CBE forced to take over as it can't find buyers for Turkish-owned Saygin Dima.
After repeated attempts to transfer the ownership of troubled multimillion Br textile company Saygin Dima, the Commercial Bank of Ethiopia (CBE) has taken control of the company. The bank is still looking into options for the administration of the company. Saygin Dima, which used to be owned by Turkish investors, has been in the foreclosure process for the past six months. However, the factory has failed to generate any interest from buyers. The foreclosure came after the former owners failed to pay their loans.
The factory was established in 2008 as a joint venture between the Ethiopian Government and Turkish investors. The investors then relocated their factory from Turkey to Ethiopia.
At the time of the set up, the government had a 60pc share in the company, valued at 625 million Br. The Turkish investors controlled the remaining 40pc. The distribution of shares in the company was dictated by the government. The company's machinery alone had an estimated value of 406 million Br. The company managed to secure loans of 574 million Br loan from CBE following the partnership deal.
The factory, located in Sebeta-Dima, 24km southwest of Addis Abeba, opened in 2011. The plant was established on 17ha plot of land with a capacity of producing daily 30tn of yarn, 40,000m of fibre and 50,000m of finished fibers. But during the five years of its operation, the company could not produce any more than 50pc of its production capacity.
The partnership did not last long. The government dissolved the partnership due to the unsatisfactory performance of the company. Above all, its export performance did not meet expectations. Last year, the company declared that it was only able to earn 105,000 dollars.
Such disappointment is not unique for Saygin. The whole textile sector has not met expectations. Last year, earnings dropped by 21pc to 77.8 million dollars, while a 17pc plunge in volume saw the supply of only 14,800 tonnes of product to the international market.
The impact of the under performances of these textile producers has hit banks hard. Last year, banks in the country disbursed 31pc of a 75.5 billion Br loan to the sector. In what can be considered a sign highlighting a sector-wide problem, the Development Bank of Ethiopia (DBE) registered 60pc of its nonperforming loans in the sector.
Just last week, DBE foreclosed on Else Addis, a Turkish-owned textile company located in Adama. The owners borrowed close to 900 million Br from the bank they have defaulted on.
"We will make a decision on how and who will manage (Saygin Dima) soon," Belihu Takele, acting communication manager of CBE told Fortune.
Earlier this year, Saygin Dima came under attack following civil unrest in some parts of the Oromia Regional State.
"We are also looking on how to revive and restore some of the damaged machines and properties," Belihu added.
One bank executive familiar with the textile industry commented, "If they are opting for this option, they better give control of the company to someone who knows the sector."