Thursday, February 22, 2024
NewsTigray business empire demands audit of seized assets

Tigray business empire demands audit of seized assets

– EFFORT calls for audit into caretaker

– Machinery losses pose major obstacle to sur construction’s rebound

– Two-year salary crisis adds difficulty for EFFORT in saving top employers like Almeda, Sheba

The business group that helped power Ethiopia’s Tigray region is now seeking answers about millions in assets frozen during the country’s bitter civil war.

The Endowment Fund for the Rehabilitation of Tigray (EFFORT) has formally requested an external forensic audit to account for funds and properties taken over by the federal government last year.

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The demands come after EFFORT regained control of most – but not all – of its multi-sector holdings last month. “We want a full, independent investigation into what happened to our companies and bank accounts during the restrictions,” EFFORT investment chief Goitom Yibrah told the Reporter.

The conglomerate, formed in the 1990s, had grown to include industries like agriculture, construction and media.

But in late 2020, as fighting erupted between Tigray forces and Abiy Ahmed’s Prosperity Party, the government froze EFFORT’s business empire nationwide. Commercial Nominees was then tasked with oversight.

While 13 companies were returned on July 31st, according to Goitom, textile producer Almeda and tech firm Tekeze remain in legal limbo. EFFORT is alleging lack of transparency in federal management during the 15-month asset freeze.

Upon assuming control of the companies under the subsidiary of the conglomerate, EFFORT’s management discovered existing financial arrears and obligations that had accumulated during Commercial Nominees’ tenure as caretaker. This prompted EFFORT to request an audit to investigate and assess the financial activities and events that occurred during the caretaker period.

“Commercial Nominees withdrew a total of 20.8 million birr from the companies, exceeding the court-determined management fee,” explained Goitom Yibrah, chief of Investment and Business Development at EFFORT. He noted there are also outstanding amounts still owed to the firms.

“Overall, we are seeking to uncover what transpired during the tenure of the designated caretakers. Therefore, we urge the court to order an external independent audit,” Yibrah said.

When Commercial Nominees assumed management of the EFFORT companies in September 2021, the court ruled the caretaker period would last one year. As part of this, Commercial Nominees was granted a monthly management fee of one million birr from EFFORT’s accounts.

However, due to the ongoing war in Tigray, the caretaker tenure was extended to 16 months total. Notably, the court did not provide any additional terms for the final months of the extended period.

EFFORT’s management argues Commercial Nominees is only entitled to receive a total of 16 million birr, corresponding to one million birr per month for the 16-month duration.

The management contends the withdrawal of 20.87 million birr by Commercial Nominees, exceeding the 16 million birr believed rightfully owed, is illegal.

They assert Commercial Nominees exceeded the court’s stipulated management fee and should be held accountable for the difference.

Despite repeated requests from The Reporter, officials from Commercial Nominees have not provided any response or comments regarding this matter.

They have to provide justification to the court or we may consider taking legal action,” stated Goitom. “Considering that Commercial Nominees is a state-owned enterprise under the Commercial Bank of Ethiopia, we expect them to act responsibly and be fully transparent.”

On July 31, 2023, the Federal High Court of Lideta issued a ruling mandating the return of management rights for 26 enterprises that had been frozen due to suspected involvement in terrorism financing during the conflict in the northern region.

The court document drew attention to certain inconsistencies and discrepancies in the reports submitted by CN while overseeing these companies during the freeze period.

One instance mentioned was regarding Dedebit Microfinance. It was revealed that condominium offices owned by Dedebit Microfinance had been opened and rented out during the freeze period. However, no records or reports were provided regarding the rental income generated from these offices.

Similarly, the court document highlighted the lack of explanation as to why the warehouses of Mesebo Cement were not rented out during the freeze period. Dividends and incomes generated by the frozen companies during the wartime period were not reported, according to the same source.

Specifically, it was discovered that a G+7 building owned by Trans-Ethiopia had been rented out, but the income generated from this rental was not accounted for in the reports. There was also a lack of available reports regarding loans taken by the firms during the freeze period. Commercial Nominees did not allegedly offer an explanation regarding the utilization and disbursement of the monthly one million birr fee they received, the document says.

According to the court document, Guna Trading, an EFFORT member company, had 18.7 million birr in uncollected revenues, while Mesebo Cement had 19.4 million birr at the time when Commercial Nominees assumed management. However, Commercial Nominees failed to provide any information or updates regarding whether these outstanding revenues had been collected or not during their oversight.

Goitom emphasized that EFFORT’s company management will conduct thorough studies to evaluate and determine their future prospects.

“Some of the EFFORT member companies have suffered total damage, while others have been significantly affected but may potentially be restored,” said Goitom. He noted that if studies determine certain companies cannot be recovered, they will be closed down.

The five most heavily impacted EFFORT companies, according to Goitom, are Almeda Textile, Saba Marble, Sheba Leather, Hiwot, and Addis Medicine Factories.

Sur Construction, Mesfin Industrial Engineering, and Trans have also sustained significant damage. Goitom mentioned that Sur Construction lost a substantial portion of its machinery, which could greatly impact its operations and productivity.

Before the conflict outbreak, Almeda Textile employed approximately 6,000 people, highlighting its significance as a major employer in the region. Sheba Leather employed around 1,000 employees.

“These employees have gone without salaries for 20 months. It poses a challenge for us to save and sustain such large enterprises,” Goitom expressed concern.

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Video from Enat Bank Youtube Channel.

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