The Ethiopian Sugar Industry Group (ESIG) is embroiled in a legal dispute following the termination of a supply agreement, triggered by recent foreign exchange liberalization reforms.

Founded under Ethiopian Investment Holdings in 2022, ESIG oversees sugar sales and manages milling projects.

It now faces a 1.4 billion birr lawsuit from Agrocorp International, a Singaporean agricultural commodity trading company, over the annulment of a contract to supply 100,000 metric tons of sugar.

According to information obtained by Capital, the two parties entered into a contract in April 2024 to supply sugar aimed at stabilizing the market. This was necessary as domestic sugar mills, including the autonomous factories at Wonji Shoa, Metehara, Kessem, Fincha, and Tana Beles, were operating well below capacity.

After several months of unsuccessful negotiations, ESIG decided to cancel the contract, leading to the current litigation. The group cited potential price increases stemming from changes in the foreign exchange regime introduced in July 2024 as part of significant macroeconomic reforms.

Sources indicate that ESIG contends it should not be held to the agreement due to the substantial devaluation of the birr, which the group claims would inflate the cost of imported sugar beyond initial estimates. During negotiations, ESIG asserted that it was not liable for the contract because it had not issued a letter of credit (LC).

Agrocorp countered that the LC serves as a payment mechanism and does not invalidate the contract. After months of fruitless discussions, Agrocorp—familiar with the Ethiopian market and public procurement processes—filed a lawsuit in court.

Agrocorp alleges that ESIG breached the agreement, resulting in significant financial losses, and is seeking compensation for damages due to the contract’s cancellation. The original contract specified that Agrocorp would supply 100,000 metric tons of sugar, to be shipped in four lots. Following the breakdown of negotiations, the company filed its claim with a higher court in February 2025.

The contract detailed that the sugar was to be loaded from an Indian port, and Agrocorp claims its losses stem from payments already made for procuring the sugar. When the agreement was finalized, the sugar was priced at USD 880 per metric ton on a CFR (cost and freight) free-out basis at Djibouti Port, with shipments to be managed by the Ethiopian Shipping and Logistics. The contract also included a 12-month deferred payment provision.

Attempts by Capital to contact Weyo Roba, Chief Executive Officer of ESIG, were unsuccessful, and the group’s public relations department declined to comment, citing the ongoing court proceedings.

Ethiopia’s annual sugar demand is approximately 750,000 tons, while local production meets only around 400,000 tons. The remaining demand is fulfilled through imports, which are now predominantly handled by private importers as the country seeks to shift away from a state monopoly and promote greater private sector involvement.

The government has expressed strong interest in privatizing some public sugar mills; however, past responses to invitations for investment have been disappointing. A few years ago, the government approached potential large domestic investors, offering various incentives to take over parts of the factories—either independently or in partnership with international firms—but those efforts have yet to yield results.