DBE to buyout flower growers debt
Meles Angered of the Coffee Issue
Prime Minister Meles Zenawi last Wednesday took a firm tone when discussing issues concerning the horticulture and coffee sectors.
During the full-day discussion Meles scolded coffee exporters saying they are making the industry into a family business and ignoring the benefit of the country.
Meles said that the government is going to “cut the hands” of those committing grave crimes against the country as of January 9, 2009.
He further said that 10,000 tons of coffee bound for export has disappeared recently and added that the government is vigorously investigating the case.
At current global prices, 10,000 tons is worth about 20 to 23 million dollars.
Ethiopia produces about 200,000 tons of coffee a year, half of which is consumed locally.
The country’s production is just a small fraction of the world’s coffee, dwarfed by giants like Brazil, Colombia and Vietnam. However, the quality and potential holds a key to unlocking prosperity in one of Africa’s poorest countries, an expert in the coffee sector commented.
At the discussion that predominately held coffee exporters responsible for mishandling the country’s biggest foreign currency earner, Meles warned exporters that work with different licenses both as suppliers and buyers to cease their illegal practice. He said that government is going to take severe actions on those who are dishonestly working in the sector.
During the discussion the PM cited the sector’s performance as a reason for the steep decline of the foreign currency income by the sector from past years.
Replying to Meles’ questions, coffee exporters blamed the problem on the Ethiopian Commodity Exchange (ECX), saying it has delivery and storage troubles.
Eleni Zaude G. Medihin, CEO of ECX, denied these accusations.
The exporters further said the global economic crisis has hit sales hard and that banks are tightening credit for their customers.
But experts in the sector said that the effect of the global crisis is not more than 5% on the coffee market.
Moreover, the ECX price index is relatively higher than the New York Stock Market that fluctuates minute by minute.
Coffee earned 525 million dollars in the 2007/08 fiscal year.
Some 12 million people are dependent on the coffee industry. Ethiopia’s key markets are Germany, Japan, USA, France, the Middle East and Scandinavian countries.
Meles has also held discussions with flower farm owners who appealed for extensions of loan repayment periods.
During their discussion, some flower growers who began operations taking loans from private banks appealed to the Development Bank of Ethiopia (DBE) to take over their project after settling the loan.
The growers said that private banks are not interested in long-term loans and these farms could not handle the pressure of the private banks for repayment.
DBE officials during the discussion accepted the appeal and said that if the cash flow of the company is considered healthy DBE would service the loan payments for the private banks and would transfer the company to ownership as collateral.
According to DBE’s credit policy ratified by the Public Financial Enterprises Agency – the regulator of state-owned financial institutions – headed by Dr. Eyob Tesfaye on September 25, 2008, the bank could buyout performing loans found in government and private banks. According to the bank’s lending policy, investments in all agricultural products, excluding oilseeds, pulses and gums, all manufactured industry products, excluding hides and skins, agro-processed products and manufactured goods are considered as priority areas.
With the newly approved credit policy, the bank is allowed to take over loans found in other banks upon the request of a borrower.
Another issue that was raised is the one-year grace period the bank gives to its clients. The growers said that repayment time would arrive before they could even start setting up the greenhouses they use for their products.
The borrowers appealed for the extension of the one-year grace period to two years, a request Meles said would be taken under consideration.
The other bottleneck growers raised is the repayment period of five years, which they said could not be achieved by investors in the sector. They subsequently requested a seven to ten year repayment period.
Meles told sector representatives these, and other issues, including freight service by Ethiopian Airlines would be considered.