ERCA freezes Sheba Steel

(April 26, 2011, Addis Ababa)--The Ethiopian Revenue and Customs Authority (ERCA) freezes the assets of Sheba Steel Mills Plc, a company owned by the Pakistani business group Mishkaat Holdings LLC, after the authority learned the steel factory was halting production.

About a year ago, the federal authority had audited the company and accused them of alledgedly evading taxes. It ordered Sheba Steel to settle an undisclosed amount, said to be a large sum. However, the steel factory disputed the amount owed and refused to pay.

Asfawessen Aleneh, head of large tax payers branch office of ERCA, said that based on Sheba’s appeal, his office revised the audit findings. “Currently, our re-auditing process is finalized and we are expected to declare the amount the factory owes in unpaid taxes in the coming week,” the head said.

Even though the authority says they will wait a week to publicly state how much the factory owes, they have begun seizing assets three weeks ago. “With the collaboration of police we have begun taking control of the properties at the factory,” Asfawessen told Capital.

“We did do a re-audit, but the amount the company owes is still huge and for this reason we have begun seizing the factory’s assets,” the branch head added. Asfawessen said the main reason that the authority is taking over the property is because Sheba Steel has ceased production.

For the last six months the factory has not made steel, according to sources at Sheba.
“Disagreement between the company owners, who are based in Pakistan, is the main reason for the production cut,” sources said.

According to Asfawessen, if the company does not have sufficient capital to settle the amount owed ERCA can go after their assets. “We are simply trying to recover the taxes owed if they settle the amount we will not continue holding the factory,” he explained.

Recently, Sheba Steel vacated its head office in Bole and opened another office in Kality at the compound of its sister company that produces plastic materials. That company is still operating. Sheba Steel Mills Plc installed its factory in Debrezeit (Bishoftu), 40 km east of Addis Ababa in 2004 with an initial investment of 20 million birr.

Recently the steel company has fallen on hard times. Sheba Steel has been ordered by the Federal High Court to settle payment for Yetenbi Trading Plc and for an individual called Nura Mohamed following a bounced checque lawsuit.

The plaintiffs were unable to collect their payment when they appeared before Dashen Bank with their cheques issued by Sheba Steel. Sheba apparently did not have sufficient funds in their account and all other accounts were closed.

The court ordered Sheba Steel to pay a total of 874,274 birr with nine percent legal interest to Yetenbi Trading and over 1.1 million birr to Nura Mohammed. Nyala Insurance SC has also sued Sheba for three unpaid promissory notes worth 589,777 birr.

In addition Federal Ethics and Anti-Corruption Commission and Ethiopian Electric Power Corporation are charging Sheba with corruption allegation related to the purchase of scrap metal used for the production of steel  from various governmental institutions and electric power consumption fraud.

While the two government offices had been investigating their respective issues there is not any disclosed information obtained from both offices attempts to obtain official responses from Sheba Steel remained unfruitful.

Commencing production in 2004, Sheba Steel Mills Group now owns Sheba Plastic Industries at Kaliti, Sheba Cable & Wire Industries PLC, Sheba Gases PLC and Sheba Free Dispensary Medium Clinic. Sheba Steel Mills Plc is expected to have an annual production capacity of 10,000 to 20,000 tons.
Source: Capital