Federal authorities’ efforts to buy 20 million litres of edible oil remain at a standstill as negotiations with the supplier are afoot. A company headquartered in San Francisco entered into a contract with the state-owned Ethiopian Industrial Inputs Development Enterprise (EIIDE) in April to supply sunflower oil for 30 million dollars.

Alpha Capital Ventures Ltd has agreed to receive payments through a deferred letter of credit. It is a business practice that allows the federal government to settle the bill in a year, after the supplier delivers the oil. The deal compels the Enterprise to provide a sovereign guarantee from the federal government if it defaults on the payment.

“We’re negotiating to finalise the deal,” Solomon Girsha, deputy chief executive officer (CEO), told Fortune.

Established in 2015 with a paid-up capital of four billion Birr, the Enterprise buys and distributes essential consumer items such as cooking oil and sugar through 83 outlets. It also imports inputs for manufacturing industries.

The Enterprise recently concluded the procurement of 10 million litres of palm oil from Golden Africa, valued at 20 million dollars. Golden Africa is a subsidiary of the Malaysian Pacific Inter-Link, the palm oil processing and refining business. The company runs a plant in Djibouti with the capacity to refine 9,000tns of palm oil monthly.

The Enterprise faces rising rail transport costs to ferry the oil from Djibouti; it pays a little over 118,000 Br a wagon. Built with 4.2 billion dollars in credit from the Chinese Export-Import Bank, the Ethio-Djibouti Railway transports five percent of all cargo shipped to and from Djibouti.

The Enterprise has thus far transported five million litres of palm oil. Nonetheless, the volume falls far short of the national demand estimated at over 850 million litres annually. Supply is sufficient to meet only two-thirds of demand.

Over 410 million litres of cooking oil have been imported, valued at 23 billion Br, since last September. Refined palm oil accounted for a third, while sunflower oil comprised 43pc.

Shortages and volatility in the edible oil market are expected in Addis Abeba, where monthly demand reaches seven million litres. Last March, the price of a five-litre sunflower oil bottle doubled overnight from a retail price of 590 Br. The issues pushed officials at the Addis Abeba Trade Bureau to distribute essential commodities at subsidised rates through 140 cooperatives for over a decade.

However, the city administration can only meet two-thirds of the demand, disclosed Daniel Mieassa, director of public relations.

A consumers’ cooperative in Wereda 06 of Kirkos District is among the city’s trade bureau partners. It receives a monthly 3,400 litres of edible oil from the federal government at a subsidised price, retailing five litres for 733 Br.

Simret Gelana, sales officer, told Fortune that the stock available could only satisfy a quarter of the demand. Close to 1,300 households buy essential commodities from the cooperative using coupons.