The Ethiopian Petroleum Supply Enterprise (EPSE) has decided to build 160 fuel service stations across the nation, in a bid to relieve shortage of fuel stations in the country.
With the view of filling the gap in the fuel distribution sector, CEO of EPSE, Tadesse Hailemariam, said that the Enterprise is planning to form a new company that will engage in fuel distribution business. The proposed company will build 160 fuel service stations in Addis Ababa and regional towns, with sixty fuel service stations in Addis Ababa. “For the time being, the administration has prepared five locations for us.”
The business proposal will be presented by the management of EPSE to the board and if approved it will be presented to Council of Ministers for endorsement. In partnership with a foreign fuel firm, EPSE is contemplating to venture into the fuel distribution sector. “The government will decide either we will from a joint venture company or we shall do it all by ourselves,” Tadesse said.
The growth of the sector is being hampered by many obstructions in the Ethiopian fuel distribution sector. Some of the red-tapes hindering the development of the sector are low profit margin, unavailability of land for fuel station construction and inefficient transport system.
With a population of 100 million, Ethiopia only has 800 fuel service stations while neighboring Kenya with a population of 40 million has over 2,000 fuel service stations operating in the country. There are 15 fuel companies in Ethiopia engaged in the fuel distribution sector while Kenya has 65 companies.
There are more than 800,000 registered vehicles in Ethiopia, with 480,000 of them concentrated in the capital Addis Ababa. There are only 100 fuel service stations in the city while most of them are old and have small and ageing fuel depots that have limited storage capacity. An average of 4,000 vehicles are served by these rickety 100 fuel service stations.
Scarcity of land is the other major obstacle hindering the growth of fuel distribution sector. A myriad of challenges to secure land particularly in Addis Ababa will be faced by fuel companies or private investors who want to build fuel stations which has limited the number of fuel stations in the capital as well as the regional towns.
Investors do not prefer to invest in the fuel distribution sector due to this and other pertinent issues. Fuel companies are unable to build new fuel service stations particularly in Addis Ababa.
CEO of National Oil Company of Ethiopia (NOC), Tadesse Tilahun, said that his company has invested a huge sum of money and created many jobs for the youth, although the minimal profit margin is discouraging companies not to make new investments. Managing director of Total Ethiopia, Lasina Ture said that when compared to other African countries, profit margin, is very minimal, adding that it was deterring investment in the fuel distribution sector.
The newly-established indigenous fuel company’s manager, Yigzaw Mekonnen, said that fuel companies and fuel service station owners earn only 15 cents per liter while the minimal profit margin in Africa is 1.50 cents. “There is a huge gap between the profit margin companies get paid here and the lowest profit margin in other African countries.” PWKD15052018