The Reporter (Addis Ababa)

Ethiopia: DBE Approves 30 Percent Loan for Habesha Cement

In September 2011, the Development Bank of Ethiopia (DBE) approved 1.53 billion birr loan to the newly formed Habesha Cement Share Company, a 70 percent capital the company was looking for to cover the costs of factory construction.

Three years later, in November this year, DBE was able to sign 30 percent of the previous agreement specifically, 660.3 million birr which is way below the original approval. The loan request was subdued due to liquidity gap DBE was facing.

Yet, according to Engineer Mesfin Abi, Chief Executive Officer (CEO) of Habseha Cement, which is owned by 16,300 shareholders, the company was able to secure some USD 50.5 million. And the remaining 40 percent of the loan will be secured from the Eastern and Southern Africa Trade and Development Bank (PTA). In a press conference held on Thursday at Habesha Cement headquarters, the CEO said that the construction of the 130-million-dollar cement factory will be finalized by the end of 2015 and will commence production by the time. The company in 2011, however, was unable to provide 655 million birr, which DBE requires to have as a 30 percent equity contribution to have the loan processed. During which time, the National Bank of Ethiopia (NBE)-the regulatory body of commercial banks- was devaluing the birr against major international currencies of transactions. According to Mesfin, the loan approval took longer time. The recurrent currency devaluation impacted the equity finance the company was having at stake. The alternative solution was to look for external sources for loan and that was fulfilled when the company has approached PTA bank. Tameru Wondmagegnehu board chairman of the company noted that the loan approval process within the PTA bank took only a year, he said. The company hired Northern Heavy Industries, a Chinese contractor company which will design, build and train workers. Habesha Cement is expected to produce some 1.3 million tons of cement at the town of Holeta where the civil work of the plant is taking place at the moment. Indian based Data Consulting Engineers will pursue the consultancy and supervisory works of the plant. Tameru said that the immense number of shareholders in the company put the Ethiopian Commercial Code under pressure where some 16,300 individuals' ownership of a single company was not the circumstance in the country before. It is scarcely practical to gather all the shareholders under one roof for cases such as annual meetings. Dangote Industries (Ethiopia) Private Limited Company, a subsidiary of Dangote Group, owned by a Nigerian billionaire Aliko Dnagote, will be the major contender to the cement industry players, including Muger Cement, Habeaha Cement and Derba Cement. However, Mesfin is confident that both market proximity and costs of production are the competitive edges that Habesha Cement ventures as plus sides to remain a major actor in the business to come.

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