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Raising domestic capital Print E-mail
Saturday, 04 October 2008
ImageBy Kaleyesus Bekele It is hard for Ethiopian entrepreneurs to raise long-term risk capital and this is a key constraint to stimulating their businesses. People who save money do not have sufficient opportunities to invest their funds locally for attractive returns. Almost all the problems boil down to dearth of financial resources. Since there is no stock exchange market, raising domestic capital is a challenging endeavour. With the view to raising domestic capital, Ermiyas Amelga, a businessman who had returned from the US, established Access Capital Services in 2006. Access Capital claims that it is an innovative company which supports economic growth in Ethiopia by helping dynamic Ethiopian businesses to raise funds and to widen the opportunities for investors. It seeks to encourage the growth of sustainable and productive businesses and economic infrastructure while achieving above-average returns for its shareholders. The company started operation in June 2007. It has 40 shareholders and has raised a capital of over ten million birr. The company believes that innovation is urgently needed to address the problems of lack of long-term capital for businesses and those of limited options for investors looking for appropriate investments. Access Capital wants to bridge the gulf between the owners of financial capital and those who can use it effectively to create and undertake productive enterprises. In this way, the company aims to benefit Ethiopian investors, entrepreneurs, workers and farmers. Access Capital plans to support the establishment and growth of business enterprises that can compete nationally, regionally and globally by making direct equity investments from its own account in companies with attractive potential for growth and profitability, and designing the best financing mix from debt and equity to finance growth. The company encourages other investors to co-invest in such businesses, including foreign investors into Ethiopia. Ethiopians living abroad are highly encouraged to invest in their home country. Last week Access Capital hosted a team of American investors, including a leading stockbroker and several hedge fund managers from Wall Street, New York who came Addis Ababa on a business trip to explore investment opportunities in Ethiopia. The private equity department of Access Capital makes investments into operational subsidiary companies. The company takes controlling stakes, “turn-around” the businesses and then manages them. This could include businesses that have run into trouble with banks and others. The company wants to set up and run new businesses for identified business opportunities. The Private Equity Transactions team sources new transactions and negotiates, structures, finances and does due diligence and other studies related to acquisitions, as well as executing the acquisitions. Process, systems and governance are key to the success of Private Equity Transactions. Access Capital is developing transaction models appropriate to local conditions, such as shortage of audited financial statements or other reliable information. The team screens a large number of investments to find a few interesting prospects, Access Capital’s first investments are thermoplastic, juice, bottled water, polytechnic bag and flour mill factories. Access Capital advises the 100 million birr share offer of Access Real Estate S.C. (ARE). It also continues to act as advisor to Zemen Bank S.C., which raised 140 million birr in equity during 2007 from a total of 2,700 shareholders. “Ethiopia has become an attractive country for investment. If you look at the world economy today you will realize that Ethiopia is a safe place to invest,” Ermiyas Amelga, president of Access said. “Recently, we have seen investors coming from the US, Middle East, London, Hong Kong and Singapore. Ethiopia’s export is growing at a rate of 25 percent, which is pretty impressive,” he added.
 
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