By Muluken Yewondwossen

The Ethiopian Investment Holdings (EIH) voices out bottleneck concerns over the highly anticipated proposed public procurement proclamation that has been submitted to parliament for confirmation.

Abdurehman Eid Tahir, CEO of EIH, stated during the meeting with the Public Enterprise Standing Committee on Wednesday, December 6, that an article requiring all organizations, including public enterprises, to follow the proclamation for their procurement process is included in the draft proclamation that seeks to amend the procurement and property administration proclamation no. 649/2009, which was issued in 2009.

According to him, it does not take into account the competitive hemispheric dynamics that public enterprise encounters.

“The laws that could impact their operations would not be included for public enterprises that are competitive with the private sector, including global payers,” stated the CEO. The much awaited draft proclamation has been in the works and under discussion for years.

It was supposed to solve a number of concerns that would have made it easier to combat unlawful activity and expedite government procurement, including e-procurement.

But according to EIH, “We are in danger if we include Ethiopian Airlines to be governed under the procurement proclamation, therefore it is inappropriate for public businesses.”

“We will use various tools to manage the businesses, but in order for them to become more competitive, they must have some degree of autonomy,” Abdurehman emphasized.

He informed Capital that while his organization had previously discussed the matter and believed it had been resolved, “We are now hearing that the case has returned back at its previous position.”

“We don’t know how it went back to square one, but the Ministry of Finance, which is the higher body for overlooking the government procurement administration, which developed the draft proclamation, and other pertinent government offices understand and support the businesses’ position,” he continued.

He pushed for the standing committee to be involved in the matter. According to Abdurehman’s first quarter report, the 26 public firms that are a part of the newly created SWF generated revenue of 250 billion birr during the first quarter of the budget year, which is 83 percent of the target.

Public enterprises as a whole made 36.5 billion birr in profit before taxes within the specified period, or 69 percent of the goal. The CEO emphasized that once the full year operational report is acquired, the true performance of the company would be fully understood.

According to him, Ethiopian Airlines, Ethiopian Petroleum Supply Enterprise (EPSE), and Commercial Bank of Ethiopia (CBE) accounted for 76% of the total income.

The CEO clarified that some companies, like Ethiopian Electric Utility, disclose their profit at the end of the year, which is one of the reasons for the lower profit compared with the target. “However, that will be corrected when they embark the quarterly reporting scheme,” he cited.

With respect to the profit-sharing companies, Ethiopian Airlines (ET) and Ethio Telecom contributed 80 percent of the total profit before taxes.

CBE’s portion of the profit was 7.5 percent, meaning that the combined profit contribution of the three firms was over 87 percent.

Ethiopian Pulp and Paper, Ethiopian Minerals Corporation, and Ethiopian Sugar Industry Group were the three businesses that did not make a profit during the reported period.

According to the Sugar Industry Group, the first quarter of the year was a major maintenance time, and was thus not operational. During the specified time, EPSE’s profit was 157.7 million birr, despite its revenue being one of the highest at 56.6 billion birr.

“The enterprise is a tool to supply energy for the economy, so even though it undertook reforms, the profit margin was almost zero, and we are not expected to earn a profit from it,” the CEO stated.

He continued by saying that EIH is interested in partnering on the oil depot project. In comparison to the same period last year, its profit and sales have decreased by 20% and 28%, respectively.

However, it has supplied more petroleum than expected in comparison to the same period last year.

The largest airline on the continent, ET, had a 55 percent increase in earnings in the first quarter of the budget year as compared to the same period of the previous year.

The airline achieved a profit before tax of 19.5 billion birr, representing 118 percent of the objective. Similarly, its income reached over 102 billion birr, up 21 percent from the same period last year. Between July and September, ET carried over 4.49 million people, which is 36 percent higher than the previous year and 102 percent of the anticipated figure. According to EIH CEO, the airlines requires a new airport because of Bole’s saturation and also because of a solution for fuel supply.

Regarding Ethiopian Shipping and Logistics (ESL), a prosperous company, the CEO said that it is prepared for the impending competition, “The industry will be open to other players soon.”

He asked the standing committee to assist ESL in regaining access to the accumulated payments that are owed to various government agencies and businesses.

The other portfolio, the massive insurer Ethiopian Insurance Corporation, has brought in 4.6 billion birr in income and is insuring property valued at 5.5 trillion birr, an increase of 86% over the previous year. In comparison to the same time last year, its profit before tax increased by 403 percent to reach almost half a billion birr.

According to the CEO, 23 out of the 26 portfolios had good book endings for the reporting time.

EIH has made it a goal to incorporate private parties, mostly international investors, in its investments in the chosen, established businesses, including greenfield ventures.

Among the targets that EIH plans to jointly invest in are the: Hospitality, Paper and Pulp, National Lottery Service, Ethiopian Tourist Trading Enterprise, a duty-free trading enterprise with stores at the airport and in the town, and Educational Materials Production and Distribution Enterprise.

“Investor identification will be carried out, and some of them have already begun,” stated Abdurehman, adding, “This will be followed by due diligence process. Furthermore, business optimization will be implemented on both greenfield and existing business investments.

According to the CEO, “Audit is crucial to have consolidating financial statement, which is key to attracting foreign investors.”

The CEO also elaborated that EIH has been conducting audits of the businesses to better understand their situation and plan for future capital investments.

With regards to capital increase, the EIH board has given Ethiopian Airlines permission to increase its capital from 100 billion to 300 billion birr in five years.

Abdurehman told Capital, “Its capital has already reached 200 billion birr, so we are confident it will attain the set amount in two and a half years rather than five years.”

The other EIH portfolio, Ethiopian Agricultural Business Corporation, received a capital increase from two billion to seven billion.

The state businesses under EIH’s management brought in a total of 924 billion birr in income during the previous budget year, with 115 billion birr in profit before taxes. The profit margin for the year was 12.5 percent, and the dividend paid was 19.2 billion birr.

ET, Ethio Telecom, CBE, EPSE, and ESL were the five public firms that accounted for more over 90% of the income. Financial services, manufacturing, trade, chemicals, utilities and connection, hospitality, real estate and construction, transportation, and logistics are also all included in the EIH portfolio.