1 March 2016

East African Bottling Ownership Mix Less Tasty Than Coca-Cola

Multi-layered issues within the process of recovering funds lost in corruption, are not usually associated with the popular product

With 10 days to go before the auction of a portion of Coca-Cola shares held by Nigussie Hailu, two shareholders, Abinet Gebremeskel and Dereje Yesuwork, a.k.a. Jambi, have challenged the process demanding that all of Nigussie's shares be auctioned.

Abinet and Dereje wrote a letter to the company on February 19, requesting an update on crucial information - the number of Nigussie Hailu's shares and the latest value of each share. The two joined the company, buying the shares of Nigussie and Hussein Abedella in 2007, during a court-ordered auction to recover losses of Sheikh Mohammed Al Amoudi and the government from an 18 million dollar corruption scandal involving former Prime Minister, Tamrat Layne.

Then the sale of Nigussie's Shares, ended up generating more than what was owed, leaving behind 18 million Br in the bank.

East African Bottling S.C. now has four local shareholders: Nigussie Hailu and Munir Duri, who are among the first private owners, and Abinet and Dereje, who joined later. SABCO, the South African Coca-Cola bottler, holds an 80pc share, having bought its first shares in 1995, and progressively increased them. It signed a joint venture agreement in 1999, when the Company changed its name from Ethiopian Bottling to East African Bottling.

Share percentages vary regularly because Coca-Cola International, based in Atlanta, requires a capital increase every two years.

Nigussie's share has also increased, even after the notice for auction was issued.

Abinet and Dereje indicated in the letter copied to the Ministry of Justice and the Federal Courts Execution Directorate, that Nigussie had a total of 32,624 shares, whereas the notice published in the state-owned Amharic daily, Addis Zemen on January 22 stated that only 11,054 were put forth for auction. The letter also pointed out that the 2,372 Br value per share indicated in the auction was higher than the current value of 1778 Br. The higher value was based on audit report of 2013, while the latest refers to the 2015 audit report.

Accordingly, the two shareholders have asked the executive management of East African Bottling S.C. to notify the Execution Directorate of Federal Courts of the actual existing number of shares.

"This is what can legally be termed as 'unsolicited advice'; any person can provide such information at any stage of the process," said Kumelachew Dagne, legal counsel for many international and local businesses. "It is up to the Execution Directorate to accept or not."

Whether the auction will be cancelled or whether it will proceed because of what Abinet and Dereje have initiated cannot be known now, he added.

"We have to wait and see," he said.

The course of the auction could be affected more by evidence of the lower value of the shares as claimed by the two in their letter.

"Price is crucial, and I believe the directorate has to be cautious not to sell shares that do not have a matching value at the time of sale," Kumlachew said.

Officials of the Ministry of Justice, which will collect government's share of the money from the auctioned shares, were not available for comment, because of preparations for a meeting on an unrelated issue.

This was the Ministry that represented the government during the Supreme Court case, the result of which initiated the execution process for reclaiming 4.2 million Br worth of coffee exported illegally.

As per the Court's decision, its Execution Directorate announced back in November, 2015. The sale of Nigussie's shares as he and co-deendants are deemed liable jointly and severally, making him responsible for the whole amount.

Managers and Board members of East African Bottling all are not willing to discuss the issue outside of the internal structure and the Ministry of Trade (MoT).

For the past few months, MoT has been attending to complaints lodged by some of the shareholders. This led to a meeting during which an official of the Ministry is reported to have determined the people to sit on the company's Board of Directors - one seat for each of the four local shareholders and another for SABCO. Fortune was not able to get confirmation of this decision from the Ministry. An official with the bottling company declined to discuss the details of the meeting but affirmed that the company has asked the Ministry to give them its decision in writing.

"I call it transgression over a company's autonomy; it would be completely against the law," Kumelachew commented on the claim that the Ministry went as far as allocating Board seats.

This ongoing problem has made it difficult for the company to raise its capital, as required by the Atlanta headquarters. Because of this a planned expansion on land granted at Kilinto in Addis Abeba has not been able to take place, the official at East Africa Bottling said.

"It is taking so long to begin that the company could lose the land," he added.


Govt to Free 528 People Arrested During Protests

Ethiopia's top prosecutor said Monday that charges against 528 prisoners detained in connection with anti-government… Read more »

Copyright © 2016 Addis Fortune. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 600 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.