Fortune News | Dec 27,2018
For the first time in years, the Private Organizations Employees’ Social Security Agency auctioned off the property of Ayka Addis Textile Investment Plc for failing to pay the pension fund what it collected from employees.
The company failed to pay 28.7 million Br in debt it collected as pension payments from more than 4,000 employees since November 2017.
To recover the debt and refund the employees, the Agency auctioned off the land, which is registered under the company's name. The property rests on 6,000Sqm of land in Alemgena town, near YES Mineral Water Plant, 20Km west of Addis Abeba.
Ayka Addis, a company that was established in June 2006 by three Turkish individuals with an authorized capital of one billion Birr, of which 679 million Br has been paid, took the land to build houses for its expat employees and had started the construction of the housing units.
While the company was supposed to pay the installment monthly, it made no payment for around two years, according to Girma Sisay, legal service director at the Agency, which manages the pensions of 1.5 million employees working in around 187,000 private organisations.
In the auction, the Agency authorized 5.1 million Br as a floor price for the property.
Initially, the Agency announced the auction in July of this year. The property managed to attract 10 individual bidders, and four of them reached the final stage. However, the winner could not pay the amount offered within the time frame, leading the Agency to announce another auction.
In November, the Agency announced the second auction, which attracted five bidders. However, none of them could meet the minimum price.
"The Agency is preparing to announce the third auction soon," said Gudissa Enkossa, chief of the Agency's central region.
Both at private and government institutions, employers contribute 11pc and employees chip in seven percent of salaries, making the total contribution for pensions 18pc of gross salaries every month.
For the past couple of years, the company has been in financial distress. During the establishment, the owners borrowed 813 million Br in 2010 from the Development Bank of Ethiopia (DBE) to launch an end to end chain of operations at its plant, which included spinning, knitting and dying garments.
However, since 2013, the company has been declaring a huge loss. Beyond the initial loan, Ayka also borrowed 2.9 Billion Br as of October 31, 2018, to DBE, which extended loans to further finance the project as well as for working capital.
Due to the failure of the owners in servicing their debt, DBE has taken possession of the textile plant from its defaulted Turkish owners.
Ethio Capital Investment S.C., established by the DBE to manage and administer the assets of foreclosed factories and companies, took over the company last year. It also announced auctions to transfer the company to private owners on three occasions, however, it failed since no one showed interest in buying the company. After the third attempt, the Bank took full ownership of the company.
After the Bank repossessed the company, the management has been paying the pension fund until it ceased operations five months ago, according to Tesfaye Abdissa, head of the Labour Union of Ayka Addis.
"Currently, the company is not in operation," Tesfaye told Fortune.
The company could not resume operations, since it faced a challenge in renewing the business license of the company, according to sources close to the case.
"Since the company didn't pay tax, the Bank faced a challenge in renewing its business license," the source said.
Liku Worku, a lawyer who worked as a draft person and public prosecutor at the then Ministry of Justice and and as a part-time lecturer at Addis Abeba University, says that the measures taken by the Agency to auction off Ayka’s property is legitimate.
“Though the company is owned by DBE, as far as there is an interest of employees in the case, the Agency has the right to auction off the land,” Liku said.
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