Belated Financial Report Unravels Scope Of Sugar Industry Group’s Woes

An overdue audit report highlights the continued struggles of the state-owned Ethiopian Sugar Industry Group (ESIG) and more than a dozen of its sugar estates scattered across the country, as years of mismanagement and security issues sustain the Group’s poor financial performance and risk the fate of Ethiopia’s sugar production ambitions.

An audited financial report of the Group’s performance for the 2022/23 fiscal year was published this month, following more than two years of delays.

The state-run Audit Service Corporation reports the Group, which at the time was run by long-serving CEO Weyo Roba and chaired by Girma Birru, saw its revenues drop by more than 13 percent to 7.4 billion Birr year-on-year.

The Group’s comprehensive losses totaled 9.6 billion Birr during the reporting period, significantly lower than the 22 billion Birr registered the year prior but indicative of its ongoing troubles. Its forex losses also dropped by nearly 12 billion Birr to 3.6 billion Birr, while operating losses eased to 3.8 billion Birr from 15.7 billion.

However, despite the declining losses, the Group reported a two billion Birr drop in total asset value, while cash and cash equivalents on hand dwindled from four billion Birr to 1.5 billion.

The report outlines the dire financial status of the Group, which came into being in 2022 as part of a restructuring of the former Ethiopian Sugar Corporation that was established in 2010 in place of the Ethiopian Sugar Development Agency.

More than a decade ago, the Corporation embarked on a campaign to launch new sugar estates and upgrade existing ones like Wonji Shoa, Finchaa, four in Omo Kuraz, Welkayit and the two Tana Beles estates in the Amhara region.

At present, esign operates eight major sugar Estates, five of which operate independently as subsidiaries. These include Wonji Shoa, Metehara, Fincha, Kessem, and Tana Beles. Theamining three—Arjo Didessa, OMO KURAZ II and Omo Kurz III—Are still under the dictionary of the direct control of the group.

Overall, ESIG administers around 86,355 hectares of sugarcane plantations, with estimated annual production of 600,000 tons of sugar, of which between 325,000 and 400,000 tons is consumed domestically.

Additionally, ESIG oversees several sugar plants that are under construction or non-operational, including Omo Kuraz I and V, Welkait and Tendaho, all of which are managed as branches until completion or restructuring.

The Group has ambitions to meet national sugar demand by 2028, targeting nearly 730,000 tons annually by 2026/7, but the report published this month indicates these ambitions are unlikely to be realized.

When ESIG was established in 2022, its paid-up capital was reported to be 115 billion Birr, but later inquiries uncovered a deficit of 10 billion Birr.

The Group’s board of directors decided in September 2025 to officially shrink the capital to 105 billion Birr in light of the deficit, and adjusted its authorized capital down by 30 billion Birr to 420 billion Birr. The adjustments were approved by Ethiopian Investment Holdings (EIH), which oversees the Group.

This month’s audited financial reports reveal the Group’s sales of imported sugar, which makes up a large portion of its revenue, almost halved to 1.3 billion Birr in 2022/23. Sales of locally produced white sugar also dropped by 17 percent to five billion Birr, while molasses sales doubled from 231 million to 484 million Birr.

The report indicates the flagship Wonji-Shoa sugar factory holds a long outstanding construction-in-progress balance of 2.2 billion Birr, primarily related to development and civil and irrigation works on outgrowers’ land.

But these assets remain uncapitalised due to the termination of contracts by the majority of outgrowers, according to the report.

Moreover, an impairment of 434 million Birr was recorded for advances and prepayments to outgrowers, a significant portion of which pertains to sugarcane plantations damaged during the political unrest of 2017 and to farms that unilaterally terminated their agreements with the factory.

As these balances involve public funds and remain unsettled, management needs to re-engage the contractual agreements with the outgrowers, and recover outstanding advance payment, auditors urge.

The auditor identified significant deficiencies in the internal control of intercompany receivables and payables in the Group, resulting in accumulated unreconciled inter-branch balances of 1.5 billion Birr. Differences remain between subsidiaries and the Group, as well as branches and the Group, according to the report.

The residual balance was changed to accumulated losses without appropriately reflecting the economic substance of the transactions, resulting in accumulated loss of 1.5 billion Birr, it reads.

A receivables balance of 1.47 billion Birr is recorded under the Sugar Industry Development Fund (SIDF), for which no supporting evidence was provided.

The report notes inconsistent inventory methods are deployed across the Group’s estates, and identifies a 98 million Birr deficit between physical inventory count and the ledger balances at the Group’s factories and head office project unit.

A further discrepancy of 166 million Birr was noted at the head office between sugar ledger and physical count sheets. This difference remained unresolved, resulting in a continued overstatement of inventory.

Moreover, the Group holds long outstanding goods in transit totaling 523 million Birr, including letters of credit (LCs) issued beyond contractual terms that remain unclear, according to the report.

Auditors say sugar estates lack an effective mechanism for allocating overhead and production costs, leaving them unable to place reliance on the 4.7 billion Birr in reported cost of sales.

They also found trade and other payables totalling 7.4 billion Birr, including 1.2 billion Birr in long-outstanding balances. Advance payments to contractors totaled 14 billion Birr, of which nearly 60 percent is impaired, according to the report.

This high level of impairment reflects significant deficiency in internal control over monitoring and recovery of advance payments, auditors caution, urging the Group to take legal and administrative measures to ensure accountability and recovery.

While factory operations declined, the cost of goods production stood at 4.7 billion Birr. Salary and benefits took up nearly one billion Birr, according to the report.

The report also reveals the extent of the impacts of conflict and insecurity on the Group’s operations and margins.

It details opaque withdrawals of nearly 50 million Birr from bank accounts associated with the Welkait Sugar Factory during the two-year northern war. Military operations in Oromia posed significant problems for the operations of the Arjo and Fincha estates, according to the report.

Arjo incurred losses of 10.4 million Birr due looting and property damage, while Fincha lost 8.3 million, according to auditors.

A confluence of weather- and conflict-related factors continue to pose significant challenges in Tendaho. Management has been unable to gain access to the sugar estate to verify losses owed to theft or misappropriation, according to the report.

As of June 2022, Tendaho’s property, plant and equipment carrying a value of 19 billion Birr remain exposed to risks. Following partial assessments, management recognized impairment losses of four billion Birr, according to auditors.

The Welkait sugar factory has also experienced looting and destruction of property, according to the report.  In light of inability to access the site, management ceased depreciation and recognized an impairment loss equivalent to book value of 112 million Birr, auditors revealed.

Meanwhile, the audited report indicates that interest expenses alone on loans the Group took from the state-owned Commercial Bank of Ethiopia (CBE) and foreign banks stood at five billion Birr in 2022/23.

All debt owed by the Group to the CBE has been transferred to the state-run Liability Asset Management Corporation (LAMC) and the Ministry of Finance over the past few years.

In 2022, 102 billion Birr in outstanding debt was transferred to LAMC, with another 25 billion Birr owed to Chinese creditors was transferred to the Ministry’s books the following year.

The report reveals that provisions for legal claims arising from litigations of labor cases, contractual and extra contractual liability and property damage claims stood at 1.3 billion Birr in June 2023, up from 759 million Birr the year prior.

Contingent liabilities are also held, as there are a number of legal cases pending. One significant case involves Amibara Agricultural Development PLC.

The firm entered an agreement to supply sugarcane to Kessem sugar factory and later filed a claim for 1.2 billion Birr, alleging damage and losses related to sugarcane that was either spoiled or left unutilized, according to the report.

ESIG disputed the claim, asserting the loss did not result from negligence or contractual breach. The Federal High Court ruled in favor of ESIG, however, Amibara appealed and the case is currently under review.

A number of projects under the Group remain suspended. The estate in Welkait reportedly requires a minimum of 42 billion Birr to recover from the impacts of the northern conflict, an amount Group executives are looking to cover through bank loans.

Tendaho was also affected by the conflict, while the termination of most of its staff has raised uncertainty about the continued existence of the estate. Omo Kuraz I has been at a standstill despite construction on the project progressing to 83 percent, according to the report. The estate has been in limbo since the contract with the former Metals and Engineering Corporation (MetEC) was voided in 2018.

The Group’s management is weighing its options, which include privatising a few or all of the sugar estates it operates. However, the government’s repeated efforts to sell off its stake in the troubled sugar industry have failed time and again.

Earlier this month, the executives of EIH presented a quarterly performance report to Parliament in which they characterized the Group as one of four state-owned enterprises (SOEs) determined to be in “critical condition.”

Meleket Sahlu, deputy CEO of EIH, told lawmakers that efforts to privatize eight sugar estates under the Sugar Industry Group have halted after a number of tenders failed to attract sound offers from bidders, even under direct negotiations.