After failing to privatize five public enterprises during the past half fiscal year, Privatization & Public Enterprise Supervising Agency (PPESA) has now been able to get an interest for the government’s share in the Ethiopian Crown Cork & Can Manufacturing Industry S.C. (ECCCMI), with an offer price of 206.2 million Br.
Crown Cork has 75pc of government share in it, with the remaining privately held.
The Agency had a financial opening on March 5, 2015, three state enterprises, including ECCCMI, Agricultural Mechanization Services Enterprise, and Bilito Siraro Farm. There were Bahir Dar Textile S.C. and Kombolcha Textile S.C. on offer, but cork was the only to get any offer.
The company that offered to purchase ECCCMI is called Fairfax Africa Fund Llc. It is a U.S. based investment firm. This is the same company that was participating in a tender to provide Enterprise Resource Planning (ERP) for Ethiopian in 2009 with Zemedeneh Negatu, Managing Partner of Transaction Advisory Service at Ernst & Young, working as a point man for the company.
The company had shown its interest to purchase the share of Crown Cork and as per this interest, it submitted its proposal to the board that was assigned by the agency to look after such cases.
“According to their proposal, they insisted to be treated as a local company so they make their payment as per the payment procedures set for local investors,” said Aseb Kebede, vice head of public relations office at PPESA.
As far as the transfer of public enterprises is concerned, the Agency has a precondition for domestic and foreign companies, which bid for the enterprises. For local companies, PPESA requires 35pc down payment and the remaining within five years, while foreign companies pay a 50pc down payment, and the rest within three years.
Ethiopia fits the high growth potential that Fairfax Africa Fund is looking for, especially in agro industry and manufacturing, which is the reason for its offer for the Crown Cork & Can Manufacturing Company, according to an email David Johns, Director of Fairfax African Fund, sent to Fortune.
“Our bid for Crown Cork includes a group of Ethiopians as partners and therefore we submitted the bid as a joint foreign Fairfax and Ethiopian investors’ partnership with Fairfax Africa Fund as the main bidder, according to statement sent to Fortune via email.
“For now, we have been helping them in facilitating and advising on matters related to the tender,” Zemedneh told Fortune.
If the company has become successful in acquiring to purchase Crown, we will have a stake in their investment.
According to Zemednhe, Fairfax African fund will spend up to 500 million Br, including the offered price to expand and reestablish the company.
The Agency’s board will soon make a decision on their proposal, said Aseb told Fortune.
During the first half year, it was reported that the PPESA lost the expected revenue of 1.3 billion Br from the transfer of enterprises to private holders; though the period was marked with a profit of 398.4 million Br profit from 27 public enterprises that are under its administration.
The Agency made 7.6 billion Br from the sale of goods and services from the 27 enterprises that it manages, down from a target of 8.6 billion Br. In addition, it has managed to make 17.3 million dollars from export from five of the enterprises under it.
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