Wednesday, January 18, 2023
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BusinessPrice escalations, scarce working capital push Corporation to quadruple its paid up...

Price escalations, scarce working capital push Corporation to quadruple its paid up capital

The Ethiopian Agricultural Business Corporation (EABC) is awaiting approval to quadruple its capital to 9.76 billion birr. In second and third phases, the corporation strategized to increase the capital to 12 billion birr and 24 billion birr, respectively.

The corporation is currently forced to handle up to 50 billion birr in business transactions, disproportional to its paid-up capital.

“Following the price escalation of agricultural inputs in the international market, our business portfolio upshot to 50 billion birr, but our capital is very small. We could not take overdraft because the agricultural input prices are highly inflated now. This is affecting our working capital,” said Kifle Woldemariam, CEO of the corporation.

The management of the corporation requested the Public Enterprises Holding and Administration (PEHA) previously to raise its capital. The administration was evaluating the strategic plan and business plan until very recently. But since the accountability of the corporation shifted from PEHAA to Ethiopian Investment Holding (EIH) lately, the corporation again placed its request to the EIH.

The EIH, a sovereign fund founded in January 2022, included 27 SOEs under its portfolio including the corporation.

“We are awaiting the approval from the EIH as soon as possible,” added Kifle.

The EABC, an amalgamation of five autonomous state enterprises engaged in agricultural inputs business, was formed in 2015. However, its authorized capital at the time was 2.44 billion birr, the paid up capital remained at 610 million birr for a long time. After the corporation evaluated its asset using IFRS, its paid up capital jumped from 610 million birr to 1.7 billion birr.

Though the corporation managed to achieve the 2.44 billion paid up capital, it lagged behind the business volume it was handling.

The corporation imports and supplies agricultural inputs to farmers, including fertilizers, and produces other inputs locally, like improved seed. The corporation keeps a five percent profit from the inputs it supplies for farmers.

 

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