All Eyes on State Textile Factories


The two textile factories have been open to bids for over a decade, but only recently received offers




After more than a decade of being floated for bids, the two state-owned textile factories. Kombolcha and Bahir Dar, have finally received firm offers over the past six months.

The latest offer came from Tiret Corporate – an endowment of the Amhara National Democratic Movement (ANDM) party. Another, from the foreign-based, Up Front & Personal Global Management Consultancy. Tiret, the local company shot for both- Kombolcha and Bahirdar textile factories while up-from is interested on the latter only.

Bahir Dar was established back in 1961, financed by the Italian war reparation fund. It was then re-established in 1999, with 65.2 million Br in capital. In 2006, the company was leased to Chinese investors, who stayed for 18 months. In 2012, the total assets of the company were reported to be worth 105 million Br.

The government has invested 500 million Br for the renovation of the factory, which sits on 188,000sqm of land. Bahir Dar has the capacity to produce 95,000sqm of garment a day, while its spinning machines can produce 15 tn a day. The factory employs close to 1,400 people.

Kombolcha, which sits 363 km south east of Addis Abeba and 482 km from Djibouti has received a rare offer. The factory was established as a public enterprise in 1986; by the end of 2013, its total assets were worth 174 million Br. Four years ago, the government invested 380 million Br into the facility.

The then Privatisation Agency has invested almost half a billion birr for the renovation of each textile factory.

After a long pause in attracting the attention of interested buyers, it was a couple of monts ago that it finally received an offer. In this respect, Dinku Deyassa was the one who broke the ice in May 2016.

Back then, Dinku offered 606 million Br for 100pc transfer of both factories. This is broken down to 304 million Br for Bahir Dar and 302 million Br for Kombolcha.

It has also proposed an expansion of the companies by 100pc.

Dinku is an influential businessman investing in various sectors, including education, and hotels and resorts.

His earlier endeavours with the former public enterprise Agency include his successful bid for a share of the Sodere Resort in 2011. At that time, he won the bid along with his two partners – the renowned Oromiffa singer, Kemer Yousuf, and Elias Eibssa.

Later, he was also able to buy out his business partners.

“My two partners sold their share and I now own the whole property, pending legal formalities,” Dinku told Fortune in June 2016.

However, the Ministry rejected his offer to acquire both the Bahir Dar and Kombolcha Textile Factories.

The reason for the rejection was that the listed prices were considered to be low considering the asset value and capacity of the factories.

Regarding the latest proposed offers by Tiret and Up Front, so far the Ministry has opted to keep the negotiations behind closed doors.

“Early disclosure might compromise our negotiation power with the companies,” a source from the Ministry explained. “It is with ultimate precaution that we will deal with this.”

A staff members of the Bahir Dar Textile Factory told Fortune that he is unaware of the proposed offers.

He recalled his experience of the previous bid, when interested parties used to come and visit the factory.

“It is after we get a heads up on the preliminary offer that we will conduct a feasibility study,” a source from one of the companies told Fortune, declining to mention the figures.

Textiles is one of the sub-sectors that is seen as a priority in Ethiopia. During the first Growth & Transformation Plan (GTP I), the country had planned to export a billion dollars’ worth of products, but only managed to export products worth 456 million dollars – less than half the target.

In this respect, during the first half of 2015/16, Kombolcha managed to earn 1.95 million dollars – a 41pc decline in comparison to the same period last year. While Bahir Dar also underperformed, with total earnings of just 710,000 dollars – a 35pc decline.

In a bid to have their share of the market, the biggest global names in textiles, such as the US Van Heusen (PVH) – the company behind brands such as Tony Hilfiger and Calvin Klein – Vanity Fair, Raymond Group and Arvind Ltd are all setting up at the Hawassa Industrial Park. Though too early to see the fruits of their labours, these Parks seem to be the fashion of the time.

The Ministry is still looking into the proposed interest of Tiret and Up Front, according to a source there.

Tadesse Kassa, CEO of Tiret, confirmed their proposed interest, but declined to disclose negotiation price.

Tiret, which was established in 1995 with 26.1 million Br in capital and 25 founding members, now includes close to seven companies under it.



By DAWIT ENDESHAW
FORTUNE STAFF WRITER

Published on Nov 08,2016 [ Vol 17 ,No 862]


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