The Metals & Engineering Corporation (MetEC), the state-owned, military-industrial conglomerate, is splitting into two parts – commercial and defence – following an order by Prime Minister Abiy Ahmed (PhD).
To facilitate the split, eight separate committees incorporating members of the Corporation, the National Defense Forces and the Ministry of Defense have been formed. A lead committee chaired by Minister of Defense Motuma Meqassa that includes Berhanu Jula (Gen.), operations chief of the Ethiopian National Defense Force, and Molla Hailemariam (Lt. Gen), chief of the Army Logistics Department, has also been formed.
Though the idea of splitting the corporation into two entities was floated in the air for the past couple of months, the final decision was made by the Prime Minister three weeks ago, according to sources close to the case. The Prime Minister has also directed that the split and handover of the companies be completed in September, sources disclosed to Fortune.
Once the split is concluded, a defence industry section will be established under the Ministry of Defense with the mandate to administer the new company involved in the manufacture ofdefence-related machinery and equipment only, according to the same source.
The defence wing of MetEC now produces armoured vehicles, personnel carriers, assault vehicles, ambulances and command and surveillance vehicles. It also manufactures ammunition ranging from 7.62mm bullets to 130mm artillery shells, as well as defence and security vehicles and military utility aircraft. The commercial wing manufactures tractors, trucks, buses, television sets, energy meters, turbines, construction machinery and engines among many other products.
The late Prime Minister, Meles Zenawi, put forward the establishment of MetEC as one of the major tools for industrialisation with the aim of transforming Ethiopia into a middle-income country. When MetEC was established eight years ago, it registered 10 billion Br in capital and incorporated 15 military and civilian companies. The company was given seven main mandates: building the technological capabilities of the country’s defence forces; the design, building and commissioning of manufacturing industries; the manufacturing of industrial machinery; the enhancement of engineering and technological capabilities; the manufacturing, maintaining, overhauling and upgrading of weapons, equipment and parts of the military; and the sales of its weaponry products.
However, MetEC has often been criticised by members of parliament and the public for delaying the nation’s mega-projects, including the 10 sugar plants that were expected to be completed six years ago but have not yet been delivered. MetEC is also blamed for the delay of Yayu, a Multi-Complex Industries Project, and recently for the delay in the construction of the Great Ethiopian Renaissance Dam.
“Though the corporation was established with a positive objective of changing the country, the approach has many problems,” said Prime Minister Abiy on August 25, 2018, during his meeting with members of the media.
He also stated that the country was supposed to complete the four-billion-dollar dam within five years, yet seven or eight years later the country cannot make a single turbine operational.
“Salini Impregilo, the prime contractor of the dam, has demanded compensation for the delays caused by others,” he said. “Studies we made show that if we cannot oust MetEC from the project, it will take even longer.”
“According to the law, when a company is hired to fulfill a contract but fails to deliver a project, or lacks the capacity to perform on a contract, it can be terminated. This is what happened in this case,” said Abiy, referring to MetEC’s contract on the dam project.
During the press conference, the Prime Minister also disclosed that three sugar projects contracted to MetEC were also terminated, and the government is in the process of selecting other companies with experience to complete the projects.
Five months ago, the founding CEO of MetEC, Kinfe Dagnew (Maj. Gen.) tendered his resignation from the office and was replaced by Bekele Bulado (PhD), former minister of Trade. MetEC has over 19,500 employees, both members of the military and civilians, working at 98 subsidiary companies.
At the beginning of last week, MetEC terminated the contracts of nearly 1,000 employees following the termination of its sugar factory contracts. Ethiopia Power Engineering Industry, one of the subsidiaries of MetEC that employs 3,000 people, discharged most of its employees on a one-month forced-leave to cut administrative costs, according to sources close to the case.
According to an expert with intimate knowledge of MetEC, the split may take more time than the time allotted due to the intertwined nature of the commercial and military operations of the company.
“For instance, Bishoftu Automotive Industries manufactures both commercial and military vehicles,” said the expert. “It will be difficult to split this company,” he concluded.