ETHIOPIA – Schulze Global Investments (SGI) has invested three to seven million dollars in a local milk processing company, MB Plc, for a 45pc share of the company.
The deal is a package which also includes a new CEO from Kenya, Robert Kariuki.
This is the second equity investment taking place in Addis Abeba in two weeks, following the 42 million dollar investment by 54 Capital, a UK firm, in Addis Pharmaceutical Factory.
The latest deal was announced at the office of SGI at the Tensae Building, Cape Verde St, on January 21, 2016, at an event attended by Mebrahtu Meles (PhD), state minister for Industry.
It was the culmination of a year-long process.
Greg Metro, managing director of SGI, decline to give an exact figure on the amount of investment.
MB is the sixth company in Ethiopia in which the equity firm is investing since first arriving in the country in 2008. Its other investments include a coffee roasting factory, a cement factory and a school.
MB, founded in 2001 with a capital outlay of 36 million Br, has a plant at Lebu and another at Kera, where it processes 30,000lt of milk a day. SGI’s investment will triple that production within a year by expanding the Lebu plant, according to Greg Metro, managing director.
There is also a plan to triple the number of employees, which now stands at 133.
Equipment for testing the safety of milk is currently being imported, CEO Kariuki said.
SGI’s Managing Director disclosed that the tests will cover feed given to the cows to check for such problems as aflatoxin levels, of which both companies are aware. Other machinery is also being selected from European markets, he added.
In terms of quantitiy, Kariuki explained that Kenya produces more milk, five litres on average, than Ethiopia, where the average is 1.5lt, mainly because of the feed.
“It all depends on the feeding system; you get what you give,” he said.
Ethiopia’s current production has reached 4.1 billion litres, according to the state minister, who spoke at the ceremony.
MB is so far reliant on milk sources from Addis Abeba, Sebeta and Akaki. It now plans to go further afield expanding its source base by acquiring trucks with cooling systems following SGI’s investment. It has recruited the Indian consulting firm, 3P Consultant, to study the market chain for that purpose.
MB’s deputy manager, Hailu Eshetu confirmed the expansion plan.
“We will also expand our market to include areas far from Addis Abeba,” he said.
Metro explained that the new CEO was picked from Kenya, because the dairy industry there is well advanced.
“We believe that the CEO has advanced experience in operations management as he has worked in some of the well known dairy processing companies in Kenya,” he said.
The government, which has formed a new Ministry of Livestock & Fisheries, plans to increase milk production to eight billion litres and to double the number of milk processing companies from 17 to 34 by the end of the second Growth & Transformation Plan (GTP II).
The Ministry of Industry has identified 17 locations in the country to set up agro-processing industrial parks that are expected to increase milk processing.
So far feasibility studies for one site in each of Tigray, Amhara, Oromia and Southern regional states have been completed, Mebrahtu said.
These four are 250ha to 1,000ha wide; development will begin following approval by the federal government, the State Minister said.
“We are expecting that the actual investment will begin in the next fiscal year,” he added.
SGI is a business established by a family with three adopted children from Ethiopia.
The company is said to have raised 86.5 million dollars by 2014 focusing on Ethiopia only. Its wide-ranging interests include agriculture, manufacturing, education, healthcare, real estate, and tourism.
Metro declined to identify the companies in which SGI has invested, although he added that another negotiation with a consumer goods company is approaching finalization.
January 22, 2016; http://addisfortune.net/articles/equity-firm-local-industry-partnership-in-dairy/