an agreement with a Chinese contractor, Sinoma International, for the construction of the second phase. However, the company suspended the expansion project due to some challenges it has faced.

Trugillo said his company has decided to suspend the project due to shortage of foreign currency and electric power the country is facing. "Dangote Cement is unable to repatriate the profit it has been making to its parent company in Lagos, Nigeria. Repatriation is one of the biggest challenges we are facing. If we cannot send money to our parent company and service our debt that used to build the first plant how can we invest on the second line," he said.

Erratic electric power supply is the second issue. "While we are not able to get enough power for our existing cement plant, we cannot build the second plant," Trugillo said.

"I reviewed the project proposal and we recently deliberated on the matter in our recent board meeting. The expansion project is not scrapped but it has been put on hold because of the prevailing situations," he said. "If the business environment improves the project would be reactivated," he added.

There is also security concern in the area. Former Country Manager of Dangote Cement Ethiopia, Deep Kamara, his secretary and driver were shot dead on May 16, 2018 a year ago on their way back to Addis Ababa after a field visit to the cement plant. The culprits have not been arrested and brought to justice. The late Kamara was trying to manage labor disputes.

The Adaberga Wereda Administrator Moti Gemeda told The Reporter that the relationship between the labor and management has improved since the arrival of the new country manager in July 2018. "Previously there were problems with the management of Dangote in respecting workers' rights. Now the local administration is working closely with the management of Dangote and Social and Labor Bureau in solving labor grievances. The situation has improved significantly," Moti said.

According to Moti, the assailants who murdered the employees of Dangote have not been identified. "The search is still on by security forces. The local administration is working with security forces and all other relevant authorities not to have similar incidents," he said.

Trugillo shares Moti's view. "It is fair to say the labor management relation has improved. We now have open communication with the workers. My office is open to everybody. We are closely working with the labor union, Wereda administration and the community leaders. There are some residual issues from the past that we are trying to resolve through dialogue," Trugillo said. "But since I came last July the situation is peaceful. Peace and security is a national concern. It is not a peculiar problem to our company," he concluded.

Ethiopia

Ethiopia's Power, Security and Democracy Dilemma

Recent assassinations of senior political and military leaders in Ethiopia sent shock waves across the country, casting… Read more »

See What Everyone is Watching

More From: Reporter

Don't Miss

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 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.