Sweet boost to Indian business in Africa

June 30th, 2009 - 2:34 pm ICT by IANS  

By Groum Abate
Addis Ababa, June 30 (IANS) India may be slow off the block to procure business opportunities in Africa but its foray received a sweet boost after its flagship sugar factory project in Ethiopia got its first loan disbursement following settlement of a two-year dispute between two Indian contractors.

The Export and Import (EXIM) Bank of India has finally released the first phase funding for the construction of Tendaho sugar factory following settlement of a row between two Indian companies.

Officials at the Ethiopian Sugar Development Agency and Tendaho Sugar Factory sent a letter to the bank a few weeks ago, insisting disbursement of the first phase of funding, citing a resolution to the disagreement, Ethiopian prime minister’s advisor on basin affairs and board chairman of the project Shiferaw Jarso told IANS.

The bank disbursed the first phase last week and the companies are now operating at their full capacity, he said.

India had accepted Ethiopia’s project proposal and offered a $640 million soft loan for two expansion projects at Fincha and Wonji sugar factories (in central Ethiopia) and to construct the giant new factory at Tendaho in Afar regional state in northeastern state. This was the largest single line of credit India has extended to a foreign country.

The EXIM bank was then appointed to execute the loan disbursement for Ethiopia in October 2007.

The first instalment of $122 million was disbursed in 2008 and the second instalment amounting $166.33 million was disbursed two months ago. However, the bank halted Tendaho’s share from the two instalments due to the dispute between the South Asian contractors.

The Ethiopian government had awarded the engineering, procurement and construction (EPC) contract of the country’s biggest sugar factory to Overseas Infrastructure Alliance (OIA), an Indian company. The contract stipulated that OIA had to hire other Indian companies.

The company contracted two Indian companies, IJAC for steam generation and Uttam Sucrotech for processing house installations. But Uttam was not happy about OIA’s role in the project and raised questions about the EPC tender process. The dispute reached the Bombay High Court, which led EXIM bank to halt the release of funds.

Now, the companies have settled their differences, prompting the bank to transfer Tendaho’s share from the first instalment. It is learnt that the Ethiopian government had expressed its annoyance over the lingering dispute, which had led to the intervention of the Indian government to settle the matter.

According to the two governments’ agreement, the bank will disburse the total loan of $640 million within a five year period starting from 2007. In line with this, the EXIM bank is to disburse $213.33 million, $91 million and $47 million in 2009-10, 2010-11 and 2011-12, respectively.

At the end of disbursement period Tendaho will receive an aggregate of $367 million, out of the total amount, which would make it the biggest sugar factory with a capacity of producing 600,000 tonnes of sugar and 55 million litres of ethanol per year.

The remaining amount will be for the expansion projects at Fincha and Wonji-Shoa sugar factories; the total share of Fincha will be $132 million leaving the balance worth $141 million to Wonji-Shoa.

(Groum Abate can be contacted at groumabate@gmail.com)

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