By Hayal Alemayehu | The Reporter

When the Ethiopian Electric and Power Corporation (EEPCo) instituted nationwide power shedding in March and consequently ordered high-power consuming plants not to use power a month later, Mugher Cement Enterprise did not consider the power cut as a threat because it was notified by the corporation that the power cut will last for a month.

The corporation has, however, literally blocked some 100 high-power consuming factories, including Mugher cement, from production since May for about two months now, which may translate to a significant loss of revenue (and even bankruptcy at its worst) for the enterprises, according to industry observers.

“We did not consider the one-month power cut because we usually suspend production for about a month in a year in order to run maintenance and overhaul activities,” Elias Kifle, project manager of Mugher Cement Enterprises, told The Reporter. “But if the power blockage exceeds the one-month period, we will definitely register loss.”

In fact, the power cut has extended beyond schedule and the country’s cement producing giant and the other big enterprises are set to lose hundreds of millions of birr in lost revenue, with some of them expected to go bankrupt, according to economic observers.

The power cut will cost Mugher cement alone over 150 million birr in lost revenue for just a period of one month. The factory produces 900,000 Qt of cement a month on average and sells a quintal for 167 birr. Now that it has completely halted production for about two months, things may get even worse, according to inside sources.

Some 900 km away from Mugher, Messebo Cement Factory, the second biggest cement maker in the country, has been suffering from the same problem since May. Being one of the 100 high-power consuming enterprises in the country, the power cut has slashed some 60 percent of its production.

“The power interruption has affected our production,” Asam Eziz, the general manger of Messebo cement says. “It has made us lose some 60 percent of our production.” The manager is, however, reserved from mentioning whether or not the situation will lead it to bankruptcy or lose or how much the power cut will cost him in lost revenues.

Mugher’s and Messebo’s product constitutes over 95 percent of the local production, and the fact that the two cement makers have literally stopped production is now dearly affecting the construction industry.

While the local demand for cement is expected to be 3.5 to five million tonnes, the domestic production is less than 1.7 million tonnes, leaving a huge supply/demand gap.

And the fact that the two cement factories stopped or highly reduced production has exacerbated the cement shortage and skyrocketed its prices.

Days after Mugher stopped production, the price of cement had shot up by some 15 percent to hit 340 birr a quintal. That price has now reached 390 birr.

Some of the construction activities undertaken in Addis Ababa and the regions outside have been either suspended or slowed down partly owing to the shortage of cement or its exorbitant prices.

The power cut, which has mainly been adversely affecting the manufacturing industry as well as the service sector, is now proving its might in undermining the general economy, and this has received better attention than the social impact the blackout entails, at least for now.

Only this week, Prime Minister Meles has told a foreign press that the power shedding has trimmed the country’s GDP forecast for this fiscal year ending July by close to one percentage point to 10.1 percent. (Despite the IMF’s 6.5 percent GDP growth projection for the country, the government had earlier on announced an 11.2 GDP forecast.)

Scores of manufacturing companies have suspended production while many of them are expected to declare loss and/or bankruptcy for this fiscal year, according to industry observers.

Of the major sector dearly affected by the outages, the plastic manufacturing industry is at the forefront. This sector, which almost entirely relies on raw materials imports, has been suffering from the shortage of foreign currency. And the power cut is almost crippling the industry, according to observers.

“We have stopped production since June 8 while the employees of the companies are on a forced leave,” a higher official of Geo-synthetic Industrial Works (GIW), one of the biggest and the first of its type plastic factory (producing geo-synthetic products) in the country, told The Reporter on the condition of anonymity. If the power problem persists for the coming weeks as is currently expected, GIW, an Ethio-America join venture establishment, and similar companies are most likely to go out of the market or go bankrupt, according to industry observers.

Many in the manufacturing sector, which currently accounts for a small portion of the GDP compared to the agricultural and service sectors, are more than clearly suffering from the power blackout. However, a few seem to overcome the challenge. While most companies in the beverage sector find it difficult to cope with the power shedding, beer maker BGI seem to be doing fine by substituting the shedding with power from diesel generators and running its business us usual. “The power cut did not as such affect the volume of our production because we are substituting the shedding with generator power,” according to Surafel Allen, the company’s sales manager. “In fact, we have this year raised our production by 10,000 hecto liters and have program to launch an expansion project next year.”

Aside from losses in revenues, taxes and profits, the outages are expected to result in job cuts as manufacturing companies and enterprises stop production.

Fortunately, not much layoff associated with the power cut has been observed, at least so far. “One of the biggest fear was there will be more and more job cuts,” Kassahun Follo, president of the Confederation of Ethiopian Trade Union (CETU), told The Reporter. “But there is not much layoff observed in connection with the power shedding.”

“There are 562 companies and enterprises that are members of CETU, including state-owned organizations,” Kassan said. “Of these, only two (Super Chain and Country Development Plc) are reported to have cut jobs while a few construction companies have sacked temporary workers due to shortage of cement emanating from the power cut.”

All the same, if the power crisis is not resolved in time, things may get worse, the president said.

Owing to the steadily rising investment particularly in the manufacturing sector, the power demand has been increasing over the past decade, thereby further widening the power supply/demand gap significantly, according to officials of EEPCo.

EEPCo’s electrification program and the inefficient bulbs widely in use in the country currently are the other elements for the increasing power demand, according EEPCo’s officials. Lack of funding for hydropower projects from donor countries and the World Bank is the other major factor that gave way to the current power crises, according to the officials of EEPCO and Prime Minster Meles’s recent statement to the Financial Times.

Critics, however, say that the corporation could have helped to mitigate the power crises by employing various power resources like geothermal and the costly wind power and by strictly following up the ongoing hydropower projects to avoid “the redundantly” observed in project delays.

The power supply/demand gap is currently growing by some 24 percent while the current total power output stands at 870 MW.

With the power shortage reaching 200 MW this month, the power challenge is expected to stay for the coming months, until the much talked about and delayed GibeII hydro project (with an installed capacity of 460 MW) and the other much delayed Tekeze hydro-power project (with an installed capacity of 300 MW) comes to life, perhaps in the coming months.