- Who are you?
I came back to Ethiopia 23 years ago after completing my engineering degree. For 13 years I ran Cleanway, the janitorial and cleaning services firm I founded.
But about 15 years ago, the war with Eritrea made Ethiopia landlocked. That gave me the idea for a logistics company. At that time the ICD (inland container depot) idea came up, so I found a partner to work with and submitted a proposal to the government.
We didn’t find a lot of understanding ears at first. So then we dropped the whole project. Then the transnational French company Bolloré Logistics started an office in Djibouti. They still had interest in extending their services to Ethiopia. So my father and I started CLS and began working with them.
Ten years later we have 100 full-time employess and about 25 working part-time. Our key activities are transport, freight forwarding, custom brokerage, import/export, distribution and warehousing. We have offices in Kality, Bole Airport, Hawassa, Dire Dawa and Mekele.
- What is the biggest misunderstanding of the domestic logistics sector by folks outside the industry?
The word “logistics” just arrived in our country. If you said it a few years ago, a lot of locals would have no idea what you’re talking about. Before that, everything was done by the government, and the entire concept of value-added services, such as follow-up and tracking, were less understood.
There are two major bottlenecks in our industry. Number one is the lack of foreign currency, which most folks in other industries understand.
Number two, however, is the fragmented logistics sector. For example, trucks arrive and are not immediately unloaded, which adds to overall costs. The lack of coordination between the Ethiopian Customs Authority and the private forwarders and the Ministry of Transport and the Ministry of Industry is a major issue for us. One institution will bring out a new policy without first dealing with stakeholders and bringing about consensus. What happens is that there are lots of studies and efforts without crafting a policy that works for the entire industry. They’re acting in a fragmented way.
- What is the hardest part of your job?
Today, I spent 4 hours at the Ministry of Transport’s Maritime Affairs Authority. 30% of my time is spent with government officials these days. By default, we are required to attend various government meetings and initiatives. The hardest part of my job is not running CLS but actually putting together reports and coming up with various proposals and analysis of government initiatives.
We are seeing positive change though. So it’s worth it. Government officials have begun to include us in decision making. The fact that we are now regularly invited into high-level discussions is very promising. A couple years ago this was unheard of. That excites me and drives me to be optimistic.
- How has your industry changed in the past three years?
More recognition is being given to this industry. If you look at the investment in the last three years, more multinationals are arriving and the focus is on the export sector. These multinationals are changing the logistics space by bringing in their requirements for better and more varied services.
This means that Ethiopian Shipping and Logistics Services Enterprise, all of the sudden, can’t serve all these new customers. So now there is space for more private sector shipping companies.
In our organization, one of our customers, Heineken, has high expectations. This has been difficult but good for our organization. We have had to dedicate staff to strictly dealing with Heineken, which has actually improved our employees’ skill set.
All these new exporters need ways to control costs in order to meet global prices for their goods, this industry will need to continue reducing costs to meet global expectations. The only way Ethiopia will ever have a large export sector is if we build a streamlined logistics sector first.
- What ideal policy changes could help the industry?
We need to be cleared to own bonded warehouses. Currently, whether you’re big or small, every importer has to control their own bonded warehouse. If the policy changes, logistics firms like us could manage our own bonded warehouses for these importers.
Today Unilever or Diageo have their own warehouses, even though that’s not in their core business. They don’t know how to manage them. We should be allowed to do that for them. Most other African countries already have this policy. Both Uganda and Kenya do. It’s called “pre-clearance.”
Bonded means duty not paid. You’ve got to be able to make sure you have proper cash to pay storage costs while you’re awaiting clearance. Many importers tend to overstock their warehouses, because they don’t always know when they’ll be able to get receive their own supply shipments.
We have a customer that sends in refined sugar. This company sends in shipments separately for each customer: Diageo, Heineken, Pepsi, etc., which adds to the cost. If we were allowed to have a bonded warehouse, then they would send in all their sugar at once, and we could manage all their stock locally. Each business has a huge feedstock sitting in Djibouti. This costs everyone more money, especially consumers. Basically, we’re forcing them to unnecessarily pay out desperately-needed foreign exchange to warehouses in Djibouti for no reason.
- What are the most serious constraints in the Ethiopian logistics industry?
Today, the multimodal (seas, roads, air) operation involves different modes of transport. But currently state-owned Ethiopian Shipping and Logistics Services Enterprise is the only enterprise allowed to manage all those modes with a single document. They’ll bring your shipment from Germany to Djibouti and place it on a truck to Addis on a single document.
We’re not allowed to do that. We do that same thing, but the separately required paperwork at each stage of movement can take 15-20 days extra while the container sits in Djibouti and requires daily storage payments.
7. How do you expect the logistics sector to change in Ethiopia over the next 5 years?
Actually, I’m quite optimistic. I think we will change for the better.
I’m seeing what we’re negotiating with the government currently. The challenge is to bring everyone on the same page.
The rail service should be online soon. My assumption is that when it’s fully operational, it will only manage to carry 30% of current imports, because import volumes are increasing 20% annually. So our sector’s reliance on trucking won’t end anytime soon.