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Factory Owners Skip Town, Investors Cry Foul

December 27,2016

Cotton producers appeal for repayment worth millions

elsa-addis-industrial-developmentThe foreign owners of Else Addis Industrial Development Plc have abandoned their factory and left the country to escape unpaid loans, taxes and customer payments amounting to one billion Birr, two weeks ago. Development Bank of Ethiopia (DBE) which is the main creditor has already foreclosed the factory with a negotiation price of 729 million Br

Although DBE was processing a travel ban on the owners of the factory, originally from Turkey, a delay in the necessary warrants meant that the Immigration Office dropped the request.

“Although we tried to process the request in time, they were still able to escape the country,” said a DBE official.

Cotton producers and suppliers to the factory were left with unsettled payments for their sales to the company. Ten suppliers appealed to the Prime Minister’s Office, the Ministry of Trade (MoT) and the Ministry of Industry (MoI) asking for a solution to the unsettled 20 million Br bill.

The cotton producers claim that the owners gave them a cheque to settle payment that was rejected at the bank.

In a letter of appeal issued by the producers on October 26, 2016 they claimed that they were are unable to conduct their usual farming activities because of financial shortages.

The Else factory, located in Adama, in Oromia regional state, started operations five years ago. The company sits on 200,000sqm of land while the actual factory takes up 120,000sqm. In September 2016 the company terminated its operations after a power cut because it failed to pay its electricity bills, amounting four million Birr. This was four months after the DBE wrote the company a letter of warning that stated it hadn’t been properly paying its loans. The bank estimates that Else owes close to 900 million Br.

The company initially established by Else Industrial Development Plc was equally owned by Seyfettin Kocak and İImam Altinbas. It used to be

Else was a successful company with a production level up to 95pc, said Bantihun Gessesse, communication director at Ethiopian Textile Industry Institute. However the owners were not willing to export their product.

The owners also left with unpaid taxes. “Although I am not sure about the figures, the matter is under discussion with the MoI,” said Ephrem Mekuria. But sources from the bank place the unpaid taxes in the millions.

“I have heard the company has 30 million Br of unpaid tax for just one year,” said the bank official.

The factory which currently employs 1,000 people is under operation, “We are receiving a number of appeals especially from customers who used to have business relations with the company claiming their payments. However, those people need to go to court to make their case,” the DBE official said. “As a creditor, the bank has the priority.”

Before their departure, the owners allegedly damaged some of the factory’s property, such as causing the destruction of system that monitor machine integration. However, the machines are now in working order, according to authorities.

“We have to bring experts from abroad that knows how the system works,” said another Bank official.

The relationship between DBE and Else dates back to 2011, when the factory received a 176 million Br loan for machinery purchase. In 2012, they received 71.7 million Br in loans as working capital and in March 2013, again received loans of close to 95.4 million Br and 84.6 million Br, again as working capital, according to the Auditor General’s report in 2015.

The same report indicated that the two latter loans were given to the factory without the evaluation of the DBE credit approval committee, and only with the approval of the credit sector vice president and the former president.

This is not the first time that a big textile factory has gone bankrupt.

“It has been really become problematic to control these companies because their issues with making transactions transparent,” the DBE official explained. In June 2016, the Commercial Bank of Ethiopia (CBE) auctioned off Saygin Dima Textile S.C. after the company failed to meet its loan obligations. In addition to the half billion Birr loans from CBE, Saygin Dima owes another 625 million Br to the Ministry of Public Enterprises.

“I don’t think this textile company was a failed project from the very beginning,” said the official. The investors just manipulated the privileges they got from the government.”

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