By William Davison, Bloomberg Business. Photo: Commodity.com
Ethiopia may begin exporting surplus raw sugar in 2016 after finishing delayed Indian and Chinese-backed projects in the drought-hit east of the Horn of Africa nation, the state-owned Sugar Corp. said.
Unrefined sugar production in the fiscal year that ends July 7 should be more than 900,000 metric tons, primarily from the expanded Fincha, Wonji and Metahara factories and the almost complete Tendaho and Kessem operations, which are supported by state banks in the Asian nations, according to company spokesman Zemedkun Tekle.
“Not only will we stop importing sugar, but we will start exporting,” he said in a Nov. 9 interview in the capital, Addis Ababa.
Ethiopia, Africa’s largest coffee producer and second-most populous nation, wants to add 10 new plants to become one of the world’s 10 biggest sugar exporters by 2023. It failed to become self-sufficient as it forecast in 2013 and missed a target to export $661 million of the unrefined sweetener last year, according to a five-year growth plan that ended in July.
The military-run Metals and Engineering Corp. may finish a factory at Kuraz in southern Ethiopia and two plants in Beles valley in Amhara region this year, though only trial cultivation will occur, Zemedkun said. The China Development Bank and Export-Import Bank of China have committed more than $1 billion for Chinese contractors to build two other processors at Kuraz, the Welkait project in Tigray region, and Kessem in the arid Afar region.
Tendaho and expansions at Fincha and Wonji were funded with a $600-million loan from the Export-Import Bank of India agreed in 2007.
Last year, the government, which is currently the only sugar producer, imported about 200,000 tons of the sweetener after financing delays slowed projects, Zemedkun said. Domestic demand in the 12 months to July 7 may be as much as 650,000 tons, he said.
The corporation received 64 billion Ethiopian birr ($3 billion) for the industry since 2010 and needs another 172 billion birr to finish all projects by mid-2020, according to Zemedkun. The Finance Ministry said some of the $1 billion raised from a debut Eurobond in December will be allocated to sugar development.
Ethiopia won’t be able to meet the standards of refined sugar produced in developed markets, so will initially export the raw variety, Zemedkun said. Suitable ecology means plantations are relatively productive, though cost-efficiency in all areas needs improving, he said.
Ethiopia may be producing 750,000 tons to 950,000 tons of sugar by 2020, making it one of the world’s top 20 exporters of the sweetener, London-based BMI Research said in an April report. Prices for raw sugar for March delivery were 15.03 cents a pound on the ICE Futures U.S. in New York by 8:03 a.m. Friday.
Ethiopia’s trade deficit increased to $13.5 billion last tax year from $10.5 billion, as imports surged 20 percent on capital spending, and goods exports dropped 8.5 percent to $2.9 billion, according to International Monetary Fund data. Mining, electricity, leather and textiles are other industries that failed to earn the export revenues projected in the five-year plan.
Managers at Metahara, Wonji, Kessem and Tendaho, whose projects are in the basin of the Awash, Ethiopia’s longest river, have been told to conserve water for next year in anticipation of low rainfall, Zemedkun said. The United Nations estimates as many as 15 percent of the population will need emergency assistance next year after drought ruined harvests and killed livestock.