Ethiopia: signalling a new confidence
Battling ethnic conflicts and food security issues, Ethiopia’s economy is getting a shot in the arm thanks to a booming aviation sector and vibrant perishables trade that symbolise green shoots for the nation. While the logistics sector still has a long way to go, we map its recent logistics and air cargo milestones and the way forward
Even as Ethiopia, Africa’s second most populous country, is battling several pressing challenges including recovery from the impact of Covid-19, climate change, prolonged regional conflicts, the Russia-Ukraine war, and reduced agency funding that is leading to high food insecurity in the Horn of Africa region and large scale displacement - the country is looking at new ways to refocus from the current crises and forge a path towards economic stability.
One important milestone towards its economic resilience and recovery was noted by The International Air Transport Association (IATA) which in a recent press release mentioned that Ethiopia is recovering strongly from the Covid-19 crisis and its benchmark regional connectivity (within Africa) (in aviation) stood at 113% of pre-crisis levels according to IATA’s Connectivity Index.
IATA has since urged the government of Ethiopia to act swiftly to clear the $95 million in airline funds blocked from repatriation to ensure the country’s connectivity is not threatened.
Willie Walsh, IATA’s Director General said, "Ethiopia’s aviation industry is set to triple by 2040, with an average 6% growth in passenger traffic over the next 17 years. Ethiopia has the opportunity to take the lead, and in doing so, construct an aviation future that is as sustainable as it is successful.”
In fact, IATA also flagged off the first-ever two-day “Focus Africa” conference in Addis Ababa this June, with Ethiopian Airlines as the host airline that saw 400 participants join it.
Joe Lawrence, President of Airline Services International (ASI), a general sales and service agent (GSSA) for Ethiopian Airlines Cargo in Canada and Mumbai said, “The busiest trade lanes into Ethiopia include China, India, Europe, the Middle East and North America. The largest segments of this import traffic are manufacturing (around 65%), petroleum products, mining equipment, and machinery (around 14%), and agricultural products (about 13%). Exports from Ethiopia are busy into the EU, North America, the Middle East, and the rest of Africa.”
While Ethiopia’s horticulture industry has been a major contributor to the air cargo uplift volumes, with flowers and coffee being significant exports, of late the pharmaceutical exports to other African countries and the textile trade are also seeing growth.
Lawrence added, “The country has seen an increase in textile exports, including ready-made garments, textiles, and accessories. This segment contributes to the air cargo uplift volumes, especially to destinations in Europe and North America. There has also been a rise in trade with neighbouring African countries, such as Kenya, Sudan, and Djibouti. These trade lanes have experienced increased traffic, especially in the perishables segment, as Ethiopia's agricultural exports are in high demand in the region.”
“The country has seen an increase in textile exports, including ready-made garments, textiles, and accessories.” - Joe Lawrence, Airline Services International
Several global logistics players operate out of Ethiopia via local partnerships and joint ventures. CEVA Logistics works locally in Ethiopia through its joint venture, MACCFA, a leading freight forwarding agent. The company provides services particularly for consumer goods and aid and relief market segments while working for numerous multinational companies in the market.
Peter Penseel, COO, Airfreight for CEVA Logistics told the publication, “Over the past 10 years, the perishable sector has been the driving force behind Ethiopian exports, and the trade lanes are managed locally by Ethiopian Airlines. For perishables, the trade lanes are mostly exports to Europe. In addition, volumes are made up of products connected to clothing, e-commerce, and pharma industries. Trades lanes to the U.S. see sizable volumes for clothing, while import trade lanes remain connected with Asia.”
The Juggernaut rolls on
One of Ethiopia’s strengths is the country’s largest airline - Ethiopian Airlines (ET), whose earnings jumped 20% to $6.1 bln in the 2022/2023 fiscal year, despite the impact of the Russian-Ukraine war and the increase in fuel prices. As per official figures, the carrier transported 13.7 million passengers and 723,000 tonnes of cargo in the fiscal year, which ended on July 7.
The airline has been expanding its fleet, adding new destinations, and increasing frequencies on existing routes. Bole International Airport in Addis Ababa, Ethiopia's capital, has also undergone significant upgrades to accommodate the growing air traffic.
Talking about its cargo milestones, Abel Alemu, MD of Ethiopian Cargo & Logistics Services, Ethiopian Airlines told the publication, “Ethiopian Cargo & Logistics is one of the major global cargo carriers and we are currently operating nine B777-200Fs, two B767-300Fs, and four B737-800F aircraft. Following the outbreak of the pandemic, Ethiopian converted 24 passenger aircraft to Preighters. With passenger transportation returning back to normal, we have reconfigured our Preighters back to passenger aircraft.”
Recent years have seen Ethiopian ramping up cargo infrastructure and services to become a logistics hub in the continent. Cargo now accounts for half of Ethiopian’s revenues post-pandemic, explaining the vertical garnering significant investment.
Becoming one of the largest cargo network operators in Africa, the carrier has also put in place a modern warehouse of 1 million tonnes storage capacity in the cargo terminal to cater to the growing perishables and eCommerce trade between China and Africa and other nations.
Alemu added, “Ethiopian is currently in the process of investing in a state-of-the-art eCommerce warehouse and working on the required commercial and operational aspects of the eCommerce logistics services. So far more than 80% of the warehouse construction is completed and it will be ready in the last quarter of the current calendar year. In the 2021/22 fiscal year, we have transported around 750,000 tonnes of cargo, operated 67 dedicated freighter destinations, and have belly capacity to over 130 international destinations. Our vision is to be among the top cargo airlines in the world in terms of FTK (Freight/Cargo Tonne Kilometres) by providing safe, market-driven, and customer-focused air cargo, courier, and mail transport services by 2035. Accordingly, ET will operate 37 freighter jets to 90 dedicated freighter destinations by 2035.”
“Our vision is to be among the top cargo airlines in the world in terms of FTK by providing safe, market-driven, and customer-focused air cargo, courier, and mail transport services by 2035.” - Abel Alemu, Ethiopian Cargo & Logistics Services
Compared to many carriers in the region, its cargo arm has also successfully adopted digitalisation. Alemu added, “Ethiopian Cargo & Logistics Services is fully automated with one of the latest aviation cargo IT systems. We are using the latest technologies for data, information, and market intelligence with 100% eAWB from our main hub in Addis Ababa. We use Elevating Transfer Vehicles (ETV) for the movement of our shipments in our warehouse. We also use the latest real-time monitoring systems, temperature-controlled cold rooms, and ULDs in the transportation of perishable items.”
Boom in perishable trade
As per a recent report on Ethiopia published in 2022 by the ITA (International Trade Administration) which comes under the U.S. Department of Commerce, Ethiopia’s agricultural exports are primarily unprocessed commodities, including coffee, oil seeds, pulses, live plants, and cut flowers.
It is a major producer of coffee and barley and ranks second in sorghum, third in maize & wheat, and fourth in coarse grains and maintains the largest number of livestock in Africa. Ethiopia exported 271,111 tonnes of coffee in 2020/21 generating $855.6 million in revenue, cited this report.
Dawit Woubishet, Director at logistics company WoubGet Holdings and Vice President at EFFSAA (Ethiopian Freight Forwarders and Shipping Agents Association) puts the start of Ethiopia’s horticulture or perishables trade boom in 2004-5 when the flower trade began to flourish amidst government subsidies and support.
“Rose, Carnations, and Gypsophila are three major export varieties of flowers. We are also doing well in fruits and vegetables and command a huge market. We are also growing Strawberries, while Avocados are being grown on over 7500 acres of land in Ethiopia planted and will be ready for the export market from the end of August this year. 90% of our perishables are transported via air shipments primarily using Ethiopian Airlines, which does 17 charters in a week to Europe apart from existing belly capacities and small charter planes flying to the Middle East,” Woubishet said.
Interestingly a joint programme by USAID, Israel’s MASHAV, and Ethiopia’s agricultural ministry introduced an imported Hass variety of avocados over the last four years to the Ethiopian farm community. Their growth and exports in recent trial runs to encouraging results to the European market have made it a commodity to watch out for.
"Ethiopia’s aviation industry is set to triple by 2040, with an average 6% growth in passenger traffic over the next 17 years." - Willie Walsh, IATA
Talking about the potential of the first-ever Ethiopian avocado exports hitting the markets this year, Woubishet says, “Ethiopia is currently doing $570 million worth of perishable exports in the last 9-11 months, compared to $500-520 million worth of exports, showing growth in this vertical. These numbers are set to grow owing to avocado production that will be exported to China, Europe, the Middle East, and the US. Estimates put the avocado production at 12,000 containers (ocean freight in 40-foot containers) in the first season and the sea route may also be explored. However, there are many challenges including Ethiopia being land-locked, having a shortage of containers, and having to use the Djibouti and Berbera ports route, making it a time-consuming process. An unbroken cold chain, getting big shipping vessels, and handling are other challenges we might face.”
Promising aviation reforms
The Single African Air Transport Market (SAATM) and African Continental Free Trade Area (AfCFTA) agreements are expected to have a transformative effect on the aviation and logistics landscape of Ethiopia.
While SAATM aims to liberalise the African aviation market, promote connectivity, and remove barriers to air transport within the continent, AfCFTA will aid the growth of airlines and boost intra-Africa trade and tourism in Africa.
Aklilu Mekbib, Director of Global Sales at ASI said, “As Ethiopia is a major aviation hub, the adoption of SAATM will likely lead to increased connectivity, more flight options, and enhanced competition among airlines. But SAATAM by itself will not guarantee growth, the AfCFTA needs to be in place so that new and current African-based carriers can compete with the large non-African carriers that currently have a majority over African air space. The AFCFTA is a landmark agreement that establishes a single market for goods and services across Africa, aiming to boost intra-African trade. Ethiopia, with its strategic location and strong air cargo capabilities, is well-positioned to benefit from the AfCFTA. The agreement will likely lead to increased trade volumes, including air cargo, within Africa. As a result, the demand for air cargo and logistics services in Ethiopia is expected to grow, creating opportunities for the country's aviation industry.”
Woubishet added, “The idea of these agreements is good but the documentation is going to take a long time to make such reforms operational and there are countries who are yet to sign on. I have seen instances where Ethiopian and Kenyan flowers have gone to Amsterdam, Paris, and then finally to Gabon or parts of Western Africa, and such reforms can create intra-African links and reduce transit time, which is better for the life of the flowers as well.”
Focus on eCommerce
China being a major investor in Africa is one factor while another is the boom of electronic payments which is leading to a potential for the growth of eCommerce in the country.
An indicator of the sector’s growth is the Ethiopian government’s digital strategy called ‘Ethiopia 2025’ following an increasing number of online retailers and consumers taking the e-commerce route.
In line with this, Ethiopian Airlines and Ethiopost, the designated postal operator of Ethiopia, recently signed a memorandum of understanding (MOU) to enhance e-commerce capabilities and position the country as the gateway for e-commerce in Africa.
The MoU will likely ensure that Addis Ababa Bole International Airport becomes the premier eCommerce parcel gateway for Africa and its surrounding areas. This partnership will look to establish Ethiopia as a prominent player in Africa’s eCommerce market, amidst a thriving digital economy that is taking off there.
“Locally, we are in continuous discussions with eCommerce sellers on how to bring our eCommerce logistics solutions to Ethiopia, especially leveraging Ethiopian Airlines’ services.” - Peter Penseel, CEVA Logistics
This year also saw Ethiopian Cargo & Logistics Services flagging off two weekly freighter flights connecting Xiamen with São Paulo and Santiago via Addis Ababa. Ethiopian also announced two weekly freighter flights between Shenzhen and Liège from February 17, 2023. A company release cited that Ethiopian will deploy a B777 Freighter on the new cargo routes.
Ethiopian Airlines had also inked a strategic partnership agreement to jointly commence sea-air multimodal transportation with International Djibouti Industrial Park Operation (IDIPO) and Air Djibouti in March for expeditious transportation of goods to Africa last year.
Based on the agreement, the cargo will be transported from China to Djibouti Free Zone by sea and will be uplifted by air from Djibouti International Airport, thereby facilitating trade between Africa and China through fast and easy movement of cargo. The deal enables traders to order their products from China to Africa via Djibouti port and with Ethiopian facilitating the air movement of goods to different parts of Africa through its vast network, cited a company release.
In yet another significant development this year, Ethiopian Airlines Group partnered with MailAmericas (MA), a private postal operator in January to establish competitive cross-border eCommerce services between Africa and the Middle East, with Addis Ababa serving as a hub.
Alemu said, “The partnership with postal companies such as Mail America enables us to serve our customers better by leveraging the expertise and the huge postal network while also complementing our efforts in making Addis Ababa the eCommerce logistics hub for Africa and its surroundings. Cooperation across the supply chain is a must and our partnership with MA is an important step towards strengthening our activity in this area.”
Penseel of CEVA Logistics said, “Locally, we are in continuous discussions with eCommerce sellers on how to bring our eCommerce logistics solutions to Ethiopia, especially leveraging Ethiopian Airlines’ services. With the construction of a new eCommerce warehouse, Ethiopian Airlines is building substantial potential for eCommerce in Ethiopia. This potential extends to the rest of Africa as well, since the Addis Ababa hub is very well connected to the entire continent.”
Talking about the country’s eCommerce potential, Alastair Tempest, CEO of E-commerce Forum Africa said, “At present, it is a reasonably small eCommerce market (in Ethiopia), concentrated in the main cities. However, with the rapid growth of internet connections, driven by competition in telecoms, Ethiopia is set to become a bigger player in eCommerce at a national level. Ethiopian Airlines was very fast in pivoting from passenger to cargo from the start of the pandemic. It, therefore, established itself as a major air cargo provider particularly in East Africa and in Africa-India trade.”
Meanwhile, Mekbib added that Ethiopian Airlines (ET) seems well-placed to support the current eCommerce demand. He said, “As the largest African carrier, ET is responsible for the majority of movements into and out of Ethiopia. Its plans include expanding its warehouse capacity to an area of 15,000m2 (150,000 tonnes/annum). This expansion will include automated and mechanised ULD storage, retrieval system ETV, and package sorting.”
The road ahead
Apart from ethnic conflict, major challenges include the rising costs of fuel needed for transportation and the weakening currency resulting in lower import volumes.
As per the ITA report, the Government of Ethiopia (GOE) aims to boost exports and trade through a $1 billion investment in agro-processing industrial parks to make Ethiopia a top manufacturing hub on the continent.
The report also highlighted challenges in the agro-processing sector, which also included the need for effective supply chains, better cold chain facilities, and integration of smallholder farmers and food processors into the commercial value chain apart from other issues.
Alemu said, “The solution that we believe will assist in improving the growth of the logistics network is the development of policies that focus on sustainability e.g. environmentally safe inputs like Sustainable Aviation Fuel (SAF), lowering costs of air connectivity among countries, and a growing number of partnerships in the industry.”
“We are sending out a few things and bringing in so many imports, making us highly dependent on perishable traffic as we do not have other exports and finished goods to send.” - Dawit Woubishet, WoubGet Holdings
Woubishet mentioned the imbalance of cargo and market liberalisation as some of the major challenges for air cargo but also listed Ethiopia’s proximity to major markets like the Middle East and Europe as an opportunity.
He said, “We are sending out a few things and bringing in so many imports, making us highly dependent on perishable traffic as we do not have other exports and finished goods to send. With Kenya starting sea shipments of perishables, it will bring some competition on that front, while competing with Middle Eastern airlines can become a challenge for ET especially to compete on their low freight prices.”
Lawrence too emphasised that Ethiopian Airlines' plan to transform Addis Ababa into a smart logistics hub is a smart move. He said, “Addis Ababa is strategically located in the heart of Africa, making it an ideal hub for cargo operations. Its central location provides easy access to multiple African markets, enabling efficient connections and distribution of cargo across the continent. This geographical advantage positions Addis Ababa as a gateway for cargo flows between Africa, Asia, Europe, and the Americas.”