Private freight forwarders will soon be able to take part in the multimodal transportation scheme once a new draft directive is issued in a few weeks. Previously they were only allowed to engage in uni-modal operations.
The Ethiopian Maritime Affairs Authority (EMAA), the regularity body under the Ministry of Trade, Ethiopian Shipping and Logistics Services Enterprise (ESLSE) and members of the Ethiopian Freight Forwarding and Shipping Agents Association talked about the draft directive on Thursday December 19.
When providing feedback about the draft the major issues that the private forwarders raised was the financial scheme and access to land.
“Some of the criteria mentioned in the directive has confused us and some are very difficult to fulfill,” one of the private freight forwarders said.
The draft directive stated that forwarders who want to engage in the multimodal (land, sea, or road) transportation service should have their own property or rent 5,000 square meters of land or have a warehouse for transit purposes.
“The government policy did not support offering land for the sector,” the participant said.
Freight forwarding agents who attended the discussion chaired by Mekonnen Abera, head of EMAA, said that 5,000 square meters of land is too much.
They asked that the government provide land for freight forwarders at the logistics hub. The other issue brought up by the private agents was the five year minimum experience requirement.
Freight forwarding companies interested in being part of the multimodal scheme need to have at least five years of experience, according to the directive. The agents said that this requirement will bar freight forwarding companies who form an association from being part of the scheme.
Finance was another issue addressed during the discussion. Private forwarders claimed that the logistics sector was not getting adequate attention from the government in terms of finance and other policies. They said that the government has to provide loans so companies can be equipped with adequate machines like cranes, mentioned in the draft directive.
Agents recommended that the government provide duty free incentives for the sector actors to build their capacity.
“More than ten million birr is required in cash to invest in some of the equipment the directive lists as criteria,” a freight forwarding company owner told Capital. “Because of this a long term loan has to be facilitated by the government to fulfill the standard,” the forwarding company owner commented.
The draft directive stated ten million birr capital as a requirement, but experts said that it is not enough to engage in the system.
Another freight forwarding agent that attended the discussion told Capital that the government has to facilitate a plot of land for freight forwarders instead of expecting the companies to fulfill it by their own or rent property.
Experts gave their estimation that only 10 companies would be capable of fulfilling the criteria from hundreds of freight forwarding agents in the country.
It was also recommended that the private companies establish small but strong freight forwarding companies able to manage the multimodal business as opposed to working separately.
Having to rent property will cause imports to go up in price, they argued.
According to the directive, selected private movers will be assigned under the state owned logistic enterprise, which was established five years ago via the merger of Ethiopian Shipping Lines, Dry Port Services Enterprise, and Maritime and Transit Services to undertake combined service for the sector. The goal is to accommodate the growing logistics activity mostly managed by the enterprise. The Ministry of Transport had ratified a directive allowing ESLSE to manage the fleet of containerized cargo, vehicles under three tons, dry bulk and steel under the multimodal scheme but it is only allowed to operate containerized cargo and vehicles under three tons. The directive was created because of the inefficiency of dry ports related with the growing of import cargo and the need for private freight forwarders to help transport goods because of the growing demand coming from industrial parks, zones and bonded warehouses.
Skilled labour was another concerned raised during the discussion. “The sector does not have adequate skilled labour and the directive should consider this,” participants said.
The directive also stated that the logistic companies have to be authenticated as authorized economic operators by the Ethiopian Revenue and Customs Authority (ERCA). Representative of the Ethiopian Revenue and Customs Authority said that this standard will automatically put agents out of the system.
According to an ERCA representative, only freight forwarding companies authenticated by the authority as authorized economic operators are allowed to participate.
Trans Ethiopia is the only company identified as a logistic company from 40 authorized economic operators. The company representative has expressed satisfaction with the new directive and stated that his company is ready to be part of the multimodal system.
ESLSE has been engaged in the multimodal business as monopoly since the government introduced the scheme. The new directive targeted the private forwarders to be involved in the scheme as subcontractors under ESLSE.
Experts said that the new directive has been drafted to handle the growing amount of cargo.
The discussion concluded by forming a technical committee comprised of four members from the enterprise, authority and association. The technical committee that will be chaired by Yared Shiferaw, Legal Department head of ESLSE, will deal with the modification of some parts of the directive based on the points that came up in the discussion.
The committee is expected to come up with a final draft within two weeks, according to the agreement at the meeting. Further discussion that will be chaired by the Mekonnen with adequate officials of government offices will take place within three days after the committee’s response to adopt the directive.
Sources at the enterprise said that ESLSE is eager to see the involvement of the private sector to tackle cargo fleet challenges in collaboration with the private actors that it is unable to manage independently. The law is expected to be finalized within a month, according to sources.
The private actors will be included in the multimodal operation except for sea transport, which will be protected for ESLSE.
The directive also added that steel, project cargos, trucks and machines will be the new cargo that will be fully managed by multimodal scheme.
The multimodal arrangement is a scheme whereby the transportation of goods is under a single contract but performed with two different means of transportation. The transporter is accountable for the entire journey, including the shipment’s delivery at the final destination. The transportation can be carried out by rail, sea, and road.
Currently bulk imports and exports are still allowed to operate under the old plan but most of the bulk items are government owned.