Oxfam Uncovers Nestlé Corp. Demand for Millions in Compensation from Ethiopia as Nation Faces Famine and Mass Starvation

Posted: 18 December 2002

Addis Ababa, Ethiopia--Oxfam disclosed today that global coffee giant Nestlé is demanding millions of dollars in compensation from famine-stricken Ethiopia. Ethiopia is now in the midst of an extreme drought that has put over 11 million people at risk for starvation, a crisis considerably worse than the famine conditions that captured international attention in the mid-1980s. Nestlé, the world’s largest coffee company, boasting $5.5 billion in profits last year, is demanding that Ethiopia pay over $6 million for shares in agricultural firm ELIDCO (Ethiopian Livestock Development Company) that Nestlé acquired from its purchase of the Schweisfurth Group. According to documents examined by Oxfam, the capital of those shares was lost during the 1975 nationalization of Ethiopia’s private industries by the Derg military junta, which was defeated in 1991.

Adding insult to injury, Nestlé, which, at present, has failed to produce legal proof of compensation rights, is requiring the Ethiopian government to pay them $6 million by retroactively tying the restitution payment to the 1975 prevailing exchange rate. Rather than accept the Ethiopian settlement offer of 12, 417, 888 Birr (approximately $1.5 million at current exchange), Nestlé is continuing to press the Ethiopian government for full payment at a time of national crisis exacerbated by the outright collapse of world coffee prices. A full quarter of Ethiopians are dependent on the coffee industry for basic subsistence, and coffee comprises 60% of Ethiopia’s annual exports. The average Ethiopian lives on less than $2 per day.

“Nestle is bleeding an already hemorrhaging nation and its people at a time when it should be coming to Ethiopia’s aid,” said Abera Tola, Oxfam America’s representative in Ethiopia. “The corporation’s failure to accept the offer from Ethiopia’s government is not only ethically reprehensible, its bad business, too.”

Ironically, Peter Brabeck-Letmathe, Chief Executive of Nestlé, said in the 1999 Nestlé publication, The Search for Trust, that “We are going to be asked not only if we maximized short-term shareholder value, but also…what have you done to help fight hunger in developing countries?” Oxfam encourages Nestlé to take the opportunity to truly fight hunger by dropping, or at very least postponing, its case against Ethiopia and donating significant funds for emergency drought relief. The $6 million demanded by Nestlé could provide clean water to more than 4 million people in Ethiopia and fund the construction of 6,500 wells.

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