Fortune News | Apr 06,2019
May 8 , 2021
By NEJAT AHMED ( FORTUNE STAFF WRITER )
The embattled Hiber Sugar Share Company eyes new investment opportunities in the agriculture sector, proposing to get involved in rice and avocado oil production following its inability to produce sugar on a sizeable plot of land granted by the Amhara Regional State.
Authorities in the regional state reclaimed the land leased to the company after the latter failed to make any progress, leaving its shareholders, who have not yet had the chance to receive dividends, disappointed.
Hiber Sugar was established 12 years ago, to develop a private sugar estate on a 6,183ht land obtained in the Amhara Regional State. Raising equity from 5,500 shareholders, the company has little to show for it after more than a decade. Hiber has mobilised a paid-up capital of 81.1 million Br, not enough to pay for a tenth of the amount required to erect the smallest sugar plant. However, its net total assets stand at 16.1 million Br.
This may not be sufficient to let the company pursue its dream, but making a partnership with foreign investors can be a way forward, according to Mengistu Tilaye, CEO of Hiber Sugar.
"We had once signed a memorandum of understanding with an Iranian investor, but this failed as the authorities repossessed the land while we were attempting to take the deal to the next step," Mengistu told Fortune. "Alternative business ideas, however, will be considered if we fail to reclaim the land from the Amhara Region."
In a bid to shift to a new line of business, Hiber's directors have solicited proposals for investments presented during the eighth general assembly of the company, held on April 24, 2021. The Board of Directors, chaired by Aero Belete, has shortlisted seven proposals from a list of 200 ideas.
However, the general assembly was not held due to failures to achieve a quorum requiring at least a quarter of the shareholders in attendance. Despite being unable to hold the general assembly, seven directors continued their fourth urgent meeting and decided to shift to another line of business after agreeing that the current approach is bound to jeopardise the company's future.
Hiber and the Rural Land Administration & Use Bureau in the Amhara Regional State have been locked in a perpetual dispute for the last five years. While Hiber struggled to reclaim its land, the Bureau revoked the lease twice, claiming lack of progress and failure to start production on time on plots the regional state made available in Awi Zone and South Achefer of West Gojjam Zone. Thus far, the company has spent 18.4 million Br on lease payments and clearing the land to be ready it for installations of the plant, according to its latest audit report. Out of its total operational expenses, salary-related expenses and board allowance accounted for 13 million Br, while it has invested in 1.05 million Br buying shares in Amhara Bank, which is under formation with a paid-up capital of almost six billion Birr.
"There is no reason to give the land back to the company as it has already missed its timetable to develop the project," said Gizat Abiyu, head of the Bureau. "In fact, it was given more chances than it deserved under the law."
The Bureau has availed a portion of the land to other developers and internally displaced persons.
Frustrated, Hiber directors took the case to the federal government seeking intervention, writing a letter of appeal to the Office of the Prime Minister, which has yet to be responded to.
"If we can't reclaim the land, we have no choice but to come up with a new business plan that we can start with the equity on hand," said Mengistu. "This is a step in the right direction."
Hiber Sugar, which spent 55.8 million Br during its pre-operation years, plans to conduct a detailed feasibility study once shareholders decided to abandon the idea of owning a sugar estate and agree to move onto another venture, according to him.
"Any suggestion from shareholders would be welcome, and if we find it feasible," Mengistu told Fortune. "We'll go for it."
But for a business consultant with almost a decade of experience, identifying a new business idea is not as easy as portrayed by Hiber's management.
It's critical to conduct a market assessment and undertake a feasibility study as new investments usually fail because of neglecting to do so, according to Abnet Belay, who has welcomed Hiber's proposed transformation.
"Equally important is analysing the risk exposure and taking the current state of the country, including the political instability, into consideration before making any moves," said Abnet.
PUBLISHED ON May 08,2021 [ VOL 22 , NO 1097]
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