Date: Sat, 5 Nov 2011 14:12:25 +0100
Wikileaks: EFFORT used $100 Million US from aid money, Seeye Abraha
Saturday, November 5th, 2011
<http://ecadforum.com/> Seeye Abraha was one of the leaders of the Tigrayan People's Liberation Front (TPLF)
Ad TPLF bestowed a portion of this initial roughly US $100 million to each of the three other component parties in the ruling Ethiopian People’s Revolutionary Democratic Front
Seeye Abraha
SIPDIS
E.O. 12958: DECL: 03/18/2019
TAGS: ECONPGOVEAIDET
SUBJECT: PARTY-STATALS: HOW THE RULING PARTIES’
“ENDOWMENTS” OPERATE
ADDIS ABAB 00000677 001.2 OF 003
Classified By: Ambassador Donald Yamamoto for reasons 1.4 (B) and (D).
SUMMARY ——-
¶1. (C) Upon taking power in 1991, the ruling Tigrayan People’s Liberation
Front (TPLF) liquidated non-military assets held by the movement to found a
series of companies whose profits would be used as venture capital to
rehabilitate the war-torn Tigray region’s economy. The TPLF bestowed a
portion of this initial roughly US $100 million to each of the three other
component parties in the ruling Ethiopian People’s Revolutionary Democratic
Front (EPRDF) coalition to establish similar endeavors in each of their home
regions. While companies were initially established in the names of party
loyalists, they were formally transferred to the Endowment Fund for the
Rehabilitation of Tigray (EFFORT) under the “endowment” provisions within
the Ethiopian civil code, which prevented individuals from withdrawing money
from enterprises for their own gain. Although the Board of Directors of
EFFORT closely monitors the finances and business plans for each company
under its umbrella, EFFORT’s books themselves are not subject to any
transparent external review. Throughout the 1990s, EFFORT commissioned
feasibility studies and provided capital for various commercial ventures
throughout Tigray. In this decade, however, no new EFFORT ventures have been
established despite significant profits, lending credibility to the popular
perception that the ruling party and its members are drawing on endowment
resources to fund their own interests or for personal gain. End Summary.
LIQUIDATED AID RESOURCES USED TO FOUND THE ENDOWMENTS
——————————————— ——–
¶2. (C) Seeye Abraha (strictly protect), the Chief Executive Officer of
EFFORT from 1995 until his expulsion from the TPLF in 2001, detailed
EFFORT’s founding and operations to Pol/Econ Chief in a two-hour discussion
on March 17. Seeye noted that the TPLF had received huge amounts of
international assistance, particularly from the United States, throughout
the 1980s to support its struggle against the Derg government and to provide
relief to the Tigrayan people. Whatever food or other in-kind support that
they could use or transport into Tigray, they would. They sold the excess
food and support items in Sudan for cash. At the end of the struggle, the
TPLF incorporated whatever military materiel it held into the Ethiopian
military’s inventory, kept all of its more than 100 transport lorries, and
liquidated most of the remaining stock held. Seeye estimated that in 1991
the TPLF had roughly $100 million liquidated. Acknowledging that these
resources did not belong to individual TPLF members, the party decided to
use the funds as a perpetual relief mechanism for the Tigrayan people who
suffered the costs of the struggle.
VENTURE CAPITAL TO REHABILITATE TIGRAY
————————————–
¶3. (C) Initially, the party allocated a portion of the funds available to
assist families of those who died in the struggle directly. The bulk,
however, was used as venture capital to establish companies to generate
perpetual income sources for new ventures. From 1991 to 1995, these
companies were coordinated under the Economic Affairs Department of the TPLF
under the leadership of Sebhat Nega. Convinced that party insiders were more
loyal to the party than interested in personal gain, the initial companies
were established with individual party insiders listed as the owners.
Additional resources were used to fund feasibility studies for other
local-resource intensive ventures of interest.
¶4. (C) In 1995, the Defense Minister and long-time confidant of Prime
Minister Meles, Seeye Abraha assumed control of the rehabilitation-intended
entities. Recognizing the potential liability of having massive resources
held in private names, Seeye and the TPLF established EFFORT as a caretaker
foundation for the rehabilitation efforts. Seeye acknowledged that some
ADDIS ABAB 00000677 002.2 OF 003 capital had been lost in the years prior to his assuming control, but declined to give details. Having inherited only a relatively primitive civil code, the party decided that the “Endowment” provisions therein offered the best means to secure the resources available for rehabilitation without any loopholes to allow individuals to withdraw capital for personal gain. The TPLF gave a portion of its wealth to each of the other three parties in the EPRDF to establish their own endowment funds. The Amhara National Democratic Movement’s (ANDM) endowment is called Tirit, the Southern Ethiopian People’s Democratic Movement (SEPDM) founded Wendo Trading, and the Oromo People’s Democratic Organization (OPDO) established Dinsho. (Note: While Seeye confirmed that the TPLF provided funds for these other rehabilitation funds, which later became endowments, he never had direct involvement in any of those funds/endowments operations. End Note.)
¶5. (C) Once established under EFFORT, each company was transformed into a
shareholder company. Seeye argued that the TPLF’s intention in the mid-1990s
was for EFFORT to study, and then establish, profitable companies that used
locally-available resources and provided employment for Tigray. Examples of
firms established early include a transportation company to use the trucks
used in earlier relief efforts, the Messebo Cement plant outside of Mekele,
a trading house, and Almeda Garments outside of Mekele which would use
cotton grown in Tigray as an input. Feasibility studies were done for a
marble factory, a gold mine (in joint venture with Ghana’s Ashanti Gold),
and construction firms. EFFORT intended to establish companies under a
Build-Operate-Transfer (BOT) model offering the sale of established
companies to citizens through the sale of shares with the profits and
proceeds going to fund new commercial ventures. EFFORT was charged with
reviewing each company’s finances and business plans. While EFFORT was
controlled by a CEO and Board of Directors drawn solely from TPLF party
loyalists, Seeye confirmed that each company it controlled was managed and
reviewed by professionals with significant expertise in each company’s
relative sector. Managers were expected to keep and provide detailed
financial accounting, but to transfer profits not being re-invested to
EFFORT. EFFORT accounts were only internally reviewed by the party.
AN APPARENT SHIFT SINCE 2001
—————————-
¶6. (C) During the rift within the TPLF in 2001, much of the EFFORT Board of
Directors sided with their CEO Seeye and were expelled from the party. One
who did not, Sebhat Nega, was rewarded with the CEO position. (Note: As
Seeye has not been involved in EFFORT since 2001, and is now in the
political opposition, his perceptions of EFFORT dynamics since 2001 may be
skewed or intended to influence. Still, his long-term, close relationships
with those who do remain in the party’s top echelon and his — and his
family’s — attention to Tigray and continued friendships with many still in
office, do lend some credibility to his analysis of EFFORT activities since
¶2001. End Note). According to Seeye, upon Sebhat’s assumption of the CEO
position, all EFFORT companies were re-registered from shareholder companies
to private limited companies — potentially reflecting a shift in the BOT
approach previously pursued. While we do not know how profitable all of the
EFFORT companies are, we can assume that government protectionism and excess
demand in major sectors such as transportation, cement, and construction has
ensured that many of the larger EFFORT companies are reaping large profits.
At the same time, Seeye confirms that none of the ventures for which
feasibility studies or analyses were conducted while he remained at EFFORT
have been established in the interceding years — suggesting that profits are
not being rolled over into new Tigray rehabilitation endeavors, but diverted
elsewhere.
¶7. (C) Seeye argued confidently that the business community’s perception
that EFFORT’s and similar EPRDF parties endowments’ companies receive
preferential access to limited credit and/or foreign exchange stocks, or
treatment on government bids and contracts, customs clearance, and
ADDIS ABAB 00000677 003.2 OF 003
import/export license is certainly true. He went so far as to argue that
these “party-statals” likely receive preferences even over the special
treatment received by state-owned enterprises. Seeye argued that, much like
Sebhat Nega’s removal from the TPLF Central Committee in 2006, his removal
as CEO of EFFORT in late 2008 likely reflects tensions between Sebhat and
Prime Minister Meles’ wife Azeb Mesfin. While former regional Vice President
of Tigray Abadi Zemo has taken over the CEO position at EFFORT, Seeye argued
that Azeb’s ascendance to the EFFORT Vice Chairmanship reflects an
increasing consolidation of influence within the party and control over
resources by Meles and Azeb.
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