Following the recent escalation in the price of construction materials, Addis Ababa Procurement & Property Administration Agency has approved a price adjustment request from two cement suppliers, who clinch the latest cement purchase bid.
It is to be recalled that back in November, 2017, six local cement producers competed to supply 7.1 million quintals of cement for the city administration’s housing project. The total demand was composed of 4.2 million quintals of Ordinary Portland Cement (OPC) and 2.9 million quintals of Portland Pozzolana Cement (PPC).
National Cement, a local cement producer, offered the lowest price of 241.39 birr per quintal for OPC, while East Cement, a Chinese producer incorporated in Ethiopia, offered 193.50 birr per quintal for PPC.
Later on, the Addis Ababa Public Procurement and Property Disposal Agency (AAPPPDA) awarded the two companies the contract to supply the cement with the aforementioned price quotations.
As per the demand from public housing project, National Cement signed a contract to supply 2.135 million quintals of OPC and 604,085 quintals of PPC, in the stated time. In addition, East Cement signed another supply contract to provide 906, 127 quintals of PPC.
In this respect, since the contract signing in March 2018, the two companies have already supplied 1.887 million quintals of cement until the past few weeks. Meanwhile, the two were applying for price adjustment citing the recent devaluation and the subsequent hike in production cost of cement.
Following the request, the Procurement Agency with the assistance of Central Statistics Agency (CSA) accepted the basis for their demand and granted the adjustments accordingly.
According to report by CSA, as of February 2018, the year-on-year inflation has reached 15.6 percent in the local market. In this respect, non-food inflation was also at 9.8 percent.
The Agency agreed to increase the unit price of OPC and PPC supplied by National Cement and East Cement on average by 13.5 birr. This will help the two suppliers generate additional average income of 24.5 million birr from the overall contract.
It is to be recalled that following the National Competitive bid, out of the six local companies who were competing for the bid only National Cement, Dangote and Messebo Cement had made it to the financial evaluation stage.
Local cement producers, including Dangote, Messebo, National, Habesha, Mugher as well as East Cement submitted their bid proposals, out of the 11 companies that purchased the bid document.
The purchase which was conducted by the Agency on behalf of the Addis Ababa Housing Construction Project is destined for the construction of the public housing project under the 10/90, 20/80 and 60/40 schemes.
The tender was originally an international competitive bid open for both local and international suppliers.
However, this arrangement was challenged by local producers, inviting intervention by the Addis Ababa Finance and Economic Development Bureau. At the time, the local producers argued that the tender should exclusively be reserved for local producers. Their argument was based on the fact that there was ample local capacity for supplying the required amount.
Currently, the number of local cement factories stands at 20, and annual cement production of the country has reached 15 million tons per year.
Following this, the Agency amended the international competitive bid, giving local producers an exclusive right to compete in the bid.
Source: The Reporter Ethiopia