The sugar connection is attracting a few businesses, and for a very few it is becoming a get-rich-quick scheme. Yet, of course, it is also becoming a rather repulsive activity for many children, families and small businesses, finds Yosef Girmay, Fortune Staff Writer.

The Sugar  Connection

In Addis Abeba where trendy cafés are on the verge of creating ‘café mania’ among a big chunk of Addis Abebeans, Selama Café is not a common place for the crowds. Part of a one-storey building, it is less a posh café than a place which business people around Chew Berenda, Merkato, would enter for a quick bite.

On Friday morning, there were over 15 people crowded into this small café that has just six tables. Even the coffee machine is too small to give visitors any impression that they have entered a rather large pastry shop. 

If there is any attraction to this tearoom, it should be its location. It is opposite a large store managed by the state owned Merchandise and Wholesale Trade Enterprise (MWTE). Many of the people in the café are interested in sugar and they buy from the state’s store to sell them to retailers waiting for inside the café.

Unlike many cafés in town, shortage of sugar is not an issue here. In fact, there was a large bowl placed next to the coffee machine filled with white sugar. Selam a Café is not a point of sale for sugar, however. It is where deals are made before the store opens its doors for its customers.

Many young and middle-aged people eat a simple breakfast here. They talk freely, and most of them appear to know each other. They talk to each other with full understanding. There seems to be little to hide, although they have many memories of the ayve be ayer (rent seeking) business of the old days. 

Just across the street, more than 100 people were lined-up inside MWTE’s store, waiting for the big hall to open. The people inside Selam a Café were looking out through the window and talking about the reason for their presence: sugar and the price for the day.

Among them, the old businessmen spoke and gave thanks to Allah. It seemed the middle-aged people knew the trade very well. One was telling another how his deal last Wednesday, March 2, ended up in a half-disaster.

He claimed to have given 2,500 Br to somebody with a retail business licence to purchase three quintals of sugar from this MWTE branch. They had never met before and this is the way ayer be ayer business functions. Just in case, they keep a watchful eye on those given money to buy their quotas. 

Unfortunately, on that day, they were told there was no sale for the small merchants. The man got a chance to avoid the watchful eye of the old man who gave him the money but was subsequently tracked down from the address on the licence he had registered with the store. However, only half the cash was returned.

Quite a lot of people with business licences flock to one of the 10 stores MWTE operates in town. Everyday, scores of licensees turn up get some of the share designated to them through the quota system that was introduced since the shortage in the sugar supply chain emerged.

There is little evidence to claim that the shortage is due to a gap between demand and supply, according to industry observers. The three state owned companies – Fincha, Wonji and Metahara – produce a total of 2.8 million quintals a year, leaving a demand gap of an estimated 200,000 quintals, according to studies made by the state owned Industrial Projects Services. Traditionally, shortage occurs when the factories engage in maintenance once a year for three months, but no factory maintenance is taking place now. Moreover, the export of white sugar has been stopped because of the shortage in the country.

A housewife and a mother of three children, Yewubdar Tilahu, a resident in Gulele District, takes life rather lightly. She tells her children a joke: sugar is not good for your health. Their customary twice a day tea is now downsized to one and it is only served at breakfast.

Although she is allocated four kilos of sugar a month from her kebele cooperative at a price of 5.20 Br per kilo, she said it is barely enough for the size of her family. She hates lining up for hours just to buy sugar, nor can she afford to buy a kilo of sugar for nine Birr that is available at the supermarkets and the larger retail stores.

The state agency responsible for overseeing the marketing of the three sugar factories, the Ethiopian Sugar Industries Support Centre, supplies MWTE 80,000 quintals of sugar a week at a wholesale price of 450 Br per quintal. MTWE has established a quota system and offers the sugar to the retail market at 4.90 Br per kilo.

There are several middlemen between MWTE and the shelves at the end of the supply chain that have inflated the price by 100pc.

Sultan Sherif, with his partners, owns a big store in the Legar area. His store is a sort of distributor for small shops and kiosks. They acquire large quantities of fast moving items for their customers at much lower prices than those sold in the neighboured. Sugar is one of these commodities.

Yet, he is not happy dealing with this “white devil”. Sugar has been one of the least profitable commodities for him, although it is top in the list of the very fast-moving items.

“I had good customers. We were like a family. I know what they want and when they come. But these days, they come with long faces. I understand, but I cannot help,” said Sultan.

He has stopped carrying sugar in his store. He complained that many people think the skyrocketed sugar price is because of “greedy businessmen”.

“I haven’t brought sugar for the last three days,” he said.

The market becomes unpredictable with the ever-increasing price. It was just eight Birr one day last week. The following day, it was up by 50 cents. Sultan is vehemently against MWTE’s position as a sole distributor from the sugar factories.

“If any businessman could have got whatever he wanted, there would not have been such a shortage,” said Sultan.

Many agree the shortage of sugar was exacerbated in the hands of the monopoly sugar distributor, the state owned enterprise, MWTE. The prices never escalated like they are now when the Centre supplied the market through a public auction system. This system was curtailed following the arrest of many business owners and managers of the Centre accused of corruption in their dealings at these auctions. 

An employee of MWTE at the store in Chew Berenda disagreed, and preferred to attribute the shortage to a supply constraint from the factories. According to him, they have not seen supplies from Wonji and Metahara for weeks. They are selling from their stock that had arrived long ago from Fincha, he said.

“The businessmen always knew that there would be a shortage in one of the factories. Hearsay flies around like wild-fire among the sugar merchants. Next day, the price started to immediately escalate,” he said.

Ironically, he was arguing with another employee who wanted to take his share as the management allows every employee of the Enterprise to buy 10Kg of sugar a week.

“It is only two festale (plastic bags),” said this employee.

In this branch, a businessman can take up to three quintals, every two weeks, on presentation of his retail licence for a cafe or traditional tej bet. Many people do not get the chance to buy any amount of sugar because of the long queues, which usually end up with no thought for the weak. For those who are not clever enough to get more involved in the trade, it is unlikely that they will make much from their efforts.

Unlike Yewubdar, Lemelem Tessema, a resident of Kirkos District, cannot deny her children tea as “they cannot eat their breakfast without it.”

When she went to her kebele cooperative a few weeks ago to buy her ration of four kilos, there was a queue that had been carried over from the previous day.

“People were waiting in line overnight,” she recalled.

She did, however, get four kilos of sugar that her husband is entitled to buy through his office. MWTE allows government employees four kilos a month available from their workplace.

Many are fed up but nonetheless lured by the lucrative profit sugar can bring within minutes of getting a receipt for the purchase of sugar. It can be sold within the premises of the Enterprise, and nobody seems to bother. The seed money comes from the big merchants who walk around with old briefcases, and with ‘lieutenants’ under their command. They even have the power to choose who should stand in line for them.

One such businessman, for instance, had 10 people working for him on Friday morning. All the employees of the Enterprise seem to know him well.

These are businessmen who collect as many quotas as they can before channelling it into the retail market. Others are unable to find their own quota.

Yassin Zeber, a kiosk owner behind Flamingo Restaurant, in Kirkos District, is one of them. He seemed very worried because he had not been able to get his ration of one quintal for the last three weeks.

“I was there on March 1, and they told me to come back next week,” he complained. He said that there was no guarantee he would get it then.

He mentioned that most of the shops in his neighbourhood had stopped selling small amounts of sugar for as little as 10 cents. However, he wants to continue retailing sugar because “the people in this area have no other means of getting even a quarter of a kilo; as they are forced to send their poor children to school without tea.”

“I can’t tolerate this,” said Yassin, revealing a benevolent tone.

It is unlikely the government’s effort of importing sugar from aboard will have much impact on stabilising sugar prices. The international market for sugar is also increasing. Currently, the price of sugar in the international market is 429 dollars per tonne. By the time it enters the country it costs 700 dollars. The Centre has plans to import sugar, issuing a public tender for the purchase of 30,000tn.

However, with the escalating global price the Centre may reject the tender which was floated recently, according to a manager at the Centre.

The imported tiny white sugar is not popular among local consumers as it usually is deemed insufficient for a cup of tea. Etaferahu, who runs a family juice bet in Arat Kilo, complained that it takes her more than the usual 50kg of sugar whenever she uses the imported sugar a.k.a. the ‘Brazil sugar’. It is sold for 750 Br for a quintal in Merkato. In fact, sugar merchants sometimes mix the local sugar with the imported ones to make some compromise with their customers.