Ethiopia Turaco FMCG Project

Project Description

Health Care Food Manufacturers Share Company (HCFM) manufactures and distributes edible sunflower oil, and soya bean oil at its processing facility in Addis Ababa under the brand name of ‘Tena’. ZAK Ethiopia Manufacturing and Trading PLC (ZAK) produces laundry soaps and detergents and personal care cleaning products including handwash and body soaps, under the brand names of ‘555’ and the newly established ‘Aura’ and “Progard” brands.  It has a large list of new products planned for market launch over the coming years including dishwashing liquid and multi-purpose household cleaning products.

The project involves supporting the existing operations of HCFM and ZAK, the scaling up and diversification of HCFM’s operations through the expansion of its existing facilities both on refining capacity and on vertically integrating the business.  Plans include the addition of a 300 tons per day (tpd) refining capacity, and the construction of a new solvent extraction plant with a 200 tpd oil seed extraction capacity in Ethiopia (the Project).

Both HCFM and ZAK are wholly owned by Turaco of Mauritius through its intermediate holding companies. To fund the Project, Turaco signed a loan agreement of US$ 22 million with Ethos Mezzanine Partners GP Proprietary Limited of South Africa (Ethos) and Proparco of France (Proparco) (together, the Lenders). Accordingly, the Lenders, in an equal amount each, are jointly advancing a corporate loan of US$ 22 million (the Loan) to Turaco. Turaco will channel the proceeds of the Loan to fund HCFM and ZAK through their respective group intermediate holding companies in a combination of new shareholder loans and equity. In addition to the above new investments, Turaco also has existing equity and shareholder loan investments in HCFM and ZAK.

Turaco has applied for MIGA’s guarantees of US$34.1 million in total against the risks of Expropriation and Transfer Restriction to cover new equity investments and shareholder loans which will be sourced from the Loan, as well as the above existing equity investment. The tenor of the MIGA Guarantee will be 10 years for the equity coverage and 7 years for the shareholder loan coverage. MIGA’s risk exposure under the guarantees will be shared with the MIGA Guarantee Facility (MGF) of the IDA-Private Sector Window (PSW).

Environmental Categorization

The Project is category B under the MIGA’s Policy on Environmental and Social Sustainability. Click here to view the environmental and social review summary.

Development Impact

The foreseeable positive development impacts of the project are as follows:

• Establishment of sustainable value chain: The Project is expected to locally procure oil seeds for the new oil extraction plant to the levels of around USD 12 million annually once the facility reaches 90% capacity. The Project will purchase the oil seeds from aggregators who in turn purchase them from local farmers and cooperatives, therefore improving livelihood of smallholder farmers and creating new market opportunities for them.
• Import substitution: About 90 percent of edible oils consumed are imported products, and domestic soap production only meets 25 percent of the soap demand in Ethiopia. The Project will support import substitution by enabling the local production of edible oils and soaps.
• Business and sector development through demonstration of new technologies: The planned new solvent extraction plant for the edible oil business to be located in Aleltu will introduce new technology into Ethiopia. It will enable HCFM to convert oil extracted from local seeds into finished goods products, and also into an improved defatted soya cake by-product which is in line with international market standards and of export-quality.
• Employment generation: HCFM and ZAK currently employ more than 500 people of which 42 percent are women. The project is also expected to create a number of direct additional jobs and have a positive impact on indirect employment generation, local skill development, and gender.