Ethiopia Military-Linked Group Seeks Asset Sales, Debt Write-Off
Ethiopia Military-Linked Group Seeks Asset Sales, Debt Write-Off
An Ethiopian military-linked conglomerate is valuing its assets ahead of the potential privatization of parts of the company while seeking to write off 70 billion birr ($2.4 billion) of debt.
Metals & Engineering Corp. hired valuers to assess its businesses operating in industries from hi-tech engineering to automotive, Brigadier General Ahmed Hamza, the director general, said in an interview. Soon, “we will know the value of METEC,” he said. “After that, we will go for privatization” or joint ventures.
The plan is part of a shift in economic strategy overseen by Prime Minister Abiy Ahmed, who has initiated the sale of sugar factories and mobile-phone licenses to help ease debt and boost foreign-exchange reserves. He’s also ended METEC’s control over several major infrastructure projects, many of which are overdue and over budget.
In common with many Ethiopian state-owned entities facing privatization, METEC is weighed down by debt guaranteed by the finance ministry with the government-owned Commercial Bank of Ethiopia. The company has also been at the center of alleged misappropriation of state funds.
Fund Misuse
METEC “pooled all different project funds into one basket,” Auditor General Gemechu Dubiso said in a separate interview. “They have used the funds for probably something different and they have ended up in this debt situation. The money they have received is a lot more than the work completed.”
The company’s 70-billion birr of borrowings is equivalent to 9% of Ethiopia’s $26.7 billion external debt recorded by the finance ministry in its latest debt bulletin. The International Monetary Fund classified Ethiopia at high risk of debt distress during Abiy’s first year in office.
METEC has asked the government to write-off the debt, Ahmed said, adding that the burden was putting off private companies from agreeing to joint ventures. About 17 billion birr of it, owed to the CBE, was intended to fund now canceled contracts for delayed and incomplete projects, including the Grand Ethiopian Renaissance Dam, a fertilizer complex, and three sugar factories.
Ethiopia may use some of the proceeds from part-privatizing state companies to pay off government-guaranteed debts issued by lenders, National Bank of Ethiopia Governor Yinager Dessie has said.
“We are not capable of paying,” said METEC’s Ahmed. “It has to be a write-off.”
To contact the reporter on this story: Nizar Manek in Nairobi at nmanek2@bloomberg.net
To contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net, John Bowker, Hilton Shone
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