Addis Ababa, Ethiopia (Capital) — Starlight Roses Flower Farm was the last surviving subsidiary of the troubled Star Business Group, set up by three Addis Ababa businessmen. Despite its resilience, it has not been able to survive the financial collapse of the parent company and is now set to close. Worku Megra, general manager of the flower firm, is currently negotiating to return the 36 hectares flower farm to Sher Ethiopia. In the same week the Federal High Court authorized the liquidation of Ethio Investment Group (EIG) another of Star’s debt ridden subsidiaries.
Menwyelet Atenafu, Abebaw Desta and Worku Megra, business partners and shareholders of Star Business Group, Ethio Investment Group and many other well-known companies, established Starlight Roses Flower Farm two years ago. Like other flower exporters, Starlight also leased four green houses from Sher Ethiopia Plc, a flower grower and green house company based in Zeway town in the Oromia Regional State, 165km south of Addis Ababa.
Starlight had been exporting flower stems collected from the 36 hectares farm for the last two years, paying 0.51 Euro per square meter for the green houses each week. But as profits from flower farming have plummeted, due to a massive drop in export demand, the business venture became unsustainable.
“Forget about its near 1,000 employees salary, the company’s export revenue this days become unable to cover the weekly rental fees of the green house” one of the Starlight employees told Capital.
The owners have apparently tried to inject funds to cover the last two months of employee salary, said the source, but bankruptcy has forced the owners to return the farms and its employees to Sher. Gervit Barnhoovn founder and manager of Sher Ethiopia was unwilling to disclose the details of the transfer, saying negotiations are currently in the early stages. Worku Megra general manager and shareholder of Starlight confirmed the company would closed but refused to give any further details.
Employees of the farm are currently signing a 45 day contract with Sher Ethiopia stating the company will try to keep the farm functioning until another investor can be found. But, if there are issues unsettled, it would be the company’s unpaid arrears the source told Capital.
Star Business Group has now declared bankruptcy on all of its subsidiaries including Tis Abay Transport, Tana Transport, and Mina Trading. Other co-partners are currently in the hands of the country’s commercial banks, seized as collateral for unpaid debts.
This week, the Federal High Court has also authorized the liquidation of Ethio Investment Group (EIG) which was established in 1999 an importer of vehicles. EIG was the sole importer of BMW, Land Rover, Scania and others vehicles for more than seven years, but the company suffered losses of over 255.2 million birr which dwarfed its 31.9 million birr paid up capital.
This latest court ruling is a positive response to Selam Bus S.C. that had sued EIG for its failure to keep a contract signed between them. EIG agreed a contract in 2007 to deliver 15 Scanias to Selam Bus, a deal worth 23.9 million birr. The transport company, Selam Bus paid 7.1 million birr as an advance but, the vehicles are not delivered causing Selam to take legal action.
This is the latest in a series of legal problems for EIG. Since early this year they have been embroiled in court proceedings, over a disputed deal with Nile Insurance S.C. The Insurance company claim to have lost over 40 million birr from a guarantee bond issued to different companies owned by EIG’s founding business partners, according to the federal prosecutor accusation. The men are accused of misusing their position as board members at Nile Insurance to issue guarantee bonds to companies they were involved in.