Mr. Assefa, you are the one who passes public enterprises to the privatization agency for sale. On what bases do you choose and give priority to some public enterprises?
There are some policy guidelines, which define areas that are allowed for the private sector, and areas that are only allowed for public investment. This is one starting point. For example in our resident code, foreigners are not allowed to invest in the financial sector. Therefore, if for example, we think to privatize the financial sector, we can only think of local participation, because in this area the policy framework is not currently working on privatizing the financial sector to foreigners. The board chairman of the privatization agency, and the head of the public enterprises supervising authority select enterprises to be privatized. We have about 160-170 public enterprises in the portfolio now, and the only criterion that we use to select the enterprises to be privatized in the coming 2-3 years has basically something to do with the size of the enterprises. As I said it before, we cannot think to privatize the commercial bank of Ethiopia, because we believe there is not enough capital to buy it. We have also gear marked some trading houses, not because they are big or small, but because we believe if we privatize them now, we will create some vacuums in the market. As you know, the private sector is just in its infancy stage. Until we create sufficient competition, and sufficient local private capabilities to fill the gap, we will have to retain them for some years to come. These are basically the reasons, and there is no a thing in the portfolio, that we do not want to privatize. Some of these enterprises are big, while others are simple servicing companies. By privatizing them we believe we will not enhance competition, but in the opposite, distortion in the economy might be created. Some of them are not legal monopolies, but technically they just happen to be the only producers or service givers in certain areas. If we sell these to the private sector, we will only create an artificial monopoly that will lately create distortion. These are the general points that are considered, and even after having considered all, we may still have few enterprises that we do not want to privatize. Otherwise, we are preparing to privatize everything and close the public enterprises.
What have been the results of the privatization process so far? And in which sectors of the economy did you get the best results?
Actually, to talk about the performance will be a little bit early. It is about three years since we launched this program. Being a mean program, our approach was conscious in a sense, that we started by experimenting on the small units, so that even if we were to make mistakes the impacts will be localized, and we will have enough experience and exposure to the job. So far, we have started with retailing corporations, and we had a corporation with about 123 outlets all over the country. More or less, we have wind up this corporation. We have also privatized some hotels, and restaurants from some of our chains. Last year, we embarked on more serious entities, particularly in the food processing areas. We have put from 30-40 enterprises for sale. Our biggest sale has been the Legedembi Gold Mining, that we sold a year ago. Sector wise, it is limited to the sales, because we started with the smaller ones. We are basically dealing in retails, small processing plants, and gold mining. A year ago, we had detailed assessment, and we realized that there were things that we needed to improve. Therefore we hired consultants to assess the whole program. They turn with a lot of recommendations that would help to substantially improve performance, and paused the pess. We have more or less finalized our preparations, and we will start serious privatization, as of the coming July and August. We are committed to wind up the operation by June 2001.
Some of the public enterprises have been suffering some losses during the previous regime. How then, do you protect them under your supervision?
We do not actually protect them. Unlike many other countries, we had an extensive restructuring and rehabilitation program in the early days of the reform. Before we started with the privatization, originally we had a centrally organized set up where every operating unit had to report to the sector ministries. We had to break up that system, and instead of business units reporting to political institutions and government agencies, we created autonomous business units, that operate along purely on commercial line, and report to the board of directors instead of reporting to the government ministries. First, we restructured them in such a way that have public enterprises working along commercial lines, established according to the proclamation, and basically reporting to the board of directors. We had the Supervising Authority that monitors the performance of the enterprises as managed by the board. In the current structure, ministries have no access, and control over the business enterprises. Governmental owned enterprises are now operating on purely commercial lines, as their neighboring privately owned companies. This process took about 3-4 years, because we had also to restructure the enterprises as some of them were heavily scuffed. We had also to restructure the financial positions, because some of them were capitalized only on negative net. We did whatever we had to do, in terms of organizational definitions, legal definitions, and capital restructuring before the privatization. That means our enterprises had their chance to taste the challenges of competition, and free market economy before they were build up for privatization. Privatization came 4-5 years later, after the reform program. We are no longer talking, about those corporations that people initialized them from centralized contusions in other part of the world. We are rather talking about commercially oriented, and competitive enterprises that have proven their worthiness in the last six years. Most of them have been profitable.
What are going to be your main methods, to speed up the privatization process in the next phase of the privatization, that are going to start on June and July?
One important method, we are now introducing is in our operations. It seems, we are dealing with more retail units that never had their own legal existence, and their own legal actions. We were obliged to sell assets. Now, we are going to deal with full enterprises, that have their own legal identities and full balance sheets. Instead of dealing with public enterprises incorporated by proclamations, we are converting them into share companies. We need to reestablish them as private companies, then the privatization will be easier because we will not be dealing with inventories and stock counting. We will rather be dealing with balance sheets. Whoever wants to buy, will be talking about buying the equity, every other thing will be there, and the legal existence of the company will continue respective of who the owner is. We are introducing this important improvement, because it makes the implementation fast and clean. Additionally it helps to minimize the amount of money that people will need to pay to buy these enterprises. For instance, in the balance sheet it is safer to sell a company with a total asset worth of $ 100 million, that might be financed by $ 70 million of bank loans, and $ 30 million of capital. what we will be selling, will only be the $ 30 million capital that we owe, and the buyer who was obliged to pay $ 100 million in our previous modality, will only be required to pay $ 30 million. He will just have to pay a lower amount of money. We hope that, this will increase the participation of the private sector.
| Lately an increasing number of foreign companies have started to pay more attention to Ethiopia. It seems the stresses are been overcame step by step. In your opinion what should be done to make the country more visible, and attractive to the foreign business community?
Visibility as such is not something that can be fully reached by one country. Our invisibility is not predominately due from what we did or from what we fell to do, but it is from how people look generally at the region. Specially in the United States, there are a lot of people that do not know Africa is a continent of 40-50 countries. In most cases Africa is lapped into one picture. In some part of the world, black people are always thought to fight each other, and are always starved. This is not an image that can particularly be attributed to one country or another. I think, we will have to think in bigger scales, if we are to tackle this problem. With time, and with effect of communication technology, things will improve, and people might come to differentiate between war countries in Africa, and other African countries. We expect and hope that people would learn to differentiate among countries. It is only when this stage is reached, specially with investors, that individual efforts of African countries will make sense. I would still expect a long effort, and a long distance before we make sure that have achieved our part. We will have to work along the lines, that we have started. During the last 5-6 years foreign investors coming from the United States, Europe, and Asia have shown interest, and have come to visit the country. This should have a positive impact on some people. This gradual process, ultimately might probably change people perception. It might be the first time in this country to have a separate big institution dedicated to promote investment opportunities. We have an investment authority, and promotion has become everybody business now. The prime minister is being interviewed by a number of journalists. All this added have an impact. What I wanted to say is that, it is not a sort of process, that we can expect results immediately, but a long evolutionary process. Still, we have to work hard, but if we do not do something now we may remain in the darkness forever.
As a global question, with all your responsibilities how confident are you in the future of your country?
I would say I am as confident, as anybody can be about his country. I am very well aware about what these people can do, and about the potentiality of the general economy. The potential is there, but the unfortunate thing is that we never had the chance to try to convert these potentials. This has to do with the previous political systems, we have lost a lot of time in fighting with each other for about 30-40 years. In our entire history, we have been able to mobilize the attention, and the effort of the population towards one agenda, that is development. I hope and am confident, with what we can achieve. Definitely, it has been 3-4 years since we started the extension program in the agricultural sector, and there are some surplus producers. There might have been distortions in the distribution, and we might still ask for food. This is not because we did not produce enough, but because of the structural discrepancies in the distribution process. For the first time in our history, we were able to export surplus grain last year, and tried also to export this year but the prices went down. Therefore, we had to reverse them, into the local purchases of the NGOs. 90% of whatever food aid that come to Ethiopia is purchased domestically. It is no more being bought from the traditional surplus producers, and that is a big achievement. After 5-6 years we expect much more in our agricultural output. In our strategy, once you are solidly established in agriculture, that is the main stay of the economy, then it will be the spilling point for the industry and other sectors to follow.
As a more personal issue, could you give to our readers a brief background of your own professional experience?
By profession, I am an engineer. I was trained as mechanical engineer in the Addis Ababa University, and later on, I had the opportunity to go abroad and study for my MBA in London. I have served this government in different capacities. Now I am the chairman of the privatization agency, as well as the head of the public enterprises supervising authorities. I am forty six years old, and I have two children.
What have been the most pleasant things, and on the other hand the most uncomfortable aspects of your recent job on holding all these responsibilities?
The interesting thing of my job is its challenges. I never repeat one job, and every morning I always find new problems. The diversity, and variety of the problems that I deal with makes it very interesting, and one do not get bored. Today if we talk about banks, problems in the pattern sector, and in the 200 enterprises that we supervise, there are almost enterprises from all the sectors. We have small retail units, restaurants, wholesalers, the Airline, telecommunication, energy companies, etc.. We have everything from small to big, and in the spectrum you see, and we experience all sort of problems. Specially when I solve them and succeed, they give me a lot of satisfaction. On the other hand in situations like ours, we always operate within constraints situations. We have constraints in regard to the resources we can avail towards any projects. We have few constraints in the technical skills, in the amount and part of people that you can mobilize towards any program. The problems are every managers problems on earth. Problems I face here, are not different from the problems faced by any component manager in the United States, there are just small variances. However, the resources are tremendously different. First of all, I do not have the money. If I even get the money, I have to look for experts from different part of the world to help me solve the problems. Whereas, in the United States, they have developed capabilities in the country. There are not human resources limitations in that country. One frustrating thing, is we always get limited. The degree of success that can be attained is substantially limited by the resources that we start with.
As a final issue, what will be your final message to our readers?
I know what sort of image people have, when the name Africa is mentioned. I beg them to be patient, and to try to look what Africa can offer. Once they start looking into Africa, it will be our business to convince them, and show them that Ethiopia has a good starting point. I do not want them particularly to look for Ethiopia, but once they look into Africa, I am sure they will find out that Ethiopia will be the gateway and the starting point. |
Ethiopian Privatization Agency 