Ethiopian delegation to participate at Canada-Africa business summit
An Ethiopian delegation led by Tedros Adhanom (PhD), minister of Foreign Affairs, will partake at the first annual Canada-Africa Business Summit to be held next month in Toronto, Canada.
The Canadian Council on Africa (CCAfrica), in collaboration with the Government of Canada and the World Bank Group, will organize the inaugural Canada-Africa Business Summit from September 15-18, 2014, at the Fairmont Royal York Hotel in Toronto, Ontario, Canada.
A large Ethiopian business delegation comprising of manufactures and exporters will participate at the forum. Senior Ethiopian government officials drawn from the Ethiopian Ministry of Foreign Affairs, Ministry of Trade, and Investment Commission, among others, will attend the conference. Officials of the Ethiopia and Addis Ababa Chambers of Commerce and Sectoral Associations will also be in attendance.
According to the organizers, delegations from 20 African countries will participate at the forum. Heads of governments, ministers, governors, and CEOs from Africa and Canada are expected to deliberate on doing business in Africa. Renowned Canadian corporate businesses will be represented by their CEOs.
Ethiopian Airlines is a gold sponsor of the 4-day conference. Ethiopian Airlines Group CEO Tewolde Gebremariam is a key note speaker. Ethiopian is the only airline that has a direct flight between Africa and Canada.
Canadian oil and mining firms are active in Ethiopia. Africa Oil, a Vancouver based oil firm, is engaged in four oil exploration projects in Ethiopia. Allana Potash, a Canadian mining firm, is developing one of the largest potash mine in the world in the Afar Regional State. According to the Ministry of Mines of Ethiopia, 13 Canadian companies have signed contracts for the exploration of potash and precious and base metals, with a registered capital of USD 6.5 million. In January 2010, Canada concluded an Air Services Agreement with Ethiopia. Ethiopian Airlines flights from Addis Ababa to Toronto began in July 2012. According to a Memorandum of Understanding signed between Canada and Ethiopia in 2003, Ethiopian exports of textile and apparel goods have tariff-free access to the Canadian market.
Ethiopian Airlines is a reliable customer of Bombardier, a Canadian aircraft manufacturer. Bombardier is one of the sponsors of the Canada-Africa business summit.
Trade flows between Canada and Ethiopia are modest but with the potential for growth in the short- to medium-term and are subject to significant year-to-year changes due to the one-time order of high-value products like aircraft. In 2013, the two-way trade came to USD 39.2 million, with USD 21.3 million in Canadian exports to Ethiopia and USD 17.8 million of imports from Ethiopia into Canada. The year before, 2012, had seen a large boost in Canadian exports to Ethiopia, which stood at USD 123.6 million that year, due to the delivery of a number of Q400 aircraft from Bombardier to the Ethiopian Airlines. Bombardier has also set up a regional maintenance facility for the Q400 aircraft in Addis Ababa. Canada’s imports from Ethiopia consist mainly of agri-food products, such as coffee, team spices and oilseeds.
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Japanese deputy FM urges ease of investment procedures
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Neway Gebreab, Economic Advisor to the PM and Hirotaka Ishihara
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According to recent reports of the World Bank Group, Ethiopia is acclaimed for fast economic progresses and is attracting a high volume of foreign direct investment, however, for Hirotaka Ishihara, parliamentary vice-minister of foreign affairs of Japan, Ethiopia is far from Japanese expectations.
The vice minister led a business delegation and held a trade and investment seminar on Monday in Addis Ababa. His visit was focused on more of a fact-finding mission for investment and trade for Japanese firms in Ethiopia. The three-day mission, dubbed: “The Japanese Public and Private Delegation for Promotion,” brought some 15 companies from Japan.
During a press conference, Ishihara told reporters that the mission he headed was his second one and it was destined to grasp investment opportunities in Ethiopia. Except for a few companies like Hiroki Co. Ltd, which is earmarking investments on fine leather products, and Marubeni Corporation, which is attaching itself with the geothermal sector, are the only companies that can be cited for foreign investments.
Murabe Noruyiki, liaison officer of Murabeni Corporation in Addis, told The Reporter that the corporation is studying to invest on the Aluto Langano geothermal project. Currently, Murabnei supplies essential drilling machineries and equipment for the project. Aluto Langano is a project expected to generate some 70 to 100 MW electric power in Ethiopia. Murabe anticipated that the project might be operational in the coming three years. The Marubeni Corporation is situated in Ethiopia exporting some 30 percent of Ethiopian coffee shipped from Ethiopia.
Ishihara doubted that Ethiopia, though opportune for having low labor costs for companies eying in on the manufacturing sector, still lacks favorable investment landscapes. He urged government officials to ease up regulatory and procedural requirements that he said are hindering many to remain undecided to come.
Sumitomo Corporation based in Japan. The multinational operates 140 offices worldwide, is keen in mineral resources production, automobile trades and agricultural chemicals and the likes. Sumitomo expressed concerns with regards to the shortages of hard currency and opening Letter of Credits (L/C) within local banks in relation to imports of vehicles from Japan. The multinational formally has expressed interests to meet officials of both the ministry of finance and economic development and the Central Bank.
According to some officials The Reporter approached, Japanese companies here are uncomfortable about the situation to which they are facing obstacles with remitting their profits in hard currency.
During his visit here, Ishihara met President Mulatu Teshome (PhD) and Prime Minister Hailemariam Dessalegn and other ranking officials. He then flew to Rwanda and Tanzania for similar missions.
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It’s overrated? Egyptian minister downplays consequences of Ethiopia dam
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Egyptian Irrigation Minister Hossam al-Moghazi downplayed Friday the negative effects on Egypt’s water supply of the ongoing construction of Ethiopia’s Renaissance Dam, saying the first phase of construction would not cause any tangible harm to Egypt.
“The results of additional studies will appear in March 2015, six months before construction of the first phase of the dam is complete,” Moghazi told Anadolu Agency.
He added that the first phase of the multibillion-dollar hydroelectric dam would feature a water storage capacity of 14 billion cubic meters, which would not cause any “tangible” harm to Egypt. “This [continued construction of the dam] does not worry us,” Moghazi said.
Relations between Cairo and Addis Ababa soured last year over Ethiopia’s construction of the $6.4-billion hydroelectric dam on the Blue Nile. The project raised alarm bells in Egypt, which relies on the river for almost all of its water needs and feared its historical supply of Nile water would be reduced.
Last year, an international panel of experts recommended that two studies be conducted: a hydrological simulation model and an environmental, social and economic impact assessment.
The two countries agreed to resume tripartite talks over the dam – along with fellow riparian state Sudan – after Ethiopian Prime Minister Hailemariam Desalegn and Egyptian President Abdel-Fattah al-Sisi met in Equatorial Guinea in June.
The tripartite meetings came after an eight-month hiatus due to ongoing differences between Cairo and Addis Ababa.
Ethiopia, for its part, says the dam is necessary for its national development plans. It insists the project won’t impact Egypt’s traditional share of Nile water, which has long been governed by a colonial-era water-sharing treaty – a treaty that Addis Ababa has never recognized.
Construction of the dam should be complete in June 2017, according to Ethiopian officials.
Moghazi said Egypt was only concerned about the dam’s projected storage capacity, which, he says, could erode Egypt’s historical share of Nile water. He stressed that Egypt had made a goodwill gesture by not asking Ethiopia to halt work on the project – a request Cairo made one year ago without effect.
The irrigation minister added that additional studies would determine whether the projected height of the dam – along with its storage capacity – would have any negative consequences for Egypt.
http://www.albawaba.com/business/egypt-ethiopia-water-dispute-600169
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Ethiopian Electric to rehabilitate hydro-power stations
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The Ethiopian Electric, the sole power utility company, is contemplating to rehabilitate two hydro-power dams.
A senior official at the Ministry of Water, Irrigation and Energy told The Reporter that the Ethiopian Electric is anticipating the rehabilitation of the Melka Wakena and Koka hydro-power stations. In a bid to enhance the generation capacity of the power stations, Ethiopian Electric wants to undertake the rehabilitation work.
The official said a Russian company called Inter RAO has shown a keen interest to rehabilitate the Melka Wakena hydro-power plant found in the Bale zone, Oromia Regional State.
The Melka Wakena hydro-power station has an installed generation capacity of 153 MW. The power plant has four units each with a generation capacity of 38.5 MW. It was the largest power station in the country until Gilgel Gibe I power station (184 MW) became operational in 2004.
Melka Wakena power station was built by Russia and Yugoslav energy firms in 1989 at the behest of the Derg regime. The Russians undertook the civil work while the electro-mechanical work was carried out by a Yugoslav company called Energo Invest,” the official said.
At the moment, representatives of Inter RAO are holding talks with officials of the Ministry of Water, Irrigation and Energy and Ethiopian Electric. The work includes the maintenance, repair and overhaul of the power units. “The power plant is currently operating. However, the rehabilitation work is believed to enhance the performance of the power plant,” the official said.
The cost of the rehabilitation work is not yet determined. Inter RAO will present financial and technical proposals which will be evaluated by experts from Ethiopian Electric. Ethiopian Electric will present the proposal to the board of directors for endorsement.
Inter RAO is expected to secure a loan from the Russian government for the rehabilitation project. “This is a bilateral cooperation issue,” the official said. According to the official, the issue will be addressed when the Russian Foreign Minister, Sergey Lavrov, visits Addis Ababa next month.
Inter RAO was established in 1997 as a subsidiary of RAO Systems of Russia focused on the export-import of electricity. “Inter RAO keeps expanding its portfolio of power generation and supply assets while also actively developing other lines of business, primarily engineering for electric power industry,” the company’s official website states.
Ethiopian Electric is also contemplating the idea of rehabilitating the historic Koka hydro-power station. Koka power station, which has an installed generation capacity of 43 MW, was built in 1960 by the Italian government as compensation for the atrocities committed by fascist Italy during the 1936 – 1941 occupation of Ethiopia.
Ethiopia currently generates 2,268 MW from hydro, wind, geothermal and thermal energy. The Ethiopian government is currently building power plants with a total installed generating capacity of 8450 MW – the Grand Ethiopian Renaissance Dam (6000 MW), the Gilgel Gibe III (1870 MW), Genale Dawa (254 MW), Adama II wind power project (153 MW) and the 70 MW rift valley geothermal power project.
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Ethiopia Sees Greener Energy With Advent Of New Meters
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VENTURES AFRICA – Smart electric meters, called IT‐plus, are expected to revolutionize the electricity user experience in Ethiopia; these meters are centrally controlled and can determine the amount of power each individual client gets.
The Ethiopian Electric Utility (EEU) has received supplies of these smart meters from the Metal & Engineering Corporation (MetEC). The meters, which can also selectively turn off the power supply to specific clients on an individual level, are manufactured collaboratively by Hi‐Tech Engineering, Ethio Plastic Industries, Metal Fabrication Industries and Hibret Manufacturing Industry.
Following a successful testing by the EEU, the first batch of meters are soon to be delivered. The deal leading to the local manufacture and supply of these meters was signed in 2003 between the EEU and Hi‐Tech Engineering. The launch was formally done at the Hilton Hotel last week.
These new meters are expected to facilitate power redistribution in times of power shortage and technical problems. According to Berihu Gidey, General Manager of Hi‐Tech Industries, the system has intelligence value as power blackouts could easily be achieved at a national level if the need arises.
Plans are already underway to establish a smart grid system at a national level once the company starts manufacturing its full capacity of 1,200 meters daily. The new meters will arrive programmed to adjust to a three‐phase electric power system; this is expected to reduce the processing time for industrial applicants.
Bitweded Gebrealise, CEO of the EEU Wire Business, said; “The main advantage of the electric meter is that it saves electric power, especially for industries. The next process will be the replacement of previously installed electric meters through different phases.”
http://www.ventures-africa.com/2014/08/ethiopia-sees-greener-energy-with-advent-of-new-meters/
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Africa Oil to pull out of oil exploration blocks in Ogaden
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Africa Oil, the Canadian oil company, which is prospecting for oil in different parts of Ethiopia, is to pull out of two exploration blocks in the Ogaden basin, eastern Ethiopia.
In an operational update released on Thursday Africa Oil stated that it informed the Ethiopian government and its partners that it intends to withdraw from Blocks 7 and 8 in the Somali region. A well recently drilled in Block 8 (El Kuran-3) demonstrated oil and gas flow. However, the company decided to pull out of the two exploration blocks in spite of the positive exploration result.
“Although the El Kuran-3 well did demonstrate some oil and gas potential, the company does not feel it is warranted to continue efforts at this time due to concerns over reservoir quality and commerciality,” the company said.
Africa Oil has a 30 percent working interest on Block 7 and 8 found in the Ogaden basin. The British oil firm, New Age (African Global Energy), owns 40 percent while and the Dubai based East Exploration Limited (EAX), owns a 30 percent stake on the block.
Early this year, New Age, the operator in the blocks, drilled El Kuran-3 well, to a total depth of 3,528 metres. The well undergone logging and evaluation prior to taking a decision on the way forward on the well. “There have been numerous oil and gas shows in the well which is a follow up to a discovery made by Tenneco [a company which spun of its oil and gas properties in 1988] in the 1970’s. There appears to be a significant amount of oil and gas in several intervals and the primary issues are the quality of the reservoir and potential commerciality given the remote location,” the report said. The total acreage of the two blocks is 21,767 sq.km.
Africa Oil has three projects in Ethiopia consisting of blocks 7 and 8 in the Ogaden basin, the Adigala Block close to the border with Somalia and Djibouti and the South Omo Block which lies in the Omo Rift Valley of south-western Ethiopia.
The Ogaden Basin blocks are relatively underexplored with limited well and seismic data to constrain the petroleum system proved by the Calub and Hilala fields to the east. The Adigala block is a wildcat opportunity with no wells in the area. An analogue petroleum system is predicted based on nearby outcrop data and field surveys. The South Omo Block is within the Tertiary age East African Rift, just north of Lake Turkana, Kenya and within the same petroleum system as the company’s Kenya Block 10BB and Tullow’s Uganda discoveries.
Africa Oil acquired a new oil exploration block in southern Ethiopia rift system in February 2013 from the Ethiopian Ministry of Mines. The block is a large area covering 42,000 sq.km of land in the great East Africa rift valley.
In March, the company completed a farm out transaction with a US oil company, Marathon Oil, whereby Marathon acquired a 50 percent interest in the Rift Basin Area leaving the company with a 50 percent working interest. In accordance with the farm out agreement, Marathon was obligated to pay the company 3 million dollars in consideration of past exploration expenditures, and has agreed to fund the company’s working interest share of future joint venture expenditures to a maximum of 15 million dollars.
Africa Oil continues to advance plans to commence a 2D seismic program in the Rift Basin Area Block which is expected to start later this year. The company has put up a tender inviting international companies that will shoot the seismic survey.
Africa Oil has a 30 percent working interest on the South Omo Block. Tullow Oil has a 50 percent stake and Marathon Oil has 20 percent. Tullow Oil, the operator, drilled four wild cat well in the South Omo Block with no commercial oil discovery.
Africa Oil said due to the extensive drilling and seismic program, no additional work commitments will be required. “The partnership plans to evaluate the four wells drilled to date to determine if additional drilling is warranted and, if so, which portion of the block is considered most prospective.”
In the Adigala block Africa Oil has 10 percent stake while New Age and Genel Energy, a UK firm, have 50 and 40 percent respectively. According to Africa Oil, the parties to the block agreed to enter the final exploration period, which expires in July 2015 and carries a 500 kilometer 2D seismic work commitment. The company and its partner have committed to a 1,000 kilometer 2D seismic program which will commence in December this year.
Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya and Ethiopia as well as Puntland (Somalia) through its 45 percent equity interest in Horn Petroleum Corporation. Africa Oil’s East African holdings are within a world-class exploration play fairway with a total gross land package in this prolific region in excess of 215,000 sk.km.
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Nation launches livestock development master plan
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The Ethiopian Ministry of Agriculture disclosed that a 15 year livestock development master plan has been launched to maximize the benefit earned from the sector.
State Minister of Agriculture, Dr. Gebregziabher Gebreyohannes, said that the 15 year plan incorporates detailed directives including the amount and type of investment needed to boost the productivity of the livestock sector in Ethiopia.
Accordingly, the implementation of the master plan has commenced.
The plan envisions building the sector’s capacity to supply global markets, beyond local needs, he noted.
The State Minister called on all stakeholders to contribute their level best to the fulfillment of the master plan.
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Indian company’s failure with sugar plant causes in house manufacturing, repair
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The Indian company that won the restricted overhaul bid of Metehara Sugar Factory last year has failed leading the factory for in-house manufacturing of machinery and repair, according to employees and the new management.
3 STAR, an Indian firm, which has currently left Ethiopia, had been favored by the Sugar Corporation and the management of the factory to take over after a restricted bid was announced by the Ethiopian government last year. “We have already confiscated its performance bond and equipments on a legal basis. Currently, we are conducting the overhaul ourselves,” Zenebe Yimam, general manager of Metehara Sugar Factory said.
The company was found to be incapable and inefficient in maintaining the overhaul in the time frame after it cost the factory 60 million birr, according to the management.
Now the factory has been undertaking the annual overhaul that would mark October 31 as a start of production date. “We have already undertaken major rehabilitation on the boiler along with some manufacturing activities,” Laynadis Bekele, factory manager, says.
Metehara Sugar Factory is the oldest and largest sugar factory in the country so far as the government undertakes constructions of some ten big sugar factories to raise production in the country to 300,000 tons in the five-year Growth and Transformation Plan (GTP).
Despite the fact that Indian companies have been favored to consult, restore and build sugar factories in Ethiopia, their track record has turned out to be dissatisfying as another Indian company also failed to restore the new Tendaho Sugar Factory being constructed in the Afar Regional State a few years ago, according to reports. Nevertheless the Delhi-based Uttam Succrotech recently won a USD 100 million contract for the expansion of the Wonji Sugar Factory, another old sugar factory in the country.
The Indian government has given a USD 640 million loan to three sugar factory projects. Metehara Sugar was inaugurated during the reign of Emperor Haileselassie I, in 1969 and has produced 1,149,000 quintals of sugar last year in its 45-year history. The factory has over 10,000 permanent employees and hundreds of seasonal employees who work on its vast sugarcane farm that covers 12,500 hectares of land. The country’s demand has recently jumped to almost 5 million quintals per annum from 2.8 million from the state owned factories of Wonji, Metehara and Fincha, according to the Ethiopian Sugar Corporation.
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Freight’s wait at Djibouti Port reduced by new rules but private sector asks for more balanced competition
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Logistics and transportation have trended differently than other economic sectors in Ethiopia, despite the fact that the government has introduced several adaptations to enhance the sector. Logistics and transportation, which mainly engage in import and export services, are vital to the nation’s economic development. However, despite the attempts by the government to keep freight moving, it still lags behind other sectors in terms of results. Logistics and transportation of goods imported and exported into the country costs more than other countries. To alleviate this problem the government has attempted several strategies.
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Because Ethiopia is landlocked, logistics and transportation have to be very efficient, especially at the ports of entry, in order to minimize costs.
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Constructing dry ports is one of the things the government has done to alleviate some of the problems. It has also encouraged the private sector to import modern trucks and introduced the multimodal transportation scheme. A proclamation was also passed addressing the demurrage process. Additionally, private transporters are now required to adhere to associations that now have complete responsibility for transporting freight to and from the country.
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The new system was introduce late last fiscal year and 47 associations engaged in cross border transportation and 14 that work in cross-country transportation have been established. Additionally12 companies are operating under the cross border scheme, according to Abelneh Agidew, public relations head of the Federal Transportation Authority.
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The idea behind the new regulation is to control the activity of trucks crossing the border. By modernizing transportation and logistics, the government hopes it can improve its results and make the system more cost effective.
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“We introduced this system with the goal of making the improvements we felt needed to be made based on the studies conducted,” Abelneh Added.
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The public relations head and other officials close to the issue say that previously brokers and other traders who worked in the informal economy ‘gamed the system’ while truck owners had little control over how they conducted business.
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He said, since the new way of doing business was fully introduced in May this year they have seen significant improvements. There are also several other changes that have come about in the attempt to improve cargo transportation. The first one is that truck owners that are members of associations must now pay a commission to the associations for cargo they carry from the port.
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The transport market had been controlled by illegal market actors and brokers but now it is being completely led by the associations formed under the new scheme, explains Abelneh.
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“If anyone sees the past year’s performance, the amount of demurrage charges on cargo is almost zero. This is the result of the new system which has accelerated cargo transportation from the port,” the public relation head explained.
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He said that previously trucks took nine days on average to travel back and forth from the Djibouti port, but that has declined to about four days since the new scheme was fully applied.
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He argued that the current associations are not only engaged in collecting commissions from the business, but they also bring businesses for their members.” Furthermore truck owners now are able to obtain more information about their trucks whereabouts and the business that they are undertaking, which was previously not the case,” he added.
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“Currently around 250 cargo trucks provide transportation between Ethiopia and Djibouti; previously trucks would wait at the port for as much as three weeks which was very expensive,” the authority official said.
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He said that stakeholders like the Ministry of Transport, Ministry of Trade and others evaluated the changes by visiting Djibouti.
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Before the transport associations were restructured, they were considered weak and they would not take the responsibility of finding a market to support the truck owners.
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Under the new arrangement the associations are expected to be staffed with qualified employees based on the standards set by the authority.
Even though the authority stated that the new system has registered significant changes, the private sector involved in the transportation business claims there is a problem with the new ways.
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Although the number of days for transporting goods round trip between Djibouti and Ethiopia has been reduced to around four days, often the trucks are ‘deadheading’-returning back to the port without freight which reduces the profit they can make.
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“There are several costs, including fuel and tyres (tires) that still exists when you return back to the port with an empty truck,” some owners of transportation companies said. “We are driving 925km to the port of Djibouti from central Ethiopia without cargo or empty containers, which is very damaging to the nation’s economy,” the same transporters said.
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“Previously we would at least return with empty containers, even though we would have to wait for days in the country. Under the current rules we have to return to Djibouti without waiting for containers to transport back,” they complained.
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Some transporters however agree that the new system has brought about some improvements.
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They also want more clarification about the process of establishing associations. According to the new system trucks are classified in different levels. Every level has unique grades based on their loading capacity and manufacturing date or type of service provided.
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For instance the associations included on level one are divided into two different grades; the manufacturing date of a truck included on level 1 (A) is from 0-10 years and has a capacity to load from 30-40 tons of cargo and level 1 (B) has a similar manufacturing date but the loading capacity is from 20-29.9 tons of cargo. An association organized under level 1 should have 125 trucks for both A and B grades. The associations included on level 1 must have four offices including the head office at the center and a branch at the port of Djibouti.
Level 2 is for trucks from the age of 10.1-20 years and is classified in two grades with a loading capacity similar to level one, but the association that is included under this category must have at least 100 trucks, and at least three offices including the head office and a branch at the port.
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Level 3 associations are made up of trucks that have a manufacturing date of over 20 years and they have two offices and 75 trucks in each association, and level 4 is classified for only companies that have over 50 trucks. The other level included in this system is level 5 or a specialized category, which is used for transporting machines, construction materials, or very large cargo.
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With the current status a businessperson involved in the transport sector can own trucks of different ages, because it would be difficult for the business actors to be involved in different associations based on different levels. To eliminate this challenge the authority has allowed the truck owners to be in just one association, based on the majority number of the trucks that they own. For example business people who have ten trucks, a majority of which are between the ages of 10.1-20 years and few new brands will be included in the association organized on level 2, while the businessperson who has a majority of brand new trucks and few older trucks would be a member of level 1.
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“It is not clear what happens under the rules when trucks that are currently considered new become older. The government has to clarify the process,” the transporters said. “Even the way of organizing the associations has a problem, because one association might not have trucks with different loading capacities,” the transporter said.
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The Transport Authority argued that it implemented the system after several discussions with stake holders and transporters.
Transporters also claimed that the multimodal system still has room for improvement. They said that Ethiopian Shipping and Logistics Services Enterprise (ESLSE) has to work efficiently. “Even though transporting cargo from the port of Djibouti to Ethiopia has been reduced to about four days now, the container demurrage issue still remains. This is because containers still remain in Ethiopia for a long time and that mean demurrage fees which are paid in hard currency,” the transporters noted.
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They also stated that even thought they expect to sign an agreement with the enterprise to pick up cargo quickly based on the demurrage law; it is difficult to get approval or a signature from the enterprise. “For this reason it is hard to get a demurrage charge from the enterprise,” they complained.
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But the transportation actors agree that the new system has reduced port costs and storage fees.
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The latest World Bank report on Ethiopian international trade stated that high fixed costs are driven by a mix of factors ranging from infrastructure and trade logistics (where individual companies may need their own fleet to transport their inputs and outputs) to low regulator quality to constraints on the credit market (where new market entrants of smaller sizes have little chance of receiving finance from private banks).
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It stated that smaller firms suffer most in a high fixed cost environment, and the few firms that are able to overcome high costs of entry are then those that are large enough to stay in business for a longer period. “It is no surprise that this produces an environment where incumbent firms have relatively high survival probabilities beyond the second year,” the report stated.
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In fact, high rates of protection on outputs combined with high transport costs change the profit incentives for producers by influencing which sector to invest in and which markets to serve.
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The report recognized that Ethiopia is currently undertaking some crucial investments to improve trade logistics in the medium-term.
With several new public investments in roads, a rehabilitated rail link between Addis Ababa and the rapidly modernizing container port of Djibouti, the expansion of the dry port in Mojo, expanded coverage of the multi-modal transport system and coordinated reforms between customs and shipping-related agencies, trading is expected to be improved according to the report.
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Currently the sole Multi modal operator, Ethiopian Shipping and Logistics Services Enterprise, a public enterprise, also plays a role transporting cargo to and from sea ports. The enterprise currently operates 60 freight trucks and has ordered an additional 115 new trucks with 60 tons of hauling capacity. These Renault trucks should help the logistics service. Based on the latest government decision the enterprise will also get another public freight transporter. Comet Transport which has about 205 trucks, and has also ordered 100 Renault trucks with the logistic enterprise and will merge with the state giant shipping enterprise, which is considered to be one of the biggest shipping firms in the continent.
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The new trucks purchase by the enterprise and Comet was signed with a Dubai based supplier Van Vliet XL. Some transporters consider this to be unfair competition. “The government needs to consider ways for private truck companies to be more involved,” they claimed.
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“We will be forced out of business when the state enterprises boost their capacity,” the transporters, some of which are also engaged in freight forwarding and transit services, said.
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A government official who requested anonymity stated that the government is responsible for expanding the public enterprises with the goal of improving logistics service to meet the growing demand and improve the nation’s development.
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“The private sector does not have that much capacity to invest as the government does,” the official said.
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“It is a monopolistic market that is fully owned by ESLSE and that is highly damaging the private sector. They can buy the trucks, but it is difficult for the private sector to get finance to purchase trucks like state enterprises,” the private actors complained. “We are expected to privatize state enterprises, but the government is actually excluding the private actors,” they added.
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Market competition is crucial not only for efficiently transporting cargo from the port but returning back empty containers to the port, the transporters suggested. According to experts, containers have stayed at the Ethiopian dry port for less time, 71 days, whereas previously it would take several months. Still private companies say they could do even better if they were allowed to fairly compete.
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Filed under: Ag Related, Economy, Infrastructure Developments, News Round-up Tagged: Agriculture, Business, East Africa, EEPCO F.C., Ethiopia, Investment, Millennium Development Goals, Sub-Saharan Africa, tag1 
