Saturday, April 1, 2023
BusinessTobacco monopoly up for bid

Tobacco monopoly up for bid

Ministry unable to collect two billion birr

The Minister of Public Enterprise (MoPE) is set to privatize the famous National Tobacco Enterprise SC, a legal tobacco monopoly in Ethiopia, and the state-owned Ethiopian Crown Cork and Can Manufacturing Industry SC (ECCCMI).

The government owns 78 percent stake in National Tobacco Enterprise while the remaining 22 percent is owned by a Yemeni company, Sheba Investment PLC. Hence, in the latest round of bid, the government has floated only 40 percent of the stake that it has on the tobacco company, while the remaining 38 percent of the share will stay under the control of the government.

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Regarding ECCCMI, the ministry has offered 75 percent of ownership right for sale. According to Wondeafrash Assefa, head of public relation for the ministry, although the ownership right of the government will decline, the enterprise will retain its monopoly right even after privatization.

In addition to transferring the two companies in an open bid, the ministry has also offered two giant textile factories, Bahir Dar Textile SC and Kombolcha Textile SC, on the bases of negotiated acquisition.

Since the incumbent government declared its privatization policy in 1995, the two textile factories have been available for sale and went up for bid on many occasions. However, both have not been able to attract buyers. The government even had to spend millions of birr to renovate and upgrade the factories to attract the interests of bidders. Now, the government has shifted its strategy and availed the two enterprises for a negotiated acquisition.

A year ago, the Ministry, the then agency, made an opening for three companies, ECCCMI, Agricultural Mechanization Services Enterprise, and Bilito Siraro Farm. Moreover, the Bahir Dar Textile SC and Kombolcha Textile SC were made available by the Agency for interested buyers on the basis of negotiated acquisition. With the exception of ECCCMI none of the other companies attracted any bidders.

It was, in fact, only Fairfax Africa Fund which showed interest in buying ECCCMI. Fairfax is a US-based investment firm which invests in emerging economies with high growth potential. The fund is invested in Africa, the Middle East and other locations. Their total worldwide investment portfolio exceeds 150 million dollars.

As far as the transfer of public enterprises is concerned, the ministry has a precondition for domestic and foreign bidders. For local companies, ministry requires 35pc down payment with the remaining sum to be paid within five years, while foreign companies are expected to pay a 50pc down payment, and the rest within three years.

The National Tobacco Enterprise (Ethiopia) Share Company (NTE) was established as “Imperial Ethiopian Tobacco Monopoly” with a paid up capital of 50,000 birr. It started its work with a single cigarette machine and a single brand, Nigusu. The production capacity of the machine was 300 pieces per hour.

The Enterprise gets 30 percent of its tobacco supply from a farm in Shewa Robit in the Amhara Regional State, and three farms in Hawassa, Welayta and Blate, in the Southern Regional State, where it has contracts with 8,000 farmers. On average, the company produces 1,200kg of tobacco a hectare, cultivating 2000ha in two seasons a year. The remaining 70 percent is imported mainly from Brazil and India.

In a related development, The Reporter has also learnt that the Ministry is contemplating legal action against those private companies which owe an array of payments to the government a combined two billion birr for companied that have been privatized in the past two decades. According Wondafrash, there are a total of 28 companies are yet to settle their payments; however, some 60 percent of the overall array of payment is owed by one private company.

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