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Babile (mineral water) Private Once Again

Addis Fortune (Addis Ababa) March 20, 2007
By Issayas Mekuria

The Privatisation and Public Enterprises Supervisory Agency (PPESA) sold one if its two mineral water-producing factories, Babile Mineral Water to Petram PLC at a price of 6.5 million Br.

The agreement between the Agency and the company for the sale of the factory, located 526Km east of Addis in the Harari Regional State was signed last Tuesday, March 13, 2007.

PPESA's previous and repeated attempts to privatise Babile Mineral Water remained futile after interested buyers failed to show up for the tenders it floated.

In the latest tender, opened on January 18, 2007, that found closure to the privatisation woes of the company there were only two contenders, Petram and Ture PLC.

Though the financial figures that were offered by both participants were a far cry from the 10 million Br indicated price that the Agency put up, the management made a decision to accept the larger of the two, Petram's.

The Agency's Board of Directors was at first hesitant to accept the recommendation that was made to it by the management. It returned the recommendation on February 16, 2007, for the management to investigate and clarify the rules that would be applied under such circumstances.

"A directive stipulates that it is possible to sell to a company even if the price that they are offering is lower than the one indicates by the Agency," Wondafrash Assefa, Public Relations officer at the Agency told Fortune.

Babile Mineral Water is one of the two mineral water producing factories that are under the supervision of PPESA. The other, Ambo Mineral Water, which controls over 85pc of the mineral water market, has faced similar problems, being unable to find interested bidders for an international call for a joint venture that was put out by PPESA.

Crystal Mineral Water, produced by East African Bottling, is the only private sector competitor in the mineral water sector.

Italian investors established Babile Mineral Water Factory in 1953. At the time, the factory was also producing soft drinks called Mandarin, Arenchata, Lominat and Kinito until it was nationalized in 1975 by the Derg military regime.

Information from the Agency indicates that this factory, re-established 15 years ago with a subscribed capital of three million Birr, has a bigger market share in eastern Ethiopian towns like Harar, Dire Dawa, Jijiga as well as in eastern Oromia towns.

The factory gets its mineral water from Babile town, 30Km outside of Harar, and has a capacity to produce 13,500 bottles of water an hour. However, the company has never used more than 37pc of its production capacity.

General Manager of Petram, Abdulkarim Bedri, says the company will began expansion of the factory in July 2007 to increase the production capacity to between 250,000 and 500,000 bottles daily. The expansion that is projected to take six months is part of the company's plan to modernise in order to begin exporting.

Babile rests on 8,000sqm of land and has an additional 23,500sqm plot on concession. Its distribution centre in Dire Dawa rests on a 2,895sqm plot.

This company registered gross revenue of 7.7 million Br during the last Ethiopian fiscal year of which 527,572 Br was registered as its net profit.

Of the 6.5 million Br Petram offered, 50pc has been paid, according to the agreement signed with PPESA. The company has a year and a half to complete the remaining payment.

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