Ethiopia removes sugar subsidy as production, importation costs rise

ETHIOPIA – The government of Ethiopia has put a halt to the sugar production and import subsidy scheme which had been in force for a decade, in a bid to enable the country’s sugar corporation to meet its costs.

The Ethiopian Sugar Corporation was formed by the government following market disruption caused by inflation and international sugar price increases.

With the installation of the corporation the government suspended the auction system and assumed authority of the value chain and the price.

The removal of the subsidy has been made as a result of rising production and the cost of importing sugar, indicated Eshete Asfaw, state minister for Trade & Industry.

“It’s not meant to make profits. It’s to stop the losses the Corporation has been incurring and make it at least cover its costs.”

State Minister for Trade & Industry – Eshete Asfaw

According to reports by Addis Fortune, the corporation currently carries 3 billion Birr (US$80m) in debt from the Commercial Bank of Ethiopia (CBE) for imports of sugar, to provide the commodity to consumers at an affordable price.

The removal of the subsidy will also curb the sale of sugar in the black market at higher prices by some industries.

The directive will increase the factory gate price of the sugar from 15.54 Br a kilogram before value-added tax (VAT) to 20.54 Br.

“It’s not meant to make profits. It’s to stop the losses the Corporation has been incurring and make it at least cover its costs,” said Eshete.

The latest price change is the fourth since the government took control of the sugar value chain.

In 2013, 100 kg of sugar was 1,100 Br (US$30), and it was increased to 1,400 Br (US$37) after two years. The last change was made in 2018, when the price increased to 1,642 Br (US$44) for 100kg.

Government to privatize 13 sugar factories

Other measures undertaken by the Ethiopian government to enhance efficiency and improve productivity in the sugar sector include planning to privatizing 13 state-owned sugar factories.

Beginning of the year, the Tigray Chamber of Commerce & Sectoral Associations of Ethiopia started mobilizing investors to take part in the bidding process for the privatization of Welkait Sugar Plant, one of the sugar factories the government of Ethiopia is working to privatize.

Other heavyweight industry players such as Coca-Cola Company under its subsidiary in Ethiopia and Nigeria-based Dangote Group have expressed their interest in the privatization process.

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