Nestlé want $6m from starving Ethiopians

Just before Christmas, an Oxfam campaign exposed how Nestlé, as if afraid its public image was getting too positive, has shot itself in the foot by demanding a compensation settlement of around US$6m from the Ethiopian government for the 1975 nationalisation of a company they didn’t even own at the time.

The Ethiopian government has offered a settlement worth around $1.5m - the value of the initial shareholding, with compound interest of 6%. The basis of Nestlé's claim against the Ethiopian Government is that it wants the settlement valued in US dollars at the exchange rate in force at the time of the nationalization, as this gives it a far greater sum. As British Nestlé critics Baby Milk Action point out, ‘Why Nestlé should require payment in dollars rather than the Ethiopian currency is unclear - Nestlé operates in Ethiopia today and could presumably make use of the Ethiopian currency - the Birr - particularly as it claimed it would invest the money in Ethiopia. Nestlé's home country is Switzerland and its accounts are presented in Swiss Francs. The subsidiary more directly involved is German, operating in Euros. It appears that Nestlé is selecting a currency and a time to set the exchange rate to maximise its income.’1
Struggling desperately to drag itself out of the PR hole they’d dug for themselves, Nestlé suggested they would donate the money to famine relief, and the issue was ‘a matter of principle’. But what principle? The Schweisfurth Group’s Ethiopian holdings were nationalised by the totalitarian Dergue regime in 1975, the parent company was then taken over by Nestlé in 1986. Aftre years of civil war and upheaval, Ethiopia emerged with a democratic government and, in the mid-1990s, on the orders of international creditors, started compensating for the nationalisations of the previous regime. So the principle Nestlé speaks of is presumably the principle that the government of a starving and effectively bankrupt country should pay out for the actions of its despotic predecessor to one of the world’s richest companies, in ‘compensation’ for takeover of assets of a company which Nestlé did not then own, and which it presumably took over in the full understanding that the Ethiopian assets were effectively gone. High principles indeed.

Meanwhile, a report published last week by the British Medical Journal (BMJ)2 exposed serious malpractice in the marketing of breastmilk substitutes in the West African countries of Burkina Faso and Togo, where companies including Nestlé, Danone and Wyeth were found to be in breach of the International Code of Marketing of Breastmilk Substitutes. Biased and misleading information (not mentioning the health benefits of breastfeeding and promoting substitutes as equivalent to breastmilk) was distributed to health professionals and mothers, free samples were being distributed to health professionals and breastmilk substitutes were advertised in pharmacies and other supply points in both countries and on billboards in Burkina Faso. Obviously the ‘principle’ of the superiority of breastfeeding is still rather hard for Nestlé to grasp.

1. Baby Milk Action press release: http://www.babymilkaction.org/press/press07jan03.html
2. Abstract of report at http://bmj.com/cgi/content/abstract/326/7381/127?ijkey=wdTivVGidY5Bo