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Cablegate: Privatization or Monopolization in Ethiopia?

VZCZCXRO9490
RR RUEHROV
DE RUEHDS #0082/01 0110727
ZNR UUUUU ZZH
R 110727Z JAN 08
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 9106
INFO RUCNIAD/IGAD COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 ADDIS ABABA 000082

SIPDIS

SIPDIS
DEPARTMENT FOR EEB/IFD/OIA - NHATCHER AND AF/EPS - AADLER

E.O. 12958: N/A
TAGS: EINV ETRD ECON EFIN ET

SUBJECT: PRIVATIZATION OR MONOPOLIZATION IN ETHIOPIA?

1. SUMMARY: An examination of available information on privatized
enterprises in Ethiopia shows that companies owned by, or affiliated
with, Ethio-Saudi billionaire Sheik Mohammed Al Amoudi have
purchased the vast majority (in terms of value) of enterprises.
Nearly every enterprise of significant monetary or strategic value
privatized since 1994 has passed from the ownership of the
Government of Ethiopia (GoE) to one of Al Amoudi's companies. While
the privatizations of these enterprises were for the most part
competitive tenders, the dominance of Al Amoudi brings into question
the true competitiveness of the process. END SUMMARY.

2. Privatization of state-owned enterprises began in 1994 when the
Ethiopian Privatization Agency (EPA) began disposing of businesses
either started by the GoE or seized during the Marxist Derg regime.
While complete data are lacking, an examination of EPA's website
along with press reports and other information provided by EPA
reveals a pattern of nearly all enterprises of significant value
being awarded to companies owned by, or associated with, Sheik
Mohammed Al Amoudi, an Ethio-Saudi billionaire and the world's 80th
wealthiest person. While the vast majority of enterprises in terms
of numbers-- 233 of 254 -- have been either sold to employees in a
Management/Employee Buyout (MEBO) arrangement or purchased by
individual Ethiopians, these are mostly small shops and hotels. In
dollar terms, nearly 60 percent of enterprises have been awarded to
Al Amoudi-related companies.

3. According to information provided in December by EPA, 254
enterprises have been privatized to date, 21 of which went to Al
Amoudi companies. EPA declined to give price information to post.
However, based on information up to 1999 provided on EPA's website
and press reports, price information was located for 19 of these,
with a total purchase price of 2.34 billion birr, or nearly USD 254
million at the current exchange rate of 9.2 birr per dollar.

4. EPA informed post in December that privatizations have garnered
the GoE over USD 460 million. Thus, the 19 Al Amoudi enterprises
with price data available account for approximately 55 percent of
total privatization revenues. Moreover, based on the price of
similar enterprises, the two businesses lacking price data, a hotel
and a meat packing plant can be estimated a 1.5 million birr or
about USD 157,000. Even without precise data, it is clear that Al
Amoudi has purchased the overwhelming bulk of value privatized thus
far.

5. The enterprises purchased by Al Amoudi are wide ranging and held
by a variety of companies affiliated with the Sheik. A list of
enterprises and USD values at 9.05 birr per dollar follows:
Purchased by Ethio-Leather Industry Company (ELICO)-
Universal Leather (USD 1.76 million)
Awash Tannery (USD 13.89 million)
Ethiopian Pickling (USD 3.86 million)

Purchased by Equatorial Business Group:
Dil Paint Factory (USD 3.80 million)

Purchased by Ethio-Coffee and Tea Plantation and Marketing:
Wush Wush and Gumaro Tea (USD 24.36 million)
Gojjam Gonder Agricultural Development (11.28 million)

Purchased by MIDROC:
Ras Hotel Debre Zeit (USD 946 thousand)
Ethiopian Meat Concentrate Factory (USD 3.99 million)
Dire Dawa Meat Factory (USD 5.1 million)
Kombolcha Meat Factory (USD 1.68 million)
Melgue Wondo Meat and Vegetable Factory (USD 6.77 million)
Poultry Development Enterprise (USD 6.77 million)
Live Stock Market (USD 8.13 million)
Cheffa Farm (USD 873 thousand)
Gonder Meat Factory (price unknown)

Purchased by Moha:
Pepsi Bottling (USD 11.45 million)

Awarded to National Mining (NMC):
Legedembi Gold Mine concession (USD 140.30 million)
Abijata Soda Ash Factory- 54% share (USD 3.59 million- estimated
from press reports)

Purchased by Star Technical:
Addis Ababa Gas and Plastic Crates Factory (USD 2.44 million)
Wanza Woodwork (USD 3.48 million)

Purchased by Zewd Village:
Awassa Wabe Shabelle Hotel #2 (price unknown)

Additionally, National Mining was initially awarded a concession for
the Kenticha Tantalum Mine at a price of USD 23.45 million. This
concession was later revoked because NMC failed to deliver a
scheduled payment. Currently, MIDROC is in negotiations with EPA to
purchase the National Tour Operation at an unknown price.

ADDIS ABAB 00000082 002 OF 002

6. COMMENT: While companies related to Sheik Al Amoudi have
purchased a small number of the total privatized entities, the Sheik
has cherry-picked the best of the companies sold to date. For
example, Legedembi is the only large scale gold mine in the country,
and Wush Wush is the sole plantation-style tea producer. There are
no overt indications of impropriety in the bidding process, and the
Sheik is likely the wealthiest entity to have a significant interest
in the Ethiopian economy. However, Al Amoudi is known to have close
ties to the ruling TPLF/EPRDF regime, and rumors persist of
favorable treatment. Regardless of these unproven accusations, the
Sheik's influence in the Ethiopian economy cannot be underestimated.
Post will continue to track privatization and monitor future awards
for any indications of a more inclusive process. END COMMENT.

© Scoop Media

 
 
 
 
 
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