Public Enterprises Privatization Service Agency (PEPSA) failed to privatize none of the five enterprises it aimed to transfer during the first half of the current Ethiopian fiscal year.
The Agency planned to generate a total of 1.3 billion Birr during the six months, yet it only secured 398.4 million Birr profit from the 27 public enterprises it run under it.
The five companies that were intended to be privatized were Bahir Dar Textile S.C., Kombolcha Textile S.C., Agricultural Mechanization Services Enterprise, Crown Cork & Can Manufacturing Industry S.C and Bilito Siraro Farm. These firms failed to attract any bidder, Wondafrash Assefa, PEPSA’s communications head, explained.
Companies that approached the Agency to buy the enterprises were found to be financially incapable compared to the current status of these enterprises, Wondafrash added.
However a financial analyst at Inter-American Development Bank, Ezana Kebede, notes the methods followed by the Agency is one proven to be a sluggish The current bidding process might be practical for the government, considering Ethiopia does not have a stock market or the mechanism for Initial Public Offering, but the bid process only benefits few companies or individuals where as making these companies available as share companies would distribute wealth across the board, and help jumpstart a Stock Market in Ethiopia, said Ezana.
“The Government of Ethiopia needs to focus on establishing a Stock Market in order to facilitate impactful privatization,” suggests Ezana.
Wordafrash explained PEPSA has two ways of determining the prices of the enterprises. One is by the market value of the enterprise and the other is by asset evaluation. The former is based on the profitability of enterprises while the latter uses the enterprises asset value.
“We believe that our enterprises are profitable, so we determine their prices based on market evaluation,” said Wondafrash.
The agency has announced a bid for the transfer of three of the above mentioned enterprises whose opening will be made in March 5, 2015. PEPSA insisted companies to buy enterprise via negotiation schemes such as Bahir Dar S.C and Kombolcha Textile S.C, yet failed for lack of interest.
Source: Fortune
