Transport Companies Facing Slowdown in Business

Decreased imports continue to affect sectors of economy

Lorries line up at loading docks to have their cargo loaded. This could take hours or days depending on whether they are carrying merchandise. Abush Abebe, 26, has worked in the transportation business as a driver’s assistant for the last 10 years starting after his father’s passing. He is now the only bread winner for his three underage sisters and his mother. Abush used to work the route from Addis Abeba to Djibouti, transporting cement mostly. He left his long time job at Mulugeta Afework Transport two months ago after his income had decreased significantly due to the declining numbers of imported items, which forced him to switch to changing wheels at a local shop where he spent most of his time sitting with his colleagues. In his previous job he used to have to go to Djibouti once a week; however he has not gone there for 45 days. The devaluation of the Birr against the dollar combined with the price cap helped trigger his resignation. Across most of the country around 80pc of imports come through Djibouti, which has created a business for truck drivers, owners, and employees like Abush. However, due to the devaluation, the lending caps, and the price caps, imposed on 18 commodities which are also imported to the country, imports have significantly decreased affecting people engaged in transporting items from Djibouti to Addis Abeba. The rising foreign currency reserves of the country also show the current decline of imports. The problem is compounded by the decreased income of those who are engaged in supplying different kinds of services for imported goods to come to the capital or be distributed throughout the country. Due to the above problems import volume at the national level have decreased by 14.3pc compared to the 2009 fiscal year, in which the country received 8.1 billion Kg, while 2010 levels of imports stayed at 6.9 billion kgs, showing a 1.6 billion kg decrease since 2009. Abush used to receive a 400 Br salary and 500 Br per diem for a single trip when imports were abundant, and imports contributed 15.9 billion Br to the total 383.4 Br nominal gross domestic product in 2010. He also brought 40 sacks which could hold a maximum of 20kg of charcoal, from which he earned up to 2,000 Br. In total, he used to earn 10,000Br per month from his previous job, while he only earns 1100Br gross salary per month at his new job without the benefits which he used to get at his former job. Just like Abush, Fasil Yosefe, who works as a truck driver and has transported goods from Djibouti to Addis Abeba for a private limited company for the last fourteen years, and is supporting his family of 12, has plans to change his long time career. Fasil used to earn as much as 15,000Br per month from importing 400 qls of goods during the last fiscal year, but now he can sit down with Abush on a cold Wednesday afternoon, (where Fortune had found them) since he does not have as much work as he used to. Employees who used to work in the import sectors are now sitting around talking about their old jobs and the income they used to earn. Ethiopia’s imports in 2010 were worth eight billion dollars, making Ethiopia one of the seven largest buyers of foreign goods among Sub-Saharan countries, according to a research report published by Access Capital in 2010. The major imports were fuel, taking 17pc of the total imports for the country, while machinery took up 11pc, vehicles eight per cent, electrical materials seven per cent, and grains with six per cent. Ketema Denbe, a laborer who is also affected by the decline used to earn as much as 180 Br per day by loading and unloading, imports for the country totally covering 35pc of capital goods and 30 pc of consumer goods imported through the Port of Djibouti. Currently, he works in a construction site in the centre of town earning 80 Br per day. The benefits were not only for the truck drivers and their assistants, or for the people who load and unload shipments, rather they also include truck owners who charge up to 100 Br per kilogramme to load a single quintal of a shipment of imports, and charge up to 63 Br for exports. However, due to growing income differences and fewer imports, most of the truck drivers do not want to engage in transporting exported items which are increasing in number compared to imports. Truck owners claimed that they used to go back to Djibouti Port without loading exported items which take five days to load on their trucks. They could earn as much as 40, 000Br by transporting an average load of 400 quintals per week. However, this income has significantly decreased to 26,000 Br, which has reduced their profit to about 3000 Br, which is barely enough to cover service and petroleum charges, discouraging them from sending their trucks to the field. The total imports, most of which were from China, for the first six months of this fiscal year fell by one per cent compared to the same period last year affecting people like Abush. Non-petroleum imports showed three larger percentage drops compared to the same period, recent research explained. Similarly, the diesel price increment from 14 Br to 16 Br has also contributed to the decline of imports to the country due to transportation costs. Getachew Abate, the operation manager of a transport company that manages 28 trucks, echoed the same opinion. Although the company has lost income it is better off compared to other business people who are engaged in transport. They are working with National Oil Company (NOC) as a subcontractor for the delivery of charcoal to a Dire Dawa Cement Factory from Sudan, which they started on April 2011. They earn 70,000 Br per trip from the agreement. However, he only uses an average of eight out of his 28 trucks. Currently, five of the trucks are in service while he reserves the rest to protect them from damage from transporting charcoal. The company, which seems not to be seriously affected by the difficulty of the shortage of imports, has also contracted other trucks by paying them 66,000Br per trip. Before their new agreement with NOC they received 44,000 Br in revenues, a very low amount which they had not seen since the company was established five years ago, Getachew says. The company, which is administered by Getachew, usually earns 2.6 million Br per month on average. Currently, however, they earn 1.6 million Br per month due to their contract with NOC, but they lost AL-SAM Plc, Abebaw Plc and World Food Program (WFP) who were their major customers with large shipments, which reduced their imports. A similar problem is raised by bulk fuel transport owners who are exempt from paying mostly Value Added Tax (VAT) and imports from Saudi Arabia. The per diem payment for a driver has increased from 150 Br to 370 Br, and 1,200 Br in insurance premiums per trip, Tsega Asamenew, deputy chairman of the Ethiopian Bulk Fuel Transport Association, said at a meeting last week with the association members. However the bulk fuel transporters have not suffered major setbacks forcing them to switch businesses compared to those importers of consumer goods. The situation is a challenge for most of the private sectors that are severely affected by the current situation. Most of the owners have old trucks, which consume more petroleum than the new trucks puts the owners in a dilemma to send their trucks to the field for less profit or a probable loss, Mesfine Eshete, who has been working in this sector for the last 18 years as a manager, said. Abush, who did not think ahead for a bad day such as this, regrets losing his previous lifestyle. He spent all of his money while facing the dilemma of coping with a new lower salary, which has left him with a dream to go back to his previous job hoping the problem will be resolved.