The Development Bank of Ethiopia (DBE), the state policy bank, repossessed the textile plant of Ayka Addis Textile & Investment Group from its defaulted Turkish owners .
The decision was made by the Bank’s management and subsequently approved by its board.
The decision also involved the Ministry of Trade & Industry and Textile Industries & Development Institute, and notification of the Bank’s decision was communicated to company’s labour union.
“The owners are either unwilling to raise the necessary capital or equity,” said a source close to the case, “the action is taken to impart a lesson to other companies.”
As of October 31, 2018, Ayka has failed to service its 2.87 billion Br debt secured from the Bank since 2006.
Ethio Capital Investment S.C, established by the Bank to manage and administer the assets of foreclosed factories and companies, has taken over the plant and restarted its operations beginning mid-week this month. Ethio Capital will operate Ayka Addis until it is transferred to private ownership.
Ayka Addis was established in June 2006 by three Turkish individuals and an authorised capital of one billion Birr, of which 679 million Br has been paid. During the establishment, the owners have borrowed 813 million Br from the Development Bank.
The company became operational in 2010 in Alemgena, 20Km west of Addis Abeba, spinning, knitting and dying garments, and initiatingoneof the few textile operations in the country that adopted an end-to-end production chain. The factory exported its products to Germany, Spain, the United States, Japan, France and Canada.
Germany, where one of the former shareholders is based is a major destination for the products of the company, had consumed more than one – third of its capital.
The company operated with 7,000 employees and has been reporting losses. In 2014, it reported a loss of 615.29 million and registered a loss of 312.8 million Br the following year. The company has accumulated losses that totaled 1.86 billion Br to date.
Costs of production, sales, distribution and administration have contributed to the losses registered by the company, according to its financial statement. The company was also scaling down its operation that led to declines in revenues.
The former owners of the company claim that the factory has generated 400 million dollars from export since it became operational. They also state that they have lost close to 50 million euros due to the widespread unrest across the country that occurred three years ago, and have submitted new applications for additional loans from the Bank.
Three months ago with the financial support of a foreign firm, the Bunk hired an expat from Mauritius as a turnaround manager removing the Turkish manager to recover losses and reverse the financial crises the company has sustained. The new expat manager replaced Yusuf Aydeniz, former president of the Ayka Addis and major shareholder. Yusuf was in charge of day to day operations at the company.
The owner of the company is also attempting to open another integrated cotton processing plant in Ouagadougou, Burkina Faso, with an investment of 200 million dollars. Ayka Istanbul will be the major shareholder in the factory with 55pc, while the government of Burkina Faso will control the remaining share. Four banks have already shown interest to finance the project, according to Burkina Faso-based, state-affiliated media outlets.
In the past couple of weeks, Yusuf has left the country without informing the employees and people around his circle.
“It has been over two weeks since we have seen him,” said one of the employees.
Ayka will be the third Turkish-owned company along with Else Addis Textile Factory in Adama and Angel’s Cotton & Textile in Legetafo town, to be handed over to Ethio Capital Investment after the owners of the companies defaulted. The Bank tried to auction off the two companies but no bidder showed any interest to acquire the companies.
Three other Turkish firms, BMET Cables, ETUR Textile Plc and MNS Manufacturing Plc have also defaulted and have failed to service their loans to the Bank, according to a source close to the case.
Employees at Ayka Addis did not welcome the ownership change fearing job losses. Following notification by the Bank, workers staged a walkout on Friday, December 21, 2018, demanding job security.
“We don’t know what to do next,” says one of the employees, who claims that he was not officially informed about the new changes at the factory.
Though the Bank did not inform every employee, workers were assumed to be informed by their labour union, according to the same source at the Bank.
“No employee will be laid off,” said this source, “the Bank is committed to allocating the necessary budget to make the factory productive.”
Yusuf Aydeniz did not respond to an email inquiry from Fortune.