A policy measure that favoured steel importers over manufacturers was laid out as the major issue for the industry tethering on the brink of collapse. Following discussions at the Prime Minister's Office with Girma Birru, advisor to the macroeconomic committee, leaders from the Association of Ethiopian Basic Metals & Engineering Industries took swift action, enlisting the expertise of Ruhe Long & Flat Products Consultancy Plc to probe into the industry's woes.

Under the stewardship of Belete Sirabizu (PhD), the study analysed the four-year performance of 19 steel manufacturers, uncovering a litany of issues plaguing the sector. From excessive stockpiles to glaring policy deficiencies and foreign currency shortages, the findings told a tale of underachievement lingering at less than 20pc capacity.

At the heart of the industry's woes were importers enjoying clear advantages, courtesy of duty-free privileges and opaque incentive mechanisms. Manufacturers tackled a shortage of inputs to remain competitive in the market, accessing only a fraction of their 1.5 million tons monthly demand.

According to Belete, the acute shortage of scrap metal clogged production capacities and led to inflated market prices. He highlights the glimmer of hope, suggesting that manufacturers retained the potential to ramp up annual output to 5.3 million tons under conducive conditions, doubling the demand. However, existing policies heavily favoured importers, exacerbating the influx of duty-free steel imports.

Over 1.25 million tons of steel valued at 600 million dollars were imported predominantly from China last year. This marked a significant increase compared to the previous year, which saw imports at 201,000tns, and an even greater leap from two years prior with 263,000tns from Turkey.

“Control mechanisms should've been in place,” Belete told Fortune.

Belete suggests redirecting efforts from imports through franco-valuta measures towards using the scheme for importing raw materials. This shift aims to boost domestic production while curbing the reliance on imported finished goods. The abundant potential of unexplored iron ore reserves in the northern region, according to Belete, signals an opportunity for economic growth.

While the source of illicit imports remains elusive, over 56 million Br worth of contraband steel was confiscated by the Ethiopian Customs Commission in the past six months. Tegegene Derese, head of Inspection at the Commission, acknowledged the rigorous inspection procedures but emphasised the need for a comprehensive investigation to uncover the true extent of illicit activities.

The findings were submitted to the macro-economic committee three weeks ago. Representing 76 members, Solomon Mulugeta, the Association's general manager, said the study has exposed policy gaps that pose imminent threats to the industry that endured longstanding neglect.

"We need urgent remedial action," he said.