There is no doubt that the Ethiopian Privatization Agency is essential for the development of Ethiopia. Could you give to our readers a brief historical background of your agency?
During the previous regime, enterprises were completely owned by the government. All of them were functioning under the umbrella of corporations, because of the central planned economy. When the present government took power, we started installing the market economy. The first step taken was to dissolve those 10 big corporations, and form a number of enterprises out of them. As a result, over 200 enterprises were formed. Each enterprise was allowed to function as an autonomous company, with its own board of directors, interested in the task of overseeing the operation of the enterprises. Some sort of autonomy was given to the enterprises, and they started to function under the market economy. In a way, we were doing some kind of commercialization. After this step was fulfilled, the next step was to privatize them. For that purpose, it became necessary to establish the Ethiopian Privatization Agency. Therefore, the Agency was established by proclamation in February 1994. For about a year after its establishment , we were engaged in organizing the Agency, and attempting to bring in the necessary professional logistics. Finally, we started the privatization process a year later in 1995. Now, it has been about 4 years, since we started privatization.
What have been the results so far, in the different sectors of the economy?
We have succeeded in the initial phase of the privatization program. During the 4 years of privatization, we have succeeded in divesting some 178 units. Of course, this includes about 127 or 128 small businesses, which were largely engaged in real trade business. These were super market with big stores, and fourteen of the enterprises of medium size. We divested those intentionally, and we took it as a strategy. In the economic policy, that the government adopted at the end of 1991, one of the priorities set was to disengage the government from doing small business. We then started with the small businesses in order to comply with the new economic policy. The government is now virtually out of these small business ownership. The other purpose of starting with the small businesses was to learn something about privatization, as we started the program on our own, and did not bring any expertise to help us. We just wanted to know it by ourselves, and it was a nice experience. We thought if we made mistakes with the small businesses, they will definitely be minimal. I think in both cases, that is in disengaging the government from small business ownership, and in gaining experience, we did succeed. After that, we gradually came to medium enterprises, and succeeded in divesting some 38 units so far. We were careful in the selection of these enterprises. We tried to select from the pro- section of all sectors, in order to provide wide choice to investors. We also tried to select those enterprises at least with sound business performance. Our intention was to see the program succeed, and we just wanted to offer the attractive enterprises. It worked out well.
What are the main criteria to submit an enterprise for privatization?
Generally, it is not the Ethiopian Privatization Agency that selects the enterprises to be divested. the selection is done at top government level, meaning the enterprises are selected there, and the list is transmitted to us. It is the Supervising Authority or the Public owned enterprises that present their proposal to a secretariat. The secretary will then decide which enterprises are going to be privatized, and which enterprises are to be retained by the government. Actually, we have been given a long list of enterprises that are going to be privatized over the coming three years. To be more precise, we were given a list of 115 enterprises, from which 109 are still remaining. The rest are already divested. The enterprises that are going to be privatized are already selected, and are in our hands. These are generally enterprises which are not strategic. The strategic enterprises, like the financial sector that includes banks and insurance are still state owned. They are not open to foreign investors, and are still in the hand of the government. However, the non strategic enterprises are all transmitted to us, and are in our programs to be privatized.
Are there already plans for the strategic enterprises?
There is no any plan in the foreseeable future, but that does not mean they will permanently remain owned by the state. When the time will come, the government will decide on that. For the time being, I think we have enough work to do, and we will continue to work on that. The government until recently had not opened the telecommunication and power generation to the private sector. Now, it is open for the private foreign and local investors. There could be a tendency to also open up the other sectors as well in the future.
Calub Gas has been offered for privatization. However, 2/3 of the projects approved are located in the region of Addis Ababa. Don't you think there could be a risk of imbalances in the whole country?
Concerning imbalances, the policy of the previous government is to be blamed. We can not help it because they are already installed. Eventhough, I am not sure whether 2/3 of the approved enterprises are located in Addis, there could be some errors in the programs. Living the small enterprises aside, we have privatized some 38 bigger enterprises so far. Out of these enterprises, around 45% are out of Addis and found in the various regions. As I mentioned it earlier, we have still 109 enterprises to be privatized. Around 45% of these enterprises are in Addis, whereas some are found in Addis and in the regions at the same time. For instance we can take the construction sector, which is building roads, dames, and buildings. They are doing these works outside Addis, even if their head office is in Addis. They are employing workers from various regions. Water roil, and drilling enterprises are also operating outside Addis even if, they are located in Addis. Therefore, although they are located here in Addis, their activities are outside, in various regions. If we take this into consideration, we might say half of the enterprises are in and around Addis Ababa, while the rest are located outside Addis Ababa. This is a situation, we inherited from the previous regime, and there is nothing we can do about it. As far as the present government is concerned, this issue is properly addressed in our investment code. Attractive incentives are offered for investors, who invest outside Addis Ababa, and other major cities. Specially, for those who invest in the remote areas, the incentives are quite attractive. This is one of the steps that the government took to minimize the imbalance that we are facing.
What are the main measures, that privatization agency is using in order to speed up the privatization process?
We are very eager to speed up the privatization process, and we are very committed to our objectives. We are also very much concerned about its speed. About a year ago, we had a kind of workshop, where we invited a cross section of this society, to allow them to comment, and express their opinion about the privatization program that we are running in this country. We invited scholars from the universities, consultants from the cities, local leaders, businessmen, investors, and potential investors. Some of them commented that we were slow, while others said we were fast. There were all sort of opinions, and very good comments. We also got a number of recommendations, and using this we invited the consultants to address the issues. We were able to handle some of the comments internally, but those which require measure decisions were presented to the government, where they were studied carefully. For those which require further study, we invited foreign consultants to study and give their own recommendations. | We were assisted by the World Bank, which provides us around $500 000. With that fund, we engaged consultants, so that they could study the whole privatization program. The aim was to speed up the process, and as in one of the recommendations, it was to strengthen the capacity of the Agency. Another recommendation was to promulgate a new privatization law. They suggested some financing mechanism for the enterprises that were selling. They also developed some strategies, on how to go ahead with the privatization process. They identified the moralities that need to be followed. All these were done to accelerate the privatization program. Currently we are in the process of implementing the recommendations. We have restructured the Agency. At the same time it was recommended that, the work of the Agency is enormous and that we needed assistance in some of the works and services. We are now assisted for some of our works by consultants, and they are helping us in preparing the enterprises for privatization.
Will the stock exchange help in your activities?
I do not think stock exchange will help in the privatization program. As you know it will take some time to establish a stock exchange, and to develop it. We have a three years privatization program, and I do not think we will be able to have a well functioning stock exchange system within this three years. however, we can have it in our country, we just have to think of stock exchange as a macro level, and not for the privatization purpose.
Our readers are always interested in new business opportunities. As the General Manager of the Ethiopian Privatization Agency could you mention some big privatization opportunities?
There are consultants who are helping us in preparing the enterprises for sale. They are working with us. In about a week time, two more consultants will be brought in. These consultants are auditing the enterprises, re-valuing their assets, restructuring the balance sheets, and converting the enterprises into share companies. So far we have been selling the asset, because they were not organized as share companies. Consultants also prepare the documents for the conversion of these enterprises into share companies. They also determine the per values of the shares, from the total capital. With all these works done, preparation of the enterprises for privatization will be completed. Now there are about some 28 enterprises that are being prepared in this manner. This task will probably be completed by the end of April, and as in the middle of May, we will start floating shares. This will include five companies from the food sector, four priories, four textile meals, four garment factories, four tanneries, one engineering industry, three tea plantations, and one coffee plantation. Hopefully, they will be forwarded for sale by the middle of May. Another group of consultants will be engaged in another group of enterprises in the same manner. That preparation will be completed in August and we will repeat again the same process. The enterprises will include some big state farms, construction enterprises, mining enterprises, and many other manufacturing enterprises. For instance Calub Gas will be included, as we have already started it, and there are some investors who are offering some proposals. we will not wait too long, probably on June Calub Gas will be privatized.
Lately an increasing number of foreign companies are starting to pay more attention to Ethiopia. In your opinion, what should be done to make the country more visible and attractive for the foreign business community?
That is a very important question. Attracting foreign investors is a challenging task, and I think we have to work hard. For instance, we need to substantially promote our investment opportunities. We need to do lot of promotions. We will have to work hard, in order to compete with a number of other countries. In fact, most of them are well ahead from us, because they started much earlier. We are new entrants, and that makes it very challenging. We have to promote our investment opportunities, in the privatization area as well as in the green pilled area. As far as privatization Agency is concerned, we are currently developing a promotion program. Previously, we did not even have public relations office, but it has recently been established. We also are have some technical assistance from Germany. Some specialists will be coming soon. With their assistance, we are tending to do some substantial amount of promotional work. The other aspect, to attract investors could be to initially offer some of the attractive enterprises like the telecommunication that is open now for the private sector, the power generation and the enterprises that I mentioned earlier (e.g. the tanneries). Many investors are contacting us to offer their proposals. Besides, we have done our best to make our investments law as attractive as possible to foreign investors, and we are continuously reviewing our tax system.
As a more global question, how confident are you in the future of Ethiopia?
I am confident in the future of my country, because we are having the right leadership that issues the right policies, and pursuing them vigorously. I think, this is very important for the development of a country. We have also political stability in this country, that plays its role in the development of our economy. With all sorts of programs that the government has undertaken, I think we will achieve a remarkable progress within a short time. Already, you might have noted our progress in the last seven years. The economy has performed very well, and we have an average of GDP growth of around 6.4%. This is a sign that the country will develop in the near future.
Could you give me a brief background of your own professional experience?
I came to the Ethiopian Privatization Agency, when the proclamation establishing the Agency was issued. I am the one, who organized and brought it to its actual level, with the assistance of the government. I was educated here at the Addis Ababa University, and graduated in business administration with a bachelor degree. Then, I joined the Ethiopian Tourism Commission. Afterwards, I worked for 20 years in Ethiopian Road Authority. In between I went to the United States for higher education, and I did my masters program at Virginia polytechnic institute.
Could you tell to our readers your most personal satisfying achievement, since you are the General manager of the Privatization Agency?
I can not say I have done a lot so far. My personal satisfaction is that we have established the Ethiopian Privatization Agency, and I am satisfied to see it operating as one of the government organs. My great satisfaction will be, when I complete the task of privatizing these enterprises. Even if, at the end I might find myself deprived from work, I am willing to take the risk.
What will be your final message to our readers?
I have a brief message to your readers. Ethiopia is a big country, with immense investment opportunities in the agricultural, tourism, mining, construction, and many others. It is also a country with a population of 60 million people, with by itself is a big country. Ethiopia is located near the middle East and the Europe market, and we have a skilled discipline. Additionally, I would say our labour force is cost effective. I would then ask foreigners to come to Ethiopia, see for themselves, and invest in our country. |
Ethiopian Privatization Agency 