Ethiopia Mulls Fertilizer Plant Tender as Army Deal Reviewed

(Bloomberg) -- Ethiopia's government may cancel a contract for a fertilizer plant awarded to its military-industrial conglomerate and offer it to international tender, the Public Enterprises Ministry said.

The possible revision of the contract is the latest sign that Ethiopia's new prime minister is fulfilling a pledge to purge “favoritism” toward the security forces. The state awarded the Yayu project in Ethiopia's restive Oromia region to state-owned Metals & Engineering Corp six years ago, but since then less than half the work on the complex has been completed, ministry spokesman Wondefrash Assefa said.

“It may be that we will cancel the agreement and we will continue with another contractor, but the decision is not reached at this time,” he said by phone Friday from the capital, Addis Ababa. “It may be that others will participate including foreign companies.”

Prime Minister Abiy Ahmed came to office April 2, succeeding Hailemariam Desalegn, who quit as prime minister in February after failing to end protests in the Amhara and Oromia regions that began in 2015 amid demands for greater economic inclusivity. Abiy has vowed to ensure more even wealth distribution by reducing “favoritism” toward the security forces.

Moroccan Interest

Office Cherifien des Phosphates, a Morocco-based fertilizer producer, may be among companies that could be considered to take over the project, Wondefrash said. OCP has an interest “to produce fertilizer but we've not reached a conclusion on this issue,” he said.

Craig Atherfold, a spokesman for OCP, said he passed a request for comment to a colleague.

Metec is run by the Ethiopian military, one of Africa's largest armies, and has been involved in projects including the $6.4 billion Grand Ethiopian Renaissance Dam and a series of sugar developments. Officers connected with the rebel movement that overthrew Ethiopia's junta in 1991 have dominated senior government positions for the past quarter century.

“The security forces have to be freed from any type of favoritism and serve the people according to the constitution,” Abiy said in a speech broadcast on state television.

Project Cost

Metec had said in 2012 that the Yayu project would cost 11 billion birr ($400 million) and take two years to complete, according to a statement published on the Facebook page of the Oromia regional government in February. The company has since asked for an additional 20 billion birr to complete, it said.

The Public Enterprises Ministry is awaiting the outcome of a parliamentary review on the Yayu matter after it submitted a report to parliament and “the appropriate government bodies” last month, Wondefrash said. “The office of the prime minister already knows about our report.”

Prior to stepping down in February, Hailemariam appointed his deputy, Demeke Mekonnen, who is also Abiy's deputy, as chairman of Metec. Abiy earlier this month appointed Bekele Bulado, a civilian who was previously a minister for trade, as the new director-general of Metec, replacing Major-General Kinfe Dagnew, who tendered his resignation ahead of an April 19 cabinet reshuffle.

The Yayu fertilizer complex has been “obviously delayed,” said Fekadu Dame, chief executive officer of the state-run Chemicals Corp., which oversees chemical-related projects in Ethiopia. “Now the issue is presented to the government through our ministry for public enterprise,” Fekadu said by text message, declining to comment further.

Metec Marketing and Sales Director Colonel Shegaw Mulugeta and Metec's head of public relations, Michael Desta, each didn't respond to two calls and two text messages seeking comment.

To contact the reporter on this story: Nizar Manek in Addis Ababa at nmanek2@bloomberg.net.

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Liezel Hill

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