Ethiopian Petroleum Dealers Association (EPDA) blasts government and claims that the government has rejected to listen to them.
The leadership of the association that was formed in 1970s currently has 120 members of which the members are expressing neglect. They expressed that despite being at hot point in the petroleum business, the government hasn’t shown any interest in discussing with them the sector challenges that they are facing.
Henok Mekonnen, chair of the board of directors of EPDA, said that from time to time the sector has been facing massive challenges that lead dealers to change their activity to other businesses.
Meanwhile, the petroleum business that is strictly regulated by the government has had some changes in profit margin in the past couple of year in response to the several years claim by distributor companies and dealers problems.
The current profit margin per liter has expanded to 23 cents from three cents, while they claimed that their cost has been expanded by oil companies’ different charges.
On the press conference that was held on Friday February 19, the board members claimed that the government did not discuss with EPDA members on the new petroleum sales arrangement that will be started as of March 10, while the new scheme has been briefed for oil companies.
“Since we got the information, we have been trying our best to meet government officials at relevant offices that was unfruitful, due to that we are forced to call media and inform the situation,” Demise Shibeshi, a member of the board said expressing his frustration.
The new scheme will change the existing one month credit petroleum supply that is supplied by the state owned Ethiopian Petroleum Supply Enterprise (EPSE) to cash bases.
Similarly, some oil companies have informed their dealers on the distribution approach which will be on cash base as of the implementation period on the companies from the enterprise.
“We are calling the government to discuss about the issue before the implementation because it would create serious challenges on our operation,” Henok says, adding, “The time is fast approaching, while we are not prepared. We are not against the new cash base system but need more time for preparation and profit margin adjustment that shall fill the cost of access to finance that may be covered by over draft or bank guarantee.”
According to the previous study the association conducted to keep the sector safe, the safe line for profit margin stood at 80 cents or three percent profit margin from the total annual transaction.
They claimed that the current annual profit is one percent from the total transaction.
They also argued the decision of some oil companies who announced that the full cash based supply will be started as of March 10. “According to the new government decision the cash based supply of oil companies will be applied in different phases that will be concluded in a year’s time; for instance as of March 10, companies will come up with the payment of 25 percent on cash and increased by another 25 percent after three months and the balance continue under similar manner. But companies are informing dealers that they will pay the full amount as of the stated period,” Ephrem Tesfaye, member of the board at EPSE stated expressing his anger.
Ephrem elaborates that the study that was table shows how the sector is affected and poses discouragement of the actors and new entrants. “For instance the study shows that a dealer that has a daily trade of 15,000 liter gains 1.3 million birr gross profit from 133 million birr total transaction per annum, 350,000 birr and 200,000 birr from lubricant and other activities that is a total gross profit of 1.86 million, while their total cost is 2.15 million that shows that they loss 200,000 every year,” he claimed.
They have also argued that the current lubricant business that includes kiosks has also been affecting their activity which ought to be controlled by the government.
The association leaders said that they will disclose their decision after discussing with members if the government will not come up with a decision beforehand.
Currently there are 36 oil companies and 800 dealers in the country.
Tadesse Hailemariam, CEO of EPSE, recently told Capital that the upcoming arrangement will implicate a tariff change since companies are supposed to come up with cash.
Tadesse said that the new arrangement will improve the enterprise’s cash flow and working capital. “It will also cut the hassle that occurs when companies default to settle their payment on time,” he added.
The petroleum is now being supplied in a month credit but companies’ mainly new entrants abused the system, which forced EPSE to manage the case on legal battle.
The CEO said that the companies that recently joined the market are focused on the credit scheme than operating prudently. “The long existed companies and dominant market players on the sector are loyal and efficient compared with the new comers,” The CEO stated.
From the 36 oil companies only one third of them are loyal to settle the credit on time.
Fuels pricing and revisions are made by MoTI on a monthly basis. Lubricants and greases, however, are being directly imported by the oil companies with less margin control unlike petroleum.