By Muluken Yewondwossen

The Ethiopian logistics industry is poised for transformation as new participants enter the multimodal market, heralding an era of increased competition and innovation. The long-awaited liberalization of the multimodal sector has reached a pivotal juncture with the selection of three local operators, marking a significant departure from the previous monopolistic trend.

Initiated by the government in 2020 as part of broader efforts to liberalize the industry, the multimodal scheme sought to diversify participation beyond Ethiopian Shipping Logistics (ESL), which had held a monopoly for 13 years. However, earlier attempts to open up the sector were thwarted when bids from prospective operators were withdrawn.

In the latest round of bidding, seven businesses vied for the opportunity to participate in the multimodal operation, demonstrating a keen interest in the burgeoning logistics sector. The selection process was guided by stringent criteria outlined in regulations dating back two years, aimed at ensuring the qualifications and capabilities of prospective operators.

Among the prerequisites stipulated by the regulations include a minimum paid-up capital requirement, ownership or lease of suitable land and infrastructure, logistical equipment, and a workforce of competent employees. Additionally, selected firms are mandated to possess a fleet of owned and rental trucks, maintain overseas branches, and establish partnerships in the shipping and aviation sectors.

While local operators dominated the latest bidding process, a multinational logistics company also threw its hat into the ring, reflecting the growing interest from foreign entities in Ethiopia’s logistics market. However, the participation of foreign firms was limited, with only one reportedly involved in the latest round of bidding.

Following a rigorous evaluation process, the Ethiopian Maritime Authority (EMA) announced the selection of three operators to advance to the next phase of the multimodal operation. Panafric Global Plc, Tikur Abay Transport Plc, and Cosmos Multimodal Operation Plc emerged as the chosen entities, signaling a shift towards greater private sector involvement in multimodal transport.

Despite challenges and regulatory complexities, the liberalization of Ethiopia’s logistics sector signifies a significant step towards fostering competition and innovation. With the government’s commitment to promoting industrial competition and facilitating private sector participation, the stage is set for a dynamic and vibrant multimodal logistics landscape that caters to the diverse needs of the Ethiopian economy.

As the selected operators prepare to embark on their multimodal journey, stakeholders anticipate heightened efficiency, enhanced service delivery, and greater connectivity within Ethiopia’s logistics ecosystem. The advent of new participants heralds a new dawn for the industry, characterized by increased competition, innovation, and economic growth.

By our staff reporter

The Ethiopian government strongly criticizes coffee suppliers and exporters who fail to fulfill their obligations on the vertical trading platform, citing mistreatment of farmers and suppliers.
Adugna Debela, Director General of the Ethiopian Coffee and Tea Authority (ECTA), expressed concerns about traders’ lack of trust and dishonest practices, emphasizing that these issues hinder the success of the vertical integration scheme. He highlighted credit trading and defaults as significant challenges facing the industry.
Debela stated, “Some suppliers are selling green beans to exporters while receiving advance payments from others, which goes against our directive.” He emphasized the need for direct payment transactions as per the authority’s guidelines.
During a meeting on Friday, March 8th, farmers and suppliers shared their grievances, particularly regarding individuals who disappeared without making payments, causing significant losses.

Agriculture Minister Girma Amente emphasized that the nation’s key commodity, coffee, should not be subjected to mistreatment. The vertical integration scheme serves as a trade platform directly connecting farmers or suppliers with exporters.
Implemented in the 2018/19 budget year as an alternative to trading at the Ethiopian Commodity Exchange (ECX), the vertical integration program has witnessed substantial growth over the past five years. In the 2021/22 budget year, it accounted for the majority of coffee exports, handling 240,000 metric tons out of 300,000 metric tons shipped.

The coffee sector experienced its peak in the stated budget year, generating a record hard currency of USD 1.4 billion, with USD 1.1 billion attributed to coffee processed through vertical integration. The government aims to increase coffee exports to USD 1.7 billion in the current budget year, up from USD 1.3 billion in 2022/2023.
Despite achieving 65 percent of the revenue target in the first seven months of the fiscal year, Girma noted that the volume remained unchanged compared to the previous year.