Backlogged Payment Creates More Complications for ELSE

ELSE Addis Trading Industrial Development Plc has been sued for allegedly not paying 28 million Br for a cotton purchase made from the Upper Awash Agro-Industry Enterprise. The suit presented by Upper Awash before the Seventh Bench of the Federal High Court at Lideta District reads that ELSE signed a contractual agreement with Upper Awash in Addis Abeba on October 6, 2015. As per the agreement, Upper Awash delivered 44 million Br worth of cotton from October 2015 to January 2016.

Else is a company which is engaged in the textile products while Upper Awash is known in for the production of fresh and processed fruit and vegetables. It also produces cereals, cut flowers, seeds, and fiber crops.

According to the plaintiff, a warning letter was sent to ELSE on March 14 2016 demanding payment for the cotton. Documents showing that ELSE received the cotton, dated October 22, 23 and 24, 2015 were presented as evidence by the plaintiffs. ELSE paid 16 million Br following the warning letter.

The defendants’ objection stated that the cotton provided by the plaintiff was sub-standard. The cotton was below one micro air volume 4, and herefore not up to par. The defendant added that this result was acquired from an examination they performed at their own laboratory.

The claims presented by Upper Awash were not consistent, according to the defendants. The amount that they were asked to pay after the initial payment was 29 million Br. However, the suit was filed for 28 million Br.

Upper Awash explained that ELSE should have raised its concerns on the quality of the cotton when provided with the warning letter. They also explained that the amount requested in the suit is one million Br less than mentioned in follow ups to the warning letter because ELSE already paid 16 million Br of its total debt to the company. ELSE consumed all the cotton provided without any complaints, according to the plaintiffs. They argued that the laboratory examination evidence presented on the quality of the cotton should be examined by a separate party and presented to the court independently.

The judges presiding over the case, Yohannes Negussie, Samuel Tadesse and Yehenew Kelela adjourned the case for February 1 2017 in order to examine the evidence provided by both sides.

The ELSE factory, located in Adama, in Oromia regional state, started operations five years ago. It was owned by two Turkish investors, Seyfettin Kocak and Imam Altinbas who left Ethiopia while owing unpaid loans, taxes and supplier payments amounting to one billion Birr. The Development Bank of Ethiopia (DBE) provided loans to ELSE starting in 2011, when the factory received a 176 million Br loan for machinery purchases. 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 a report by the Auditor General in 2015.

Aside from Upper Awash, the owners of ELSE have allegedly failed to pay close to 20 million Br to ten cotton producers. These producers have appealed to the Prime Minister’s Office, the Ministry of Trade (MoT) and the Ministry of Industry (MoI). The producers, in a letter of appeal issued by the producers on October 26, 2016, claimed that they were unable to conduct their usual farming activities because of financial shortages.

The Development Bank of Ethiopia (DBE) is currently managing the company until it is sold to another owner.


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