9 September 2012

Ethiopia: Shipping Enterprise Transformation in Corner With New Study

Total outsourcing, JV in Sight, while stakeholders envision multimodal privatisation

The dry port that are set in Modjo, 73km has been so full for the past three weeks that the enterprise has started to use the compound of COMMET Transport located in Akaki Kality district.

The government is to invite international consultant firms to conduct a study that will enable to transform the newly amalgamated Ethiopian Shipping Lines & Logistics Service Enterprise (ESLSE).

The bid document and the Terms of Reference (TOR) are all ready and will be public in three weeks time, sources disclosed to Fortune.

"It is to strengthen the management of the enterprise to attain a better level of competence," according to these sources.

Although the government was aiming at efficient use of resources and for better coordination when amalgamating the three entities under state control, the new management that is headed by Ahmed Tusa, the chief executive officer (CEO), is in confrontation with importers who containers have not been lifted timely.

This came after the decision to universally apply the Multimodal Transport System on all imports in which one operator is responsible for the carriage of goods from shipment to a place destined for delivery. Since the enterprise remains to be the only multimodal operator, it has taken the system by monopoly that made many of the stakeholders who used to operate in the sector furious.

The enterprise, however, did not manage to handle the system on its own and hence the process has gone out of control leading to thousands of containers at the Djibouti port to remain stranded.

The enterprise has made various methods in order to clear the containers including getting back to uni-modal system for certain imports such as perishables and factory raw materials. But this did not seem to help much and the enterprise has now started to allow all importers to transport their goods from the port, despite the type of import, by their own transport up on notifying the enterprise.

The enterprise's CEO has also admitted that the enterprise is responsible for the chaos that has been going on for the past seven months stating that the amalgamation and the multimodal system came as the same time making it difficult for the new management to administer the system effectively.

The government is now trying to solve the problem by transforming the management of the enterprise based on the recommendation of the consultant firm, according to sources.

"The study might suggest that the company should be given to foreign management as a whole or in joint venture."

This solution, however, did not convince some stakeholders who were arguing that the monopoly would create such a problem from the very beginning. "Although the new management lacks professional competency on the matter, the major problem is not with the management but the monopolization," a stakeholder argued.

If the government thinks that the problem will be resolved with a management transformation only, it is trying to prepare a good management that will properly handle the monopolization. If the government is seeking a real solution, it should open the system for private operators, as it cannot by any means handle the country's import by itself, according to the owner of a logistics company.

Objecting to the recent monopoly of the enterprise, the Ethiopian Forwarders & Shipping Agents has appealed to the Ministry of Transport (MoT) and Office of the Prime Minister although it has failed to get any response. They also recommended the government to ratify a bill that allows private multimodal transport operators (MTOs).

The bill that is drafted by the Ethiopian Maritime Affairs (EMAA) a year ago allows private companies, which have a five million Br capital, to be involved in multimodal operations requirement. Although the draft regulation has been sent to the council of ministers for approval four months ago, it has not been ratified until now.

If the government wants to see the multi modal system functioning rightly, it should open the system for competition and no less solution will solve the problem that the enterprise, the owner warned.

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