5 April 2014

Ethiopia: Govt, Sheba Investment Negotiate Tobacco Enterprise Acquisition

The government of Ethiopia is negotiating with representatives of Sheba Investment PLC - a company owned by foreign investors - for the full acquisition of the National Tobacco Enterprise SC, a legal tobacco monopoly in Ethiopia, The Reporter has learnt.

Currently, the state has 78 percent ownership right in the enterprise after it sold the remaining shares to foreign investors back in 1999. And it is these investors who are currently in Addis Ababa and are negotiating with the government to make the enterprise an entirely private entity.

However, if the negotiation fails to materialize, the government will put the enterprise up for a bid.

The enterprise has tobacco farms in different parts of the country namely Hawassa, Robit, Bilatie and Wolaita, which would be part of the package that is up for grabs. Last year the Prime Minister's office instructed the Privatization and Public Enterprises Supervising Agency (PPESA) to conduct a valuation to estimate the true worth of the enterprise in the market.

With the complete privatization of the enterprise, the decision whether or not to relieve the enterprise of its monopoly remains to be seen.

The monopoly of the enterprise extends to importing famous cigarette brands like British America Tobacco's (BAT) Rothman's and Philip Morris International's (FMI) Marlboro brands not to mention the authority to issue permit for the importation of other brands.

There are some who believe transferring the enterprise to private ownership is not a wise decision. Their basic argument is that it is an enterprise that should be considered as a strategic industry given its products have a direct impact on the health of users. In fact, many of them ask why the government is opting for the privatization option while the enterprise is making an impressive profit. Last year, the enterprise collected a net profit of over 280 million birr.

Previously one, private company that was interested in acquiring the enterprise was, Horizon Ethiopia, a company owned by the Ethiopian-born Saudi billionaire, Sheik Mohamed Al Amoudi.

The National Tobacco Enterprise, which is located off Roosevelt Street, started production with a single machine in 1941. Currently, the company has two machines, procured in 2003, that have the capacity to produce 7,000 sticks a minute. The current annual production capacity of the enterprise is 4 billion sticks. The company has bought an additional machine for 150 million that will enable it to produce 2 billion extra sticks annually. The enterprise currently produces and distributes the popular Nyala as well as other brands like Gisilla, Elleni, Delight and Nyala Premium.

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