Ethiopia SWF eyes asset growth via sovereign stake sales
Ethiopian Investment Holdings (EIH), the country’s sovereign wealth fund, is preparing the sale of stakes in a number of the state enterprises it owns, to provide a pool for future investments.
“We have begun investments and are considering a range of opportunities,” Abdurahman Eid Tahir, who was appointed CEO of EIH in January, told AsianInvestor.
The fund is already conducting an active programme of allocations via existing cash and other liquid funds.
EIH
The fund was launched in December 2021 to serve as the strategic investment arm of the government of Ethiopia, Africa’s second-most populous country.
The combined value of its 24 investments, comprising state-owned companies and assets including Ethiopian Airlines Group and Commercial Bank of Ethiopia, is more than $150 billion.
Following its launch, representatives from the fund visited three sovereign funds in Africa, including Rwanda’s sovereign fund Agaciro, and three beyond – Singapore, Malaysia and France – to benchmark experience of other leading funds.
After a yearlong review of its existing holdings, EIH formulated a five-year investment plan earlier this year.
This will include divestment of portions of its portfolio to private investors, to produce cash for investment in other projects across key themes: agriculture, energy, manufacturing, real estate, life sciences and logistics.
The plan has not yet been approved by the board.
CASH RESERVES
Much of the fund’s current cash reserves comes from a $850 million sale by the government in 2021 of the country’s first telecoms licence, to a consortium led by Safaricom, the biggest operator in neighbouring Kenya, in the sector’s first auction.
Additional funds for deployment are likely to come soon. In February, the Ethiopian government announced it would sell a 45% stake of EIH-owed Ethio Telecom – an increase on the 40% it announced in November – and launched separate plan to issue a second full telecoms licence.
A crucial element of the divestment process will be the establishing of Ethiopia’s first security exchange, due to launch at the end of next year.
In October, EIH, which is driving the initiative, invited consultants to bid for a fundraising drive to raise capital for the new bourse.
In keeping with its plans for divestment of other state-owned companies, the EIH plans to retain 25% ownership of the exchange, with a further 25% to 55% ownership of the ESX reserved for corporations, capital market intermediaries and operators of international securities exchanges.
“Establishing a securities exchange in Ethiopia will be important for selling the stakes [in EIH-owned companies],” said Tahir.
EIH subsidiary companies, which collectively account for 34% of Ethiopia’s GDP, feature across a number of the country’s leading sectors.
They include logistics operators – including Ethiopian Shipping and Logistics Services besides Ethiopian Airlines Group – Ethiopia’s major utilities companies - including Ethiopian Electric Utility, Ethiopian Petroleum Supply Enterprise.
In financial services, besides Commercial Bank of Ethiopia, it owns Ethiopian Insurance Corporation. It also owns several leading players in real estate and construction, hospitality and manufacturing.
EARLY INVESTMENTS
EIH is already pursuing infrastructure projects at home and abroad.
The fund in February signed a joint development agreement for an undisclosed sum, with Masdar, a UAE-government owned renewable energy company based in Abu Dhabi, to develop two solar photovoltaic plants, with a combined capacity of up to 500 megawatts, in Ethiopia.
In November 2022, EIH secured 30% ownership of a new port facility in Djibouti, providing an important facility for land-locked Ethiopia.
The fund is also likely to play a role funding some of the $2.2 billion in investment required for Lemi National Cement Share Company Industrial Complex, a new private investment park, anchored by a number of massive cement factories, in the country’s Amhara region.
Work began on the complex in 2021 and is set to complete between 2026 and 2028.
In the real estate sector, the fund is likely to develop a number of direct investments, individually and alongside with investment partners, developing greenfield and brownfield sites across Ethiopia, but particularly in and around the capital Addis Ababa.
Among the EIH’s 24 subsidiaries are companies that own huge tracts of land in the capital and beyond, several retail and tourism sites in and around the capital have already been developed in recent years.