Ministry of Trade and Regional Integration (MoTI) officials will submit a formal application for a Franco-Valuta permit allowing companies with foreign currency to import cement and metal products soon, sources told The journalist.
Critical shortages of cement and metal products have been a stumbling block for those involved in the construction industry. The price of cement has more than doubled since last year, now reaching 1,200 birr.
The cost of all types of rebar also showed similar price increases over the same period. This is the result of a supply shortage that has become evident due to the inability of local suppliers to meet demand.
Ministry officials have proposed Franco Valuta, as a feasible solution to reduce the supply shortfall. Hassen Mohammed, Minister of State for Trade System and Licensing at the Ministry of Commerce, is one of them.
“Local factories are unable to make up for the shortage. We believe that Franco Valuta is the possible solution to stabilize the market,” Hassen said.
Local cement manufacturers produce seven million tonnes of cement, half of the country’s demand. Producers of metal products, especially those making rebar, Ethiopia’s rarest construction input, meet less than a third of demand. They cannot use their production capacity to the maximum due to shortages of inputs.
Industry insiders welcomed the proposal made by the Department of Commerce.
Girma Habtemariam, president of the Association of Construction Builders, explains that his entity proposed a similar solution three years ago with the aim of avoiding the shortage of previous years.
“Local factories are unable to meet demand due to aging machinery and lack of inputs,” Girma said, adding, “Allowing companies with foreign exchange resources to import cement is the right solution to satisfy local demand”.
Some, however, do not see Franco Valuta as a viable solution to stabilize the market.
“It may help to increase the supply, but it cannot lower the market price. Even if companies are allowed to import cement without tax, it will not make a significant difference on the sale price,” said Fitsum Nigussie, National Cement Factory representative to the Cement Producers Association.
If the Ministry of Finance grants an import permit for cement and metal products under the Franco Valuta, the two products will join the list of goods allowed to be imported under a similar regime.
Since last year, the government has allowed importers to bring in commodities like edible oil from abroad using their own currencies from any country outside Ethiopia.
Economists, however, warned of an economic bite if the government continues to use the program to stabilize the local market. They fear the parallel market will flourish as people would be encouraged to avoid official channels in search of better profits.