30 July 2014

Ethiopia: Only One Out of Six Enterprises Attract Bidders in Privatisation Bid

Bidders swarm warehouse offer with highest bidden providing 10.1m Br

Only a warehouse, which was under a court injunction order, attracts bidders out of the six public enterprises offered for sale by the Privatisation & Public Enterprises Supervising Agency (PPESA), in its latest round tender.

The tender was announced on May 14, 2014, and remained open until 15 minutes before a financial opening was held on Tuesday, July 22, 2014. The tender involved seven companies, five of which have previously failed to attract any buyers. Bilito Siraro Farm and the warehouse of the Ethiopia Fibre Products Enterprise are up for sale for the first time.

During the financial opening, five bidders provide offers only for the warehouse of the Ethiopia Fibre Products Enterprise. No one made offers for Bahir Dar Textile S.C., Kombolcha Textile S.C., Agricultural Mechanisation Service Enterprise, Transport Construction Design S.C. and Bilito Siraro Farm.

The financial opening for the Ethiopian Mineral Development S.C is extended till July 6, 2014, following the request from the bidders, stating they could not finalise the preparation of the proposal, according to Berhane Gebremedihen, chairperson of the Evaluation Committee at PPESA.

The highest bid for the warehouse came from G Seven Trading & Industry Plc, who acquired the Ethiopia Fibre Products Enterprise in 2008 from the Agency. G Seven was established in May 2005 with an initial registered capital of 7.2 million Br. It has bought Meher Fibre Products Factory in July 2006 from PPESA. It produces jute sacks, twine and ropes from natural fibre.

G Seven come up with 10.1 million Br offer, followed by Ture Plc, who came up with 8.8 million Br. The third offer was 7.158 million Br from Ambalay Raiey Trading Plc. Dukem Textile Factory extended a very closer amount with Ambaly, by proposing 7.155 million Br. The least offer of 5.5 million Br came from Adabo Midroc Trading Plc.

The bidders, which are all local companies, came up with Certified Payment Order (CPO) or Bid Bond of 96,569 Br, along with technical proposals. Four of them proposed a payment of 30pc in advance and the remaining 70pc five days before the handover, while Ture Plc offered to pay 30pc in advance and 70pc in a year time.

The warehouse, located around Saris, occupies 650.3sqm. It lies on a plot of 2,550sqm, which also has office buildings sitting on 266sqm. In addition, it has two metal containers that cover 37sqm. The warehouse was not part of the transfer when G Seven acquired Ethiopian Fibre Products in 2008.

Hawassa Textiles was using the warehouse, when it was a public enterprise, and still use the warehouse even after it was sold to Dukem Textiles in 2011 for 37 million Br. Hawassa has utilised the warehouse for a total of 20 years. Dukem went to court in mid-May 2012, when it learned that the PPESA had floated a tender to sell the warehouse in April 2012.

Following the tender, the financial opening was meant to be held on May 21, 2012 and the warehouse got a single offer from the buyer of the Enterprise, G Seven. But the bid was not opened because of a law suit that Hawassa Textiles filed against the Agency.

"After the court reviewed the case, it ruled in the favour of the Agency earlier this year, so we offered the warehouse for sale again this year," said Wondafrashe Assefa, corporate communications head with the Agency to Fortune.

Both G Seven and Dukem Textiles participated in this round to acquire the warehouse.

The evaluation committee intends to conduct a technical evaluation in a few weeks time and the Agency's final decision on the warehouse will be announced in a month's time after the Board of the Agency gives approval, according to Wondafrash.

According to Wondafrash, the agency will float another tender for those enterprises that do not mange to attract any bidder.

Previously, the PPESA used to transfer enterprises through three different approaches. One was through lease, where a private sector company would have full use of the enterprise for a limited time by paying rent. Bahir Dar Textile Factory, one of the enterprises slated to be fully transferred to private investors this year, but with no bids, was previously leased to a Chinese company. This type of transfer, however, was abandoned two years ago, as the Agency deemed that private companies were not taking proper care of enterprises that they leased.

The Agency has so far privatised 370 units and able to collect 14 billion Br from the privatised enterprises since its establishment back in 1994. During the last fiscal year, the Agency has managed to privatise only five enterprises out of the planned 20 enterprises.

The Agency attempted to discover, through a questionnaire, why so few offers were being made, and the responses pointed towards the high prices, a source in the Agency said. It did not respond to that concern, however, claiming that it based its indicative prices on the market and did not think they were too high.

But during this year's six month performance report,Beyene Gebremeskel, director general of PPESA, cited poor promotion and a lack of interest from investors to engage in the manufacturing sector as reasons and he noticed the Agency will try to reach to the masses through more aggressive promotions.

Published on [ Vol 15 ,No 743]

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