Nestle insists on Ethiopia refund

Ethiopia faces critical food shortages

The Swiss-based food giant, Nestle, has defended its demand for $6m in compensation from famine-stricken Ethiopia.

The dispute with the Ethiopian Government centres on a livestock firm that was owned by Germany's Schweisfurth Group, a Nestle subsidiary, before being nationalised by the former communist regime in 1975.

Nestle has been offered $1.5 m so far

"I think it goes way beyond the legal case," a Nestle spokesman told the BBC.

"I think it is in the interest of the developing countries in general to have a continued flow of foreign direct investment."

He said it was "very important for a country like Ethiopia that people do not fear to invest in that country".

More than 40 governments and individuals are making claims against the Ethiopian Government for money lost during the communist regime.

According to poverty relief organisation Oxfam, the Ethiopian Government has offered to pay Nestle about $1.5m (£930,000) - a figure based on the current exchange rate between the dollar and the Ethiopian birr.

But the food giant is pushing for a payment of $6m, a sum based on the exchange rate in force at the time of the nationalisation.

Claim condemned

Oxfam has condemned Nestle's stance, saying there is no justification for diverting Ethiopian Government money to a multinational which made profits of about $3.9bn (£2.4bn) in the first six months of this year.

"This is a company that has said publicly that one of the things it wants to do in the world is to help make poor people better off. This is a company that is trying to squeeze out of one of the poorest countries in the world $6m," said Oxfam's director of policy in the UK, Justin Forsyth.

Famine fear

Ethiopia, with average gross domestic product per person of just $100 a year, faces the prospect of its most serious famine since 1984 after drought caused widespread crop failures earlier this year.

"The disaster we had in 1984 to1995 - the number of people involved was roughly a third to one half of the number of people involved now. So if that was a nightmare this will be too ghastly to contemplate," the Ethiopian Prime Minister Meles Zenawi recently told the BBC.

Government revenues have been seriously depleted by a slump in the world price of coffee, the country's principal export.

The World Bank's investment arm is taking part in negotiations between Nestle and the Ethiopian officials.

"This $1m in our opinion is justifiable. But this is not the point of view of Nestle. They are trying to get as much as they can," said a World Bank spokesman.