Soap Manufacturers On ‘Verge Of Collapse’ As Supply Chokepoint Throttles Production

Lobby group alleges input supply monopoly and unfair trade practices

A lobby group representing soap and detergent manufacturers says forex-related issues burdening a foreign-owned supplier of essential chemical inputs have forced production cuts and closures, warning of higher prices for consumers.

The managers of the Ethiopian Chemical Products Manufacturers Association (ECPMA), which represents basic chemicals, soap and detergent, and paint and adhesive factories, say their pleas for government intervention have gone unanswered for months.

An assessment conducted by The Reporter found that countless small-scale soap and detergent manufacturers, as well as large factories like Repi Soap and Detergent PLC, have been forced to shrink their output as they struggle to access key raw materials.

Assessments conducted by a team of experts at the Chemical and Construction Inputs Industry Research and Development Center Ministry of Industry also confirm that a number of soap and detergent factories have been forced to shut down production lines and cut back employee work hours.

The chemicals in short supply are linear alkyl benzene sulphonic acid (LABSA) and sodium lauryl ether sulfate (SLES) —both crucial components in the production of bar soap, powder soap, liquid soap as well as shampoos, body washes, dishwashing liquids, and detergents.

Allied Chemicals, a firm established in 2008 with backing from Indian investors, is the primary importer of SLES and LABSA in Ethiopia. The firm processes the imported chemicals at one of several plants it operates in the country before supplying them to soap and detergent manufacturers.

Manufacturers say the chemicals have been unavailable for months.

“For several past months, Allied stopped supplying these inputs. Since July, we’ve been tabling the problem to the Ministry of Industry, but there’s still no solution. Meanwhile, factories are closing their production lines,” a manager at a detergent production plant told The Reporter.

A manager at Allied who spoke to The Reporter anonymously confirmed the firm faced supply issues between September and last month in light of forex shortages, but contends things are now back to normal.

“Our supply stopped for a brief time due to forex shortages. But we didn’t interrupt distribution as we had adequate stock. Our factories are back in operation now. Challenges like forex shortages happen sometimes. It’s normal,” said the manager.

However, he also claimed this interruption in supply was the first since Allied began processing SLES and LABSA a decade ago.

“We have 300 employees at our factories, we are paying them salaries. Why would we stop supply, seeing as it is our own business and benefit? The benefit of the business is not only for the factories but also for us. We also don’t want interruptions and we are sure it won’t occur again,” he told The Reporter.

The manager argues that fluctuations in supply emanate from the soap and detergent factories themselves.

“They never send us their projected annual demand for SLES and LABSA, so we can’t precisely allocate the forex needed to import the raw materials,” he said.

Allied supplies manufacturers with up to 30,000 tons of LABSA and around half as much SLES each year.

“There’s a shift in the domestic market from bar and powdered soap towards liquid soap. So it’s difficult for us to know which raw material is in greater demand unless factories tell us,” said the manager.

The Ministry of Industry’s report says otherwise.

Over a 16-month period, Allied provided 12,888 tons of LABSA. More than two-thirds of the total volume was supplied to four major detergent companies: Zac, Bekas, Unilever, and Repi. Large manufacturers accounted for the lion’s share of 6,300 tons of SLES supplied by Allied as well.

The report concludes that Allied does not possess the production capacity to meet growing demand from manufacturers.

The total installed capacity of Ethiopia’s soap and detergent factories stands at over 535,000 tons. The report indicates they need at least 80,000 tons of SLES, much higher than the 57,000 tons Allied has the capacity to supply, according to Ministry documents obtained by The Reporter.

In reality, Allied is covering just half of demand from manufacturers.

“Factories manufacturing liquid, powder and bar detergents, have huge manufacturing capacity. However, due to lack of raw material supply, inadequate forex supply to import the inputs, inadequate working capital, security issues, local market fluctuations and growing cost of living; they are unable to manufacture at full capacity. The raw material supply from Allied Chemical is covering only half of their demand,” reads the Ministry’s report.

It indicates that while detergent industries’ demand for SLES and LABSA has been surging substantially, Allied’s supply has remained stagnant for two years. The report also showcases fluctuations in the supply of SLES and LABSA in the months since July 2025.

Allied also managed to generate USD 1.2 million in recent months through the export of SLES and LABSA, according to official documents.

However, the lobby group contends the problem goes deeper than forex shortages and production capacity.

Allied is the beneficiary of an exemption from the 15 percent duty levied on the commercial import of SLES and LABSA. Other importers are not exempted, giving Allied what the lobby group describes as an unfair advantage that has allowed it to corner the market.

“The duty free policy is designed to serve only one supplier. It was designed to serve Allied, not the sector. As a result, the whole sector is on the verge of collapse because one company stopped supplying inputs,” said a senior member of ECPMA, which represents more than two dozen large-scale manufacturers.

He alleges Allied is using its superior bargaining power unfairly.

“Allied typically collects payments upfront before supplying the SLES and LABSA. It takes 50 million or 100 million Birr in upfront payments and holds on to the money before eventually supplying the inputs after five or six months. Several factories have their capital tied up before they even get the inputs,” said the senior Association member.

Because other importers do not enjoy the same duty-free privileges that Allied does, buying SLES or LABSA from them carries a 15-percent markup.

“Then soap and detergent companies have to add 15 percent to the price when they sell their products to the public,” said one plant manager.

The lobby group wants to see an immediate solution to the problems.

Melaku Alebel, minister of Industry, convened industry players to discuss their misgivings and review a study on the problems plaguing the sector.

Manufacturers called on the Minister to push Allied to resume imports, and requested that the company’s duty-free privileges be removed. Melaku promised to table the issue to the Ministry of Finance and get back to them with a solution swiftly, but that has yet to happen, according to people who took part in the meeting.

“If importers were also allowed to import the inputs duty-free like Allied, supply could have been secured and the problem would have been solved,” said one industry executive. “The solution is to grant the privilege to all importers so that the policy works for the sector rather than a single company.”

Industry players say the situation has left them in a state of indecision.

“Factories now have to decide whether they should await a solution or buy the inputs from commercial importers with the 15 percent markup,” said one plant manager. “If we buy from the commercial importers, then we have to add the cost to our products, which would affect end consumers. If we keep waiting for Allied to resume imports, we may be forced to close our factories.”

Ethiopia imported soap and polish valued at seven billion Birr in 2024/5, up from five billion in the previous year, according to data from the National Bank of Ethiopia (NBE). Import volumes have also surged in recent years, nearly doubling to 110,000 metric tons since 2022.

A substantial volume of soap and detergent was imported through the franco valuta scheme, according to the NBE.

While Ethiopia sources most of its SLES and LABSA from suppliers in the UAE, Egypt, Turkey, India, or China, suppliers in many of these countries rely heavily on manufacturers in Iran, whose operations have been affected by Tehran’s feud with Israel and the US, industry insiders say.

“The remaining options are India and China. Importing from China can take up to four months. We hope other countries might resume manufacturing the ingredients after January,” said an Association member.

Importing a ton of these chemicals can cost up to USD 3,000.

“SLES and LABSA are dollar-intensive. The NBE says there is no forex problem, but banks do not allocate when importers ask for more,” said one manager.

Experts at the Industry Ministry recommend that soap and detergent manufacturers be allowed to import their own SLES and LABSA at a reduced import duty of five percent as a short-term solution. They urged the manufacturers be granted priority in forex allocation and called for the establishment of a ‘LABSA-SLES Taskforce’ to oversee Allied Chemicals’ import and distribution process.

However, the experts cautioned that Ethiopia can not afford to depend on imported SLES and LABSA. They see attracting able investors to enable the domestic production of these materials as the only sustainable way forward.

“The shortage of SLES and LABSA emanates mainly from deep-rooted problems of forex shortage, distorted tariff systems, and dependency on imported raw materials. To solve these issues permanently, introducing strategic intervention and ensuring sustainable value chain supply for the sector, and attracting domestic investors in the domestication of the raw materials is critical,” reads the report.