Dangerous ‘Red Terror’ Still in Demand



Dump trucks are important in the construction industry and Sinotruk is a popular brand because of its price and other features. However, as DAWIT ENDESHAW, FORTUNE STAFF WRITER, finds out, profits are declining and modifying the trucks has led to their taking first share in fatal accidents in the city.


On a Thursday afternoon less than ten days ago, a truck was speeding along the quiet back roads that lead west from Ayat. As it made a right turn at the Summit bottling plant, the driver lost control and hit the concrete barrier on the corner before overturning and landing on its side. The chunk of concrete promptly fell off; taking with it some of the stone masonry that made up the retaining wall separating the turn from the roundabout a couple of metres below. The debris landed on the popular three-wheeled vehicle, commonly referred to as bajaj, instantaneously flattening it and the four passengers within. Among the group was a 23 year old mother on her way to bring her son home from school.

Despite the horror dump trucks regularly inflict on the road, more and more persons are selling their belongings to invest in acquiring them for the business of serving the country’s booming construction industry. Even as a business venture, ownership of a truck is risky. However, their disrepute has not come from the realm of trucking but from that of road safety.

The vivid red colour of the Sinotruks has ideological and historical association in Ethiopia and adds to their terrifying reputation. Despite this, it is common to see them lined up and busy at construction sites around the city.

Key Shiber, literally meaning Red Terror, is no misnomer for the trucks that are notorious on Ethiopian roads for all too often being the cause of fatal accidents. In fact, they take first place on the list of accident-causing vehicles in Ethiopia. Different brands of similar models are sometimes generically called Sino trucks as well.

Convinced by their observation of higher demand for trucks by construction sites in and outside of the city, Alayu Asayu and Girma Legesse, father and son, pooled their resources and bought a Sinotruk.

On a cloudy Wednesday afternoon, the two were at the construction site of the newly started Adey Abeba Stadium, where excavation is now underway, on a vast plot of land located in front of the former Imperial Hotel. They went there with the hope of making a deal with Abayneh Mekonnen Construction Company, contractor for the excavation job. In the two months since excavation began, the company had already rented close to 40 trucks to truck soil away from an area of 200,000 cubic metres.

Girma sold his older truck, and financed his 1.7 million Br new acquisition through a bank loan.

He had changed trucks with the hope that he would earn more income. But the investment seems slow off the mark in bringing anticipated returns.

“So far we have been able to get only short term work,” the father said. “Finding lasting contracts has been a headache.”

A few metres up ahead, Gebrehiwot Gebremeskel looked pleased as he drove his own truck into the construction site. He is lucky to have secured a contract for his Sino with a carrying capacity of 18 cubic metres of soil.

“I have had a bad experience managing drivers,” he recalled smiling proudly. “Now I take care of everything: safe for my truck, safe for my business.”

A single tyre on his trucks costs 10,000 Br. He claimed to have saved a significant amount of money by driving carefully to make sure they last at least eight months. When he had another driver managing his truck, it required a change of tyres every four months, amounting to 100,000 Br for the set of 10.

Usually a Sinotruk driver gets about 9,000 Br a month and their assistants receive 3,000 Br, including their per diems. Nevertheless, his experience revealed the practice of hired drivers and their assistants engaging in side businesses, which leads to excess and improper utilization of the trucks, heightening the chance of their causing accidents.

He did not mind driving 16km back and forth to Bole-Bulbula, where the soil from the stadium’s excavation soil is dumped. Each round trip earns Gebrehiwot 400 Br. So far, he has made 70 trips in five days.

Average monthly income for owners cum operators like Gebrehiwot ranges from 35,000 Br to 40,000 Br, after covering all expenses. Yet, compared to what he used to earn two years ago, his income has declined.

“Rent an hour used to be 550 Br to 600 Br then,” he recalled. “Now with the increasing number of Sinos on the market the chances are high that it might decline even further than the 300 Br to 400 Br we get now.”

Contrary to that decline, the price of the red trucks has increased. Gebrehiwot’s investment of 1.17 million Br was 600,000 Br less than that of Alay and Girma.

Last year the price of the trucks ranged from 1.1 million Br to 1.2 million Br if buying from importers, and an additional quarter of a million Birr when buying through bank loans.

Bunna and Lion banks seem to be dominant lenders for financing such purchases. However, this perception in the industry has not been supported by an authoritative survey.

Given the foreign exchange crunch and reductions in the export of grains such as sesame, traders, who are also importers of these trucks, are the ones being blamed for the price hike, according to an industry operator, who wished to remain unnamed.

“They compensate their losses using such techniques,” he said.

An importer that has been in the market for the last two years, sells trucks at the price of up to 1.4 million Br. This company receives its trucks from a wholesaler in China.

Following the commencement of the first Growth & Transformation Plan (GTP I) and its Universal Road Accessibility Programme (URAP), the country imported 58,725 dump trucks from China alone in 2012. In the following three years, it added 7,503 more trucks from the same country.

“The price jump is caused by the increase in demand in the market, nothing else,” said the same operator, who works at the import section of the company.

While banks and importers are seeing opportunity in the profit margins of the business of supplying Sinotruks, insurance companies are shying away because of the number of accidents in which they are involved. And the number of accidents is escalating by the day.

Traffic accidents cause two per cent of all deaths in Ethiopia, ranking tenth on the country’s cause of death list, right beside malaria, according to 2013 data from the Centre for Disease Control & Prevention (CDC). However, data from the World Health Organisation (WHO), used to compile the publication World Health Rankings in May 2014, identified road and traffic accidents as the number 12 cause of deaths in Ethiopia, at an increased share of 2.5pc.

Of the 17,904 accidents that occurred in Addis Abeba in the year 2013/14, 20pc were caused by dump trucks. In the next year, the number of total accidents increased by 38pc, and single carriage trucks caused almost 10,000 of those.

The increasing cost of claims incurred by insurance companies increases the premium owners are required to pay for coverage. For dozer trucks like the Caterpillar brands, the annual premium is only 18,000 Br to 20,000 Br but for the Sino dump trucks, the premium for comprehensive insurance may be as high as 34,000 Br.

Five years ago, the premium charged was around two per cent of the total cost of the trucks. But now, the insurance industry is increasing the rate. The current average rate of premium charged by insurance companies is between 3.5pc to 4.5pc of the cost of the trucks.

One insurer, Oromia Insurance Company (OIC), S.C., based on the loss ratio specifically caused by this brand, conducted a five-year study beginning in 2011. The results showed that the company had been paying 184 Br for each 100 Br it received. Total claims paid last year amounted to 50.5 million Br.

“The severity and frequency of the damage is alarming,” said a manager at one OIC branch, who preferred not to be named.

Under these circumstances, OIC was forced to increase its premiums by 41pc. It also adjusted the amount of loss the owners are supposed to bear. Previously, owners bore the cost of five per cent of the damage but based on the study’s results, that was increased to 10pc.

Given the competition in the insurance sector newer companies charge less – some with a difference of up to 2.5pc, attracting customers away from other companies. However, they soon also follow similar direction, upping the premium to the truck owner, according to the Manager.

Based on the significant number of Sinos and the influence of their owners, who are either contractors or exporters in the market, it is difficult for insurance companies to stop insuring these trucks.

“You can’t say no to them,” said an Underwriting Manager at Lion Insurance.

His company has reported 101.5 million Br gross claims. Frequent and severe damage caused by accidents involving Sino trucks is said to be one of the reasons for the escalation.

Those in the industry list various elements as causative agents to the car’s accident-prone nature. One is the incompatibility that can arise within the truck’s body structure when it is modified.

For instance, Nissan brand trucks predominantly have a carrying capacity of only 10 cubic metres. However, after these Japanese trucks come to Ethiopia, many owners opt to upgrade them to higher carrying capacity.

He is also the. This upgrading is technically incorrect because the volume is made in line with carrying and the brake capacity, according to Tamrat Tegegne, a technician who specializes in heavy trucks, and also owns a maintenance and troubleshooting centre in a place called Gorro on the outskirts of Addis Abeba.

“If there is imbalance between the two, that can lead to an accident,” he said.

His maintenance centre is among many that lie along the streets of Gorro, and are dedicated to heavy trucks. From those parked along the road, and inside those centres, red-coloured Sinos dominate the scene.

Imbalance between the brakes and carrying capacity of Sinos usually has this technical problem, said Tamrat. Most of them are beyond the limit, carrying from 320qt to 380qt. The Nissans carry up to 200qt.

When such imbalance occurs the brakes are unable to control the vehicle. For instance, if it is Nissan and the brakes air pipe is cut because of friction, the truck will immediately stop. But when it comes to Sino truck, the brakes cannot control the vehicle. It keeps moving even when the driver applies the brakes. This is how most of the accidents occur, according to Tamrat.

“In an attempt to minimize accidents, owners now visit our garage to reduce the volume of the trucks,” Tamrat disclosed while showing a scrap of metal removed from one Sino last week. “At least in one week two trucks will be refurbished.”

Sileshe Dejene, a presenter on Sheger 102.1 FM radio programme, ‘Car Talk’, who also owns a maintenance workshop, concurred with Tamrat, arguing that the trucks’ loading capacity has to be minimized to be like that of Nissan.

“Ten tyres cannot handle an additional six cubic metres of volume,” he explained.

The training format of human resources where drivers’ get their licences should also change, Sileshi suggests. Drivers need to have more experience before they can be allowed to move from one category to the other. There should be a longer interval in between.

Despite escalating accidents, a number of factors push people to prefer Sino trucks: speed, carrying capacity, lower oil consumption and their relatively inexpensive prices. They cost less than IVECO, DAF and similar dump trucks on the market, which fetch prices of up to three times more in comparison. But, they can be as fast as 80km to 90km an hour and their carrying capacity can range from 14 cubic metres to 16 cubic metres and 18 cubic metres respectively.

The operational income is another factor that keeps attracting buyers. One Sino can generate up to 60,000 Br of gross sales each month. A year ago this figure peaked to 100,000 Br, a man in his mid-thirties with more than 15 years of experience as a driver told Fortune.

The generated revenue is enough to warrant hiring other staff. Some owners, unlike Gebrehiwot prefer to do so even though they share his concerns about mismanagement.

Kalu Bayabil, a Sino truck owner, used savings from his equb (traditional savings scheme) to meet half the cost of his truck, securing the other half through a loan from Bunna International Bank S.C.

He pays surprise visits to the sites where his truck works and calculates payment on an hourly basis to avoid speeding by his drivers

“I ask for 600 Br an hour,” Kalu said.

To his dismay, the jobs on offer only give half of what he asks.

On that Wednesday afternoon of March 9, 2016, Kalu presented himself at the construction site to negotiate a price with the company and to agree on modality of payment. Even at that time, his truck had completed only two trips.



By DAWIT ENDESHAW
FORTUNE STAFF WRITER

Published on Mar 21,2016 [ Vol 16 ,No 829]


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