The asset manager will also “quickly” increase the
number of drugs produced in Adigrat in the northern Tigray region to
150 from 90, Chief Information Officer Saad Aouad said in an interview.
54 Capital bought a 40.7 percent stake in APF last month and has an
option to invest a further $12 million to acquire 49 percent of the
company, which is co-owned by a conglomerate with ties to Ethiopia’s
ruling coalition.
“We are backing here the largest player in the country
with a very strong and motivated management team that we want to help,”
Aouad said Jan. 18 in the capital, Addis Ababa.
Ethiopia, sub-Saharan Africa’s second-most populous
nation with 97 million people, is forecast to be the continent’s
fastest-growing economy this year, after Mozambique, expanding an
estimated 8.1 percent, according to International Monetary Fund
estimates. APF, which mainly manufactures antibiotics and painkillers,
has revenue of 500 million birr ($24 million) and a share of about half
the locally produced pharmaceutical market, according to Aouad.
KKR, Geldof
Several foreign private-equity companies are active in
Ethiopia. Schulze Global Investment, based in Singapore, has a $100
million Ethiopia fund, London-based Duet Group and Vasari Global Ltd.
bought into Dashen Brewery in 2012 and Bob Geldof’s 8-Miles LLP fund has
a stake in a privatized winery. KKR & Co.,run by billionaires Henry
Kravis and George Roberts, bought a stake in Afriflora, an Ethiopian
flower farm, in 2014.
Since 2014, Africa-focused
54 Capital has made other Ethiopian investments worth $35 million,
including a soap factory, edible-oil plant, two pasta producers and a
dairy.
APF plans to increase existing capacity usage from 30
percent and start to produce injectable treatments, said Aouad.
Therapeutic medicines will be introduced, while 54 Capital is trying to
improve efficiency by centralizing some operations of its Ethiopian
businesses. The products will supply a market estimated at more than
$400 million that’s growing at 25 percent a year, the government said in
a July report.
Patchy Power
The largest challenge in Ethiopia is a worsening electricity supply caused primarily by patchy distribution, Aouad said.
“In one of the factories, we lost three weeks of
production because the fluctuation of power destroyed a component,” he
said. Sluggish bureaucracy and complex regulations that can mean a
three-month importing process are also a challenge, he said.
APF is a unit of the investment arm of the Endowment
Fund for the Rehabilitation of Tigray, which was founded in 1995 using
assets acquired during a 17-year rebellion against the central
government by the Tigray People’s Liberation Front.
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