ETHIOPIA MULTIMODAL SECTOR

 Summary 

Winning domestic firms due to start operations in six months 

Foreign companies missing from the Government Roll out.

The list of companies awarded the first batch of multimodal logistics operator licenses in Ethiopia features a conspicuous lack of foreign entities as the government’s efforts to liberalize the sector are dogged by security concerns and worries about favoritism. 

Three separate domestic joint ventures received licenses during a ceremony at the Sheraton Addis this week, out of eight domestic bidders looking for a piece of a lucrative market that has long been under the monopoly of the state-owned Ethiopian Shipping and Logistics Services Enterprise (ESLSE). 

It is the culmination of a federal policy revision and executive directive issued by the Ethiopian Maritime Authority (EMA) in 2021, announcing plans to grant multimodal operator licenses to up to five firms including ESLSE. 

The authorities initiated a bidding process in 2022 only for it to fail before the second attempt ended with three licenses granted this week. Panafric Global Logistics Plc, Tikur Abay Transport Plc, and Cosmos Multimodal Operator S.C. are the recipients. 

“The bidding process was open to foreign companies as well. Besides the capital, infrastructure and human resource requirements in the directive, what we mainly required was that the company has to be registered in Ethiopia and form a joint venture,” Abdulber, one of the Ethiopia's Government official said.  

Global logistics giants such as French-based companies CEVA Logistics and Bollore Africa (now Africa Global Logistics) began forming joint ventures with Ethiopian firms in 2019 following an extended period of serving clients in the country through local agents. 

These joint ventures appeared keen to take part in the bid for multimodal operator licenses when the tender was first announced in 2022, with Bollore officially taking part in the first round of bidding. However, the interest appears to have dried up for the second round. 

“We didn’t prohibit foreign companies from competing,” said Abdulber. 

All three bid winners have met the minimum requirements listed out in the multimodal directive prepared by the authorities. These include 350 million birr in paid-up capital and five hectares of land under lease or ownership, of which three hectares are to be used to develop a terminal with a minimum of 3,000 square meters of bonded warehouse space. 

The companies have been granted a six-month window to finalize preparations and begin operations. Failure to meet the time constraint could see administrative measures including the revocation of licenses. 

Elizabeth Getahun being the CEO of Panafric Global and President of the Ethiopian Freight Forwarding and Shipping Agents Association noted the lack of foreign participation in the bidding process. She says, 

“I think the foreign companies made their own business decisions by not taking part in the bid,” ..... “But it’s a big deal for domestic firms to get the licenses.” 

A logistics expert who spoke to the media on condition of anonymity observes the disinterest from foreign firms might have stemmed from an “inevitable high favoritism on the side of the government towards ESLSE.” 

The expert says that security concerns also likely played a role in discouraging foreign interest. 

“No peace means no logistics at all,” said the expert.

CHANGES OF SHIPPING ROUTES FROM RED SEA

 

Hijackings, missile strikes and drone assaults on ships by Yemen’s Houthi rebels have forced one of the The world's largest shipping group, Mediterranean Shipping Company (MSC), to divert its ships away from the Red Sea because of an increased threat of attacks. Other Shipping Lines, Danish shipping giant A.P Moller-Maersk -- which also accounts for 15% of the global container freight market -- suspended voyages passing through the Bab al-Mandeb until further notice. 

Hapag-Lloyd on the other hand -- which controls 7% of the container market -- also paused traffic through the Red Sea until at further notice.

French company CMA CGM took a similar step a day after 

Their decisions, announced on Friday, are a sign that major corporations are taking the security situation in the Red Sea increasingly seriously. But the consequences might also be felt by the world’s oil markets and the cost of energy that consumers need to bear – though the extent of any disruption might depend on how major global players respond to the looming crisis, said experts.

The decision comes after Israel was accused of a genocide in Gaza, Palestine by Houthi rebels in Yemen, who are said to be targeting ships travelling to Israel. The Houthis have warned that they will target ships sailing off the coast of Yemen and with links to Israel, in response to the war between Israel and the Palestinian Islamist movement Hamas in the Gaza Strip.

The ongoing conflict in the Middle East had already caused some carriers in the past few weeks to avoid the Suez Canal in the interest of security, with the accumulation of attacks from Yemeni rebels leading liner companies to re-route ships via the Cape of Good Hope (CGH) to avoid hostilities impacting container ship traffic in the Red Sea.

Zim Integrated Shipping Services (Zim Lines) - an Israeli carrier based in Haifa, that has since been dismissed from several ports, including Malaysia -- has increased freight rates on its Asia-Mediterranean service to cover the rising costs of securing its vessels. Other Affiliates of Zim Line follow suit.

Meanwhile, On the Arctic Side, Russian nuclear agency ROSATOM said recently it has set up a joint venture with Dubai's DP World to develop container shipping through the Arctic as part of an initiative heavily promoted by Russia President Vladimir Putin.

The deal with one of the world's top port operators is the most tangible sign yet of Moscow's ability to attract big international partners to help it realise its ambitious plans for what it calls the Northern Sea Route.

Putin has talked up prospects for the Arctic corridor, including in a speech at China's Belt and Road, as Russia shifts its trade eastwards in response to Western sanctions over the war in Ukraine as well as the Red Sea Corridor getting shut.

The route, made viable by the melting of Arctic sea ice due to climate change, runs from Murmansk near Russia's border with Norway to the Bering Strait near Alaska.

LAMU PORT, KENYA GEERING UP FOR MORE SHIPPING LINES

 

Kenya’s newest port, Lamu Port is anticipating more shipping lines to make use of the facility especially for handling goods destined for the northern parts of the country and neighbouring Ethiopia and South Sudan.

The port received its 44th ship Wednesday since launch in May 2021, MV African Swan with 7,300 metric tonnnes of relief food destined for Kakuma and Daddab refugee camps and areas affected by drought in northern Kenya.

Lamu Port South Sudan and Ethiopia Transport (LAPSSET) corridor Manager Salim Bunu said the operationalization of the facility is an important step towards opening up the northern region.

“Most of the northern parts of the country have not been developed properly because of poor road network. LAPPSSET as a corridor is meant to open up that region and the entire country so that all the counties participate in economic development,” said Bunu.

The port which is also used for transshipment of cargo has so far employed 100 locals to help in the offloading of ships, a figure which is expected to rise in the near future.

Besides direct employment, Lamu County has similarly seen explosion of economic activities in areas around the port such establishment of food outlets, fuel stations as well as increased local revenue from trucks using the facility.

“We have been handling transshipment containers since the beginning of the year. And we would like shippers to make use of the facility. Even those seeking to build cargo sheds and grain handling facilities can now invest in Lamu,” added Vincent Sidai, Lamu Port General Manager.

The cargo by the World Food Programme (WFP) from Djibouti includes sorghum, millet and yellow split cowpeas which are to benefit affected regions.

“This is the first time that we have brought food into Lamu Port. We are looking to this food to provide support to two of our operations within Kenya,” said Shane Prigge, WFP Head of Supply Chain.