Feds Crack Down on Parallel Market with Tougher Fuel Enforcement

Jul 19 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

An aggressive push by federal authorities to digitise fuel sales has ignited a market-wide reckoning, exposing deep-rooted illicit trade and the limits of digital transformation in a country still struggling with infrastructure and security deficits.

This month, a wave of enforcement swept across fuel stations and distribution networks after the Ethiopian Petroleum & Energy Authority (EPEA) revealed alarmingly low adoption rates of mandated electronic sales platforms. A terse memo from Dibara Fufa, the Authority’s deputy director, instructed regional trade bureaus to escalate action against operators resisting the transition.

The numbers provided rationale for his actions. Of the 71,360Ltrs of regular gasoline distributed in May by a distributor, only roughly 10pc were sold digitally. The compliance rate for diesel was even lower at nine percent. Of the total 10.88 million litres of petrol (MGR) and 36.88 million litres of diesel (ADD) imported by 38 distributors in May, only 1.42 million litres of MGR and 5.37 million litres of ADD were sold through the digital system.

“If they don’t sell it digitally, we believe they are diverting it to the black market,” Dibara told Fortune, reinforcing federal suspicions of systematic leakage.

Indeed, the figures point to a major credibility crisis in the fuel distribution chain. Of the 531,550Ltrs of automotive diesel distributed in May, only 47,351Ltrs went through the approved digital channels from one company.

Authorities have already flagged 354 dealers, seven of whom were deemed new offenders. More damning is that nearly one-third of fuel stations investigated to date had less than half digital transactions recorded since the rollout began in early 2023.

“If they don’t sell it digitally, we believe they are diverting it to the black market.” Dibara Fufa Deputy Director General Ethiopian Petroleum & Energy Authority

Regulators have begun deploying the full force of new enforcement provisions. Fines can reach 350,000 Br, and prison sentences can be up to two years. Six distributors have already been suspended for illicitly trading 2.8 million litres in two months, and another seven face final warnings.

Thirty-six additional companies now face a two-month supply embargo, pending the outcome of performance reviews. Continued underperformance will trigger stiffer penalties under the Petroleum Product Marketing Law, which includes jail terms of up to five years and fines of half a million Birr.

The assertive campaign follows a troubling legacy of fuel smuggling. A 2018 study by Jimma University found that only 18pc of fuel smuggling offences between 2015 and 2017 led to convictions, with the annual cost of contraband fuel exceeding 45 million Br. Porous border towns, such as Bedele, Dembi Dollo, and Mizan Teferi, have long served as conduits for smuggling, a trend exacerbated by regional price disparities and weak enforcement mechanisms.

The government’s technological arsenal includes platforms like Telebirr, CBE Birr, M-Pesa, and others offered by private banks, all integrated into a national aggregator managed by the Ministry of Transport & Logistics, with back-end support from EagleLion Systems. In theory, the real-time monitoring should enable a swift detection of anomalies. In practice, results remain uneven.

By the third quarter of the current fiscal year, 176 billion Br, roughly 41pc of total fuel sales, had been routed through digital channels. But these national aggregates obscure regional disparities.

Fentaw Fetene, deputy bureau head in the Amhara Regional State, confirmed that 150 stations were warned for lagging behind the national average.

“This time is different,” Fentaw said. “We’re holding both distributors and retailers accountable.”

However, station operators argue that systemic shortcomings limit their ability to comply with these regulations. Many are located hundreds of kilometres from Addis Abeba in zones with sporadic internet access and occasional conflict flare-ups.

“Peace and infrastructure issues may occur in certain areas, but not all the time,” said Fentaw. “We’ll weigh these issues while still pursuing penalties.”

The rollout of fines has come as a surprise to stakeholders.

“We only learned about the penalties through public announcements,” lamented Ephrem Tesfaye, board member of the Ethiopian Petroleum Dealers Association.

With digital compliance sometimes falling below two percent, he warned that the burden of proof has now shifted to station operators to demonstrate that they are not complicit in parallel-market sales.

Digital payments expert Nebiyu Taye, founder of Click Digital Solutions Plc, believes technology remains the best line of defence, but only if it is comprehensive. His prescription includes mandatory biometric verification (Fayda ID), geo-fencing of deliveries, GPS-equipped tankers, and point-of-sale systems at every pump.

“Look at Kenya and India,” he said. “They use QR-coded receipts and real-time audits. That’s how you close the loopholes.”

Ahmed Tusa, a former trade minister who once served as the director general of EPEA and a retired policy advisor in the same ministry, echoed the need for balance. He sees fuel diversion as both a cross-border and domestic issue. While parallel-market exports are driven by price arbitrage, local shortages fuel profiteering in the informal retail sector.

“Regulations are not always the answer,” Ahmed cautioned.

He advocated for a dual strategy, including expanding supply while tightening enforcement, as was done during the cement market crisis.

The crackdown marks a major departure from the governance of the analogue era. According to experts, whether the transformation endures will depend less on punitive measures and more on systemic upgrades, reliable connectivity, user-friendly platforms, secure data systems, and stakeholder buy-in.

PUBLISHED ON Jul 19,2025 [ VOL 26 , NO 1316]