Wednesday, July 24, 2024
BusinessSeven logistics firms rejected for multimodal licenses

Seven logistics firms rejected for multimodal licenses

– Ethiopian Maritime Authority overturns initial selection, rejects all applicants for multimodal licenses

– Bollore Transport & Logistics among logistics firms denied license despite extensive experience

The Ethiopian Maritime Authority (EMA) has rejected bids from seven logistics companies seeking multimodal operating licenses, including the French Bollore Transport & Logistics. 

The Authority had floated a tender in November seeking bids from companies interested in four new multimodal licenses and operating certificates. This followed a government decision to increase the number of multimodal providers to five, including the Ethiopian Shipping and Logistics Enterprise.  

Seven domestic logistics firms submitted documents showing they met the requirements. The bidders were Tikur Abay Transport Plc, Ethiopian Railways Corporation (ERC), Panafric Global Plc, Gulf Ingot FZC Industries Plc, National Transport Plc, Ethio-Djibouti Railways S.C and Bollore Transport & Logistics.

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Of the seven applicants, the Authority had initially selected only Tikur Abay.

In a letter sent to Tikur Abay this week, EMA said it was overturning the initial result and announced that Tikur Abay had also been disqualified.  

“Though Tikur Abay fulfilled most requirements, it failed to meet minor criteria regarding board structure,” the letter stated. “The screening committee discovered this after reviewing complaints filed by other applicants,” it added.  

Tikur Abay, which had already begun investments to launch the multimodal service, is bewildered and complained about EMA’s inconsistent decisions.

“The stated reason is that we did not meet board requirements. This is absurd,” an official at Tikur Abay told The Reporter. “The criteria specify directors must have a master’s degree and five years’ management experience. Our board structure met the criteria perfectly. A month ago Tikur Abay and the board wrote a letter to the transport minister. But we were never given a chance to respond,” the official added.

Tikur Abay’s 17 million birr remains in an escrow account. Depositing half of the required 10 percent cash – 350 million birr – was one of the criteria to win the multimodal license.

The Multimodal Transport Operators Commercial Licensing and Competency Certification directive issued in 2021 stipulates stringent criteria for firms to obtain operating licenses and certificates of competence.

Multimodal transport operators provide logistics services for transporting goods on a free on board (FOB) basis. Multimodal operators must deliver import and export goods using at least two means of transport, be it road, rail, sea, and/or air. In short, applicants must meet at least the facilities and capacity of the Ethiopian Shipping and Logistics Enterprise.  

To obtain a license, bidders must establish a new company with a minimum paid-up capital of 25 million birr, of which at least 10 million birr should be deposited in cash in a blocked account. At least one shareholder of the new company, enterprise or share company (S.C) must have at least five years of experience in the sector.

At least 75 percent of the assigned board of directors must hold a first degree and above, with a minimum of five years’ experience in the sector. The new company must obtain a trade license from the Ministry of Trade and Regional Integration (MoTRI). Then it obtains the certificate of competence from the Authority.

One of the requirements to obtain the certificate of competence from the EMA is that the company or enterprise shall have a paid-up capital of 350 million birr in cash and other assets. At least 10 percent must be deposited in cash in a recognized bank, and the remaining 90 percent shall be in the form of different assets such as transport equipment, cargo handling equipment, warehouses, and office buildings. Fifty percent of the 10 percent cash deposited in a recognized bank shall be deposited in a blocked account.  

Other requirements include owning or renting for at least four years a properly fenced and secured minimum of 5 hectares of land. Of this, a minimum of 3 hectares shall be a well-developed terminal and have at least 3,000 square meters of warehouses built with concrete and block.  

The land is used to develop a dry port. The company must have a dry port that can handle at least 10,000 containers at one time.

The ideal candidate must own or lease for at least four years one reach-stacker or crane, 30 cross-border trucks with a minimum capacity of 380 quintals each, one tractor with trailer, and two forklifts. It must also hire and manage an additional 40 cross-border trucks with a minimum capacity of 380 quintals.

The company/enterprise is required to have at least 15 trained employees holding a first degree or certificate of competence with eight or more years of experience in areas like freight forwarding, customs clearing, port operation management, cross-border transport operation and management, ship agency, maritime law, and other international trade logistics operations. The company should also operate branch offices locally and abroad.  

Officials from the companies criticized EMA’s decision, claiming they met the requirements.  

An Ethiopian Railways Corporation (ERC) official said: “We fulfilled all the multimodal license requirements. But we were denied for a minor thing. ERC is the most qualified candidate among the competitors.”

The official argued that ERC has rail infrastructure and exceeds the directive’s requirements: “We have 20 freight terminals along our rail lines. Our Endode terminal alone sits on 260 hectares. We can provide terminals on hundreds of thousands of hectares. We over-qualify.”  

ERC was also in process to procure machineries required in the multimodal directive. “Now that equipment purchase is a waste. EMA ordered us to do all that just to deny us the license,” the official lamented.

An official at Tikur Abay Transport said: “Our capital is in a blocked account. We hired employees, consultants, and procured equipment. We met all multimodal directive requirements and were ready to start. But EMA did not grant us the license.”

The official added: “We requested in letters and our directors went in person. We worked hard to get this license. I don’t understand why the government is unwilling to give and support us.”

The Reporter’s efforts to obtain comments from EMA were unsuccessful.

The companies also said they could not file grievances with EMA as it did not provide detailed explanations.

According to The Reporter’s sources, EMA’s inconsistent decision stemmed from frequent reshuffling of officials. Officials who launched the bid were replaced, and the new officials overturned the screening results determined by their predecessors.  

Some experts say the government is unwilling to open the sector to new players. They also argue the requirements are unrealistic and designed to keep competitors out.  

An international logistics and maritime consultant who advised Ethiopia’s logistics policy and multimodal license process, declined to comment specifically on EMA’s screening or the directive’s implementation.  

However, the consultant said the directive itself was well-designed. “It was introduced after extensive study of logistics,” the consultant noted. “The underlying goal of diversifying multimodal providers in Ethiopia is to end ESLSE’s protectionism that has come at the expense of importers and exporters,” the same source explained.  

Stringent capital, resource, and human resource requirements for multimodal licenses aim to avoid erratic service for exporters and importers. “Any recipient of a multimodal license must provide seamless logistics services. The policy will ensure importers and exporters don’t face erratic service,” she said.

Candidates like Tikur Abay and ERC are preparing for another competition round to obtain a license. EMA’s letter stated there would be another round after invalidating the first results. However, EMA has not confirmed the schedule or whether new criteria will be introduced.

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