BY ABEBE WOLDEGIORGIS
Inflation surges from time to time have been unbearable to the ordinary citizens. There are assumptions that the case for inflation among others; hoarding consumption products including agricultural and manufacturing products and over purchasing of goods due to fear that scarcity may occur as well as shortage of supply can be mentioned.
Husein Ali, an economist, while presenting his study paper on a public discussion recently, said that the excess amount of money dispersed in the market before the government led by Prime Minister Abiy Ahmed has come to power, is still aggravating the inflation. The extended value chain also can be taken as the case to the rise of price of commodities.
As to him, the role of the production and export sectors in the economy is insignificant yet. The very limited production capacity and the high demand for commodities exacerbate the cost of living.
The Public, usually, are forced to purchase imported commodities with higher price because of the scarcity of local products. On the other hand, the export products don’t show remarkable increment in volume.
Back ward trade system coupled with unethical business men fraud practice made the exchange of commodities cumbersome and unpredictable. The value chain from producers up to the consumers is much extended and even here in Addis Ababa, commodity prices are highly varied within 2 kilo meters interval.
The trade root is dominated by brokers who play a negative role by hampering the flourishing of business and farmers have no sufficient knowledge of the price of their products here in the capital. For instance, farmers sell their onion 15 Birr per kilo gram while brokers made the price up to 30 Birr and this indicates how farmers are marginalized from benefiting the actual market price of their products.
Discussants of the session agreed that the political conflicts occurred here and there also have their own impact in hampering the movement of commodities and products which in turn pose shortage on the supply.
According to an official from the Ministry of Agriculture, in the last rainy season, crops were planted in more farmlands than the previous year. Based on the Prime Minister’s initiative, lands that include which are found in school compounds and belong to the churches were cultivated and covered by crops. In addition, private investors cultivated their own farms.
According to the Ministry of Agriculture, in the last rainy season, crops were cultivated in 13.9 million hectares of land all over the country. However, crop cultivation was carried out only in 12.8 million hectares of land in the previous year and 350 million quintals of crops were harvested.
But this year, 375 million quintals of crops were harvested. One can understand from these figures that this year, excess crops were harvested as compared to the previous year.
Therefore, it seems that the commodity inflation has nothing to do with production rather it is attributed to the supply system.
In this regard it is understood that the role of the producers and consumers cooperative association in stabilizing the market is immense because they can break the brokers’ chain.
According to Usman surur, President of the Federal Cooperatives Association, in order to withstand the COVID-19 aftermath, producer’s associations collected products not only from their members but also from none members during this harvest season and sounding impact to reverse the harm was attained to some extent.
To continue such practice, the government and other stake holders must raise fund to purchase and collect more products from producers so that fair distribution of basic consumption commodities could be achieved.
A participant from the Ministry of Trade and Industry also said that the Ministry engaged in checking the value chain from producers up to the supply of basic needs in the retail sellers and attempted to stabilize the market. For instance, had there not been to the government intervention, the price of benzene per litter would have been increased by 8 Birr and currently 1 litter benzene is sold by 25.85 Birr.
The government in the past imported wheat 800 to 900 Birr per quintal from Australia and other countries. Currently the imported wheat is sold by 1927.70 Birr per quintal with subsidized price.
In the international market, a tone of edible oil is sold from 600 to 700 Dollars but currently it has risen to 1000 Dollars. Nevertheless, the government supplies the imported oil to consumers by reduced price. The flourishing of edible oil factories locally are expected to contribute a lot to stabilize the price and supply their product below 360 Birr.
But side by side with increasing production of basic food items, checking the amount of products whether or not they are properly supplied to the market is essential. The reason to do this is excess amount of teff product was found dumped hidden in some places in Amhara State recently. The intention of hoarding was to sell the product in an inflated price some time later. Such type of inspection should be applied both in Oromia State and in Addis Ababa City Administration too. However, to bring long lasting solution increasing production and productivity should be considered as way out.
The other thing which was critically debated on was the skyrocketing price of cement. The participant from the Ministry of Trade and Industry said that the shortage of cement supply to the market aggravated the inflation and hampers activities of the construction industry. As a result, many buildings remain unfinished.
The monopoly of the supply of cement products by few individuals contributes to the artificial price rise. Customers quitted coming to the cement shops because of the high price. Since the beginning of September 2021, cement product has become declining. The scarcity of cement also affects the market of other construction materials as they cannot be utilized alone. Customers gave up purchasing construction materials because unless the main input of construction, cement, is accessible to completed buildings, getting other materials is meaningless. Purchasing of cement from the wholesaler is carried out secretly and this is the main case for the shortage of the products.
Some traders are engaged in hoarding cement which in turn poses shortage and incurs heavy pressure on the other economic activities.
As to experts, the annual turnover capital of the construction industry raised up to 7 billion Birr annually but the shortage of cement critically affects the industry. Hence, unless the government is fully engaged in stabilizing the market, the repercussion would be severe.
Increasing production and applying transparent price of commodities essential to stabilize the market
The trade root is dominated by brokers who play a negative role by hampering the flourishing of business and farmers have no sufficient knowledge of the price of their products here in the capital. For instance, farmers sell their onion 15 Birr per kilo gram while brokers made the price up to 30 Birr and this indicates how farmers are marginalized from benefiting the actual market price of their products.
The Ethiopian Herald 11 April 2021
