By Muluken Yewondwossen
The state owned and only deep sea vessel operator in the continent, Ethiopian Shipping and Logistics (ESL), receives the go ahead by its board of directors chaired by the Finance Minister, Ahmed Shide, to diversify in massive investments.
The company that shouldered debt to its Chinese creditors up until the end of the 2021/22 budget year due to finances for the construction of nine vessels that were delivered about 12 years ago is now clear of any significant debt particularly from foreign creditors.
As a result of cleared debt, ESL has now been able to stand on solid grounds and it is now capitalizing on its status to engage in profitable investments. For instance, in the past budget year, the company was able to swap its two tankers with a more suitable ultramax dry bulk carrier.
Similarly, it has made moves to order the construction of brand new two big vessels and is now waiting to finalize the process of foreign currency approval from central bank.
According to the information that Capital obtained from ESL, in the budget year that started early July, the board of directors of ESL have approved the management’s proposal for the involvement of massive investments to boost the capability and competitiveness in the global market for the logistics firm.
Wondimu Denbu, Deputy CEO for Corporate Service at ESL, told Capital that the board has accepted to expand the vessel ownership with different specialized services including new business ventures like ferry service.
As he explained, as per the approval, ESL will order two brand new ultramax dry bulk carriers with over 63,000 DWT, the construction of two multipurpose vessels; one used container vessel and ferry, which mainly carry passengers and their cargos like vehicles besides some portion of other cargos. The ferries will be based on Lake Tana.
Wondimu added that the board has also allowed the enterprise to expand its position on containers ownership which was recently expanded to tackle COVID 19 related challenges that hampered the logistics sector globally.
“We will expand our TEU and forty feet container position besides securing additional reefer containers, which is a cold box that helps to transport perishable cargo,” the Deputy CEO added.
In the 2022/23 budget year, ESL possessed its first 30 reefer containers that cost almost a million dollars.
ESL has also plans to add 150 trucks to hit the inland transport that currently has a fleet of 570 with 185 tracks joining the freight business in the past budget year.
In the previous financial year, ESL had floated an international bid to which it selected a Chinese company to build two ultramax vessels. The case has however been delayed due to approval slowdown from the National Bank of Ethiopia, because of high amounts of foreign currency, to which the central bank is stretched.
Berisso Amallo, CEO of ESL, told Capital that his enterprise is hopeful to get a permit very soon from the central bank to access the first installment to commence the building of the new vessels.
As per the plan, the state owned financial giant, Commercial Bank of Ethiopia (CBE), will facilitate 70 percent of the required fund for the procurement of the two vessels in a process that is said to take over two years.
“We will cover the 30 percent and CBE will facilitate the remainder as a loan if we shall get foreign currency,” Wondimu recently told Capital. The company, which is now expanding its cross trade, is one of the major foreign currency generators for a public enterprise.
As ESL officials indicated, the payment will be concluded in five installments with 20 percent each. As per the framework agreement, the initial payment will be concluded when the contract is signed and the balance will be divided on steel cutting, keel-laying, launching and delivery.
About 12 years ago the successful logistics enterprise had embarked to purchase nine vessels including two tankers at a total price tag of USD293.5million courtesy of a loan backing from the Export Import (EXIM) Bank of China.
When the seven 28,000 DWT multi-purpose vessels were built they cost USD 32.5 million each while the two oil tankers price points were USD 37 million each.
Recently, Wondwossen Kassa (Cap), Deputy CEO for the Shipping Sector at ESL, told Capital that the logistics mammoth plans to boost its foreign currency generation by six folds from cross trade, as well as expand its carrying capacity by 3.6 folds and containers ownership by 7.7 folds.
ESL is one of the known handy size multipurpose (MPP) operator in the shipping market and has a plan to acquire four 62,000metric tons MPP vessels in the coming 5 years. Such acquisitions will further consolidate ESL’s position as MPP operator in the international market.
“Considering the fast changing local, regional and international realities, ESL believes its container carrying capacity and connectivity should be enhanced in the coming years,” Wondwossen underscored.