Capital Market Authority butts heads with Ashewa Tech, Purpose Black
Suspicious share offerings from untested businesses promising impossible dividends threaten the financial wellbeing of a largely uninformed public as the authorities lag behind on the introduction of legislation that would govern public offerings.
Warnings from regulators at the newly-formed Capital Market Authority or senior officials at the Ministry of Trade and Regional Integration have done little to discourage a crop of new businesses from offering unregulated stakes in their questionable operations to the public, with promises of a return on investment that commercial bank executives can only dream of.
A TV advertisement has been making the rounds on national broadcast channels in recent weeks, announcing an opportunity for an eye-watering 14-fold profit margin in four years via investment in a new and relatively unknown technology firm.
Ashewa Technologies S.C, the company behind the ads, claims it will deliver close to 7 million birr in returns on a 500,000 birr investment within a four-year period. Interested buyers who do not have half a million birr to invest, according to the ad, can buy a tenth of a share with nine other investors for 50,000 birr each.
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The Reporter recently paid a visit to the offices of Ashewa Technologies S.C. on the eighth floor of Town Square Mall on Djibouti Street in the Haya Hulet neighborhood, disguised as an interested share buyer.
The sales personnel inside the mid-sized office greeted visitors with confidence and almost immediately began their sales pitch with a comparison to the world’s largest tech firms.
“They [Meta, Amazon] are all single platforms, but successful now. We will build several platforms like them,” said a member of senior management at Ashewa’s sales department.
He told The Reporter his employer provides several kinds of digital services: e-commerce, enterprise resource planning (ERP), e-learning, website design, and software development.
A look at the company’s (largely plagiarized) website reveals similar information, barring a tab for “e-payment” services, which it says are “coming soon.” The website also reveals that Ashewa Technologies S.C. was established in 2020 by “entrepreneur Daniel Bekele and his 5 friends.”
Following the introduction to Ashewa’s services, the salesman moved on to a tirade on the lack of tech awareness in Ethiopia.
“We [Ethiopians] don’t understand how greatly we can benefit from technology,” he said. “Technology is the backbone of wealthy countries, yet we don’t use it enough as a country.”
The salesman compared the platforms he claims have been developed by Ashewa to the software used by well-known taxi services such as RIDE and Feres.
“The software business is very profitable,” he told The Reporter. “We will develop several of these [kinds of] software.”
Ashewa’s website makes similar claims about its software development prowess, and lists partnerships with commercial banks such as the Bank of Abyssinia and Dashen Bank, as well as with state-owned enterprises Ethio telecom and Ethiopian Airlines.
The company website also falsely claims that Ashewa is an official partner of IBM, the tech multinational.
A quick search of IBM’s official partners list available on IBM’s official website turns up blank for “Ashewa” or “Ashewa Technologies.”
Further examination of the Ashewa company website and the website builder used to construct it reveals a list of ready-made templates that anyone (including Ashewa) can purchase online for a small fee, or even for free.
According to the salesperson, however, Ashewa built, launched and manages the website completely independently.
The only one of Ashewas digital services that appears to function is its e-commerce site: “Ashewa.com”.
The retail platform offers some 600 products, most of which are small household accessories, perfumes, cosmetic products, and gift packages. The company website claims Ashewa operates a warehouse and delivery network in Addis Ababa, as well as an office in Nairobi.
The Reporter was unable to find any premises or business licenses registered to Ashewa Technologies in Kenya.
The website information on Ashewa’s e-learning services is vague, and although it repeatedly mentions tailored online courses for “students, employees, and the public,” there is no sign that these courses actually exist.
The information under the website’s e-logistics tab is similarly uninformative.
A closer look at the company website shows that two foreign individuals – “Mr. Darius F.” and “Alberto Lopez-Doriga” – are members of Ashewa’s senior management team.
Mr. F is named as the Chief Technology Advisor with the Ashewa website claiming he is an “experienced full stack developer” while Lopez-Doriga is listed as an “Advisor and Business Developer.”
Reverse Google image searches for both of these individuals reveal they do not exist, or at least, not at Ashewa.
“Mr. F” turns out to be an individual named Darius Manea, a seasoned financial analyst currently working as a corporate accountant at Edenred Pay, a financial services firm based in Florida, USA.
Lopez-Doriega is a management consultant based in Valencia, Spain. The Reporter was unable to verify the existence of any links between Lopez-Doriega and Ashewa.
Despite the red flags, the company website and its senior management claim Ashewa has managed to raise 200 million birr in subscribed capital from an unspecified number of shareholders over the last year and a half.
Kasse Assefa is the marketing and sales manager at Ashewa. His face appears beside those of “Mr. F” and “Lopez-Doriga” on the list of executives on Ashewa’s website.
Kasse told The Reporter that Ashewa is looking to raise an additional 100 million birr in capital before the end of the month.
He claims the company is 80 percent of the way there, meaning it has reportedly raised an additional 80 million birr from the public. But why does Ashewa require capital on par with most Ethiopian insurance firms?
“Tech companies like ours have massive promotional and marketing expenses,” said Kasse. “We might need physical infrastructure like a data center.”
A data center is indeed a costly endeavor. Dashen Bank paid over 230 million birr to erect a tier-3 data center at its headquarters last year. But Dashen is one of the country’s largest commercial banks, operates with close to 1,000 branches, and has billions of bytes of transactional and other data to process every day.
On the other hand, a glance around Ashewa’s head office reveals about a dozen employees.
Kasse, however, claims the company employs more than 200 staff, and the additional capital it is raising will help it “equip itself with better-skilled labor.”
The skilled labor will be crucial if Ashewa is to deliver on its promises of a 1400 percent return on investment in four years’ time.
For context, Awash Bank, the most successful private commercial bank in Ethiopia, managed a 57 percent return on investment last year.
“It isn’t difficult to achieve the promised profit,” said Kasse. “We can deliver the returns as planned as the profit margins in the sector are huge.”
Despite repeated attempts, Ashewa’s management did not share copies of the company’s investor agreements, articles of association, or its prospectus with The Reporter before this edition went to print.
Nonetheless, the opaqueness does not discourage Kasse from taking pride in “the strong bond” between investors and the company.
“Every investor has their questions answered,” he said. “We’re doing a clean job.”
The list of Ashewa’s investors might soon include a middle-aged woman who was leaving Ashewa’s office premises on the afternoon of December 25, 2023.
The woman, who requested anonymity, told The Reporter she is considering buying a tenth of a share using 50,000 birr of her money. She was almost sold on the tantalizing idea of close to 700,000 birr in returns in four years’ time.
“Tell me, then, what am I supposed to do with this 50,000 birr?” she replied when asked about her faith in the investment.
“I might not know what they [Ashewa] do in detail, but I know for sure I don’t have a better use for this sum of money,” she said.
The woman told The Reporter she first heard about Ashewa Technologies on television.
Another company that has come to heads with officials at the Capital Market Authority is Purpose Black – a self-styled multi-business firm that has been selling shares in a cooperative housing and commercial development it allegedly plans to construct in the center of Addis Ababa.
A few months ago, Purpose Black announced it is selling shares in the development project (which, according to the company, will be a “skyscraper”) valued at 1.5 million birr apiece.
The phrasing of the announcement and ensuing advertisements stirred controversy, as it appeared to be offering a three-bedroom flat in the center of the capital for 1.5 million birr. No less than 1,000 people bought shares from Purpose Black under the impression the payment was for a flat that would otherwise have sold for a sum closer to 50 million birr at current market rates.
“We will give the housing to shareholders as gifts,” Fisseha Eshetu, CEO of Purpose Black, told local media in June 2023. “We didn’t say we would sell the housing for 1.5 million birr.”
Nonetheless, the misunderstanding led officials at the Authority to issue a notice, cautioning the public to exercise caution when buying shares.
Although the Capital Market proclamation issued in July 2021 obliges any issuer of securities to obtain approval of its prospectus from the Capital Market Authority before advertising for a public offering, the law cannot be implemented for lack of a directive.
The Authority did not exist outside of government project offices until December 2022, when its heads, including founding Director-General Brook Taye (PhD), were named to their posts.
It has been a year since Brook, a former advisor to the Minister of Finance, and his management team took the helm at the Authority, but there is still no sign of the directive that would force companies like Ashewa and Purpose Black to submit prospectuses to the Authority for review.
During an interview with The Reporter six months ago, Brook said his team was working to “expedite [the preparation of the directive] at bullet speed.”
The draft directive is still in the consultation stage, awaiting approval.
The Director-General says the delay is due to the novelty of the legislation and fears of disturbing the market.
“We have to come up with a directive that is carefully constructed in consultation with all stakeholders,” said Brook.
He fears a rushed preparation could discourage successful businesses that have been raising finance using public offerings.
“Of course, the directive is late and the Authority has to speed it up,” he said. “We’re pushing really hard.”
The directive would oblige companies like Ashewa to prepare a prospectus that clearly outlines strategies and investment risks.
“It will require businesses to tell the investor they could face losses as well as gain profits,” said Brook.
The management at Ashewa, however, sees nothing wrong with their aggressive share offerings. The company’s sales team is not obliged to tell potential buyers their investments may go down the drain.
“The public gets sufficient information from us, but any investor knows about risks,” said Kasse. “Any share buyer is aware of this principle. It is a general fact.”
Kasse argues that Ashewa’s operations are all legal and legitimate. He is aware of the contents of the directive in the works at the Authority.
“Since the new law hasn’t been implemented, we aren’t required to follow it,” Kasse told The Reporter.
Still, the legality of Ashewa’s operations in the time period between the issuance of the proclamation and the directive are subject to legal scrutiny, according to Brook.
“If what [Ashewa] is doing turns out to be illegal, they should be held accountable,” he said.
Brook observes the Ministry of Justice and the Trade Ministry have the jurisdiction to investigate the offerings and operations of firms like Ashewa.
Meanwhile, experts observe the return on investment promised by Ashewa Technologies is virtually impossible to achieve.
Share companies are typically less successful in Ethiopia due to a lack of regulatory frameworks, according to Dakito Alemu (PhD), a financial expert and lecturer at Addis Ababa University’s School of Commerce.
Dakito argues that financial institutions (commercial banks and insurance firms) have enjoyed success as share companies due to support from the National Bank of Ethiopia (NBE).
“This is despite the weakness of the financial institutions’ corporate governance,” said Dakito.
He argues the government should have begun regulating the sale of shares as soon as the Capital Market proclamation became effective two-and-a-half years ago.
Dakito observes there is no need to wait for a directive to enforce laws on the sale of shares.
“It is good to also have the directive, but the proclamation itself states clearly that no share shall be sold without the knowledge of the Authority,” Dakito told The Reporter.
On the other hand, Tadesse Lencho (PhD), a prominent law expert and managing partner at TBeST Law LLP, argues the directive can offer rigorous provisions to help the Authority execute the law effectively, which might not be possible with the proclamation alone.
He advises the authorities to issue public notices to issue the uncertainties in share offerings while legal frameworks are being drafted.
Tadesse also urges the public to practice caution when buying shares; “just like they do when buying food.”
“When buying shares, the public must ask who the promoters are, and who is behind the company,” he said.
Tadesse also points to the Commercial Code, which rules that a share company has to reimburse investors (with interest, in some cases) in the case of default.
“Failure to do so would make the company liable for civil or criminal suits,” said the legal expert.
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