ETHIOPIA – The government of Ethiopia has established the Ethiopian Sugar Industry Group (ESIG), to manage operations of five state-owned sugar factories i.e., Wonji, Metehara, Fincha, Kesem and Tana Beles 1 plants.
The factories are among a dozen of mega sugar production projects which were run by the Ethiopian Sugar Corporation (ESC), a public enterprise established in 2010 to develop mega sugar estates.
“For years, the Corporation has been managing sugar development projects and factories with several complicated problems alone,” said the Prime Minister Office.
“This has caused the enterprise to lose its focus and capacity to realize its main mission,” said the office, adding that the latest move, among other things, is aimed at “reducing some of the major responsibilities from the Corporation.”
Other than management of the five plants with a combined production capacity of nearly 4 million tonnes per year, the group has the mandate to monitor the activities of the other eight state-owned sugar plants under construction.
By replacing Ethiopian Sugar Corporation, the group is set to offer a corporate platform to raise financing through loans from domestic or foreign institutions and the sale of bonds for developmental projects.
Establishment of the group will also speed up the privatization process of the earmarked sugar factories, a process that is currently handled by the Public Enterprise Holding & Administration Agency.
Last July, the agency appointed Ernest & Young Global (EY) Ltd, a multinational professional services network, to be its transaction advisor in the privatization process.
The companies slated for privatisation include Tendaho, Kesem, Omo Kuraz II and III, Tana-Belese I and Arjo-Dedesa which are operational and Tana-Belese 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.
The state-owned Commercial Bank of Ethiopia (CBE) has long served as the primary domestic creditor of the sector.
Late last year, the ESC had asked for Birr 11.3 billion (US$219m) in loans from the CBE for rehabilitation works and servicing debts.
The sugar corporation is among the public enterprises slated to have their debt soaked up by the Liability & Asset Management Corporation established last year.