MIDROC Thrives at Privatisation Tender:
Al-Amoudi targets expansion of his companies’ presence in agricultural, mining sectors
By Elleni Araya | Addis Fortune
Companies under the umbrella of Mohammed International Development Research and Organisation Companies (MIDROC) Ethiopia and its affiliates appear to have thrived at the opening of a public tender to privatise close to eight state-owned firms, after they made offers to acquire more than half of the firms up for a sale.
The Privatisation & Public Enterprises Supervising Agency (PPESA) had offered Ethiopian Marble Enterprise; Coffee Processing & Warehouse Enterprise; Kality Metal Products Factory; Upper Awash Agro Industry Enterprise; Awash Winery SC; and Gojeb, Abobo, & Bilito Siraro farms up for privatisation through a public tender issued on January 9, 2012.
When the bid was opened on Thursday, February 23, 2012, MIDROC and its affiliates made an aggregate of 1.3 billion Br in offers to acquire five of the eight enterprises. MIDROC Ethiopia extended the highest offer of 860 million Br for Upper Awash Agro Industry Enterprise. It was the only offer that came for the enterprise.
The Enterprise is involved in the production and export of fresh and processed fruit and vegetables from its four farms located in Oromia and Afar regional states. Originally developed by a joint venture of domestic and foreign investors during the Emperor’s time, these farms lie on an aggregate land area of 7,049ht. It was nationalised in the late 1970s by the military regime.
Another subsidiary company of MIDROC that stood tall at the bid opening last week was National Mining Corporation (NMiC), managed since its foundation by Melaku Beza, a Russian-trained mining engineer. It offered 110 million Br, and an upfront payment settlement to acquire the Ethiopian Marble Enterprise (EME).
NMiC is not new to dealing with the Agency. It launched its operations in 1993, with a registered capital of 43 million Br, after acquiring Awash Marble Factory from the Agency for 45 million Br. The Factory had the capacity to produce 300,000tn of marble, limestone, and granite for export to the Middle East and Europe.
NMiC’s biggest prize came four years later, when it triumphed over a bidder from South Africa in acquiring the nation’s lone goldmine, Lega Dembi, in Shakiso Wereda, Borena Zone, Oromia Regional State, for 172 million dollars. With the government retaining a two per cent share, the goldmine was granted to NMiC as a concession for 20 years.
The concession coming to an end in five years, NMiC has positive prospects after its geologists discovered the largest gold reserves ever found in the country, in Tigray and Oromia regional states, two months ago. Managers of NMiC announced their plans to start production in three years, in hopes of raising total revenues of four billion dollars within 20 years of exploitation.
Its latest bid to acquire the Ethiopian Marble Enterprise, established by Italian investors in 1963 and nationalised in the late 1970s by the military regime, will bring it additional quarries located in Benishangul Gumuz and Harari regional states. The Enterprise has three branches in Nifas Silk, Bole, and Gulelle districts and made a gross profit of 3.3 million Br from its operations last year.
“There is a big gap between the demand and supply of marble in the country. We are trying to narrow this gap by further expanding our company,” Melaku Beza CEO of the corporation told Fortune. “Ethiopian Marble has a lot of resources that we can use,” Melaku Beza CEO of the corporation told Fortune.
Melaku also affirms that MIDROC is undergoing expansion plans, which explains its numerous bids that it had placed on Thursday.
“MIDROC is always on the move,” says Melaku, explaining that all its subsidiaries are undergoing expansion plans.
National Mining for example is considering opening a large marble factory, once it has finished conducting a feasibility study.
Two MIDROC-affiliated companies, largely owned by the Saudi tycoon Mohammed Hussein Ali Al-Amoudi, are Saudi Star Agricultural Plc and Horizon Plantations Plc. Both offered tens of millions of Birr to acquire state-owned plantations, last week, as well.
Saudi Star, incorporated in 2009 with a capital of 500 million Br, offered 90 million Br to acquire Abebo Farms, located in Gambella Regional State, with 3,000ht of land and a cotton processing plant with a 65,000sqm premises.
If it succeeds in its bid, it will add to Saudi Star’s already vast holdings in the regional state, where it currently holds 10,000ht of land in Alwero area, for growing rice. Saudi Star, now managed by Fikru Desalegn, former state minister of Capacity Building, has pledged to pay 45pc of the payment upfront and settle the balance within four years.
Horizon Plantations Ethiopia Plc, run by [ name removed by court order ], as a deputy to Al-Amoudi, was the lone bidder for two of the other enterprises that the Agency offered for sale.
Horizon Plantations, owned by Al-Amoudi and [ name removed by court order ], also a prominent edible oil importer, was established in 2008, with a registered capital of 190 million Br. It is not new in acquiring properties from the state, as it bought Bebeka Rubber Plantation, located in Southern and Gambella regional states. Its main farm stretches from Addis Abeba to Dukem and employees 5,000 with a resident population of 28,000. It also acquired a 60pc share in a tyre factory, Addis Matador, and has been granted 85,000ht of land in Bench Maji Zone for a, Southern regional state in February of 2011.
Horizon offered 35.1 million Br, last week, to buy Gojeb Agricultural Development, a private farm during the Emperor’s time, which grows maize, banana, and pineapple on 1,400ht of the 1,800ht of land it owns near the border between Oromia and Southern regional states.
Horizon Plantations is also interested in acquiring the Coffee Processing & Warehouse Enterprise from Agency, offering to pay 228.2 million Br, out of which half is pledged to be paid upfront and the balance to be settled within two years.
The deal, if successful, could put Horizon in a better position than the other bidder, Ambassel Trade Works Enterprise, which has made an offer of 135 million Br, proposing to pay the amount in five years.
However, the bids will have to go through a review process before winners are selected, according to Brehane Gebremadhin, the agency’s director and bid committee chairman.
“The bid committee will review both the technical and financial proposals, which all bidders have submitted, and shortlist winners to the board of directors,” said Brehane.
The Agency’s board is chaired by Tadelech Dalecho, former sate minister of Culture and Tourism (MoCT).
“It is true that MIDROC is undergoing an expansion plan, as it explained during the inauguration of Derba MIDROC Cement Factory,” [ name removed by court order ] told Fortune.
This is part of Al-Amoudi’s commitment to help achieve the Growth and Transformation Plan (GTP) in the shortest possible time, according to [ name removed by court order ].
“We bid on the Coffee Processing & Warehouse Enterprise from the Agency so that we could have our own sorting, preening, and polishing facility to produce export-standard coffee.”
The company has pledged to invest an additional half billion Br in Upper Awash, according to its technical proposal, [ name removed by court order ] revealed, speaking for MIDROC.
“We plan to use the farms to grow cash crops through irrigation,” he said.
It is a good expansion strategy that MIDROC is following if they manage to win the bids, according to Henock Assefa, consulting expert and managing director at Precise Consult International.
“Mining and agriculture are very profitable investments,” according to the expert. “You cannot go wrong with such investments, even if you have your eyes closed.”
Other bidders who appeared at the floor of the Agency, located on African Avenue, last week, were Ques Industrial SC, Morel Agro Industry Plc, and individual bidders, such as Mulugeta Tesfakiros and Tigist Deneke. They submitted offers for the acquisition of Kaliti Metal Factory, Bilito Siraro Farm Development, and Awash Winery SC, respectively.
Morell Agro Industry, a foreign company established in 2008, made an offer of six million Birr to buy Billito Siraro Farm in Oromia Regional State. The Farm harvests maize, haricot beans, and sunflower seeds on 3,270ht of land. The company has 10,000ht of land around the border of Somalia.
Mulugeta, who bought Langano Bekele Molla Hotel from the state for 80 million Br, in June 2011, after the original owners defaulted on a Commercial Bank of Ethiopia (CBE) loan, was seen last week bidding jointly with Tigist Deneke to acquire Awash Winery SC, offering 202 million Br.
The Winery, up for auction for the second time, has been in business since 1943, with brands such as Axumite, Guder, and Awash. It had been the lone operator in the domestic market up until competition knocked on its door, in the form of Castel Winery, a sister company of BGI Ethiopia, brewer of St George, Bati, and Castel beers.
The results of the current bid will be announced in less than a month’s time, according to Berhane.