United Africa Group embroiled in legal war

Local businessman, Haddis Tilahun’s United Africa Group (UAG) is in a legal tussle with an Ethiopian-based company for failing to honour a contractual agreement to upgrade a private property.

The Federal Supreme Court in Ethiopia reopened the litigation between the Privatisation & Public Enterprises Supervising Agency (PPESA) and UAG, which it had previously closed after both the defendant and the plaintiff failed to show for the court hearings.

The Agency is now claiming close to 700,000 Birr (N$312 000) in punitive damages, for failing to honour a contractual agreement, including five per cent of the total amount and a penalty, according to court documents.

PPESA is alleging that (UAG) did not live up to its contractual pledge to renovate Awassa Lakeside Hotels (Number One) under the Wabe Shebelle Hotels brand, which it had acquired from the Agency in May 2005.

This prompted the Agency’s lawyers to institute a civil suit at the Federal High Court’s Eighth Civil Bench in June 2010.

Tilahun yesterday confirmed the ensuing legal battle to Namibian Sun, saying that
UAG in 2006 successfully won the bid of the Federal Republic of Ethiopia’s privatisation of state owned businesses.

He said his group entered into negotiations with PPESA to transfer the business ownership and the assets which was mainly an old, pre-1950s hotel which evidentially needed full restructuring and construction.

“The negotiation and the implementation of the project has taken enormous time and effort, which resulted in a judicial interference to correct the mismatch,” he added.

UAG acquired Awassa Lakeside Hotels, located about 273 kilometres south of Addis Ababa in 2005, at a total cost of 6.95 million Birr (N$2,9 million).
It has been operating with its 30 employees, providing hospitality from its 26 rooms since then.

Reports indicate that the UAG agreed to spend a total of 18 million Br (N$8 million) in order to upgrade the hotel to a three-star accommodation within three years.

Deal

The deal was signed with the condition that the buyer would upgrade the Hotels to three-star status based on its business plan, which convinced the Agency to approve the bid, setting aside the highest financial offers from other bidders, Ayene Tefera, lawyer of the Agency, wrote in his suit.

The Agency wrote a letter of notice which led to another agreement with the Group. UAG found that only 21 rooms of the hotel could be renovated, investing 66 million Birr (N$29,3 million), as opposed to the initial planned investment of 18 million Birr, the Group claimed.

The projected cost was expected to be sourced from bank loans, whose delay in approval affected the timeline to upgrade the property, Addisu Yidnekachew, lawyer of UAG, argued in his response to the charges.

The delay was also due to the time it took to develop the architectural design for upgrading the property, while subsequent construction was delayed due to disruption by alleged employees’ activities after they found out that they might be suspended from their work to speed up the construction process, the lawyer argued.

Yet, UAG failed to persuade the presiding Judge Ayeshesum Melese, who ruled in favour of the Agency.

UAG failed to prove that it could not implement its business plan due to force majeure (superior force), as its lawyers could not establish the fact that the problems were beyond the control of the developer, the Judge said during the hearing.

The next hearing is set for March 13 this year.

“The way forward for United Africa Group would be to await the outcome of the court ruling so that we can expand our business operation in Ethiopia as well as Sub Saharan Africa,” Tilahun said.

UAG was established in 1992 by Tilahun, a Namibian resident and his Namibian wife, Martha Namundjebo.

The company is engaged in real estate, energy, finance, and hospitality services in the Southern Africa region, through its nine chain hotels under the umbrella of UAG.

It is registered in Namibia, in operation for the last 16 years, employing 480 individuals through its subsidiaries.

click to enlarge Businessman Haddis Tilahun and his wife, Martha Namundjebo-Tilahun