Ethiopian Business Review

Businesses Displeased Over New Laboratory Test Requirement, cost Upsurge Featured

Ever since the Food, Medicines & Healthcare Administration and  Control started implementing a new rule that requires the inspection of 18 food items, such as pasta, noodles and edible oil, imported into the country, businesses are crying foul over the surge in laboratory cost. The new measures, which are said to be part of the Authority’s five-year plan, forces importers to wait weeks in order to get test results, as well as raising the cost of laboratory tests. For a single 20-foot container, the cost of testing has increased by an average of 14pct, reaching as high as 100Pct, depending on the nature and type of imported food items. This has discouraged many importers and supermarket owners engaged in the wholesaling and retailing of food products. EBR’s Samson Berhane spoke to retailers, importers and government officials to explore the issue. 

Business has been always difficult for Misgana Woldu, major shareholder and general manager of Zikri Plc- a company engaged in the import of juice and edible oil for more than 15 years. Bureaucratic hurdles, an inefficient tax system, poor logistics and the recurrent foreign currency shortage used to be major sources of frustration for Misgana. But after March 2018, when the Food, Medicines & Healthcare Administration and Control Authority (FMHACA), a government body authorized to set and enforce standards and regulations for locally-produced and imported foods, started to enforce mandatory laboratory testing, Misgana and others in the industry found another roadblock. The tests were done by taking a sample from all food imports and sending them to the importers’ choice of laboratories for further testing. 

Although officials stress that the new requirement was introduced to make sure that imported food items are safe to be consumed locally, those in the business, like Misgana, argue that is discourages them. “Spending more than a week on testing is a big challenge, especially for businesses engaged in food imports. The costs are prohibitive,” Misgana told EBR.” 

Such complaints are not rare. Businesses engaged in importing food products have been experiencing a surge in operational costs starting three months ago. As a result, finding some imported products is becoming increasingly difficult for suppliers, retailers, and consumers because of the imposition of rigorous and expensive requirements.

One supermarket company, with a paid up capital of ETB8 million, is another major player in the food market affected by the mandatory laboratory tests. 

Compared to before the implementaion of the new rule, the number of food items found at the company’s store have drastically dropped. “For instance, the type of spaghetti that was available in the store has dwindled eight-fold to three,” explained one of the company’s senior managers, who asked to remain anonymous.  “It is not sensible to test a product twice.”

In Ethiopia, food quality and safety protection regulations first emerged four years ago, in order to safeguard consumers from both economic and health risks. Their aim was ensuring the operation of the food market in a well-ordered way, by getting rid of the production and sale of unsafe food items, and protecting against fraud, protecting public health, satisfying consumers’ expectations, and enhancing foreign earnings. As a result, Ethiopian importers have been obliged to present originals and copies of health certificates for food items, excluding alcoholic drinks, according to the food exporters, importers and wholesalers control directive, effective from 2014. 

“While we are required to present certificates from internationally authorized entities to show that imported items are risk free, it is not reasonable to enforce mandatory laboratory testing even after the products enter the country,” argues the senior manager. “It paves the way for the contraband market to thrive.”

Although the food item importers EBR interviewed stress that the new rule does not follow the law of the country, their complaints do not hold water for Ayalsew Melese, director of the Central Branch Office of FMHACA, which is tasked with checking the safety and quality of items brought to the capital. “There is a strategy which states that at least 30 food items must be subjected to tests. It is clearly outlined in the second phase of the Growth and Transformation Plan document,” he says. “Additionally, the establishment proclamation of the Authority gives it the full authority to implement any systems to ensure the safety of food products. There is no legal limitation.”

The directive introduced four years ago stipulates that pre-certified products will be cleared without arrival inspection and delays, although the Ministry of Trade (MOT), which has the authority to control the quality of imports and restrict entry of products that do not comply with Ethiopian standards in coordination with FMHACA, reserves the right to conduct random sampling and testing. On the other hand, uncertified products are subject to normal inspection procedures at the point of entry.

Prior to the introduction of the new requirement, the Authority used to conduct post market surveillance, instead of pre-laboratory testing, according to Ayalsew. “In doing so, we discovered that there are counterfeited and substandard products in the market. That has pushed us to enforce laboratory tests as a mandatory requirement.”

Levels of aflatoxin, fiber and nutritional value are amongst the major things that are tested for during the tests, in accordance with the country’s standard, set by the National Codex Committee, together with the Ethiopian Chamber and Sectoral Association, food stuff importers and distributors, as well as respective government bodies. 

“If the checked parameters are below the country’s standards, they may cause damage to public health, including cancer,” Ayalsew underscores. “We select the products after doing identification analysis on products that we perceive as risky to vulnerable groups such as pregnant women and children.” 

Yet industry insiders indicate that besides the extended time, the new requirement is raising their operational costs. The 67-year old Bambis Supermarket, which is a well- known institution in the food retail market, is one of the companies affected by the new requirement. 

“The requirement is nothing but another headache for the already incapacitated retail market,” argues Charalambos N. Tsimas, a.k.a Bambis, a major shareholder and manager of the supermarket, whose company was requested to pay ETB146,000 for a test on 15,000 kilos of pasta, equal to half the aggregate price of the items. 

According to Charalambos, the price is three times higher than what the company paid seven months ago. “We won’t able to satisfy out customers’ demand if the new system remains.” 

Taking Bambis’ complaints into account, the Authority later decided to reduce the number of items selected as a sample to three. “Since pasta is dry and less risky, we reduced the size of the sample because consumer would be the one to feel the burn, because importers add the laboratory costs on the final price,” says Ayalsew.

Despite the government’s efforts to reduce the burden, concerns over the new requirements persist. “In a country where few laboratories exists, it’s costly to add another test. The cost is added onto the final price,” said a senior manager at a retail outlet, whose supermarket is known for selling items at relatively affordable prices. 

In Ethiopia, there are only three accredited agri-food quality testing laboratories, while neighboring Kenya has 21. For a long time, the state-owned Ethiopian Conformity Assessment Enterprise, which was re-established in 2011, was the sole lab that provided standard assessment laboratory services. Although it was supported by the Ethiopian Health and Nutrition Research Institute, the latter was unable to satisfy the demand for service support in the food sector, inspection activities, and follow export and import activities. Its role in conducting laboratory tests for food products diminished after the emergence of the first ever private agricultural products and food testing laboratory, Bless Agri-Food. 

However, the cost of laboratory testing is still a huge problem for importers. “The higher the laboratory cost, the less we are interested in importing the item because customers lose interest once the price increases,” stress a senior manager of a retail firm.

In Ethiopia, inflation is one of the major problems observed in the retail market. Although it has exhibited a significant growth over the past decade particularly, in the capital, the retail sector, which is highly dependent on imports, has been affected by the foreign currency crunch and lack of sustainable supply.  “Added to such problems, the new requirement is like a death pill to the retail industry,” says the senior manager. 

Entities engaged in laboratory testing, however, beg to differ.  “There were a few complaints for almost four years, ever since the enactment of the directive and the setting of the standard,” explains Gashaw Tesfaye, deputy director of Ethiopian Conformity Assessment Enterprise (ECAE). “Now, when it became obligatory, everything changed in light speed.” 

According to Gashaw, this shows that there is a lack of awareness about tests carried out on food items. He did, however, admit to the price change in the food safety testing market over the past few months. “Had the food importer come in an organized way, the price of the tests would have been lower. The higher the number of the items tested, the cheaper the cost.”

The cost is not only determined by the volume of the goods, but by the type and characteristics of the product, according to industry insiders. The case of Bambis, which requested a test for 18 varieties of pasta, demonstrates this. “Although all of the products subjected for the test are all the same, there were 18 types, which require nine testing parameters as per the regulation,” says Kahen Negussie, marketing and business development director of Bless Agri Food. “The complaint should be about the regulation, not the cost of the laboratory that is computed based on the number of the items, volume of the works and cost of inputs, and other things.”

Owned by Nutriset, a French-owned company, and Belete Beyene, Bless was established four years ago after getting authorization from the Ethiopian Standards Authority (ESA) to issue Certificates of Conformity for food items. It was set up with a capital of ETB80 million, now has 60 employees, and serves 200 clients annually. 

Kahen does not hide the fact that his company recently adjusted prices. According to an assessment by EBR, the highest price increase was for fiber testing, which grew from ETB940 to ETB1,860, whereas the lowest rise was for the protein test, from ETB691 to ETB738. On the other hand, a test for aflatoxin, which is conducted on the majority of imported food stuffs, exhibited a ETB56 increase to ETB2,236. 

The costs of laboratory tests is a bit higher compared to countries, such as South Africa and Kenya. But Kahen argues it is because Ethiopia is more import dependent than South Africa and Kenya. “The government neither supports nor incentivizes businesses like us. As the only laboratory in the country and a support to exporters, we should have at least been allowed to get a tax exemption.” 

Yet, Gashaw stress that the same test costs between 250 Euro and 270 Euro in European countries, such as Germany. “If the suppliers are asked to pay a price that is three times lower than in these nations, the cost is reasonable.” 

Even after the entrance of Bless into the food testing market, the demand still remains unsatisfied, pushing businesses to wait for between 10 to 12 days for their test results. “We are far behind the technology available in other countries. That is why we are spending days waiting for test results, which can be done in less than an hour in other countries,” says Gashaw.


6th Year . June 16 - July 15 2018 . No.63


 

 

Samson Berhane

Editor-in-Chief

samson.b@ethiopianbusinessreview.net

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