Addis Fortune (Addis Ababa)

22 June 2014

Ethiopia: Yemeni Company Seals Majority Stake in Tobacco Enterprise

The PPESA has used many methods to privatise state-owned companies, but has only processed four this year

Sheba Investment Plc, a Yemeni based company, boosted its ownership of the National Tobacco Enterprise S.C (NTE) to 60pc with the 1.25 billion Br acquisition of the part owned by the government.

Sheba already had a 22pc share in the tobacco monopoly, which it acquired in 1999, with the rest of the shares remaining with the Ministry of Finance & Economic Development (MoFED). Sheba boosted its share to 60pc, with the MoFED's agreement last week to shed some of its shares.

Sheba approached the Privatisation & Public Enterprises Supervising Agency (PPESA) three months ago proposing an increase in its shares to 70pc. This came following the Agency's interest in selling on a further 27pc share. The Agency's board has been reviewing the request and decided to sell only an additional 38pc and passed the decision for approval to the MoFED, according to Wondafrash Assefa, public relations head at the Agency.

"The decision was sent to the MoFED, because the Ministry owned the remaining 78pc share of the Enterprise on the behalf of government", said Wondafrash.

Sheba's proposal did not include the payment modality, but it is likely it could be paid all at once, according to Wondafrash.

The Enterprise, located along Roosevelt Street, has a capital of 3.3 billion Br and a production capacity of six billion sticks a year in the Nyala, Gisilla, Elleni, Delight and Nyala Premium brands. Its net profit for 2012/13 was 350 million Br.

The 70-year-old tobacco manufacturer had been operating with a single machine for over 60 years, but acquired a new 150 million Br model in 2003. The enterprise has tobacco farms in different parts of the country, including Hawassa, Shewa Robit, Bilatie and Wolaita.

The PPESA uses different approaches to privatise state owned enterprises, including full sale, partial sale and joint venture, as well as the lease of the factory facilities. The Bahir Dar Textile Factory S.C had been leased to a Chinese company, but the Agency was not happy with the way that company handled it and auctioned it for full privatisation. Currently, the Agency is conducting full sales at a considerably in higher level.

It has succeeded in privatising four enterprises and a villa within four rounds of tenders it has auctioned for the current fiscal year 2013/14 - the tobacco deal being its latest success. The other successes included the villa in Bole District, owned by Batu Construction S.C, as well as Hamaressa Edible Oil S.C, Ethiopian Pharmaceutical Manufacturing S.C, Bekelcha Transport S.C and Weyra Transport S.C.

It will present financial openings on July 23, 2014, for seven additional enterprises. Five of the enterprises - the Ethiopian Mineral Development S.C, Bahir Dar Textile S.C, Kombolcha Textile S.C, Agricultural Mechanization Service Enterprise and Transport Construction Design S.C - had failed to attract any interest from bidders previously. It added two to these the Bilito Siraro Farm and the warehouse of the Ethiopia Fibre Products Enterprise, among others.

The Agency has so far privaised 370 units, including the four enterprises and a villa privatised this year. During this fiscal year it has managed to privatise five out of a planned 20 enterprises.

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