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Habesha Cement applies for new loan

World Cement,

Ethiopia’s Habesha Cement has filed a loan application with PTA Bank, or Common Market for Eastern and Southern Africa (COMESA), following the withdrawal of financing from the Development Bank of Ethiopia (DBE) last month.

Habesha Cement has over 16 000 shareholders, generating Br.150 million when the IPOs were closed back in 2010, but was depending on a Br.1.5 billion loan from DBE to finance the bulk of the plant construction. The bank has recently withdrawn from this agreement, and instead proposed a new amount of just 30% of the original loan on the basis that Habesha must raise the remaining amount from outside financing.

At a shareholders meeting last month – held in a sports stadium to accommodate the numbers – the project promoters promised that Habesha would be able to secure the necessary funds. Shareholders were originally promised a return on investment of 122% per share within two years, but the plant remains in the project phase long after it was due to be operational.

Habesha Cement has hit a number of stumbling blocks in its financing since it was first proposed, and has been rescued each time up to now. It is now co-owned by Pretoria Portland Cement and Industrial Development Corporation and is looking into the potential of further financing from the IFC in addition to this new loan from COMESA.

Ethiopia’s current cement capacity stands at 9.4 million t – an enormous increase from 1.5 million t less than a decade ago. National Cement SC, Ethiopia’s first cement plant, has been upgraded and will be inaugurated in April this year, reportedly adding a further 3 million t to the domestic market. Other reports suggest that Derba Cement is slashing prices, putting smaller producers out of business. But Habesha’s management isn’t put off by the increase in capacity and reduction in prices: "We aren't scared," Mesfin, one of the project’s original promoters, told Fortune. "There will be a lot more demand from the market, requiring more factories to come to the scene."

Edited from various sources by Katherine Guenioui.

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