National Tobacco to Maintain Monopoly Rights After Majority Share Acquisition

The National Tobacco Enterprise (NTE) will continue to hold its monopoly right as producer, importer and seller of tobacco products for the next 10 years. Sheba Investment Plc, co-owner with the government, has been holding over a billion Birr in payments to the government for months, which will make it the major shareholder, pending this decision.

Sheba, a Yemeni company, could have a 60pc share, with the government, holding the remainder. Sheba and the Privatisation & Public Enterprise Supervising Agency (PPESA) agreed in June 2014 for the former to pay 1.25 billion Br to boost its share from 22pc. Sheba believes the amount it agreed to pay is more than the NTE’s assets are worth, according to Minase Zeray, its general manger, because of which it requested the PPESA for the continuation of the monopoly rights.

The NTE was established in 1942, as the National Tobacco Monopole. It was reestablished in 1999, selling 22pc of its shares to Sheba, as the NTE and maintained the monopoly rights, but only for 10 years, until 2009.

Sheba made the request to the PPESA, whose board reviewed it and passed it on to the Ministry of Finance & Economic Development (MoFED), which also holds thes hare of the government, according to Wondafrash Assefa, public relations head at the Agency. The MoFED sent the letter approving the monopoly on October 1, 2014.

“We bought the brand and the monopoly rights of the company, paying beyond its assets,” said Minase. “That is why we asked them to grant the monopoly rights for at least another 10 years.”

Sheba will soon pay the 1.25 billion Br it agreed to for the additional shares, he says.

The Enterprise, which is located along Roosevelt Street, has a capital of 291 million Br and a production capacity of four billion sticks a year in the Nyala, Gisilla, Elleni, Delight and Nyala Premium brands. It has recently acquired a new 140 million Br machine from G.D SpA – an Italian company – to make and pack cigarettes, through a loan it obtained from the Development Bank of Ethiopia (DBE). The machine will boost the annual production of the company to 6.4 billion sticks starting from January 2015.

Sheba, an affiliate of the Sheba Investment Group, which has a presence in Egypt, Yemen and Libya in finance and catering services, also manufactures Coca Cola in Egypt and Yemen. The NTE has been seeing growing profits over the past years, with 246 million Br in 2011/12, 280 million Br the following year and 319.5 million Br during the 2013/14 fiscal year.

“We included it as precondition in the deal and we were waiting the response by refraining from making the payment for the shares we bought,” said Minase.

The 70-year-old tobacco manufacturer has tobacco farms in Hawassa, Shewa Robit, Bilatie and Wolaita, from where it gets 30pc of its tobacco input, contracting 8,000 farmers. On average, the company produces 1,200kg of tobacco a hectare, cultivating 2000ha in two seasons a year. The remaining 70pc of tobacco input is imported from Brazil and India.


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