Radar | Jan 05,2019
Foreign currency shortage has impeded power supply installations to integrated agro-industrial parks despite the Ministry of Industry remunerating Ethiopian Electric Power (EEP) in local currency.
The Bure, Bulbula and Yirga Alem parks are hindered from manufacturing at maximum capacity for a lack of adequate electricity. Minister Melaku Alebel reported to Parliament three weeks ago that in spite of the 1.4 billion Br paid by the Ministry for power installation works, significant progress has yet to be observed.
Bure Integrated Agro-Industrial Park, located 411Km north of the capital in Amhara Regional State, demands 50MW power to match the inhabitants' production scale.
The power supply installation contract penned in 2021 stipulates delivery within 14 months. However, the park needs more power to accommodate manufacturers, according to Birhanu Tamyalew, CEO of the Amhara Industrial Parks Corporation.
The installation includes building a 120Km long transmission line from Debre Markos to Bure town and a substation in the Park vicinity.
Berhanu said the lack of adequate power supply has impeded over 32 investors who have registered an aggregated 11.5 billion Br capital to process and add value to the agricultural endowments of Bure and neighbouring towns.
"Electricity is indispensable in any industrial park," he told Fortune.
One of the manufacturers in Bure Integrated Agro-Industrial Park, Richland Biochemical Production Company, produces soya beans, starch, edible oil and animal feed. Its plant erected on 21hct is compelled to produce at 20pc capacity due to the power shortage. The management is dismayed over the stalled expansion to install protein compound processing machinery.
Officials at the electric power point out that opening a letter of credit to import the essential equipment is one of the prerequisites for beginning installation.
Moges Mekonen, communication director at EEP, concurs that the electromechanical works essential for power provision must progress according to plan. He said EEP's did not default on its contractual obligation since the start of the installation is contingent upon the letter of credit opened at the Commercial Bank of Ethiopia (CBE).
According to the communication director, despite the completion of design ratification and soil study, the electromechanical works are stalled for equipment such as insulators and circuit breakers imported from abroad.
High-interest rates and lengthy procedures are attributed as impediments to the extended project completion time.
Asres Dagnachew, senior management at the pilot project of integrated agro-industrial parks, said the 12 million dollars financial guarantee the Ministry of Finance extended in 2022 has lapsed while procedural and interest rate reduction negotiations were taking place. He reasons the 12.5pc interest rate imposed by the state-owned Commercial Bank of Ethiopia (CBE) does not consider the nature of the projects and the financial capacity of EEP.
Asres urges a swift resolution for Bure Integrated Agro-Industrial Park, considering the disparity between power demand and supply. However, he believes the plight in Yirgalem and Bulbula parks is not as concerning. According to him, the 12MW power supply at Yirgalem and nine megawatts at Bulbula can accommodate a handful of manufacturers working in the two parks.
Experts advise that integrated parks that substitute imports be prioritised regarding infrastructure development.
Alemayehu Geda (Prof.), an economics expert at Addis Abeba University, argues the country should reduce annual imported products by 30pc for the next five years to get relief from the recurrent forex crunch.
He observes that aspirations to solve the hard currency shortage by adding value to primary products do not match reality. Alemayehu recommends integrated parks that substitute imports and generate hard currency be given priority to access the foreign currency needed for their infrastructural developments.
PUBLISHED ON May 13,2023 [ VOL 24 , NO 1202]
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