Ethiopia launches US$231m sugar factory, appoints Ernst & Young to oversee privatization of state-owned sugar plants

ETHIOPIA – The Prime Minister of Ethiopia, Abiy Ahmed has inaugurated the long-waited Tana Beles Sugar Factory one, constructed in the Amhara regional state.

Delayed for over 8 years, the sugar factor project commenced in 2012 with a planned completion date of around 18 months.

However, by end of 2017 only about 60 percent of the project was completed forcing the government to cancel the business agreement with the original contractor, Metal Engineering Corporation (MeTeC).

CAMCE, a corporation which belongs to China National Machinery Industry Corporation (SINOMACH), took over the project in September 2019.

“Inaugurating Tana Beles -1 Sugar Factory is key to building a competitive sugar industry in our country. Delayed for over 8 years, the Vision For Prosperity we embarked upon 3 yrs ago has enabled us to fast track projects to completion,” said Prime Minister Abiy Ahmed.

The government estimates that it has injected about US$231m in the construction of the facility which has a processing capacity of 13,000 tons of sugarcane and 1,500 tons of refined sugar per day respectively.

Ethiopia expects the completed project to produce 200,000 tons of refined sugar annually, while creating job opportunities for nearly 10,000 Ethiopians.

The plant is also equipped with a 45 MW generator set, which can generate 30 MW to the external power grid.

CAMCE has also been contracted to oversee the construction of Welkait Sugar factory, one of the factories slated for privatization with a processing capacity of 24,000 tons of sugar cane per day.

“Inaugurating Tana Beles -1 Sugar Factory is key to building a competitive sugar industry in our country.”

Prime Minister Abiy Ahmed

Ernst & Young to advise privatization of sugar factories

In other related news, Ethiopia has chosen Ernest & Young Global (EY) Ltd, a multinational professional services network, to be its transaction advisor in the privatization of a couple of state-owned sugar factories under the Ethiopian Sugar Corporation.

This marks the end of a long search for a consultancy firm by the Public Enterprise Holding & Administration Agency (PEHA), who invited interested parties to launch their bid in undertaking the task since last year.

EY has emerged as the suitable candidate among the 11 international companies that had filed their expressions of interest.

According to reports by Ethiopian Reporter, out of the 11 bidders, only six were said to have met all the technical and financial requirements set in the bid.

Narrowing down to the final two, EY clinched the job from Price Water House Cooper Limited (PWC) as it put in a financial offer worth US$3.3m while its competitor offered US$6.3m.

As part of EY’s assignment, the firm is expected to come up with plans and recommendations for a privatisation transaction, conduct market research, and suggest the best transaction approach that fits each sugar plant.

Also, the transaction advisor will assist the client to bringing a strategic investor on board as is necessary to close the transaction.

Ernst & Young is expected to commence the advisory role upon the final approval of the bidding committee.

The international company provides financial advisory services, such as risk management, internal audits, supply chain, operations, accounting and tax advisory, assurance, and auditing services.

The companies slated for privatisation include Tendaho, Kesem, Omo Kuraz II and III, and Arjo-Dedesa which are operational and Tana-Belese I and II, Welkayit, Omo Kuraz I which are currently under construction.

Initially, the government intended to privatise 13 sugar factories; however, it dropped the plan for three operational plants: Wonji Shoa, Metehara and Fincha sugar factories, and decided to keep them under government ownership.

Also, the privatisation plan of Omo Kuraz VI Sugar Factory, which was under construction was held back due to poor performance by the building contractor, leaving it 20% complete.

The decision to offload the sugar factories has come about as the government is unable to cover the debt accumulated over the years and maintain funding for the faltering sugar plants.

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