Following the high profile corruption probe into Keangnam Enterprises and the death of chairman of the company last April, the fate of the cash strapped South Korean construction company in Ethiopia is in peril.
Company sources told The Reporter that machineries and equipment of the company are being unlawfully sold to local contractors. Sources claim that asphalt plant, crasher plant, bulldozers, motor graders, excavators, rollers, dump trucks and light vehicles have been unlawfully sold for cheap prices by some officials of the company.
“These machineries were temporarily imported with bonds. Local contractors are buying the machineries for cheap prices. But all the parties involved will be held accountable,” sources said.
They added that the machineries are being sold without proper documentation and some individuals are benefiting from the illegal transactions.
“The persons that are selling the machineries and equipment do not have the legal authorization to sell the properties of the company. Even some equipment from the company’s workshop at Dukem are sold like scrap materials,” sources said. They also said that the Ethiopian Revenues and Customs Authority is investigating the matter. Keangnam has a big workshop that lies on a 50,000sqm plot of land in Dukem town.
The management of the company refuted the allegations. Temesgen Bekele, assistant manager at Keangnam, told The Reporter that all the accusations are baseless. ” Keangnam is a big international company. There is no way that it could sell properties illegally. We are selling the machineries in accordance with the country’s customs law,” Temesgen said.
Temesgen said that Keangnam is a big company that has successfully undertaken major road construction projects in Ethiopia. “We have constructed a total of 1600km of road in Ethiopia. We have more than 1,000 employees.”
According to Temesgen, the sale of machineries does not have anything to do with the death of the chairman of the company Sung Wan-jong who committed suicide last April following a high profile corruption charge launched on Keangnam Enterprises by the South Korean government.
The builder has been at the center of a bribery scandal involving several South Korean political heavyweights. Keangnam has 1,500 construction machineries and trucks in Ethiopia.
“Some of the machineries are imported with temporary bond, others are imported duty free and still others are duty paid. We have finalized most of our projects. Some of the machineries are scrap. The company has two options-to sell the machineries here or to re-export them. We are selling those which are imported free of customs duty to companies who have duty free privilege with appropriate procedures of the Ethiopian Revenues and Customs Authority. For the machineries that are imported with temporary bond we are selling them after we pay the required customs duty and tax.”
According to Temesgen, in the past two months only the company paid more than 43 million birr in customs duty and tax for 45 machineries. He said that he does not have the details of the total number of machineries sold and the total amount of money collected from the transactions at hand.
Head of the Material Department, Lee Myung Chul, is on vacation in South Korea.
Keangnam did not auction the machineries. It rather hired a sales agent, a private company called Sarfe Business, that sells the machineries. Since the company is cash strapped the sales agent provides cash to be paid for customs duty. After selling the machineries Keangnam pays back to Sarfe.
Temesgen said that most of the machineries sold were imported for the Azezo-Genete-Metema road construction project which was completed sometime ago. According to him, some of the machineries were transferred to the Aposto-Erbamuda road construction project but that project is also finalized. “So we are selling the machineries before the bond period expires.” The machineries were imported in 2007.
Keangnam entered the Ethiopian market in 1997. The company’s first project was the Addis Ababa Bole International Airport runway upgrade work. Since then the company built roads including the Modjo-Awash-Gewane, Hirna-Kulubi, Azezo-Genete-Metema, Hossana-Sodo, Alaba-Humbo, Aposto-Erbamuda, and Jimma-Bonga-Mizan. The Jimma-Bonga road was recently inaugurated while work on the Bonga-Mizan road is 97 percent complete.
However, its client, the Ethiopian Roads Authority has put Keangnam in its black list. Recently, ERA snatched the Meki-Zeway expressway road construction project from Keangnam after financier of the project the EX-IM Bank of South Korea refused to release the fund saying it has lost confidence on Keangnam.
Sources told The Reporter that Keangnam does not have the required financial resource to win and execute road construction project in Ethiopia. They said that the company’s future is bleak. “Unless they pull money from abroad the company’s life in Ethiopia is numbered,” sources added. The news originating from Seoul supports sources claim.
Keangnam was established in 1951 and was publicly traded since 1963. Last April the company was delisted from the Korea Stock Exchange after it failed to deal with mounting debt. Keangnam left the Korea Exchange 42 years after it became the first construction company to go public in South Korea. Keangnam suffered a spiral loses of USD 263 million and USD 155 million in 2013 and 2014 respectively. Creditors claim USD 913 million from Keangnam. In a bid to revive the company the management of Keangnam is trying to sell a 72 story sky scraper in Hanoi, Vietnam.