The Development Bank of Ethiopia (DBE) approved a 151.2 million Br loan on May 1, 2007, for the expansion of Awassa Textile Factory SC. The Bank has communicated its decision to the Factory informing the Management to sign the loan agreement.

“We have waited for more than a year to get this loan,” Awassa Textile Factory CEO, Habib Narin, told Fortune.

Built 23 years ago, the Textile Factory was one of the six textile factories under the Privatisation and Public Enterprises Supervisory Agency (PPESA), before it was leased for five years to the Turkish company, Narin Orme Textile Group, on April 30, 2005.

According to the lease agreement Narin pays 50,000 dollars monthly until the expansion work is completed. After completion the monthly payment will grow by 25,000 dollars, bringing the total to 75,000 dollars.

According to Mesenbet Shenkute, DBE’s vice president for Client Relations and Branch Operations, the Bank has taken a 40.4 million Br investment from Narin as an equity contribution for approval of the loan.
 

The present expansion work for the procurement and installation of the manufacturing line for spinning, netting and finishing is expected to be completed by the end of June.
 

Before the lease in 2005, Awasa Textile had a 79 million Br turnover which grew to 104 million Br in 2006 after it was leased to the Turkish company according to the Factory’s financial statement.

“For the last 10 months our revenue has reached 84 million Br,” Narin told Fortune. The company expects the revenue to reach 106 million Br by the end of the year. The Turkish company also hopes to secure 22 million dollars in revenue by exporting Awassa’s products to Europe.

The Factory has an annual capacity of manufacturing 6,500kg in spun textiles with an ambitious plan of upscaling it to 14,000kg after the full expansion is completed. In addition, it plans to install a new garment line with a capacity of manufacturing 8,500 garment pieces with the Bank loan.

“After all the expansion projects are completed by the end of the year, we are expecting to employ 1,500 additional workers,” Narin said. The Factory currently has 938 employees.

According to the loan application by the Factory, the fundswill be used to purchase machinery.

“We had uncertainties after failing on a Dire Dawa textile factory which was leased and later sold to a Turkish investor, but this one has proved clear of uncertainties,” an official at PPESA told Fortune.

Narin Orme Textile Group also leases Arba Minch Textile Factory, built by the former military Derg regime to supply Awasa Textile, and currently employing 890 people. Arba Minch Factory’s annual revenue before the lease was 23 million Br. After the lease, in 2006, it increased to 47 million Br, according to the Factory’s financial statement.

“We generated 52 million Br in revenue in the last 10 months,” says Narin. “We expect 58 million Br by the end of the year.”