The repeated attempts of the Development Bank of Ethiopia (DBE) to auction off four troubled companies, previously owned by both local and foreign investors, have failed to attract any bids – a significant setback for the state policy bank that seeks millions of Birr from the companies.
Angel’s Cotton & Textile, the Omo Valley Corporation, Condor Flower Farm and M2K Engineering Plc are the four companies that were put up for sale by the DBE for failing to pay their debts.
The opening of the bid for the companies was meant to take place three weeks ago on the premises of the Bank located on Joseph Tito Street, but no bidders appeared, according to Kifle Haileyesus, communications director of the Bank.
The Turkish Company, Angel’s Cotton & Textile, which is located in Legetafo Legedadi Town, Oromia Regional State, is the first company to be auctioned, and it failed to attract any bidders. Resting on 25,000sqm, the company was engaged in the production of underwear and other textile products, exporting 97pc of the products, for the past four years. Its debt was 258.8 million Br.
In addition to this, the Omo Valley Corporation, which is located in Hamer, Southern Nations, Nationalities & Peoples’ Region (SNNPR), failed to grab the attention of a single bidder for the second time. Six months ago DBE unsuccessfully tried to sell the 10,000ha cotton farm with a threshold price of 166.5 million Br.
About 18 months ago, the former Agricultural Land Investment Administration Agency served Omo Valley, which had leased land to engage with commercial farming in 2012, with warning letters for leaving land unutilised for too long.
Another company which failed to get any buyers for the second time is Condor Farm, located in Bahr Dar, Amhara Regional State, with an area of 150ha. The initial price set by DBE for the auction was 142.9 million Br. Eight months ago DBE, a bank that was established a century ago, auctioned off the Farm after the owners fled from the Farm, which was vandalised during the popular political uprisings in the area.
M2K Engineering Plc also did not get any buyers who could offer 19.5 million Br to acquire the properties of the company, which rests on 3,000sqm in Gelen Town, Oromia Regional State. M2K Engineering, established in 2004 as a sister company of M2K Investment group, was working on medical and educational furniture with a capital of 2.5 million dollars, creating job opportunities for 120 staff members.
The state-owned giant, the Commercial Bank of Ethiopia (CBE), had also faced the same failure last year after it auctioned the Saygin Dima and Selen Dawa textile factories as a result of nonperforming loans (NPLs). No companies appeared at the Bank to acquire the two companies.
Besides these four companies, DBE has been auctioning companies with non performing loans (NPLs), but it has been failing as no buyers were showing interest in the companies, including for Else Addis Textile Factory, which was owned by Turkish investors located in Adama, 100Km from Addis Abeba.
Following this, it established a new enterprise, Ethio Capital Investment S.C, nine months ago, with a cost of 10 million Br – a move aimed at preventing the legal restraints in administering the assets of foreclosed factories and companies.
The formation of the Enterprise cannot be a sustainable solution according to Sewale Abate (PhD), an assistant professor at Addis Abeba University (AAU), College of Business & Economics, who has also worked at the Bank’s Bahir Dar District. He also believes that the formation of the new company entails that DBE is being diverted from its initial and establishment objective.
“Close follow up, providing additional capital for firms before they face liquidation and extending loan payment periods are the sustainable ways to reverse the current situation,” Sewale told Fortune.
Last year, the firm registered a disappointing performance with a 21.6pc decline in gross profit to 323.8 million Br for the second year in a row. Its NPL ratio has also increased from 16pc to 25pc. Currently, the Bank has close to 2,400 employees working at its 110 branches and 13 districts.
“The bank will proceed to the next step to sell the companies,” Kifle stated.
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