Hedasse Automotive & Machinery Market S.C availed 2.99 million shares worth three billion Birr for public subscriptions to build a grand mall in Addis Abeba, whose exact location remains undisclosed.
The company has also offered to charge potential subscribers of shares the highest, 17pc, as promoters’ fee, meant to cover administrative and promotional cost during the period of formation. If succeeded, promoters will raise over half a billion Birr in promoters fee.
Most share companies floating initial public offerings (IPO) charge service charges of five percent to 10pc, thus making Hedasse’s the highest fee to date.
Ahmedin Mohammed, one of the 11 promoters and president of the share company, says such high fees is crucial to cover “operational cost of the project.”
From the fees collected from prospective shareholders, 15pc of it will be deducted for VAT, while six percent goes to corporate social responsibility and eight percent to service commission reserved to shareholders who bring others to buy shares, Ahmedin told Fortune.
The company was initially founded two years ago by 30 individuals and currently has 215 shareholders. With par value of 1,000 Br, minimum number of shares up for subscriptions is 600 shares while the highest is at 2,400 shares.
Hedasse started to sell shares on February 5, 2017, but it officially offered IPO on April 19, 2017, at the Sheraton Addis Hotel.
The company aspires to work in three different industries; automotive market, manufacturing and a grand mall, which is hoped to incorporate no less than 5,000 stores, and claimed by promoters to be “the largest mall in Africa.”
“We’ve been doing research, market analysis and the design of Hedasse grand mall for the past two years,” says Ahmedin, who is an importer of spare parts and machineries.
Ahmedin is currently constructing a spare parts manufacturing plant worth 109 million Br in Qaliti, along Debrezeit Road. He is also among those who initiated the idea of importing 1,000 meter taxis.
The new company intends to construct a three-storey grand mall on a 250,000sqm plot, accompanied by two four-star hotels, and four residential apartments. It will also have a parking space with the capacity of about 8,000 vehicles.
Dereje Mekonnen, a general manager of the project, states that different international construction companies have shown interest to take part in the project. He also compares the grand mall with Mall of Africa located in Waterfall city, South Africa, which lies on 550,000sqm and has 2,500 shops.
“We hope to be dubbed ‘the biggest mall in Africa,” Dereje said.
The entire project will have two phases; the first phase will incorporate the shops and is expected to be finalized within three years and will be able to create permanent job opportunities for about 35,000 citizens, promoters say. Phase two will converge on the construction of the apartments and the hotels, according to Anemaw Abera, media and promotion manager for the company.
Hedasse is in the process of acquiring the land for a lower rate, negotiating on the fixed lease price with the city administration and is hoping to get one of the nine reserved areas for development in the city, according to Ahmedin.
“Even if the location has not been acquired yet, it is not a concern for me as the investment we make is safe in a blocked account,” said Raiwa Mohammed, who bought shares in the company and runs a car decor shop around Sebara Babur area, in Gullele District.
The company has opened such accounts with all the commercial banks operating in the market.
An interested shareholder buying the lowest share makes nine percent initial payment of the shares wanted, together with 50pc of the promoters fee, before being registered as a shareholder.
People close to the issue raise concerns of over ambition, particularly in relations to the ability of promoters to raise all the required capital. They relate the case of Addis Africa International Convention & Exhibition Center (AAICEC), which took over three years to sell the 300,000 shares it availed for public subscription, mainly due to the low interest from the public. AAICEC realised its plan after the involvment of the city administration which bought shares worth one billion Birr out of the total three billion Birr.
“Hedasse will surely benefit if the government gets involved,” a consultant in project development told Fortune.
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