Sheger Tribune

Drought, Inflation Force Gov't into $ 94m Wheat Buy addis fortune reports

The Ethiopian Grain Trade Enterprise (EGTE) has signed a 94 million dollar contract with Agrimpex Company Limited for the supply of 300,000tn of milling wheat two weeks ago, sources disclosed to Fortune.

Agrimpex, a private company registered in London and owned by a Mr. Phillipas, and company has entered into at least three contracts with the Ethiopian government since 2008 for the supply of 300,000tn of wheat. These procurements were done as part of the federal government's bid to fend off escalating food prices by dumping excess wheat into the market.

The agreement comes at the second week of wheat shortages in the capital, prompting shortages of bread supplies in bakeries and restaurants for the past two weeks. 

Accordingly, the Ethiopian Miller’s Association (EMA) has submitted a letter to the Ministry of Trade (MoT) calling for a solution alleging that the EGTE has failed to supply it with wheat for the past two weeks.   

“There is no response from the ministry but we have called for a general assembly to discuss the matter and look for solutions,” Biruk Temke, from the EMA, told Fortune.

Despite the government’s hope of taming inflation, the year on year inflation has increased to 39.2pc in July 2011, compared to last year. The total price index of cereals in July 2011, has also increased by 42.1pc compared to the same month in the previous year. 

The delivery of the wheat consignment is expected to ease the growing demand of wheat and stabilise prices with food inflation peaking to 47.7pc in July, as well as afford the government some respite from the nation’s dwindling emergency food security reserves, which is at its lowest.

However, the respite might be short lived as the government would have to divert some of the wheat it imported aimed at stabilising food prices to replenish the nation’s Emergency Food Security Reserve  (EFSR) needed to provide emergency relief for the 4.5 million Ethiopians affected by the drought which had hit East Africa.

The EFSR is currently heavily depleted and the reserve is close to zero as indicated by Abdou Dieng, according to a statement made by the country director of the World Food Programme (WFP) in Ethiopia on July 29, 2011.

The government has been trying to stabilise prices through the provision of excess wheat, however, during the ongoing food crisis, emergency reserves are almost nonexistent, said Dieng, talking about the dual challenge that the nation is facing.

Dieng’s comments confirmed reports that the EFSR’s stock have dramatically gone down since the June 10, 2011; reports which stated that 81,535.60tn of wheat and sorghum remained in stock out of a full capacity of 410, 584tn.

As a way of stabilising food prices the government, ETGE has been releasing food stocks from the emergency food reserve to provide subsidised wheat to the public to offset high food prices since 2008.

Since wheat is an essential food item, unless the government imports a sufficient amount of wheat into the market, the inflation rate will increase in the following month, an economist, who wishes to stay anonymous, told Fortune.

The Government Procurement and Property Disposal Service (GPPDS), which was established in October 2010 to conduct high level procurements for government offices, invited prospective international bidders to provide the nation with 300,000tn of wheat in an open bid floated on July, 2011.

“Since the tender was issued through the internet, we did not know how many companies have downloaded the large document,” Yigzaw Daba, director general of the GPPDS, told Fortune.

However, a total of five companies who responded to the tender submitted their proposals including Comi Trade, Agrimpex Limited, Mid Gulf Services Limited and Louise Deryfus Commodities, who were assessed based on their technical assessments, which constitute 70pc of the total evaluation.

The technical evaluation assessment included the harvest year of wheat, moisture content, and protein content, according to the bid document.  

Since the financial evaluation was determined by who offered the cheapest price, Agrimpex, who offered 313.65 dollars for one ton of wheat, was awarded the contract. 

This is not the first time that Agrimpex has supplied wheat to the Ethiopian government. It has already imported wheat into the country on at least three occasions, without participating in a competitive bid since 2008, sources claimed. 

The import is now being processed through a settlement agreement to be undertaken between the state owned Commercial Bank of Ethiopia (CBE) and UBS, a Swiss bank based in Geneva, upon the request of the company, according to sources who are close to the bank.

Failing to supply milling wheat to EGTE, another London based company, Mid Gulf, had secured a 13.8 million dollar contract to supply 33,000tn of grain wheat for EFSR.

A ton of wheat, on the international market, stood at 322.60 dollars in August 2011, showing a six per cent increase from the previous month, when the price was 303.80 dollars. In the local market, a quintal of wheat stood at 1,100 Br, exhibiting a 57pc rise from the previous month of 780 Br per quintal, based on prices set at Ehil Berenda on Fitawrari Habtegiorgis Street, since Thursday, August 11, 2011.

Ethiopia imported a total of 887,045tn of wheat from different countries largely from Bulgaria in 2010, according to data from Ethiopia Revenues and Customs Authority (ERCA).

China, India and Russia are the top three producers of wheat producing 115 million tonnes, 81 million tonnes and 62 million tonnes on a yearly basis, respectively, in 2009/10.

The wheat will be delivered to the country in September, according to the bid document.

Berhane Haile, director general of the EGTE who is identified as the “Procuring Entity” in the bid, declined to comment on the issue.