By WUDINEH ZENEBE | ADDIS FORTUNE

The opening of the international tender for the procurement of fertilizers last Tuesday November 11, 2008, for the first time in the current year, has been more than just good for Ethiopia’s agriculture.

The major sector of the country’s economy recently suffered a blow due to meteorological factors. The absence off fertilizers was also feared would aggravate the situation, had it not been for this procurement.

The procurement has been undertaken after the World Bank approved a 275 million dollars transfer the Ethiopian government requested the Bank to make from other projects. The government wanted 250 million dollars for the procurement of fertilizers and 25 million dollars as additional funds for the Productive Safety Net Programme.

It is also at this tender that contenders offered an unexpected low price for fertilizers – they offered to provide a tonne of Dap for as low as 633 dollars while the highest price was 877 dollars.

The offer for Urea ranged from 315 to 375 dollars a tonne.

“The prices offered at the tender are the least and unexpected,” Demere Demissie, general manager of Lome-Adama Farmers’ Cooperatives Union and a member of the Tender Committee established a week ago told Fortune.

Though these prices are not that much different from those offered during a tender in September 2007, they are significantly lower than the prices of April and May 2008.

In the tenders opened on September 12 and October 4, 2007, the offer for a tonne of Dap was between 510 and 560 dollars. In another tender opened in April 2008, the price climbed to 871 dollars. The rise in the price of fertilizers at that time was mainly due to the equally soaring price of petroleum in the global market.

The high rate of sudden price increase had repelled most of the active cooperative unions involved in the import of fertilizers from the business. Subsequently, 100,000 metric tonnes of the 530,000 metric tonnes of fertilizers the country had planned to import for the year failed to reach the country.

That placed the fertilizers procurement by the Ethiopian government close to the risk of not having interested contenders, almost resulting in a monopoly of the sector by two companies – Yara and Amropa.

This scenario forced the Ethiopian government to formulate a new fertilizers procurement scheme. The new scheme reformed the previous procedures that led to the transfer of the mandate to chiefly handle the procurement of fertilizers from the Agricultural Inputs Marketing Department with the Ministry of Agriculture and Rural Development (MoARD) to the state-owned Agricultural Inputs Supplies Enterprise (AISE).

Though AISE is also accountable to MoARD, it is a veteran institute specializing in agricultural inputs trade.

The AISE has already formed a five-member committee led by the Enterprise itself to process the procurement of fertilizers. Mebrahitu Gebre-Egziabher, general manager of the enterprise, chairs the committee whose members include Demere Demesie, representing cooperatives union, and Jemal Suleyman, Trade manager of Wondo Trading House, a party-affiliated business firm owned by the regional ruling party Oromo People’s Democratic Organization (OPDO).

In the earlier experience, the committee used to be led by the Department at MoARD and the procurement procedure had been that the department invites local contenders, including unions and companies, to offer prices for the supply of fertilizers. The companies or unions awarded the procurement would, in turn, float an international tender to procure the fertilizers from international suppliers. The tender was to be approved by the committee.

The new procedures mandate the enterprise to undertake the entire procurement in an international tender to be approved by the committee. The procedure allows the enterprise to undertake the procurement as an agent of various licensed fertilizers importers, while the process has also been open to other importers.

Unions would then procure from the enterprise to distribute among their members – the end users of the commodity.

In the first tender the enterprise floated, postponed by two weeks from the original opening date, there were seven suppliers for Dap and four for Urea.

The seven companies that showed interest in supplying Dap were: Trans Amonia; Yara France; Amropa; Jordan Phosphate; GAVI; Mid Gulf; and Key Trade, while those keen on supplying Urea were: Amropa; Yara; Givadan (Libya); and Mid Gulf.

The tender has been for the procurement 250,000 metric tonnes of Dap and 75,000 metric tonnes of urea. The previous regulation had limited procurement to about 75,000 tonnes fertilizers altogether in a single tender. The new procedure allows procuring in bulk, as it is believed that this approach would help solve the problem stemming from frequently changing of fertilizers, usually upwards.

“The bulk procurement and the more number of suppliers interested is more good news for the sector,” Demere said.

The new prices the suppliers offered are expected to lower the prices at which farmers buy a quintal of fertilizer to about 700 Br from the previous between 800-950 Br last fiscal year, especially in East Shoa Zone of Oromia Regional State.

Following World Bank’s request, the date for the opening of bids was postponed to allow for the publication of the tender internationally, “which will promote transparency in the procurement of fertilizer and ensure more competitive prices for Ethiopia,” according to Kenichi Ohashi, country director to Ethiopia and the Sudan.