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Ethiopian Military-Run Corporation Seeks More Foreign Partners

Metals & Engineering Corp., an Ethiopian military-run corporation, said it plans to partner with more foreign companies as it spearheads a government-drive to develop industries in Africa’s second-most populous nation.

METEC, as it’s known, is already working with companies including Alstom SA, Europe’s second-largest power-equipment maker, U.S.-based solar-panel manufacturer Spire Corp. and China Poly Group Corp. on engineering and manufacturing projects. Some of the company’s budding industries, like vehicle-assembly and engineering businesses, may generate more than 20 billion birr ($1.1 billion) of revenue a year, spokesman Michael Desta said in an interview.

“We’re doing this in collaboration” with foreign companies, he said on Feb. 15 in the capital, Addis Ababa. “We want to learn from them.”

Ethiopia is using one of Africa’s largest armies to help develop an economy that grew an average 8.7 over the past five years, according to the International Monetary Fund. The country operates a state-led development model that targets public and private investment in value-adding industries in order to diversify an economy in which agriculture accounts for 46 percent of total output.

The government is in the midst of a five-year plan in which it’s spending 569 billion birr until 2015 on projects including the $5 billion Grand Ethiopian Renaissance Dam, which would be the site of Africa’s biggest hydropower plant.

Military Efficiency

“The military happens to be relatively efficient, disciplined and well-organized to be entrusted with such grand projects,” said Merkeb Negash, a lecturer in political science and international relations at the Department of Governance and Development Studies at Jimma University in Ethiopia.

Ethiopia’s armed forces numbered about 200,000 in November 2011, making it one of the biggest on the continent, according to the website of Global Security, the Washington-based research company. Officers connected with the rebel movement that overthrew the country’s military regime in 1991 dominate senior positions in the government, it said.

Former Prime Minister Meles Zenawi, who ruled Ethiopia for 21 years before he died in August, may have created METEC to give the military a “stake” in the economy, said Merkeb. “Now the military will always defend the system whatsoever,” he said in an e-mailed response to questions on Feb. 6.

Grand Renaissance

The Ethiopian Electric Power Corp. contracted METEC to build the electro-mechanical works for the $5 billion Grand Ethiopian Renaissance Dam on the Blue Nile River in partnership with Alstom. The Paris-based company will provide eight turbines and generators for 250 million euros ($333 million) to METEC and commission the plant.

METEC is also building the 50 billion-birr Coal Phosphate Fertilizer Complex Project in Illubabor Zone of Oromia Region for the Privatization and Public Enterprises Supervising Agency, and is the main contractor for the Sugar Corp., a government enterprise that’s building 10 cane plantations and processors nationwide at a cost of about $5 billion, Michael said. The fertilizer project will be transferred to the newly formed Chemical Industry Corp. when it’s finished, he said.

The organization is involved in “priority areas and import-substitution,” Deputy Prime Minister Debretsion Gebremichael, who is responsible for economic coordination, said in a Jan. 23 interview. “They cannot do it by their own so they look for partners, international as well as local. They’re bringing many actors to the picture but at the heart of everything it’s METEC.”

Vehicle Manufacturing

METEC was established in June 2010 with 10 billion birr of capital by grouping nine businesses previously owned by the Defense Ministry, including Dejen Aviation Industry and Gafat Armament Industry, Michael said. Six other industries, including plastic, tractor and vehicle spare-parts manufacturers, were transferred to METEC from the privatization agency and it now operates as many as 75 factories nationwide, Michael said.

METEC is overseen by a board headed by Defense Minister Siraj Fergessa, Michael said. It employs about 13,000 people, including more than 1,000 engineers, he said.

Siraj in September opened a 200 million-birr factory in Modjo, 70 kilometers (44 miles) southeast of Addis Ababa that will make turbines, generators and high-voltage electricity- transmission cables, according to state-owned Ethiopian Radio and Television Agency. A METEC arms factory was opened the same day, it said on its website.

Poly Technologies Plc, part of the Beijing-based China Poly Group, is building truck-assembly plants in Modjo and Bishoftu for METEC, Xinhua reported on Sept. 27.

“In the future we will avoid importing everything but the engine,” Michael said. “Maybe in the future the engine will be produced here.”

To contact the reporter on this story: William Davison in Addis Ababa at wdavison3@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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