Upstart, local sugar company in privatization push

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The recently formed local firm, Ethio Sugar Manufacturing Share Company, is shortlisted as the only local company in the privatization process for the established Wonji and Metehara Sugar Factories.
Following an April Request for Information (RFI) several international companies, expressed an interest in privatizing Ethiopia’s sugar factories. However, only one local company Ethio Sugar, is adopting a community inclusive business model.
Companies from Kenya, Mauritius, UAE, Morocco, South Africa, Algeria and elsewhere expressed interest and presented business models.
According to sources, long established and operational factories like Wonji, Metehara, Fincha and Tendaho attracted the most interest. “However we are the only local company shortlisted based on the RFI,” Eshetu Geletu, Board Member and Corporate Communication Senior Advisor, told Capital.
He said that the business model targets to empower the local community and was explained to government officials at the Ministry of Finance, Sugar Corporation and Office of the Prime Minister, who facilitated a forum for company founders to get strategy details.
“We want to underline that the government should consider Ethiopians as opposed to only prioritizing hard currency. At the same time our move indicates that we will obtain foreign currency from resources like the Diaspora to secure the sugar factories,” he said.
Based on the company’s strategy they have agreed with local communities in five woredas near the sugar factories to buy shares via a loan scheme from private banks.
There are 40,000 shareholders and local community members including 10,000 sugarcane farmers 20,000 employees and 10,000 civil servants that have agreed to buy at least the minimum share, which is 20,000 birr, at the share company and their investment will be covered by a long term loan scheme of banks, according to Eshetu.
He said that three local banks, Awash, Nib and Oromia Cooperative have already agreed to cover the loans. “Cooperative Bank of Oromia, for instance has already agreed to provide loans for sugarcane farmers without any condition.”
“In the near future settling the loan process will be finalized since the privatization process is nearing,” he added.
An additional 20 shareholders from the general public including the Diaspora will also buy shares in the share company. According to Eshetu, Ethio Sugar plans to own 30 percent of the factories, and based on their target HVA Holland, a company established in 1879 with a wide range of experience in agricultural and agro-industrial development, constructed the Wonji Sugar Factory in 1951 and expanded to Metehara and now has agreed to reinvest in the factories. They are expected to take 39 percent with partners. Eshetu indicated that since the factories have debt the government will take a 21 percent share and the balance will be owned by i stakeholders like exporters or other strategic partners who use the sweet as input for their production.
The local company has targeted to amass up to four billion birr from shareholders, while other bodies like HVA will come up with the balance of finance. The valuation work on the sugar companies including the newest factories is nearing completion. On Friday the government indicated that from five to 6 sugar factories would be privatized in the coming six months to a year.
“The government has to consider the local power and give affirmative action to local investors in the privatization process. In addition, we are formed by well experienced sugar industry leaders, who operated or have several decades of sweet experience,” he said. “In relation to share mobilization we are on a promising path to get the money we need,” he added.
The share company has floated expression of interest for those experienced in sugar technology since privatization is getting closer to reality.
On Friday, Eyob Tekalegn, State Minister of Finance, indicated that several local and international companies have responded to the RFI. He said that sugar factory proclamation will govern the production, sale, import and export of sugar.
In a related development Minister Eyob said two international telecom providers will be part of the Ethiopian market via a bid selection, and that 49 percent of ethio telecom will be privatized.