Ethiopian freight forwarders have called for recognition of the role the private sector in the industry plays in stimulating the economy, while a leading figure among them decried the near monopoly a state enterprise holds on the logistics corridor.
In what was the first regional summit, to be held in the country by an offshoot of the Fédération Internationale des Associations de Transitaires et Assimilés (FIATA), a powerful global lobby for forwarding companies, Ethiopia’s rather inefficient and costly logistics industry came under scrutiny evoking heated debate.
State-owned Ethiopian Shipping & Logistics Services Enterprise (ESLSE) has held the private sector under its inordinate shade for so long the industry is impaired by the monopoly. The country’s 45 freight forwarding companies have urged that it is time to let them have a piece of the pie.
The freight forwarding business in Ethiopia is treated no better than a shipping agent which is not allowed to have either dry port or container storage facilities of its own, Salahadin Khalifa, one of the leaders of Ethiopia’s Freight Forwarders Association complained. The Association is a local lobby group established 20 years ago. It has put all its weight in persuading the regional group, RAME, to convene its annual summit in Addis Abeba, the second to be held in Africa after Ghana.
“In the past, conflicts were all over Africa, we were very reluctant to come,” said one of the founding members of RAME, who now lectures in Logistics Leadership at Harvard University. “Look at Africa now – largely at peace with itself, while the Middle East is on fire all over,” he added.
The local Association, chaired by Mulugeta Assefa of MACCFA Business Group, takes pride in the fact that it hosted 120 guests from 20 countries, in a forum of 375 participants held on Friday, May 20, 2016. Among them was Arkebe Oqubay (PhD), special advisor to the Prime Minister with ministerial rank. He has been the key figure representing the country’s quest for industrial transformation under. Arkebe was acclaimed for his preparation and organised presentation selling Ethiopia’s promise to foreign investors. Reiterating the promotion pitches of Ethiopia’s successive growth of the debatable 11pc in gross domestic product (GDP); its huge population of both workers and consumers; and low cost of electric power, he made a persuasive case for Ethiopia.
But he received a mixed reaction to his feel-good narrative of investing in Ethiopia.
“I feel like I live in a different world,” said a businessman who is a veteran in the logistics sector. “His depiction of the business climate is heaven-sent.”
Others were not pleased with his portrayal of a rather upbeat prospect of Ethiopia’s economic future, largely attaching it to industrial parks projects being executed across the country by a state corporation he chairs.
“It’s unfortunate to see him dock down the whole industry of logistics into a singular project of industrial parks,” said another businessman.
These views were openly articulated by Kassahun Aberu, a founding shareholder of AKAKAS Logistic Plc who has done his doctoral studies inTransport Economics from Hungary.
Kassahun has argued that the culprit for the escalating congestion at ports in Djibouti, where 15,000 containers are stranded now, is due to the monopoly granted to the Enterprise (ESLSE).
“ESLSE’s market share has not come from competition but by decree and regulations,” he said. “We have the same licence as it does in handling multimodal shipments but it solely works with them.”
Beginning in 1999, the Enterprise, which has amalgamated the shipping, maritime and dry port operations, has been sheltered from competition through a system known in the industry as multimodal transport operations. Importers are not allowed to open letters of credit if they fail to produce bills of lading from the Enterprise, or waiver if the ships do not reach the ports where the cargo is to be brought in.
Over 60pc of incoming cargo is carried by the Enterprise through its own vessels or ships chartered by its competitors. Its maritime department handles all the business at the port, while transport companies it hires every six months are the only operators doing business with it.
“Anywhere in the world, in the presence of monopoly, there is inefficiency,” Kassahun told the gathering at the UNECA. “The role of the private sector has not been accorded its rightful place. It [the Enterprise] sees this sector [logistics] as one that does not add value but collects rent.”
Kassahun won resounding applause for daring the speak his mind openly, facing officials such as Mekonnen Abera, general director of the Ethiopian Maritime Affairs Authority and Ahmed Tusa, CEO of the Enterprise.
The resentment of private sector logistics companies was evident at the international summit, which the Association’s leaders had worked on for so long to have it convened in Addis Abeba. The Association hopes that its gathering here will influence and change the government’s long held policy of sheltering the Enterprise at any cost.
It costs 2,380 dollars to export and a little less than 3,000 dollars to import a 20ft container from and to Ethiopia, according to UNCTAD, the UN agency for trade and development. This places Ethiopia somewhere in the middle between the five best performing countries with an average cost of 580 dollars for a 20ft container, and the five worst performing nations with a cost double the costs in Ethiopia. No less than 40 days are required for a container to be delivered by the Enterprise, compared with just four days in the best performing countries.
Delegates agreed that loss of competitive edge is a result of incompetence, cost escalation, and inefficiency in agricultural and industrial inputs as well as high storage costs both in Djibouti and the dry ports in landlocked Ethiopia. Over 80pc of the holdup of cargo is caused by lack of trucks and cargo delays in transit, according to Aboubaker O. Hadi, chairman of Djibouti Ports & Free Zone Authority, an entity which demonstrated its show of force by sponsoring the summit and claiming a commanding presence at the exhibition displayed during the summit.
For Mekonnen, a veteran of the industry, these are just dots of the bigger picture and not a diagnosis of the whole systemic malaise. Disputing the assertion that there is a monopoly in the logistics corridor, he anticipates that the adoption of a national logistics strategy, which has been in the making for years, will address many of the complaints the industry makes. In the absence of overhauling the entire system, fixating on a single entity, however, large it might be is all about missing the target.
“There is no total monopoly,” said Mekonnen. “There is a piece that they want so much – the multimodal shipment. Otherwise, most are deregulated one at a time.”
However, demand to have a slice of the pie in the multimodal transport operation is just one demand the industry has, according to Mulugeta. Freight forwarders are asking the Authority to provide them with incentives such land for dry ports in a fair deal; a container freight station; and privileges in duty free imports of machinery to support the growth of the industry.
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