Ashenafi Merid, General Manager of EBSFMIA on the challenges & prospects of bottled water manufacturers

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Established in July 2019, the Ethiopian Bottled Water, Soft drink, Fruits and Vegetable Processing/ Manufacturing Industries Association (EBSFMIA) has close to 138 companies with 55,000 permanent employees and 71 thousand jobs across its value chains.

EBSFMIA has conducted a survey to eliminate the impacts of imported bottled water plastics Necksils against the environment. By so doing, the association was successful in saving an average of $30,000 in a year from each company, Ashenafi Merid, General Manager of EBSFMIA told Ethio Trade and Investment Forum radio show.

Such a measure enabled to eliminate the damage on environment.

The bottled water industries used to pay an excise tax of 20% from their products. Later on, they have exerted efforts on the decision and started paying 10% from their sales. That measure was important to cut price hikes of bottled water, he says.

Ethiopian Standards Agency and the Association have been worked hand and glove to improve 54 standards of fruits and vegetables, which are now effective.

EBSFMIA has also made a contribution of recommendations in the new trade and industry draft polices.

Ethiopian Beverage Alliance for Water (EBAO) has been established to harness the potential of mineral water thorough an alliance with various governmental and Non-governmental Organizations (NGOs).

A total capital investment rate of 4.5 billion Birr has been so far registered by bottled water manufacturers and there are 106 bottled water producers in Ethiopia.

Challenges faced by bottled water industries

“Especially, since the Covid-19 pandemic broke out, the bottled water manufacturers have been facing various challenges,” said Ashenafi.

Raw materials price hike is another challenge mentioned by Ashenafi. He explained that they requested Addis Abeba Trade Bureau for a remedy but the matter received no response yet.

The excise tax rate levied on the sector by the government has also been the major hiccup.

EBSFMIA’s General Manager said the Association has requested the government to lift the excise tax levied on bottled water.

Ashenafi told Ethio Trade and Investment Radio Show that bottled water producers have been paying an excise tax of 10% in a month.

“On average, a single company pays close to 4 million Birr in a month,” said Ashenafi.

Water is a basic need categorized as food by the 2018’s proclamation of Ethiopian Food and Drug Authority, a government entity to ensure the safety, quality and efficacy of medicines and foods.

But excise tax is indirect tax levied on such a basic need, he argues. “Bottled water associations are the only ones that are paying excise tax on such basic needs,” he said.

“We are working with the Ministry of Finance so that the excise tax to be lifted,” he added.

Bottled water industry is growing at a rate of 17.5% per annum.

Besides the aforementioned problems, customs taxation rate system is also another challenge.

There are disagreements with the Customs Commission regarding the rule of origins, which clearly lists where the imported materials come from. “However, the Customs Commission levies $6 in a single label per kilogram, which is against what is clearly stipulated in the declaration,” Ashenafi grumbled.

“They [Customs Commission officials] even requested us to bring three samples of such labels from the most trusted local companies,” he said, adding, “The gauge for such credibility of those companies is not clearly specified.”

Cost of shipments for imported materials has also been skyrocketing, which is a source of another complain within the Association.

“The freight cost of containers is increasing to over $7000 this year from around $1800 to $2,000 last year,” as Ashenafi puts it. “Bottled water producers are complaining that price hike.”

However, the purchasing power of customers is expected to decline as the price for bottled water rises continuously, according to Ashenafi. “Governmental agencies should take swift measures to tackle such problems,” he recommends.

Quality compromised?

There have been reports that claimed some individuals illegally sell bottled water filled simply from a tap water. “Following such reports, we have reported to the Federal Police and some were caught flagrante delicto as they involved in such activities,” he said.

“We have been working closely with Ethiopian Food and Drug Authority, Ethiopian Conformity Assessment Enterprise (ECAE) and Ministry of Trade and Regional Integration to ensure our standard of quality,” he confirmed.

Media reports also claimed that companies themselves are filling jar water by tap water. Ashenafi said: “People can report such illegal activities.”

He adds: “We are regularly inspecting the jar and other water quality and safety of the plastics to maximize the quality.”

Price war among companies

New entrants to the industry have been penetrating the market through lowering price than their senior competitors. This trend has said to be created price war among industries.

Ashenafi believes: “If a company will engage in a price war, it will automatically cease to exist”. Trade Competition and Consumers Protection law doesn’t allow such activities to harm other companies.

“But, we can’t set the price for companies. They will determine their price after conducting a cost benefit analysis,” says Ashenafi.

Environmental protection activities

Beverage and water bottling companies have formed an association that was tasked with environmental rehabilitation and recycling products discharged from the industry.

Green Economy and Plastic Collection Development Association, a Non-Governmental Organization (NGO) was established with the aim of creating a green environment.

The Association has 20 founding members and received accreditation from the Agency of Civil Society Organizations in July 2020.

Coca Cola Company is among the companies which have formed partnerships to implement successful schemes to collect and recycle wasted bottle water plastics in Southern and Eastern Africa.

Environmental protection has been the main area in which companies have been discharging their Corporate Social Responsibility (CSR).

“Every year, we plant tree seedlings across industrial parks,” Ashenafi disclosed. “Besides, we have been recycling water plastic bottles.”

Plastics are on sell for 10 Birr a kilo.  “Our Association is an ambassador for its environmental protection activities by Addis Abeba City Administration,” he said.

This consortium of water, soft drink and juice bottlers was established to rehabilitate the natural resources used for production.

“But, we have not discharged our responsibility with utmost capacity. That’s the main gap,” he says.

 

 

 

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