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Money TalksSudden policy changes keep impeding aspiring businesses

Sudden policy changes keep impeding aspiring businesses

Service interruption as a consequence of “shortsighted” government policies is extremely prevalent for delivery firms that have proliferated in the previous four years. Internet outages often severed consumer contact. The latest move came from the Addis Ababa Traffic Management Agency, which may not regulate delivery businesses but directly affects their operations.

The Agency forbade them from riding three-wheel vehicles (often referred as Bajaj) and motorcycles to deliver items to consumers. The 36th African Union Conference justified the temporary ban that paralyzes firms, which must nevertheless pay their staff and meet overhead expenditures.

The 13-day embargo was imposed in line with the usual trends observed each year the AU Summit is hosted, and it went into effect on February 8th, 2023. This year was different from past AU summits, when the rule didn’t apply to Bajajs and only a few places were off limits to motorbikes. This comes on top of frequent restrictions on private motorcycles in the city due to security concerns.

A number of delivery firms and courier service providers have entered the market despite the presence of many constraints and an unpredictable regulatory environment.

Rosa Kassa is in charge of the Ethiopian Couriers Association, which is a lobbying group set up by delivery companies and courier services to voice their concerns and contribute to making policy changes that meet their needs, among others. She believes the government should have consulted with industry players before imposing the latest ban. “We could discuss and come up with a solution if there were any security-related concerns,” she said. 

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Rosa maintains that the services that are restricted are not provided by random people but rather by courier companies.

“As a consequence, the embargo is not placed on motorcyclists but rather on the businesses whose operations rely on courier services in general Such unforeseen acts are becoming impediments for our member couriers and are detrimental to the sector’s overall growth,” she said. 

In situations like these, the best course of action would be for key parties to have a discourse before the ban is implemented, according to Yilkal Abate, vice president of ICT-ET, an association of locally tech-based private companies.

“A conversation between the government and the delivery companies would have been the appropriate approach to pursue at that time,” he said. “Each time authorities try to solve a problem, there will be unintended consequences.”

The delivery service has ceased operations because of this decision, as would happen with any online-based service when the network goes down, Yilkal says.

“We have been suggesting the development of a technique for whitelisting the legitimate businesses that may be affected by the limitations. There may be methods to circumvent these restrictions through a specific route or other technique that mitigates the negative effects while reducing the dangers,”  stated Yilkal.  

The Ethiopian Couriers Association wrote to the state minister of the Ministry of Transport and Logistics, expressing their displeasure with a latest government decision and requesting for a meeting to discuss their concerns.

“We urge that the Ministry arrange a meeting so that the association may discuss with it and any other interested parties,” said the letter, which is signed by the group’s chair, Tigabu Haile.

Biruk Yosef has collaborated with a number of organizations specializing in business development and startup incubation, including blueMoon Ethiopia. Now, he is a consultant with Growth Africa, a pan-African organization that assists entrepreneurs and promotes business expansion. Biruk believes that firms, especially new start-ups, would be seriously impacted by these government decisions. He blames the frequent and unexpected policy changes in Ethiopia to be one of the greatest obstacles for the country’s businesses.

The restrictions are often rationalized as right responses to security concerns, although they seldom include backup plans or other escape routes. Businesses are never granted tax exemptions as a kind of assistance, nor are they compensated for losses incurred as a consequence of these challenges, according to him.

“There should be a legislative framework defining how businesses might be compensated for losses incurred as a consequence of unforeseen government decisions,” Biruk said. “Companies incur large financial losses as a consequence of rapid legislation changes, while their expenditures remain unchanged.”

He argues that holding decision-makers accountable for their acts and allowing companies to recoup their losses would cause them to reconsider their ultimate decision.

According to Addis Ababa Traffic Management Agency’s representative who talked with The Reporter, the embargo is not created by the agency. Despite this, the agency follows the directions of the police commission and security task forces since it is responsible for regulating the city’s roadways and traffic.

“The security taskforce merely instructed the Agency through letter to prohibit motorcycle travel at the given period, and the Agency obeyed,” a representative from the Agency said. “After receiving such letters, we do not engage with certain groups; instead, we tell all residents publicly.” This does not hold water for Biruk.

Biruk says that businesses must be planned and projected by their very nature. Yet, he feels that the uncertainty of policy changes led to the almost nonexistent steady company with long-term organic development.

“You may see a firm or person experiencing rapid development and profit owing to sudden policy changes, while another succumbs to the same cause,” he said. “Policy and regulatory changes are controllable activities, and raising uncertainty about controllable activities would expose the economy to persons seeking to take advantage of the situation.”

Prime Minister Abiy Ahmed’s (Ph.D.) much-discussed Ease of Doing Business plan is apparently bringing about favorable improvements in company license acquisition and operation. While Biruk acknowledges the advances, he remains critical of the lethargic development that continues to face challenges.

“Given how quickly firms are getting innovative and how fast disruptive entrepreneurs coming up with new concepts, the regulatory organizations are not keeping up,” he concluded.  

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