Why Do Ethiopians Want to See Karuturi Fail?

News Politics

“I have invented and discovered commercial farming in Ethiopia…. [but] Why does everybody here wants me to fail? …. Touch me, then you will see the power of India… The irony is, if the project succeeds it benefits Ethiopia but if it fails it harms nobody but Karuturi.” – Sai Ramakrishna Karuturi, founder and managing director of Karuturi Global Ltd.
By Birhanu Fikade | for The Reporter,

Sai Ramakrishna Karuturi, founder and managing director of Karuturi Global Ltd, claims that he is the person who introduced commercial farming in Ethiopia. However, his performance has been disappointing, he admits. He is having a troubled time in relation to settling bank loans.

The following is an exclusive interview The Reporter has conducted with Karuturi where he candidly and boldly argues on the insurmountable challenges he has been forced to face in his operations here in Ethiopia starting from land acquisition procedures to financing mechanisms: Excerpts: 

The Reporter: The Commercial Bank of Ethiopia (CBE) has announced foreclosure against your farmland in Gambella. You are also embroiled in a loan repayment issue with Zemen Bank. Tell us about your debt situation.

Sai Ramakrishna Karuturi: We have invested a lot in this country. I have invested my own money here. But of course banks have provided us with some loans. Yes, Zemen Bank has extended some 70 or 80 million birr to us. We also have borrowed from CBE.

You have also borrowed from Dashen Bank, right?

Dashen Bank gave me only 10 million birr in 2006 and I paid them back the next year. So we don’t owe anything to Dashen Bank. The only banks we owe money to are Zemen and CBE. Today, the remaining loan with Zemen is 26 million which we are in a comfortable position to repay.

But we recall that Zemen Bank had to file lawsuits to make you repay the loans.

You see Ethiopia is a country with its own laws, culture and heritage. If you have to function harmoniously in this country, you have to follow the rules and regulations of this country. The National Bank of Ethiopia (NBE) has certain governing guidelines. Banks cannot extend moratorium even if the assets are 100 times more than the loan. They have to see whether it is becoming a non-performing loan. If that happens, they announce an auction because, they genuinely feel that they will lose their money. It is not for me to question. However, the very same country, by its very same laws, provides relief mechanisms to borrowers who are interested in repaying the loan. We are capable of paying the loan. We have assets to justify we can repay the loan. When an investor, either an Ethiopian national or a foreigner, meets the conditions, the law allows you to go to a judge to present yourself, to offer reconciliation from the effects of NBE’s strict guidelines. After the court order, we paid Zemen Bank the money in three days. Why? Because our money was coming but they couldn’t wait. They do what they have to do but we know the money is coming. But you might not be in a position to believe because of the constraints of the law. Hence, they have canceled all the proceedings.

Ethiopia is a very orthodox country. They have very strong values, very strong customs which are both its strength and weakness. I am a friend of Ethiopia. I came here because I love this country. I love the place and I have invested a lot of my money in this country. I am not standing to claim. I am not a public person to be responsible to all questions. But society is the stakeholder. Because government has trusted and imposed their interest in me to develop land they have given me in Gambella. I have every intention to achieve that. I am the rose king of the world. I don’t need to tell anybody. Everybody knows it. I control ten present of the global flower market.

One day, I met a very great man holding a great position in this government whose name I need not mention. I had an appointment with him. While sitting in the reception I saw a newspaper which said ‘Ethiopia imports 70 thousand tons of wheat from South Africa’. After conducting my business, I said 80 million people with more than 100 million hectares of land with plenty of rain and sunshine, but importing food from South Africa hurts me. I am nobody. I am not the World Bank. But it hurts. That great leader asked me to invest in agriculture but I had no idea. I only knew Abeba (flower). But I was offered land near Bako town some 260 km west in Addis. I started cultivation there.

In the meantime, the president of Gambella wanted to see me. I asked where the embassy was. Mark my words, I thought Gambella was a different country. Pardon my ignorance. I was told he will visit me at my office. Instead, we met at Ghion Hotel and he said they will give me land in Gambella. Hence, we went to Gambella at the invitation of the president and government of Gambella. We asked for 10 thousand hectares of land.

You say you only have asked for 10 thousand. But reports suggest that you received some 300 thousand hectares, isn’t it?

It’s on record and I can produce in any court of law. The entire cabinet of Gambella government was in a meeting and said you have to take 300 thousand but said I can only take ten thousand and that was all in my capacity. I was given the absence of choice. The gentlemen after the meeting called me and said we will give you 300 thousand hectares. I said ‘thank you but I only can do with 10 thousand’. They insisted that I should take 300 thousand and I will make the terms but they will not give less than that.

The government was criticized from many corners for giving away such a huge land at a low price.

I didn’t take it. You only can eat one injera at a time. But I put down five and say eat. After some time, I came back and blame you why you couldn’t finish. What is the logic behind that?

But at no time was it disclosed that you requested only 10 thousand hectares. Why is that? The government was publicly saying they granted your company 100 thousand hectares while, according to your account, you were actually offered 300 thousand hectares.

When the agreement was drafted I pleaded with them not to put 300 thousand but they forced and put the amount stated.

We have a copy of the agreement which states that you have been offered 300 thousand. But the government denies the total amount they have offered.

You might be having a document copy from the then Ministry of Agriculture (currently, the Ministry of agriculture and Natural Resources) issued. That is not the mother document. The mother document is the Gambella agreement. This agreement is for 300 thousand hectares. Later on, a fresh agreement was made which says I will receive 100 thousand hectares to cultivate and 200 thousand more I can get if I want and if I can finish cultivating the 100 thousand. Is it my choice or your [country’s] desperation that caused all that?

I have invented and discovered commercial farming in Ethiopia. It is not my word. These are the words of great people in this country. The government of Ethiopia was very happy because they have created horticulture, they have created meat exports and they have done so much. But commercial farming by foreign investors has never been thought of as a potential venture. Hence, Karuturi was the first to do.

But I think it was Saudi Star which first ventured in that area and again that also turned out to be a disappointment to the government.

A lot international publicity came on the way. Some have supported and other opposed commercial farming. In between, the villagization program came in to make things more complex. Some said the program was introduced to clear land belonging to the residents and to give out that land to commercial farms. Such statements clicked so well in the international media which mostly write badly about Africa. Back in those days, it was the same in India. The Ethiopian government has given some three or four million hectares but today except for Karuturi and Saudi Star you can’t show me the third foreign company in commercial agriculture here. All have left and run away. Do you want me to run away too?

But how long should it take and how long shall one wait if there is nothing after six years?

I don’t know. It will take 60 years? When a hot spring came in Gilgel Gibe III, could you tell me how long it is going to take to generate electricity? You tell me. I was sitting in my house with a generator running because for two years there was not enough power. Hot water came into the tunnel at the hydroelectric power dam. Whose fault is that? These are acts of God.

Let’s get back to the foreclosure issue now…

There is no foreclosure according to me. If there is, go and write about that. I have a company that owes me a 100 million birr. I have to collect 350 million birr receivables in the market. But what I owe CBE is just 55 million birr. The bank is duty bound to follow the rule book. I have no complaints and no regrets. I respect them for what they are doing.

Last year over the phone you told me that you had settled the 25 percent down payment of the total 65 million birr loan CBE had extended. You also told me that the rest was to be paid out in a month’s time. But it took a year without paying the bank?

Yes, but they refused to accept.

What do you mean they refused?

Because of many technicalities. It happens. Sometimes, technicality is very…

Technicality in a sense…?

It is too complex to understand. Why the rescheduling of the loan did not happen? It’s because of the NBE’s guidelines again. It says we have to pay 25 percent of the outstanding amount which we have paid.

But I don’t see that hindering you from paying the entire amount anytime you want?

We have paid the 25 percent and we have proof for that. But NBE says loan should be rescheduled and they didn’t. For that I can’t answer for CBE. Hence, they have asked me to pay more and I did. Last month, I paid four million birr, I think. There is tightness in the market. The CBE people think if they shake me I will send a check from India. I can do that but I will not do that. I am a gentleman. I don’t owe any money to the Ethiopian Revenues and Customs Authority (ERCA). I haven’t broken any law and haven’t been prosecuted in any court of law in this country. I have respect for everybody.

I am the lion who went to Gambella. Wounded maybe, but I am still a lion. I am not bragging or boasting. How many people have gone to Gambella? Some Ethiopian friends of mine were telling me its madness to go to Gambella. But I said I will manage; and I thanked them for their concerns. But I went to Gambella with a purpose of increasing food production in this country. But I don’t know since when that has become a crime. I have put my money and I have developed my farm. One kilogram of rice here is sold for 60 birr or three dollars. But the international cost of rice is 350 dollars per ton. I am supplying to the government of Djibouti on contract at 350 dollars per ton. But here you pay 3000 dollars per ton. Why should you pay that much? What about the poor people? What I am trying to do is increase the supply of food on the table.

High officials touted Karuturi as the future success story of commercial farming in Ethiopia. But, unfortunately, that didn’t materialize and it is admitted that it has become another failure story.

I agree our performance is a disappointing one. But you have to stop right there. You don’t need to go further. I am the one who went to Gambella. I had spent several nights in a tent with several snakes, lions and millions of deer. You think you can scare me? Go try somewhere else. As far as the law is concerned, I have rights that I have not enforced but I have been neglected by some jokers.

The bilateral investment protection agreement between India and Ethiopia protects me. Touch me, then you will see the power of India. This is a threat because enough is enough. I don’t have to defend myself. I challenge [any official of the Ministry of Agriculture and Natural Resources] to touch my land. Then they will face the consequences in the international court of justice. I am only half Ethiopian. I have spent ten years of my life here. I still don’t know the country fully. In this country there is a wonderful structure of government. There is a top government structure with honest, well-meaning and wise people with good intentions ruling this country. That may not be practical but they are leading with good intentions. But there is a middle kingdom and because of party affiliations cannot be removed from posts and who have been problematic for many. I will challenge you to an open political debate on this. I have no right to talk beyond this point because I don’t hold Ethiopian citizenship. I’m just a guest in this country.

The government expects you to perform at a certain level and when your performances does not meet the expectations then…

Whose expectations and who is the government? I am questioning the government. I have put my money what my father gave me in Gambella. What have you given me? What has the government given me?

For instance, the huge fertile land to mention one…

B*** S**t! You can print that. You have given me flood plains that are under water for nine months of the year and I am creating agricultural land out of it. If you want to challenge that there is enough statistics to it. The Baro River flood plain, when the water goes towards Sudan, comes back after some time and floods the farm. You gave me a land which is completely worthless on its own. The land you gave me requires me to invest my money to make it come out of the water. With due respect to the government, every single investor has been given a perfectly worthless land by the government.

Worthless? Is that not a bit exaggerated?

Yes, no doubt about that. You invited all of us to this country. By that time I said this government is very brilliant. They give land with 135 birr per hectare around Holeta which is now an area and more precious land than Gambella. The land in Gambella is 10 to 12 percent sloppy and full of eucalyptus trees. It costs 1,000 dollars per hectare to remove the trees. What you have given to me is for 50 years.

Have you made such complaints to the authorities?

Of course, I did. The value of the foreign investor before he brings the money and after is not the same. It’s the truth of the world. I told [a former top official at the Ministry of Trade] this case. I told him the land I was offered was not good and I asked for flat land. They said they don’t give more than 20 hectares. I needed hundred more hectares. While leaving, he told me I can buy directly from farmers. I didn’t know this was possible. I have learnt it was possible to lease the land from farmers directly. I negotiated with farmers in Holeta, my first investment in this country. I paid 30,000 birr per hectare and took the land on lease. My farm in Holeta, therefore, is neither obtained on loan nor given to me by the government. It is given to me by the farmers. Do I look like a guy who is on land grab? You are willing to give a land on 135 birr per hectare but I said no but thank you and I went rather to pay 30,000 birr. I must have been stupid. Impressed by what I did the government has offered me a flat land in Wolliso.

CBE is asking for the loans it has extended to be repaid. The same holds true for the other banks. Government officials are saying they are disappointed. Then what will be your future?

I cannot predict my future, neither can you. But you can create your future, so can I. Why does everybody want me to fail? Why is everybody waiting for me to die? Do I look like a person who is going to shut it down? Forgive me, you got your perceptions wrong.

I see you are very frustrated.

I have learnt one thing in my ten years of wonderful journey in Ethiopia. Don’t try but if you try you should succeed. If you fail you will be crucified. Who the hell are you to crucify me? Failure is a not acceptable here. But the Silicon Valley in the US says that failure is treasure. But in Africa, if you fail you are finished. If you fall, the vultures come and wait for you to die and then eat you well. I am not asking anybody in the government or anybody in the banking system to help me or nurse me to get back to health. I am not asking for help and I have not troubled anybody. I am trying to do what I believe is a noble job which is creating food.

For the agricultural investment issues it’s the Ethiopian Agricultural Investment Agency at the Ministry of Agriculture and Natural Resources that has the mandate to follow up your activities. How do you see their assessment?

The Ethiopian Agricultural Investment Agency has been set up to monitor and develop large-scale commercial farming. I am with you on that. But if you ask Karuturi is under the agency or under the supervision of that agency and respective officials, the answer is definitely not. Karuturi is being monitored by officials from the Office of the Prime Minister. Don’t ask me why but that is how it is and I am responsible to them not to the Agricultural Investment Agency. They don’t have jurisdiction on me and I say to them back off. You can talk to the Prime Minister’s office for anything related to our project.

By the way, if the project succeeds it benefits Ethiopia but if it fails it harms nobody but Karuturi. That is for a fact. You can do the analysis. In 2007, the late Prime Minister Meles [Zenawi] told me I can sale shares to the public to raise capital but I told him that I have enough money to finish this project and I didn’t go to the share market which just lately started to be regulated. I didn’t go to the Development Bank of Ethiopia (DBE).

But you have borrowed from CBE for your operations

That’s not true. This fight between CBE and me is because of one reason. I wanted to bring USD 180 million to develop my project. I have applied to NBE to give me the permission to bring this money and later I have to repatriate it since I have to repay the loan from the Indian bank. NBE couldn’t take a decision on such sum. I have sought a solution from the Prime Minister and he said no problem as long as I bring the money. Then NBE gave me the permission.

A year and a half later, my bankers came ready to give me the 180 million dollars. But, unfortunately, lawyers said to my bankers that my Indian bankers are not allowed to extend me the money, citing foreign banks are not allowed to operate here. That means you can’t create collateral out of your property here. We were advised to take some loans from local banks to make partners so that they will give us a letter of comfort to proceed. Based on that, we have pledged to CBE for a loan providing only 25 thousand hectares as collateral. But the Ministry of Agriculture and Natural Resources gave them a title deed of 100 thousand hectares for four million dollars. We were hoping CBE will give us the security but five years later they didn’t. They say so many things for not doing so. Therefore, my bankers lost the appetite and went away and I lost the 180 million dollars loan due to CBE’s unwillingness. We both have now arrived at a point to fight. Beyond this point, I am limited for what I can say.