On August 2011, four enterprises which were working independently in the sea transport sector consolidated into a new company, which is well known today as the Ethiopian Shipping and Logistics (ESL). The companies that merged to form this logistics colossal firm were the Ethiopian Shipping Lines, Ethiopian Maritime and Transit Service Enterprise, Dry Port Enterprise; and the former Comet Transport, which was consolidated in to the new company.
This newly amalgamated enterprise as a result was vested with the huge responsibility of rendering sea-transport and logistics services to the country’s importers, exporters, and investors in a more effective and efficient way, by reducing transit time, cost and hand offs.
Cognizant of this, ESL shouldered this responsibility by working round the clock to propel the country’s economic growth. Despite the downsides of business stemming from the pandemic and tensions across the globe, ESL in July welcomed its newest and largest vessel, MV Abbay II, to its home port at Djibouti port.
Following the recent string of success, Capital reached out to Captain Wondwossen Kassa, Deputy CEO for the Shipping Sector at ESL, for an insider’s view of the Enterprise’s progress as well as future ambitions. The following are excerpts from the candid interview;
Capital: In your view what is the role of ESL in shipping in Ethiopia? What do you consider are your company’s strength and ability?
Capt. Wondwossen Kassa: In order to understand our role, first we have to appreciate the fact that shipping in itself is hard to measure, since it is complex in nature. Shipping is a huge business and there are many kinds of specializations, such as bulk shipping, tankers, containers, etc. Our company in the grand scheme of things plays a multipurpose role in shipping. With the ability and capacity that we have, we ship many kinds of items.
Out of the top 20 companies, I believe we are ranked 17th and that in the realm of Africa is a considerable achievement in that there have been many private shipping companies in the past before but that has not panned out to be the case now. We can say that right now we are the only dominant shipping company in the continent. We capitalize on this positioning by focusing on the items that get in and by controlling the seaborne trading. One of our biggest strength and ability is control the seaborne trade. What I mean by that is using the limited recourses that we have to know the prices of the products, including the origin of where the products are from and when the products are set to arrive, etc. By using this method we are able to minimize our costs greatly.
Capital: As the shipping space continues to become monopoly, with the struggle of entering this business as a new comer being slim and with others living the business entirely, how are you managing to stay afloat in business?
Capt. Wondwossen Kassa: When you compare the situation to a monopoly, of course that refers to a 100% control. This in our case is however not true considering the products that get in. The reality is that in terms of percentages the control is about 30 to 35% of ESL.
As noted, once a shipping company leaves the scene, it is very hard for it to get back in. There are cases whereby bigger larger companies over trump smaller ones, deceasing the companies’ as a form of controlling the market. This then gives the big firms control of the price market. The reason they do this is so that they can reap the benefits of profit increase. As a result, this puts a lot of third world countries under a lot of pressure.
It is a strategic sector that the country should support.
For us, the main reason as to why we are still in the business is because of government policy, FOB and finance support. As a result we have been able to stay afloat and we have reciprocated the support rendered to us by working hard as a company as well as through bringing in products that contribute growth for the country. If you notice our company from beginning to end, we have control over it, and with this ability, we have been able to decrease the costs. Our company has vast activities, we have our ups and downs like any other company, but we are resilient and are in a strong position to weather any storm.
Capital: ESL recently swapped the MV Abbay II, ultramax vessel, by ESL’s previously owned two tankers. Can you tell us about the process of purchasing the vessel?
Capt. Wondwossen Kassa: The process was very rigorous and involved; studies, permissions and purchasing, which took over a year. There was a lot of trial and error with the process. Nevertheless, I’m thankful to the board members because they were very helpful with the process. Of course there were downsides to the process because while other ships were working, our two tankers were left in a state of being stagnant in the past three years. This created a lot of loss and stress for the company. Therefore as a company we decided that we had to become productive. We went into a state of planning, on what to do, how to do it, we also focused on what our better choice were, what to do in 10 years, and how to best compete in the market including the technicalities that come with the business. In terms of the process of picking the vessel, we had to compare the environmental factors, the size, etc. In the end, we picked the one most in demand that met our standard.
We opted for such a vessel because it will enhance our operation and productivity. Now we are already seeing the fruit.
Capital: Was the vessel an all new one or was it used beforehand?
Capt. Wondwossen Kassa: It is slightly used. MV ABBAY II was built in 2016 by Yangzhou Dayang Shipbuilding Co. Ltd., China and was previously registered in Majuro under the flag of Marshal Islands. It was operated by Bernhard Schulte Ship management, a vessel management company based in Hamburg, Germany.
Capital: What is your plan for the future?
Capt. Wondwossen Kassa: For the last 5 years, we focused a lot on the standards as a result we had to change a lot of MOTEMS and for the next five years will also follow up and do the same. Again for the next five to seven years we would like to increase the profits by 3 or 4 times. We plan to achieve this by increasing our equipment, and by working with efficient high-end technologies. We also want to best understand our surroundings and capitalize on the opportunities that come with it. For the case of our country, there are lots of untapped potential with bulk shipping by trusting in the market, we aim to appropriately invest and reap the benefits from it.
Expanding feeders service and cross trade is one of the major priorities that we will tap in the future.
In order to deal with the ever changing shipping dynamics and achieve our vision and mission, ESL has launched its revised 7 year strategic plan.
After five years, since new players may join the sector in Ethiopia we are now aggressively working round the clock to be ready for the upcoming competition.
Cognizant of the reduction of commodities transported on FOB as a result of increase in commodities loaded from Djibouti, the success of cross trade which has been the backbone of ESL’s revenue is at the center of the logistics firm’s agenda to positioning itself strategically to ensure it is on top of its revenue stream.
For instance, the peace process in Yemen is expected to be a good market for ESL. Moreover, wind energy has become a new segment in the global arena, such is the case for Saudi Arabia which has new projects in addition to the establishment of new cities in the Kingdom.
Regarding the wind project there are several countries undertaking wind project all over the world, however, most of the equipment are manufactured in China that needs transportation.
To meet the demand, we need to have big vessels that accommodate the latest type of wind turbines. This is the reason which has led us to revise and come up with a new strategic plan to achieve great results in the coming years.
There are three main shipping segments under which ESL is working to engage with and expand its operations.
The first one is the multipurpose vessel operator segment. 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.
Likewise we plan to increase our container inventory from 13,000 TEU to 100,000 TEU and the container deadweight capacity to 237,000 metric tons in the coming 5 years. Such an expansion will help us to target annual container carrying capacity of 400,000 TEU.
Last but not least was the bulk segment. On this segment ESL plans to acquire 8 Ultramax bulk carries with a total carrying capacity of 500,000 DWT.
At the end of full implementation of the plan, ESL will increase its revenue from cross trade alone by six folds from the current USD 30 million to USD 180 million and its DWT capacity from the current 305,000 metric tons to 1.1 million metric tons after five years.
Capital: Are you going to use your handysize vessels to feeder service? How do you plan to use them in the cabotage method?
Capt. Wondwossen Kassa: By way of simple definition, cabotage is the trade and transport, in coastal waters, or airspace between two points within a country. For us we have comprehensive plans with the main goal being identifying the market at hand. Yes our handysize vessels are suitable for feeder service to serve the nearest destinations but we will not fully depend on them since the business shall expand that needs biggest vessels. So we need medium container vessels to expand our feeder service.
Capital: How the waiver affects your business and, how has that impacted the national interest?
Capt. Wondwossen Kassa: When it comes to waiver, everyone you know places their country first. I won’t get into the details because of its vastness since it involves a lot of factors including ourselves. The good thing about the waiver and how it is given is that a lot of gaps were present in the past, but now there are many improvements being made. Other than that I am very proud to say that we have a very efficient system, that when one ship leaves another one come at the berth .We made it in a way of avoiding cost and I am very proud of that. When it comes to trade, the national interests are very interchangeable.
Capital: What are possible challenges?
Capt. Wondwossen Kassa: It’s an up and down business as you can imagine. Even though you can’t predict it, you can always prepare for the opposite. But sometimes in cases like COVID-19 it is very unpredictable. Most fluctuations have a rhythm. We try our best to prepare, minimize cost and stay in the business. There are cases where it is out of our control such as the tension between China and Taiwan, which have ripple effects to our business.