Legal issues have erupted related to the monopolization of the National Tobacco Enterprise (NTE) by private companies related to the full privatization process.
A couple of weeks ago the Ministry of Private Enterprises (MoPE), agreed to the second biggest deal in the country with Japan Tobacco International (JTI), to sell the remaining share of the government business of NTE at a cost of USD 434 million.
According to the deal the company took the remaining 30 percent of NTE which means that JTI owns over 70 percent of the tobacco company including a record 40 percent purchase a year ago at USD 510 million. The balance is managed by the Yemeni firm, Sheba Group, who initially joined the monopoly in 1999. Their share gradually increased to about 30 percent.
Wondafrash Assefa, Public Relations head of MoPE, told Capital that the company also took a ten year monopoly right on the privatization agreement which was signed some weeks back.
He said that the agreement stated that the monopoly right will be extended for a decade.
“It is a sensitive sector that has to be strictly controlled unlike other investments or privatization,” Wondafrash said. “It is not encouraged for other private actors to engage in the sector since it is a dangerous business,” he explained.
“The monopoly is given because it needs close follow up by the government,” he added.
Experts in the sector argued that the monopoly for the private actor is against the market economy policy and strategy adopted by the government.
Wondafrash defended this saying that there is a right to transfer an enterprise with the monopoly rights. When we sold to Sheba we talked with the board about the legality of the monopoly.
An expert at the Trade Competition and Consumers’ Protection Authority argued that the sector will be opened to other private actors since it is the issue of competition and consumer protection. “It shall be applied in a strict manner,” he argued.
Daniel Getnet, head of Dabe Investment and Consulting and Conveyance PLC, a legal consultancy firm for businesses mainly for FDIs’, told Capital that the issue will be settled by the constitution and depends on a proclamation amended by parliament.
“As far as I know there is not a law in the country that allows the right to monopolies besides the National Lottery,” the legal expert said.
In some cases there are compromises by the government for some sectors, according to experts.
“It is all about the interpretation issue. If it was necessary to give a monopoly right the constitution shall give a monopoly right for tobacco like national lotteries,” Dabe’s head said.
“There is also an antimonopoly law that prevents monopolization and anticompetitive activities by the companies,” Daniel said.
The investment law allows for a monopoly for locals and is open to the overseas actors but does not mention trading excluding some selected sectors that are monopolized by the government or the finance sector.
But he agreed that it is sensitive to allow many actors on the sector. “But previously an enterprise that the government has also share but currently it is fully privatized that may against the policy of the government,” experts added.
Proclamation no. 181/1999 ‘Transfer of the Monopoly Right of the National Tobacco Enterprise to the National Tobacco Enterprise (Ethiopia) Share Company’ issued when Sheba joined the sector in 1999 stated in its preamble that the National Tobacco Enterprise has been partially privatized and converted into a share company.
It added that it has become necessary to transfer the monopoly right of the National Tobacco Enterprise, as stipulated by its establishment proclamation, to the National Tobacco Enterprise (Ethiopia) Share Company. However, there is not an additional law that supports the full acquisition of the enterprise via private actors.
The enterprise has been given an exclusive right to produce, process, manufacture, distribute, import and export tobacco and tobacco products in Ethiopia. The enterprise also has tobacco farms at Shewa Robit, Hawassa, Bilatie and Wolaita.