Hiber Sugar, a share company created in 2009 to help meet the sugar demand in Ethiopia, has still not produced a kilo of sugar and is facing demands from angry shareholders who feel its latest plan to buy government-owned sugar factories is misguided.
During the company’s annual meeting on January 17, 2017, a committee made up of shareholders put forward the option of moving to a sector other than sugar development or closing the company altogether. They will meet again and decide the fate of the company within a month.
Some shareholders also criticized the government for letting a company such as Hiber collect money from shareholders without monitoring that the promises it made can be met.
However, Hiber’s Manager claimed there was still hope and urged a steady course.
“The idea of liquidating the company is not supported by the majority,” said Mengeste Telaye, Hiber’s general manager. “The new proposal is the best and only option we have.”
Hiber’s latest plan is to purchase the half century old and non-functioning Wonji- Shoa Sugar Factory from the Ethiopian Sugar Corporation. The two plants were the first Ethiopian Sugar plants established back in 1950’s by called Handles-Vereening, a Dutch company; they stopped operation five years ago.
Hiber was established in 2009 by 30 investors, with 600,000 Br of capital, and currently has close to 6,100 shareholders. However, the Company has not paid dividends or turned a profit since its establishment.
As part of its initial investment, Hiber leased a total of 6,183ha of land for 40 years, as of March, 2013, in the Jawi wereda of Awi Zone, in the Amhara Regional State, 610 km north of Addis Abeba.
Up to this point, none of the business deals and proposals put forth by Hiber’s management have come to fruition. Two years ago the company teamed up with the Metal Engineering Corporation (MetEC) to build a factory with a capacity to produce 6,000 tonnes cane per day (TCD). However, the proposal failed because Hiber was unable to get loans from foreign banks.
It paid out 25 million Br to MetEC as an advance, but this money was subsequently returned to the company, according to the company’s audit report.
Since its establishment Hiber has also tried to work with almost a dozen foreign companies, plans that have not yet come to fruition. The most notable would be their failed deal with the Brazilian company BDFC back in 2010, where BDFC agreed to build a factory.
In its annual meeting at the Cultural Center Hall on Algeria Street, the board stated that it planned to downsize Hiber’s initial plans of building a large scale factory with a capacity of 12,000 TCD to 1,800 TCD.
“This is just unacceptable,” commented Seifeselassie Tegne, who claim to owns about half a million Br worth of shares in Hiber. “The investment needs a strong capital base and we are not up to the standard at the moment.”
The company is looking at investing 1.4 billion Br, which will require 353 million Br worth of assets to secure loans from the Development Bank of Ethiopia. It is also considering working with development enterprises in Amhara regional state to develop the project.
The Company’s latest audit report indicates that its paid capital is about 81 million Br. However, the shareholder claims that there has been up to a 15pc decrease in the amount of paid up capital than what was reported five years ago. Hiber also reported that its total assets had reached to 215 million Br, and that it spent 11 million Br on administrative and other expenses.
“There has been nothing to show for the money that was invested,” said Seife Selassie.
Issues in the sugar development sector have been a controversial topic in public discourse over the past few years.
The government’s plan to build ten sugar factories during the first edition of the Growth & Transformation Plan did not succeed, with plans for two factories canceled and eight factories behind schedule, in spite of the money injected into these projects.
Sixty years after the first production of sugar in Ethiopia the country is still dependent on imported sugar from abroad. At the moment, Ethiopia needs over 700,000 tons of sugar a year, almost twice of what has been three years ago.
This is not the first time that a company with many shareholders has been caught up in controversy. Similar share companies, most predominately real estate share companies, face similar problems of not meeting their plans.