Bloomberg News

Ethiopia Sale of State Assets Would Raise $7.6 Billion

January 11, 2012

(Corrects currency conversion in headline.)

Jan. 11 (Bloomberg) -- Ethiopia’s government would raise 132 billion birr ($7.6 billion) if it sold the country’s five biggest state-owned companies to private investors, Access Capital SC said.

The sale of Ethiopian Airlines Enterprises, sub-Saharan Africa’s second-biggest carrier, Ethiopian Shipping Lines, Ethio Telecom, the Ethiopian Insurance Corp. and Commercial Bank of Ethiopia would generate funds needed to finance infrastructure projects in the country, the Addis Ababa-based research company said in its annual economic report. Proceeds from 81 other public enterprises earmarked for sale by the government would raise more than $1.9 billion, it said Jan. 9.

“Ethiopia needs cash now and it makes perfect sense to liquidate the net worth held in long-accumulated assets for something as grand as ensuring a transformative change in the country’s economic history,” Access said.

A five-year growth plan unveiled by the government in 2010 calls for 569 billion birr to be invested in projects including roads, dams, sugar factories and railways by mid-2015. Privatization is necessary because Ethiopia doesn’t have the savings to finance the “needed, justified and on the whole appropriate” public spending, Access said. The sale of assets would also boost foreign investment in sub-Saharan Africa’s fourth-biggest economy, it said.

The government has no plans to sell its biggest state-owned companies, Communications Minister Bereket Simon said in a phone interview today from Addis Ababa.

‘Arms of Government’

“These are development arms of the government that definitely need to contribute to national development programs,” he said. “That is why the government wants to retain control.”

Privatization would also reduce inflationary pressures and “potentially dangerous external debt” that might result from the government’s need to borrow 422 billion birr, or 14 percent of annual gross domestic product, to finance investments, Access said. Ethiopia sold three state-owned breweries to international firms for $388 million last year.

Ethiopia’s annual inflation rate of 38.1 percent in June was the second-highest in the world last year, Access said. Prices surged partly as a result of a 10 billion-birr increase in central bank lending to the government, while external debt has also tripled in the past five years, it said.

Ethiopia will continue to see “rapid” economic expansion in “coming years” because of the benefits of public investment; transformations in small-holder and commercial agriculture; a “consumer goods revolution”; and the growth of exports including minerals and electricity, said Access.

The economy grew 7 percent to 8 percent annually in the five years to July 2010, according to the International Monetary Fund. Growth may slow to 5.5 percent this year, from 7.5 percent last year, before accelerating again to 6.5 percent in 2016, according to the IMF’s website.

--Editors: Paul Richardson, Karl Maier.

To contact the reporter on this story: William Davison in Addis Ababa via Nairobi at pmrichardson@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson in Nairobi at pmrichardson@bloomberg.net.


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