Consumer unions in Addis Abeba are being sidelined as delivery companies take over the distribution of subsidized sugar and cooking oil. The transition has impacted many consumer unions who previously provided these goods through the city's coupon system.
The Addis Abeba Trade Bureau (AATB) has shifted the responsibility of distributing sugar from the consumer unions to delivery companies. City authorities say this move is aimed at improving service efficiency and preventing product waste.
In four districts, Addis Ketema, Nifas Silk Lafto, Lideta, and Kolfe Qeranio, 45 consumer unions which supplied subsidized basic goods for decades have stepped back from distributing sugar and oil to coupon users as a tech-based delivery company takes over the task.
Makiva Trading Plc, operating under the brand name Agelgil, is leading the transition by delivering government-subsidized goods directly to customers' homes.
Initially launched in Kolfe Qeranio, the company has expanded its services to four districts, delivering sugar and cooking oil to 317,362 registered consumers. “When we started this work, users were skeptical about our ability to deliver items in short supply,” said Awash Mohammed, general manager of Makiva.
Makiva, which started with an initial capital of 16,000 Br, now has more than 20 million Br in capital and 120 employees in packing, sales, and customer registration. It uses 30 cars, including six Isuzu trucks and 24 minibuses to deliver goods.
The company makes a profit of three percent per kilogram of sugar. Makiva also delivers other consumer goods which it sources directly from manufacturers.
Distributing a large quantity of goods helped the company benefit from economies of scale, enabling it to sell edible oil at relatively lower prices. Makiva offers 5 litres of palm oil for 800 Br, which is sold in various shops for 1,150 Br to 1,350 Br.
Makiva is now processing operational permits for Aqaqi Qality and Gulele districts to register new customers for their delivery services. Customers receive an SMS a day before delivery, specifying the product and price, with payment options including cash or digital methods. Awash states that they do not charge additional fees for delivery.
YBS Marketing, another retailer, is also preparing to enter the basic goods delivery market. Currently, YBS offers vegetables, fruits, and other essentials at Sunday Markets. The company has completed app development and is awaiting final certification to begin operations. YBS plans to start with three warehouses, 250 employees, and three vehicles. The trial will launch in the Lemi Kura district, with plans to expand to other areas in the city. With a capital of 10 million Br, YBS expects to begin operations within a month.
Woldegiorgis Yilkal, general manager of YBS Marketing, stated that they will adhere to selling price rates set by the city’s Trade Bureau.
While the delivery companies offer benefits like convenience, consumer unions become the collateral damage.
West Union which incorporates 15 consumer unions operating in Kolfe Qeranio has been removed from edible oil and sugar distribution in the district. The Union which has 58,000 members has remained in charge of supplying 282 items at its stores and also to government employees and feeding centres run by the city administration.
Consumer unions in Addis Abeba have over 35,000 employees, with 4,000 in Kolfe Qeranio alone. Belay Tolera, the general manager of West Cooperative Union, argues that many of these employees could lose their jobs if the delivery companies continue to expand.
“The delivery companies have completely replaced consumer unions in the distribution of sugar and cooking oil,” Belay said.
Abebe Haileselassie, general manager of Jemo Multipurpose Consumers Union in Lideta district, acknowledges that delivery services offer better convenience, reducing the need to wait in long queues.
He says that consumer unions operate on limited profit margins, with the government's coupon system allocating an average of 5kg of sugar per person each month. The Union sells about 500qtl of sugar monthly with a margin of approximately two Birr per kg. The Union previously supplied up to 1,100qtl of sugar a month.
Initially, there was skepticism about delivery companies’ ability to supply goods consistently, but the convenience of home delivery has been appreciated. Yared Mersha, a customer of Agelgil delivery in Lideta, says that he no longer has to worry about supplies running out at consumer union shops.
Another customer, Tiblet Kassie, a resident of Abinet, said the delivery service has saved her from many hassles. “Going to the shops often left me vulnerable to malpractices,” Tiblet stated.
However, the shift to delivery services is not without issues. Customers complain about missed deliveries, requiring reorders if they are not present at the time of arrival.
Meketa Adefris, director of trade promotion of AATB says that the move to bring delivery companies into subsidised goods distribution aims to address the widespread inconveniences. He argues that inefficiency in the distribution system created limited availability, consumer annoyance, and product wastage.
“We used to, and still, receive a lot of complaints from consumers about the distribution system”, said Meketa. “The motive behind the scheme is to address these issues.”
Meketa argues that allowing in technology-based deliveries will enhance accessibility, eliminate consumer inconvenience, and alleviate wastage. “The new distribution system brings the products directly to consumers’ homes”, he said. “Previously, consumers had to go wherever the product was available.”
Mustafa Abdela, a business consultant with a knowledge in ecommerce, says that this transition could threaten consumer unions, with tech-based companies replacing their functions. He argues that this may lead to revenue decline and employee layoffs.
He believes the expansion of delivery companies will create employment opportunities and potentially reduce distribution costs through economies of scale. However, Mustafa cautions that, without effective oversight, the market might concentrate among a few dominant players.
PUBLISHED ON
Dec 29,2024 [ VOL
25 , NO
1287]
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