After several missed deadlines, last week MIDROC Ethiopia Investment Group, and affiliated company, Horizon Plantations, advanced a 432.6 million Br down-payment for three state enterprises that they were set to acquire a year ago.
The enterprises include; Upper Awash Agro Industry, Gojeb Farm Development and Coffee Processing & Warehouse Enterprise, which will now be handed over to the MIDROC companies, a collection of 41 companies owned and operated by Ethio-Saudi tycoon, Mohammad Al-Amoudi (Sheik).
The Privatisation & Public Enterprises Supervising Agency (PPESA) had put these enterprises, along with six others, on the auction block on January 09, 2012. When bids were opened in February that year, MIDROC and affiliated companies had caused a stir, offering an aggregate of 1.3 billion Br for five of the nine enterprises.
MIDROC offered 860 million Br for Upper Awash Agro Industry, whilst Horizon Plantations, co-owned by Jemal Ahmed, previously a prominent edible oil importer, offered 228.2 million Br for Coffee Processing & Warehouse Enterprise and 35.1 million Br for Gojeb Farm Development, a flower farm.
In addition, Saudi Star Plc, another MIDROC affiliate, with a 10,000ha farm in Gambella region, offered 90 million Br for Abebo Farm Development. Operator of the Lege Dembi gold mine, the National Mining Corporation (NMiC), also made a 110 million Br bid for Ethiopian Marble Enterprises.
The PPESA approved all of these offers in March, but down-payments were not forth- coming from the MIDROC companies. This was despite the fact that they were required to be made 10 days after the PPESA notified bidding companies that their offers had been accepted, according to the Agency's rules.
Usually 35pc of the total offer is advanced as a down payment, with the rest to be paid in equal amounts over five years, although a quicker timeframe can be offered by bidding companies. Foreign owned companies without prior dealings with the PPESA are expected to pay the full amount of their offers upfront.
After failing to comply with the 10-day rule, MIDROC, on behalf of all its companies, asked for an extension until June 30, 2012, to make the payment. Though its request was granted, no payment was made, and MIDROC, rather, asked for another extension until October 2012, this time appealing to the PPESA's board, which is chaired by Aster Mamo, government whip for Parliament. This request was also granted.
During this time, National Mining and Saudi Star made their payments, although the latter only paid 30 of the 40 million expected from it. MIDROC and Horizon, however, were still in arrears. Their delay did not result in the Agency cancelling the deal, however, but rather, another extension was granted until the end of February 2013.
Foreign company, Morell Agro Industries, which had offered six million dollars for Bilito Siraro Farm, at the same time as the MIDROC companies, was not so lucky. Its request for a lengthy extension, until November 2012, was denied after it failed to come up with the down-payment within 10 days. Morell had no prior dealings with the PPESA.
"The offer MIDROC companies made for the enterprises was attractive, and they have paid what is expected of them in their previous dealings with the PPESA," explained Wondafrash Assefa, director of corporate communications at the PPESA, when questioned about the Agency's patience with the MIDROC companies.
PPESA has so far collected 269.5 million Br from privatised companies in the first half of the 2012/13 fiscal year.
Outstanding payments were made last week, as MIDROC paid 35pc of what it offered for Upper Awash, and Horizon Plantations advanced 50 pc for both enterprises.
"It is because the capital is coming from foreign companies, which Al-Amoudi owns, and thus the process took a long time," said Jemal. "That is why we did not pay until now."
MIDROC and Horizon can now expect the enterprises to be handed over to them at their earliest convenience, after auditors are assigned from both parties.
All companies were bought as part of MIDROC's expansion plan, Jemal said, when MIDROC made the offers last year.
"We will have integrated companies, that can use the resources of each other," Jemal told Fortune.
The Coffee Processing & Warehouse Enterprise, will be an addition to Horizon's sister company, Gemadro Coffee Plantation, in southwesternEthiopia, 650Km from Addis Abeba. But, Horizon still has to pay for the six Limu Coffee farms, located in Oromia and the Southern Regional states, for which the company bid 1.13 billion Br on August 8, 2012.
"We plan to install additional machinery and also export roasted coffee," Jemal told Fortune.
Horticulture and export crop production is also something that MIDROC Ethiopia is targeting, after its acquisition of both Awash and Abebo.