Former Ethiopian Army Chief now in Brewery Business

Tsadkan G. Tinsae, Selome Tadesse and Eyessuswork Zafu
Former Army Chief Leads Northern Brewery Venture

Tsadkan G. Tinsae, former chief of staff of the Ethiopian Army, is now leading a group of businesspeople in establishing what would be the first brewery to be installed in the northern part of the country, Alamata Wereda, 600km north of Addis Abeba.

Raya Brewery SC, named after a northern town where Tsadkan spent his early school years, was incorporated on April 1, 2010, with a registered capital of 2.3 million Br, raised by 58 founding shareholders.

Tsadkan is one of the most prominent individuals in this group. He is a veteran military commander of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) forces during the period of the armed struggle and one of them to lead these forces when his movement took over the capital from the military government, 19 years ago this month.

He subsequently played a key role in recreating the military institution following the complete collapse of the nation’s defence forces, whose institutional history dates back to Emperor Haileselassie I’s early reign. He was also promoted to the rank of Lieutenant General and became the first chief of staff of the army during the first 10 years of the current administration. He rose to national eminence during the Ethiopian war against Eritrea in the late 1990s, where he was credited for his military leadership and strategic intelligence.

Following the interparty crisis that rocked the ruling EPRDF immediately after the war with Eritrea, he left the Defence Forces. Tsadkan retired from the military and joined Elliot School of International Affairs in Washington D.C. from where he obtained his postgraduate degree in International Policy and Practice.

Upon his return, Tsadkan cofounded the Centre for Policy Research and Dialogue (CPRD), a research institution working on areas of peace, stability, good governance, and economic development in the Horn of Africa, together with his long-time comrade, Yemane Kidane, a.k.a. Jamaica, and Medhane Tadesse. He has been running the centre, which consults the World Bank’s programmes in Southern Sudan, as the chief executive officer.

Yemane, former chief of staff at the Ministry of Foreign Affairs (MoFA) and also former rebel leader, is one of the founding shareholders. The list also comprises other prominent figures, such as Selome Tadesse, former general manager of the Ethiopian Television and Radio Enterprise but largely known by the public for her role as the government spokesperson during the war with Eritrea. After her departure from government, she has been providing leadership courses in Africa and Asia, hired by the British Council. Eyessuswork Zafu, a known businessman and president of the Ethiopian Chamber of Commerce and Sectoral Association, is another figure onboard Raya’s project.

These individuals formed a group who joined in the effort to establish a brewery in Alamata later, according to sources. They took the project over from a group of Ethiopians who returned from North America, about a year and a half ago, with a business plan to erect a brewery there. One of these men was Michael G. Mariam, who still sits on the board of eight directors, where Tsadkan serves as the chairman and Eyessuswork his deputy. Others included in the list of the board of directors are Sisay Tesfaye, Gizaw Zergaw, and Abeba Tasew.

This group of businesspeople secured a 150,000sqm plot of land from Tigray Regional State.

They have plans to float 250,000 shares to members of the public, targeting to raise 250 million Br. They will officially launch their marketing drive, to be held in the town of Maichew, a small town in southern Tigray, on May 8, 2010, in the scheduled presence of the chief of the regional state, according to company sources.

Raya Brewery will then join the equity market where there are close to 30 sprouting projects competing to raise investment funds from members of the public.

One such competing project is Habesha Brewery, which secured 50,000sqm of land, through lease, near the town of Debre Brehan, 130km north of Addis Abeba. Known for its aggressive marketing drive, Habesha Brewery has so far raised close to 120 million Br, according to Eskinder Desta, general manager of Habesha Capital Services, the main promoter of the project.

Although financed fully with private capital, a brand new brewery is also under construction in Quiha, 15km from Mekelle, which lent its name to the beer’s brand. It is to be erected on a 50ht plot of land was granted to Tadelle Abraha, a businessman involved in the export of coffee for the brewery.

The most dominant in Ethiopia’s brewery industry, BGI Ethiopia, also has expansion plans, with a desire to erect a brewery in Hawassa (Awassa), where the Southern Nations, Nationalities, and Peoples (SNNP) Regional Government has already granted seven hectares of land for the project.

The brewery industry has space for more to come, according to industry analysts.

Ethiopia’s per capita consumption of beer (four litres) is much lower than that of Kenya’s (22 litres) and South Africa’s (58 litres). There is also an uneven distribution of the existing plants, many of which are state owned, with 40pc of concentrated in and around Addis Abeba.

All the breweries currently operating have an annual manufacturing capacity of 3.4 million hectolitres, although half of this amount is covered by BGI Ethiopia from its plants in Addis Abeba (St. George) and Bati, in Amhara Regional State.

Others breweries, Dashen, near the town of Gonder; Harar; Meta Abo, near Addis Abeba; and Bedele, near Jimma, are known to produce at their full capacities and sell everything, revealing that there is an unmet demand for beer.

Demand for beer is projected to increase by 11pc annually, according to the prospectus of Habesha Brewery; the study conducted by BGI Ethiopia takes the figure to as much as 24pc.

All this promise that the industry holds was one of the forces that brought together the founding members of Raya Brewery. They held a series of meetings preceding the company’s incorporation few weeks ago, including the first one which was conducted at the Sheraton Addis a few months back, according to company sources.

They all seem to agree that the availability of water in the area, land secured for free, and increasing demand for beer in the northern market as well as the proximity to the port for future export markets are comparative advantages of Maichew as an ideal location to erect a plant.

“We have a reliable water resource of high quality that springs mainly from Mount Bekura, eight to 10km away from Maichew,” Tesfaye G. Medhin, project manager of Raya Brewery SC, told Fortune.

Although Raya is where Tsadkan spent his boyhood and struggled in the fight against the military regime, describing his current involvement there as “a logical extension,” the viability of the business is the most important factor, Tsadkan told Fortune.

There exists a significant volume of water downstream, currently used by local farmers for small-scale irrigation, according to Gebremichael Gebrekristos, a hydrologist at the Water Resource Bureau of the regional state. He spends much of his time supervising research projects in the area. When he was interviewed, Gebremichael was in Raya.

“The potential for underground water is enormous,” he told Fortune.

Taking advantage of the anticipated water volume, Raya plans to have a brewery plant with an annual production capacity of 300,000 hectolitres, when operations commence.

“Investment capital goes to where the environment is suitable and the returns are good,” Eyesuswork told Fortune.

Promoters of Raya promise prospective shareholders an annual return on investment of 20pc. The competition, Habesha Brewery, promises a 34pc return on investment (RoI), and the promised recovery period on investment is one year shorter than the four years that promoters of Raya pledge to their prospective buyers. They will also charge five per cent as promoters’ fee, one percentage point cheaper than that of Habesha’s and the lowest so far seen in the share market.

They will soon start selling shares to the public, promoters of Raya Brewery say, with a par value of 1,000 Br and a minimum number of shares to be sold at five with no set maximum limit. Sales of shares will remain open for eight months from the date of opening, expected to start next week. They plan to raise 40pc of the investment capital from the public and the remaining from loans obtained in the banking sector, Tsadkan told Fortune.

By Mikias Sebsibe, Fortune