Ethiopia’s Ministerial Council Votes to Dissolve PEHA Amid SOE Reform Push

The Council of Ministers, in its 41st regular session on Tuesday morning, approved a regulation that dissolves the Public Enterprises Holding and Administration (PEHA) which managed several state-owned enterprises (SOEs) in its two-decade history. Rights and responsibilities will be transferred to the Liability and Asset Management Corporation (LAMC) to enable it to continue privatization efforts, according to a statement issued by the Office of the Prime Minister.

Cross-cutting reforms to the management of Ethiopia’s SOEs is one of the key targets under the Home-Grown Economic Reform Agenda 2.0 endorsed by international creditors.

Established in 2003 as a merger of the Public Enterprises Supervision Authority and the Privatization Agency, PEHA was mandated to oversee the governance and management of Ethiopia’s state-owned enterprises (SOEs) and facilitate their privatization when necessary.

Over the years, PEHA underwent various structural changes, operating at different times as both a Ministry and an Agency, until its formal re-establishment in 2022 under Proclamation No. 1263/2022.

Its dissolution follows a month after the transfer of eight of its portfolio companies to Ethiopian Investment Holdings (EIH). With Mamo Mihretu as CEO, EIH was established nearly four years ago with 28 SOEs, which have now ballooned to 40, under its portfolio and 100-billion-birr capital. At least five of the Enterprises are poised for listing in the week-old Ethiopian Securities Exchange in the near term. Ethio-tel was the first of these Enterprises as it issued 100 million shares to the public in the country's first Initial Public Offering back in October for a 10% stake.

Some of the companies managed by the dissolving PEHA until two months back were Ethio Post, Ethio Engineering Group, Ethiopian Industrial Inputs Development Enterprise, Ethiopian Railway Corporation, Industrial Parks Development Corporation, Development Bank of Ethiopia, and Ethiopian Electric Power Corporation, as well as Ethio Pharma Group's subsidiaries, the National Veterinary Institute and ShieldVax.

Management of Ethiopia’s SOEs has been split between EIH and PEHA for close to five years with a majority of the companies under the Administration being highly indebted.

In 2021, the government of Ethiopia under the Ministry of Finance created LAMC to manage the consolidation and servicing of a portion of the country’s SOE debt, alongside a range of state-owned assets.

After an assessment of the debt of its SOEs, seven SOEs were identified as under a high risk of debt distress.  These SOEs included the Ethiopian Electric Power, Ethiopian Electric Utility, Ethiopian Railway Corporation, Ethio-Engineering Group (formerly METEC), Chemical Industry Corporation, Construction Works Corporation, and the Sugar Corporation.  Together these SOEs held close to 780 billion ETB ($19.5 billion) in domestic and international debt.

Two months ago, the House of People’s Representatives gave a nod to the issuance of nearly 845-billion-birr bonds to settle years of non-performing loans owed by SOE’s to the Commercial Bank of Ethiopia.