Financial institutions have raised concerns regarding Ethiopian Shipping and Logistics (ESL)’s recent warning, which they believe unfairly categorizes all partner banks together. They have requested negotiations to find an amicable resolution.
ESL, the state-owned logistics giant, acknowledged that while many banks have accepted its proposed fee structure, it remains open to discussions with those seeking further dialogue. This issue was reportedly addressed in a meeting of the Bankers Association.
On February 14, ESL sent a letter to 24 domestic banks expressing concerns over excessive transfer fees charged for transactions to its Citibank account. The company warned that these high fees were negatively impacting its operations and market competitiveness.
The letter, signed by Wondimu Denbu, Deputy CEO for Corporate Services at ESL, stated that steep service charges would compel the company to pass costs onto clients, potentially undermining its competitive advantage.
In correspondence with one private bank, it was asserted that “the high service charges will force the company to pass these expenses onto its clients, potentially compromising its competitive edge in the market.”
Weeks ago, the Deputy CEO informed Capital that the service fees currently charged by banks vary significantly, with some reaching as high as 11%.
Furthermore, ESL warned that it would cease dealings with banks that did not adhere to its proposed fee structure.
Three weeks ago, ESL issued another letter providing a final ultimatum to those who had not responded to its previous communication.
Despite this, banks have expressed dissatisfaction with ESL’s proposal, taking issue with its approach.
Several banks criticized ESL’s unilateral demand, arguing that the tone of the letter was unfair and that negotiations should have been pursued instead.
“The letter felt more like an order than a business discussion. As partners, we should have been invited to negotiate a win-win solution rather than being told to cut rates,” remarked one bank president working with ESL.
Another banker disclosed, “We discussed the matter in our association meeting and decided not to comply with ESL’s demand.”
Banks contend that their operational costs, including foreign currency earnings and low-interest credit provisions, justify their fees.
A bank president expressed frustration, stating, “Our bank incurs costs related to foreign currency generated through various instruments, including providing credit at significantly lower-than-average interest rates.”
ESL has requested that banks limit service fees to 1% for USD transfers (related to maritime and Djibouti port clearance earnings) and 2.5% for birr transfers.
A senior finance expert from ESL noted that over a third of banks have accepted the proposed rates, while others have sought renegotiation. For example, one major bank proposed rates of 3.5% for forex transactions and 2% for birr transactions in order to continue doing business with the logistics company, which has been in operation for over 60 years.
He informed Capital that some banks indicated that the matter had been discussed at the Bankers Association, while others requested that ESL hold further discussions before a final decision is made.
Bank leaders contend that costs differ among institutions and argue that ESL’s assertion of fees reaching 11% does not accurately represent their charges.
“Our fees are significantly lower than what ESL claims. They should address the specific banks imposing exorbitant rates instead of making generalizations,” stated one bank president.
Another bank leader noted that while ESL may have payment disputes with some institutions, others have no outstanding issues, rendering the blanket warning unnecessary.
ESL, the only deep-sea vessel operator on the continent, emphasized that high bank fees have a substantial impact on its finances.
“Banks charge between 4 to 11 million birr per USD 1 million transfer, which is unsustainable,” explained an ESL finance expert.
The company manages at least USD 50 million in monthly international payments, which include slot carriers, fuel, and Djibouti port operations, highlighting its critical role in Ethiopia’s import-export sector and the economy overall.
“Banks should recognize that we support the national economy, including their own operations. A collaborative approach benefits everyone,” added an unnamed ESL expert.
In response to a query about why ESL communicated with banks via formal letter rather than in person, the expert stated, “We preferred to present our demands through formal communication.”
However, he also mentioned, “We are now considering consultations with banks at the request of some long-term partners.”
Wondimu confirmed that ESL is now contemplating direct discussions with banks following appeals from long-term partners.
“Some banks have insisted on consultations, and we are open to discussions,” he told Capital.
Financial experts suggest that negotiations are the most effective way to maintain the relationship between the banking sector and ESL, given the company’s substantial transaction volumes.
As Ethiopia’s largest logistics firm, ESL holds exclusive rights to handle imports from China and the UAE, further emphasizing its economic importance.
While tensions persist, both parties seem willing to engage in further discussions to resolve the fee dispute.
