Domestic Engineering Continues To Be Trapped in Bottlenecks

Despite the emphasis the government has placed on the contribution of the manufacturing industry in realising its growth & transformation plan (GTP), local engineering companies complain of bottlenecks. Such issues include the large pile up in stock, the absence of an automotive policy and a lack of transparency in government auctions, among others. These are deemed to be constraining their competitiveness in the market, Fortune reported.

The state-owned industrial giant, the Metal & Engineering Corporation (MetEC); Maru Metal Industry Plc; Mesfin Industrial Engineering (MIE); Belayab Engineering Plc and the Automotive Manufacturing Company of Ethiopia (AMCE) are at the forefront in complaining of market constraints, which hinder them from becoming competitive.

The MetEC has a huge product inventory worth 13.6 billion Br waiting for potential buyers.  The six other industrial companies also have production inventory worth 89 million Br. The MIE has an inventory of 12.2 million Br, while Belayab, Amiyo and AMCE have 55.2 million Br, 928,000 Br and 20, 6339 million Br, respectively.

“We have over 9,000 tractors sitting idle while millions of farmers are in need of them,” Kinfu Dagnew (Brig. Gen.), the MetEC’s director general, said on Thursday, January 30, 2014, at a consultative forum for the government and stakeholders in the engineering industry. The event was organised by the Industry Affairs Standing Committee of Parliament, at the meeting hall of Parliament.

The MetEC has manufactured 479 buses of varying sizes, 524 trucks, 772 light vehicles, 197 forklifts and 90 motorbikes between 2011 and 2014.

A huge amount of product inventory remains in stock, representatives of the engineering companies complained, due to considerable import at lower prices.

“Many potential and real customers still have proclivity towards importing, rather than purchasing locally made materials,” a representative of one of the companies said.

Several government institutions, the companies said, do not pay on time, thus causing them to wait for a long time without payment.

Combined production from Maru, the MIE, Belayab and the AMCE amounted to 751.6 million Br at the end of the 2012/13 fiscal year, up from just 128.5 million Br in the previous year. Production at the four engineering companies has reached 357.9 million Br during the first quarter of the current budget year. The volume of sales at the four companies registered a whopping increase during the 2012/13 fiscal year, reaching 742.5 million Br, up from 113.9 million Br. During the first quarter of the 2013/14 fiscal year, 425.6 million Br sales were registered.

Mesfin is particularly known for the manufacturing of dry cargo body mounted trucks, three-axle fuel draw bar trailers and three-axle dry cargo semi-trailers, among others. Maru has been penetrating the market by manufacturing van and cargo bodies and factory equipment. Belayab, on the other hand, manufactures station wagons, pickups and sedan automobiles. The AMCE’s specialisation has been in trailers and cargo bodies.

The need to develop appeal and pride in domestic products was raised at the discussion with senior government officials, including – Debretsion Gebremichael (PhD), deputy prime minister for Finance & Economy Cluster; Teklewold Atnafu, governor of the National Bank of Ethiopia (NBE) and Tadesse Haile, state minister for Industry, among others.

The manufacturers also had issues with customs. They particularly requested a tax reduction for companies engaged in assembly work. Another area of concern was with the same amount of excise tax being required for both locally assembled and imported cars. The tax system, they said, does not encourage buyers to opt for locally assembled cars.

Another issue – one on which the engineering giants quickly won the nods and appreciation of the government – was with the need for an automotive policy for the country. A representative from the MIE called for a rethinking of the transport regulation system in the country, calling for the legislation of an automotive law.

“The market is being infested by low-cost, older model cars,” he grumbled. “We need a legislation to protect local industries and ensure safety.”

Data obtained from the Ministry of Transport in late 2013 indicates that 58pc of vehicles in the country have been in use for over 16 years.

Government representatives agreed that there was a need to draft a policy guiding the automotive market in the country. Representatives of the Ministry of Transport (MoT), who supported the idea, said their Ministry was in the midst of a study designed to find ways of limiting the importation of used and old model cars into the country. But some among the government circle seemed to find the idea of limiting older models unfeasible.

“We need to consider that millions of people eke out their living from commercial activities by using old vehicles,” protested Teklewold. “So the idea of clearing the country of older cars is really not feasible.”

Born in 2010, emulating the experiences of South Korea and Sweden, the MetEC incorporates close to 70 state-owned enterprises in the engineering sector, alongside seven military hardware manufacturing entities, while commanding over 12,000 employees.

Source: Fortune