Turkish owners of the factory abandoned it five years ago
The fourth attempt by Commercial Bank of Ethiopia (CBE) to sell the troubled Selendawa Textile Factory bore no fruit, since no buyer showed up during the bid opening date.
CBE tried to auction off the factory's building, machinery, and two buses with a floor price of half a billion Birr. However, during the bid opening that was held on January 29, 2020, no bidder submitted an offer.
The Bank's Acquired Assets Administration Office tried to auction off the Factory that failed to service the loan it took from the Bank three times previously. However, not a single company or individual has shown any interest to buy the indebted company.
Established in 2013 in a joint venture arrangement between Turkish investors and the government of Ethiopia, Selendawa is located in Dire Dawa city. It rests on 18ha of land, and it was engaged in manufacturing yarn. The lease period of the factory contract covers 69 years.
The former Privatisation & Public Enterprises Supervising Agency held a 48pc share, while the Turkish owners controlled the remaining share. However, the factory's Turkish owners abandoned the project and left the country five years ago.
It had a production capacity of 50tn of yarn, 12,000m of fibre and four tonnes of netted fabric daily. However, it was only producing 10pc of its capacity. Though the plant was performing under its capacity, it had more than 1,000 employees.
Since the former owners abandoned the factory, the Bank has been trying to transfer it to private owners.
Transferring the company to private owners can create more job opportunities and bring more revenue from exports, according to Yeabsera Kebede, acting communications director at the Bank, which mobilised 31.8 billion Br in deposits in the first half of this fiscal year and reached 1,557 branches.
"We'll keep trying to auction off the company to recover the loan," Yeabsera said.
In addition to Selendawa, CBE has failed to transfer the ownership of Saygin Dima, another Turkish textile company whose owners were unable to service their debts. The state policy bank, the Development Bank of Ethiopia, also holds assets from several Turkish companies whose owners failed to repay loans.
Ayka Addis, Angles Textile and Elsi Addis are among the companies DBE's management took over from the owners due to a failure in servicing their debts. Auctions of these assets also failed, since they did not draw buyers.
Atlaw Alemu (PhD), a lecturer at Addis Abeba University's Faculty of Business & Economics, argues that banks should stop providing loans to foreign companies.
But he makes an exception if the foreign investors are partnered with local private firms.
"If the partnership was with a private investor," said Atlaw, "the company would have been better managed and would not go bankrupt so easily."
Atlaw adds that there should have been a rigorous inspection process on the machinery and technology, while the company took the loan.
"Beyond the loss of the money, the employees will be idle and become an additional burden on the economy," said Atlaw.