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Completion of Preparation of the Reform Process of Ethio Telecom and Sugar Factories through Partial Privatization and Opening of the Sector for Competition

Completion of Preparation of the Reform Process of Ethio Telecom and Sugar Factories through Partial Privatization and Opening of the Sector for Competition

July 5, 2019: Addis Ababa, Ethiopia. The Ministry of Finance of the Federal Democratic Republic of Ethiopia provided updates regarding steps being taken to privatize ethio-telecom and the sugar processing factories. These measures come following the Government’s decision and announcement in October, 2018 to revitalize its privatization program.

Ethio-Telecom

The government has been assessing the privatization options in line with its intention of selling minority shares of the company. Privatization of the telecommunications sector will also facilitate Ethiopia’s push towards a digital economy by closing gaps in digital infrastructure. It will also enable the introduction and expansion of new technologies. Moreover, it is anticipated that improved quality, higher speed and expansive telecommunications infrastructure will play an important role in preparing the country for high tech industrialization. As the country develops its digital infrastructure new business opportunities are expected to emerge, creating jobs for the youth.  A priority for the government will be to prepare the youth for a fast-paced digital economy by developing training programs, through private sector participation, on opportunities through digital transformation.

Since the announcement of the State-owned Enterprise (SOE) reform program, the Government has set up a reform and privatization project management structure in the Ministry of Finance, whose focus is on improving SOE performance and accountability and encouraging greater private sector participation and inflow of private capital in to the economy. The reform of the telecommunications sector, the enactment of the Communications Services Proclamation, and a review of the privatization options for Ethio-telecom and opening the sector to competition have been a key focus of the Government’s SOE reform agenda.

To support the introduction of competition, Ethio-telecom, while vertical integration, is going to be structured into two operating divisions, an infrastructure division and a services division. The infrastructure division will be responsible for managing the international gateway, the national fiber optic backbone network and passive element of the access to network including cellular towers. The service division will be responsible for managing all cellular, retail internet and fixed line services. The structure will provide greater cost transparency, which will facilitate for Ethio-telecom negotiate fair and transparent open access contracts with new operators.

Underpinning the reforms and planned competition, the Government has strengthened the regulatory structure by enacting the Communications Service Proclamation which establishes a new independent telecom regulatory authority. Ethiopian Communications Authority (ECA) has the responsibility to administer, monitor and enforce the telecommunications regulations and issue licenses for existing and new operators. These reforms are attracting investment interest from international tier 1 telecom operators. Furthermore, the Government has determined that two new operators will be allowed to enter into the market and compete with Ethio-Telecom.

By taking these steps the Government is supporting increased competition in the sector. This is expected to improve and expand telecom services. Services will also be expanded to underserved areas in the country, which is in line with the Government’s goals of achieving universal coverage. Partial privatization of Ethio-Telecom and private investment in the expanded telecommunications market will also contribute to attracting foreign direct investment, support the country’s effort to improve ease of doing business and its wider economic reform agenda. Furthermore, it will generate revenues through license fees, taxes and dividends that will contribute to overall economic restructuring.

To ensure the success of the partial privatization process, the Government will adopt competitive process that is open and transparent and properly manages the due diligence and bidding process. The Government plans to complete partial privatization and awarding of licenses during the first quarter of 2020.

Sugar Corporation

To utilize the country’s resource potential for sugar production, the Ethiopian Sugar Corporation since 2010 has been working to increase its production through expansion of factories to meet the growing local demands as well as exporting sugar to regional and international markets.

To support this expansion program, the Ethiopian government is assessing restructuring options, including contracting out management and operations, public private partnerships and full or partial privatization for sugar factories currently owned by the Ethiopia Sugar Corporation. These reforms will strengthen management within the sugar sector, facilitate investment and the introduction of private sector capital as well as support export growth. In addition, the privatization of the sugar sector is also expected to expand business opportunities in areas such as animal feed, animal fattening, pulp and paper as well as alcohol production, among others.

To facilitate the privatization process of the sugar factories, the Ministry of Finance has been undertaking a valuation of the Corporation’s assets, conducting factory capacity assessments and carrying out environmental impact assessments on each factory. The Ministry is also working on a draft sugar proclamation-that will regulate market participation.

The Ministry has also sought Requests for Information Form (RFI) from interest parties and has gathered useful information from potential buyers. The RFI process has also enabled potential buyers to express their interests on the reform and privatization progresses process. The Ministry will announce bids that will be structured in an open, transparent and competitive manner. The Government expects the privatization of at least five to six of the sugar factories to be complete within 6 to 12 months.

 


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