Ethiopian Investment Holdings (EIH) issued a press release yesterday on August 19, 2022, inviting both domestic and foreign private investors to submit Expressions of Interest (EOI) for the tendering of eight state-owned sugar enterprises for up to 100% ownership. This is in line with the state’s sugar sector reform program, whereby an increase in private sector participation is used to sustain rapid and inclusive economic growth.

As of May 2022, the Ethiopian Sugar Industry Group (ESIG) has 12 sugar enterprises with an annual total sugar production capacity of 450,000 MT. The eight that are being put up for purchase include Omo Kuraz 1, Omo Kuraz 2, Omo Kuraz 3, Omo Kuraz 5, Arjo Dedessa, Kessem, Tana Beles, and Tendaho sugar enterprises, which are newly constructed factories with built-in trunk infrastructure, abundant water, land resources, and excellent cane growing agro-climate conditions. The proposed transaction is aimed at improving competitiveness and increasing sugar production to meet the domestic demand.

 The local sugar consumption demand was estimated at 1.2 million tonnes in 2020/2021 against local sugar production of 340,000 tonnes, resulting in a deficit of 860,000 tonnes. The demand is expected to grow at a CAGR of 3% to reach 1.7 million tonnes by 2029/30. Besides, the acceleration of domestic sugar production will save Ethiopia millions of foreign exchanges. In 2020 alone, Ethiopia had imported $150million worth of white sugar.

According to EIH, increase in sugar production to cover Ethiopia’s demand is expected as the country has 1.4m hectares of untouched fertile and irrigable land for sugar cane development. The fertile soil and favorable climatic environment present an opportunity to cultivate 120 tonnes of sugarcane per hectare. 50% of the enterprises to be privatized have the capacity to produce 100,000-200,000 tonnes of sugar per year. Once all enterprises reach full capacity, they will have a total output of 2.7million tonnes of sugar.

Apart from sugar production, the enterprises produce ethanol and electricity for internal use and to supply to the national grid. The total electricity production capacity of the eight industries is projected to be 632MW. Exports are another aspect of this lucrative opportunity, as the combined sugar deficiency in Kenya, Somalia, Sudan, South Sudan, Dijibouti, the EU, and the Gulf countries gives investors a potential and addressable supply market of 11.46 million tonnes.

As per the press release, the Government of Ethiopia (GOE) has appointed Ernst and Young LLP as the lead transaction advisor to assist with the transaction process. A detailed description, timeline, and instruction in relation to the proposed opportunity are set out in the EOI available for download here, while the document providing comprehensive information about the sugar economy and the state of each sugar enterprise on tender, as publicized by the Ministry of Finance,  can be found here.

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