The war of words between global coffee giant Nestle and Ethiopia over a $6-million compensation claim is a good example of the insensitivity displayed by giant multinational corporations to poor countries, especially in Africa.

Nestle has been demanding that the cash-strapped Ethiopia pay that money in compensation for a business that was nationalised by a different government 27 years ago. 

To make matters worse, Nestle didn’t even own that company when the military government of Mengistu Haile Mariam nationalised the Ethiopian Livestock Development Company (Elidico) in 1975. 

A German company, Schweisfurth Group, did. In 1986, Nestle bought the German company and thus "inherited" the claim.

Although Nestle may legally have a claim, the timing of the demand is wrong: 11 million Ethiopians face starvation, which many predict may get worse than the 1984 disaster which killed more than a million people.

In any case, even were Ethiopia able to pay, why should it give Nestle a cent when the pertinent legal issues have not yet been satisfactorily settled?

The demand comes on the heels of the collapse of world coffee prices. A quarter of Ethiopia's population depends on this crop. So, why this pestering?

Six million dollars is not a big deal for Nestle. It actually represents about an hour's turnover for a company that posted sales of $59.36 billion and pre-tax profits of $6.15 billion last year and made profits of about $3.9 billion in the first six months of this year alone.

But for poor Ethiopia, this money is enough, as British charity, Oxfam, says, to provide clean water to more than four million people or sink 6,500 wells. That money could also be enough to feed a million people a month.

Ethiopia has been willing to pay $1.5 million – just over half the value of the company at the time it was nationalised. But Nestle is insisting that the payment be converted at the 1975 exchange rates, a sinister demand that adds $4.5m to the bill. 

Ethiopia's $1.5-million figure is based on the current exchange rate between the dollar and the local currency, the birr. Nestle executives know that Ethiopia is yet to recover from the 2000 famine and three years of failed rains. 

And as the world's leading coffee processor, the firm also knows how the collapse in coffee prices has affected Ethiopia. 

Coffee makes up 60 per cent of Ethiopia’s exports. Yet, due to plummeting prices, the country is losing about twice as much in revenue as it gained from the recent debt relief. This is causing a severe strain on resources. Therefore, a $6 million burden is not to be sneezed at.

Looked at differently, Ethiopia has the lowest income a head in the world, with the average person surviving on $100 a year. Again, more than a tenth of its children die before their first birthday, and it has the fifth highest number of HIV/Aids infected people in Africa, which is an additional pressure.

Mr Peter Brabeck-Letmathe, Nestle's chief executive, says they are pursuing the issue as a "matter of principle", but viewed from a humanitarian angle, the transnational has little choice but to abandon the claim on a moral platform. That is what ethics is all about.

We all agree there are international laws that govern investments, but there comes a time when companies must rise above the profit motive and think about the people who toil to grow the coffee that brings it profits.

Ethiopian Prime Minister Meles Zenawi says that, by February, some 15 million of his people could face starvation. Available guaranteed food resources for January are only 65 per cent of the requirement for the month.

It is, therefore, possible that food aid supplies will not be sufficient for the first quarter of 2003, when relief food will be required urgently.

Food assistance equalling 1.4 million tonnes will be needed to prevent what could still be a manageable crisis becoming a humanitarian disaster. Ethiopia thus needs large-scale assistance.

That is why Ms Sophia Tickell, a policy analyst with Oxfam, correctly says that, at the very least, Nestle should have accepted the settlement offered by the Ethiopia government or dropped the claim altogether.

While foreign investments must be protected against rogue regimes, it is only fair that the talks between Ethiopia, the World Bank and Nestle be pegged on what Ethiopia can comfortably pay. 

Although some may argue that Ethiopia must pay just to avoid setting a bad precedent, Nestle can also set a good precedent by showing the people of Ethiopia that it really cares.

It is disheartening that Nestle only stopped pushing the demand because it fears a consumer boycott of its products across Europe.

Nestle has a history of this kind. Its products were boycotted for years over its aggressive sale of baby-milk formula to developing countries where hygiene standards made breast milk safer. 

A boycott over Ethiopia is something they cannot afford.

---

Mr Kamau is the editor of Rights Features Service