Swiss multinational Nestlé has once again garnered strong criticism from charity workers.
The Vevey-based company, which reported profits of US$3.9bn in the first six months of this year, is demanding that the government of Ethiopia reimburse it in full for a livestock firm seized from one of its subsidiaries in 1975. Nestlé is refusing to accept the $1.5m being offered by the government of Ethiopia, a country dealing with its most serious threat of famine since 1984, and is instead demanding the government pay the full $6m it believes it is owed.
The history of the debt is complicated. In 1975 the Ethiopian government seized the Ethiopian Livestock Development Company (Elidco) and nationalised it. Elidco was majority-owned by Schweisfurth Group, a German company that was subsequently acquired by Nestlé, the world’s largest food group, in 1986.
Four years ago, in 1998, the Ethiopian government sold Elidco to a private local business for about $8.7m, Nestlé claims. The government is offering to pay Nestlé $1.5m, based on today’s exchange rate between the dollar and the Ethiopian birr. It is unclear exactly how large the Schweisfurth Group’s stake in Elidco was, but this figure corresponds to half the value of the company when it was nationalised, plus interest. However, Nestlé is calling for the amount to be converted using the exchange rate in place at the time of the nationalisation in 1975, which is how it arrived at its figure of $6m.
Oxfam and other poverty relief organisations have asked Nestlé to reconsider, referring to CEO Peter Brabeck- Letmathe’s statement three years ago that the company had responsibilities beyond its bottom line. “We are going to be asked: what have you done to fight hunger in developing countries?” he is quoted as saying by the Guardian newspaper.
Nevertheless, the Swiss group believes there are principles involved from which it is unwilling to back away, telling BBC News Online that it was “clearly in the interest of continued flows of foreign direct investment that such conflicts are resolved according to international law.
“A successful resolution will re-establish the confidence of international investors, which will be to the benefit of the Ethiopian government.”
Nestlé is just one of over 50 foreign companies seeking compensation from the Ethiopian government for assets that were forcibly seized from them.