Eight-year-old 126 mln Birr machinery supply contract remains unfulfilled
The administration of the Somali Regional State is grappling with the aftermath of an unfulfilled 126 million Birr machinery procurement deal dating nearly eight years back, as construction delays and supplier failures force officials to consider folding a series of rural food production projects.
An investigation conducted by The Reporter found the Somali regional administration has nothing to show for its efforts after spending close to eight years and at least 126.2 million Birr on the development of poultry, dairy, honey, and horticulture processing plants in rural parts of the region.
The Somali Irrigation and Basin Development Bureau entered into a contractual agreement in November 2017 for the procurement and installation of manufacturing equipment at six major processing plants—factories to process poultry, milk, tomatoes, and honey—as part of an initiative to fuel the region’s industrial growth.
The contract, valued at just over 126.5 million Birr, was signed between Suldan Mahmed Hasan, then head of the Bureau, and Jonas Kassahun, managing director of the supplier, Frieda Business Group PLC, according to documents obtained by The Reporter.
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Frieda was expected to supply 47 million Birr worth of machines to two milk processing plants envisioned to hold a combined capacity of 25,000 liters a day, as well as equipment valued at close to 41 million Birr for a tomato and ketchup processing plant the officials in charge of the project said would have a 5,000 kilogram-a-day capacity.
Adding nearly 21 million Birr for poultry and honey processing equipment at two other plants and value added tax (VAT), the total procurement cost tops 126 million Birr.
The letter of agreement stipulated that Frieda, an Ethiopian firm established in February 2004. and headquartered in Addis Ababa, was to deliver the various manufacturing machines to proposed sites within seven calendar months from the date of signing—November 23, 2017.
The supplier also agreed to maintain the machinery for a one-year warranty period starting from the delivery date and to replace any malfunctioning equipment during this time.
The agreement stated that payment would be made in two installments: half as an advance (backed by a bank guarantee), and the remainder upon delivery, acceptance, and commissioning of the machinery.
Frieda Business Group PLC also agreed to assign one engineer and a site supervisor free of charge for up to three months.
The contract also stated that neither the supplier nor the procuring agency would be held liable for delays due to force majeure.
Despite this comprehensive agreement, The Reporter’s investigation found that for over two years after the signing, no meaningful development took place.[The investigation constitutes a thorough examination of relevant documents and interviews with regional authorities and witnesses.]
“Not a single machine was delivered. No one—not the public, not local workers, not development partners—saw any benefit. What should have been a proud achievement for the Somali Region quietly became a forgotten file,” a source familiar with the project told The Reporter, requesting anonymity.
A new development emerged in early 2019, two years after the original agreement was signed.
The parties agreed to revise the contract effective March 7, 2019.
The amendment retained the original contract amount and clauses related to erection, commissioning, and force majeure.
The amendment—this time signed by Ameddeq Mohamed Abdi, then head of the Irrigation and Basin Development Bureau, and Jonas Kassahun—did however make adjustments to the delivery timeline.
While the original contract required delivery within seven months of signing, the amendment allowed the supplier eight months from the completion of the civil works for the main processing factory buildings.
The paperwork cited reasons for the delay.
“Despite the supplier’s repeated and timely letters urging speed in the construction of the main factory buildings, our office [Somali Regional State Irrigation and Basin Development Bureau] could not execute the shed construction,” reads the document.
The reasons cited included budget allocation issues, regional instability, and site selection problems.
The contract was then amended and re-signed to allow the supplier time to extend the bank guarantee in line with new construction timelines.
A letter from Bunna International Bank S.C., dated November 25, 2017, confirmed that it had issued an advance payment guarantee of 63.25 million birr on behalf of Frieda Business Group PLC.
The guarantee, signed by Getachew Tadesse, then manager of the Olympia Branch in Addis Ababa, stated the amount was payable upon submission of documentation that the supplier had failed to fulfill its obligations.
The guarantee was valid for 210 days and set to expire on June 22, 2018, or upon receiving an official release statement.
Today, more than eight years after the initial agreement and six years on from the amendment, the project has shown no progress.
Mohammed Fatah, current head of the Irrigation and Basin Development Bureau, told The Reporter that none of the machinery has been delivered and shed light on the most recent developments concerning the project.
At the time the original contract was signed, Mohammed headed the regional Education Bureau. Now as the official in charge of the project, Mohammed acknowledges the long delay.
“There were initially—before the 2018 reform—six factories launched as part of the Bureau’s rural development projects,” he said. “Contracts had already been awarded for the supply of machinery for these factories. However, the machinery was never delivered.”
He told The Reporter the representatives of Frieda Business group were recently summoned to the office of the regional president to discuss options.
“One option being considered is a full refund. Another is for the company to provide alternative machinery for a new project. A third is to give them a new deadline. During discussions with the representative—myself and the President’s office — we presented these options,” Mohammed said.
He claims the company is open to any of the three options.
Frieda is engaged in general construction, real estate development, machinery rental, and the importation of industrial equipment. Over the years, Frieda has positioned itself as a local contractor with regional ambitions, involved in various public and private sector development initiatives across Ethiopia.
Aside from the controversial 2017 factory contract, Frieda Business Group has also been involved in the federal government’s flagship Gebeta Lehager initiative—specifically in projects based in the Somali and Shebelle regions.
“Since the contract has dragged on for eight years, all responsible bodies must be held accountable. The company has recently — just a week ago — reaffirmed to the President’s Office that they are willing to either return the funds in full or execute a new project. We’ve agreed to set a final deadline,” he said.
Mohammed also shared with the Reporter which option the regional state prefers:“From our side, we prefer to implement a new project. The value of the money eight years ago is not the same today.”
Based on inflation data from the Central Statistics Service and other economic trackers, the contract value has ballooned to more than 640 million Birr over the course of eight years. Since 2020 in particular, Ethiopia has experienced sharp rises in consumer prices, with annual inflation averaging above 25 percent in recent years.
This means the real value of the original contract has drastically eroded, making a refund or delayed delivery far less viable.
Mohammed noted a preferred alternative project:“For instance, a potential project near Jigjiga has been identified. Engineers from both the company and our Bureau have visited the site. From our perspective, it is more worthwhile to proceed with a project at today’s cost. A final decision will be made next week.”
The Office of the Regional President and the Bureau responsible for the factories have also outlined possible futures for the project:
“Considering national capacity, the government alone cannot operate these factories. If feasible, we are considering transferring them to private operators to make them functional,” said Mohammed. “For example, the poultry factory in Jigjiga already has sheds built and a fenced compound. Young people engaged in poultry production could be empowered to run it. We are working to transfer this factory to those youth groups, while keeping ownership under the government. Work has already begun.”
Efforts to contact Frieda Business Group for comment via repeated phone calls were unsuccessful.
The food processing saga is the latest in a series of incomplete public projects to raise eyebrows in the Somali region, to date.
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