With the increased foreign interest in Ethiopia's breweries, the demand for malt has increased significantly
Tiret, an endowment fund under the Amhara National Development Movement (ANDM), is beginning malt production this June at a new plant it is finalising in Gondar.
Gondar Malt Factory has been under construction for the past two years, on four hectares of land. It will be the sixth company under Tiret, which also owns Ambassel Trading House, Belesa Logistics & Transit, Dashen Brewery Plc, Tikur Abbay Transport and Zeleke Agriculture Mechanisation.
Gondar Malt Factory is expected to produce 16,200tns of malt a year, 12,000tns of which will be supplied to Dashen Brewery.
The new malt factory is entering an underdeveloped local industry. Increased international and local investment in Ethiopia's breweries has increased the capacity of the five beer factories currently under operation, to four million hectolitres. This, in turn, has raised the demand for malt to 99,540tns, in 2011/12.
Yet, the local industry, which until now only consists of a single malt factory in Assela, 164Km from the capital, only covers 36,000tns of the annual demand. The difference is imported, mainly from Holland and Germany.
In the previous fiscal year, Ethiopia spent 47.3 million dollars on malt imports, according to data from the Ethiopian Revenues and Customs Authority (ERCA).
Beer production is expected to grow significantly in the future, with the entry of new companies, such as; Raya, Zebidar and Habesha. In addition, foreign companies; Diego and Heineken, which have bought Meta, Bedele and Harar breweries respectively, have both announced expansion plans to increase production.
In such a setting, Gondar is ready to play its part in the supply of malt, according to Tadesse Kassa, General Manager of the malt factory.
The malt factory hired Afro-Tsion Construction PLC for 97 million Br, to handle the civil works, in July 2011. Afro-Tsion has experience in this field, having previously participated in the expansion project of Assela malt factory. The company has now completed 86pc of the work including the construction of accessible roads and drainage.
Plant procurement, installation and electro-mechanical works, on the other hand, were awarded to Buhler Gmbh, a German company, for a total of 13.7 million dollars, in June 2010.
A malt factory needs warehouses, a steeping plant, germinating equipment and a kiln, in order to function at full capacity. It has taken the company almost a year to import the equipment for the plant, according to Tadesse Kassahun, General Manager of Gondar Malt Factory. It has now finished 75pc of the installation work, at a cost of approximately 1.75 million dollars.
To cover all these costs, Tiret borrowed 480 million Br from the Development Bank of Ethiopia (DBE) in September 2010, a 70pc loan it acquired after putting 30pc in a blocked account.
The factory plans to source barley locally from Gondar, Gojjam and Northern Shoa. It needs 21,000tns of barley annually to produce at full capacity.
Gondar has not yet determined the price at which it will enter the market. It will sell the malt in five-tonne units, although only 4,200tns will be available to other companies annually. The coming three years, though, could see its production reaching 32,000tns, according to Tadesse, with the eventual target being 48,000tns.
"All it needs is the addition of steeping plants and germinating boxes," he said.
The kiln already has the capacity to roast 48,000tns of barley. Currently the factory has three steeping plants and two germinating boxes.
Dashen Brewery, which is planning a new plant in Debre Berhan, will use the 12,000tns of malt it gets from the malt factory for its existing plant, which produces 750,000hl. The new plant in Debre Berhan will have a capacity to produce 219,000hl.
The construction of the Debre Berhan plant is partly funded by the nearly 60 million dollar contribution of the UK investment company, Duet. Duet will have a 49pc share in the company for five years, commencing from October 2012, after which the two have agreed for it to sell its shares and leave.
Dashen Brewery currently imports all of its malt from abroad.