Procurement officials at the federal government have floundered in their efforts to buy hundreds of thousands of tonnes of wheat due to uncertainties over lack of interested bidders and technical issues.
The import of wheat is considered crucial to stabilise the market and provide welfare to low-income groups. The Ethiopian Trading Business Corporation (ETBC), a state-owned enterprise established with a capital of 3.8 billion Br in 2015, has been given the mandate to buy wheat this year, unlike in the past when the Public Procurement & Disposal Service carried out the task.
The Corporation plans to import 400,000tn of wheat, inviting suppliers to participate in a bidding process. Only three companies of the 37 that bought bid documents responded with offers to supply 80,000tns of wheat each in five lots, sourced from Romania, Ukraine and Russia. One of them faces disqualifications for failure to comply with bid technicalities, undermining the timely delivery of the imported wheat.
One of the prospective suppliers, the Dubai-based Promising International, placed its bid for lot five, planning to source the wheat from Romania. If awarded the contract, the company would deliver the grain by July 2022 in two rounds. Promising International has been awarded several contracts in the past to supply wheat through the Public Procurement & Disposal Service, including 30,000tns of wheat for close to half a billion Birr earlier this year.
United Africa Group, the second bidder, is new to the Ethiopian market. Based in Namibia, it submitted its bid for three lots with delivery dates varying from March to June next year. The company plans to source the wheat from Ukraine. Global Force, a Turkey-based company, placed its bid for lot one, offering to supply wheat from Russia.
However, United Africa failed to submit 400,000 Br in security bonds before the bid was closed on November 31, 2021. It also submitted financial and technical documents enclosed in one envelope, failing to comply with the requirement of submitting the two documents separately.
This could lead to disqualification during the preliminary review, which is expected to occur next week, disclosed Ketsela Shewarega, deputy CEO of corporate operations at the ETBC.
The Corporation plans to conduct preliminary reviews before deciding whether to refloat the tender, award the contract to one candidate, or opt for other procurement methods, according to Ketsela.
“Lots that only had one bidder will be cancelled if the offer isn’t competitive,” Ketsela told Fortune.
Ethiopia satisfies 70pc of its demand for wheat through domestic production. There are 4.7 million wheat farmers, producing 5.7 million tonnes a year. The federal government has long been importing a large volume of wheat to fill the gap. Imports have grown from 600,000tn to 1.7 million tonnes annually over the past 10 years.
Last month, a public bid for 300,000tn of wheat issued by the Procurement Service, on behalf of the National Disaster & Risk Management Commission, was cancelled as the offer from the lone bidder was well above market prices. Of the 40 companies that bought bid documents to supply 150,000tn of wheat in two lots each, only a Liberian company, Huyton Inc. Group, placed an offer. The Service used market prices to determine its decision for lack of other bidders, says Abeba Alemayehu, acting head.
The company offered 379 dollars a tonne, 10pc higher than market prices. In October, the price of a tonne of wheat from Russia and Ukraine stood at 315 dollars, close to 30pc higher than prices recorded three months earlier, according to a Food & Agriculture Organization (FAO) report.
“The price offered was exaggerated,” said Abeba.
She attributed the lack of interested bidders to an “inaccurate” perception suppliers have about the present situation in Ethiopia.
However, buying wheat on time has been a recurrent problem. Bidders raise issues of delays in contract awards and payment as factors that drive up the cost of wheat. Suppliers also face uncertainty in securing financing as banks are hesitant to disburse loans, one of the bidders disclosed.
Earlier this year, the Service had proposed reforms in the procurement process, including reconsidering the bid validity period and increasing bid bond value.
Last week, the Corporation announced that it had completed the procurement of 400,000tn of wheat to be used for market stabilisation at the cost of 11 billion Br. The procurement was carried out through the United Nations Office for Project Services (UNOPS) while contract administration, opening letters of credit and distribution were delegated to the Corporation.
Another 400,000tn is expected to arrive soon, Ketsela disclosed.
The fate of the 300,000tns wheat procurement remains unresolved, awaiting a final decision from the Ministry of Finance officials. The Ministry awaits to see the outcome of the Corporation’s bid process for the 400,000tns before deciding on how to move forward, disclosed Ketsela.
