Heineken receives US$49.8 million Forex Access in expansion plans

ETHIOPIA- Heineken has received US$49.8 million Forex Access following the central bank’s instruction to commercial banks to pay the company for its expansion project.

The government through the office of the Vice Governor, Yohannes Ayalew had ordered presidents from various banks to make a commitment concerning the same to save a degrading forex and more so revive the national economy.

According to Fortune, the decision to allocate foreign currency to Heineken, a private brewer in the country was forwarded from the Prime Minister’s Office.

The approval came against the country’s brewers since the industry had been subjected to a new directive that compelled private banks to transfer 30% of their forex earnings to the National Bank of Ethiopia (NBE).

The investment will fund expansion of its production facility at Qilindo thus increasing its capacity to 4 million hectolitres as well as offer it full advantage of the market against competitors.

Reports from people closer to the company hinted that the expansion plans were due to high cash liquidity of US$49.7 and possible transfers were hampered by low foreign currency reserves.

In addition to inflation, the Ethiopian Birr had weakened against the US dollars making the foreign companies unable to repatriate their profits thus, an erosion of their cash value.

The company’s reinvestment of its money on its expansion project received a go ahead from the authorities offering them preferential access to letters of credit in the importation of plants.

Given a significant growth in Ethiopian brewery industry over past few years, companies like Diageo and BGI Ethiopia have gone further to impress opportunities to increase their production capacities.

At the same time others like Raya, Habesaha breweries and Heineken included have opted to pursue expansion strategies while the country anticipates a 12% average growth for the next five years- according highlights from Asoko Insight.

Heineken’s investments in Ethiopia include the Qilinto brewery with a total capacity of 1.5million hectolitres inaugurated in 2015 to meet rising demand for local and international brands.

It further doubled the facility’s capacity with an investment of US$87.1 million boosting the total production of its plants including Bedele and Harar to four million hectoliters in a year.

“The government believes letting Heineken reinvest its profits would be more beneficial rather than making them repatriate,” said an aide to the Prime Minister.

The aide noted that the banks were apportioned the amount based on their net open position report and the net sum of all foreign currency assets and that some of the banks had started approving the amount requested of them to Heineken.

Earlier, the central bank made private banks transfer US$15million bill for the Ethiopian Shipping Logistics Services Enterprise (ESLSE), paid to the Port of Djibouti.

This second decision to open letters of credit (LC) for Heineken was not received well by senior executives in the industry.

“We’re ordered to prioritise beer bottlers over pharmaceutical product importers that save lives,” said a senior bank executive.

In the year ending 2016, Heineken had made investments amounting to US$112 million in the country.

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