Digital Hiccup

Execution, Literacy Challenging Transformation

Ethiopia’s economy has been affected mainly by peace and security challenges. Shortage of forex, dwindling industrial outputs, and inflation, among other challenges, have stood on the economy’s throat, leaving it gasping for air. Amidst these dark moments in the economy, Prime Minister Abiy Ahmed’s (PhD) administration has shown a solid commitment to one thing: digital transformation. Last month, the Ministry of Transport and Logistics implemented a digital payment system at fuel retail, banning cash payments throughout Addis Ababa. Since the announcement, operational gas stations have been chaotic. Despite the multi-facet advantages of digital payment, enough preparations to work on the digital literacy of the public are necessary for a seamless transition into the modern way of payment. Moreover, the details of the execution of the digital transformation need to be well thought out, writes EBR’s Bamlak Fekadu.

As thousands of people travel from all over the country for holiday vacations and family visits to the capital, Addis Ababa regularly experiences long lines at transport terminals and pump stations in the days after the holidays. This situation often leads to traffic congestion and fuel shortages, causing inconvenience and frustration for locals and visitors.

On April 24th, Monday morning, the weather was foggy and rainy, and the streets of Addis were congested with traffic, unusual considering all the exacerbating factors bearing in mind the holidays. Even with these reasons, the traffic jam was different this time, with long lines of vehicles following vehicles in most fuel and gas stations. Because too many cars lined up to get fuel, many drivers were spotted with their engines turned off, while some ran out of gas.

The directive initiated by the Fuel and Energy Regulatory Authority, a government regulatory body with the jurisdiction, was issued to transform the fuel retail industry’s transactions to a fully digitised and cashless system and was put into effect after three weeks. Over 43 thousand transactions were made via the new digital system in the first two days.

However, Addis Ababa, which is home to 60Pct of the vehicles in the country, was given only an 18-day notice before the strict implementation of cashless transactions at gas stations for all vehicles and was responsible for consuming 65Pct of the roughly 12.42 million litres of fuel the nation uses daily.

The new system aims to increase transparency and reduce corruption in the fuel retail industry. However, it has caused inconvenience to some customers who have to use the new cashless payment methods.

According to EBR’s observation in some of the pump stations, ride-hailing service providers with frustration on their faces, families with angry faces, and irritated minibus taxi chauffeurs because of the short-noticed payment system implementation.

Despite the benevolent strategy, it ultimately becomes tyrannical and exasperating for either the client or the fuel stations due to infrastructural limitations for accessing digital financial services and the gap in digital literacy.

Addisu Bazezew, 41, a husband and father of two children who works as a senior driver at a private firm, had been in one of the National Oil Company (NOC)’s 200 gas stations around Bambis on Jomo Kenyatta Street in Addis Ababa for more than three hours.

While his phone was constantly ringing from his employers, it was easy to see the frustration on his face. He did not know how much longer he could withstand the pressure. He attempted to explain his situation, but his boss did not seem convinced.

“The new payment system is not convenient. It is frustrating and inconsiderate of employed drivers. The system is time-consuming,” he told EBR.

In Ethiopia, drivers make little money; and in many cases, employers do not use fuel coupons. Because of this, they have to pay out-of-pocket for fuel without having any pre-funds deposited in their accounts before launching the digital payment initiative.

“I do not even have enough savings in my account; besides, the system has limitations with few payment modalities,” he said. As a result, he had to register on Telebirr and search for Telebirr agents nearby to make deposits for later payments.

Addisu needed clarification on the sudden change in payment methods, which required digital cash.

“I had to sit and wait for hours until the vehicles in the front line were confirmed to have paid,” he told EBR.

The trading system is new, and combined with shoddy network infrastructure and inadequate preparations, which caused delays in SMS confirmation of payment and limited digital literacy, these issues have led to frustration among users and negatively impacted the adoption of the trading system.

However, authorities claim that they put all 153 pump stations in the capital to start implementing the mandatory fuel transactions through digital payment platforms after months of tests, referring to beneficiaries of the fuel subsidy. More than 200 thousand beneficiaries have received subsidised fuel via digital payments since July 2022.

Melkamu Abera, whose last name is changed for this article, works at one of Total Energy’s 143 service stations in Lemikura District, around Ayat in Addis Ababa. He witnessed the new directive as suffocating for both retailers and consumers.

“The directive was introduced in an absurdly short period, which manifests a failure of government and payment service providers planning,” Melkamu shares his view.

The three services the government urged people to use most frequently were the Telebirr mobile wallet, CBEbirr, and the Nedaj application from the Commercial Bank of Ethiopia.

“Unlike in the past, we now require customers to pay first before we begin filling the vehicle,” Melkamu explained.

Melkamu cited payment option limitations and delays in SMS purchase confirmations as significant reasons for the unsatisfactory situation. Due to the delays, he has had incidents in the past few days where customers drove off without paying while he tried to render faster service.

Even with the brief declaration made by the authorities, the electronic transaction methods designated for the fuel-vending sector are limited to up to three platforms.

Currently, there are eight payment system operators in the country, where 31 commercial banks operate. However, the competition is between the two state-owned firms – Commercial Bank of Ethiopia (CBE) and Ethio Telecom.

CBE’s digital mobile banking services, including the CBE Birr App, have 7.9 million active members, the Nedaj App dedicated platform with over 50,000 downloads from the Play Store, and Ethio Telecom’s Telebirr mobile money system boasts 31 million users.

“Customers waited up to eight hours as a result,” he told EBR.

Testimonies from retail stations and consumers go contrary to the swearing of EthioTelecom’s CEO, Frehiwot Tamiru, assuring the infrastructure’s reliability and the connectivity coverage of the 2G network, which surfaced to 99.1 Pct.

In order to give the government control over the fuel market, the project, according to Transport and Logistics Minister Alemu Sime (PhD), was designed to create a well-organised framework that integrates with a gasoline allocation and registration system at every station in the country.

However, for fear of the unknown, consumers are engaged in panic buying, resulting in long lines and shortages at some gas stations, causing inconvenience for the public and driving others to seek alternatives in the black market.

Ethiopia has nearly 1.3 million vehicles, of which more than half are in the transport business. There are over 630,000 vehicles in Addis Ababa registered to operate for different purposes, of which the ride-hailing industry provides an estimated 90,000 rides daily utilising mobile technologies.

Ethiopia spends nearly USD 3 billion per year on fuel imports, with diesel being the most consumed with 3 million metric tons, followed by 700,000 metric tons of benzene, 600,000 metric tons of jet fuel, and 70,000 metric tons of industrial diesel, equivalent to 8 million litres of diesel and 2.5 million litres of benzene daily imports.

Over 700,000 vehicles in the city, including ride-hailing companies, taxis, commuters using tricycles, and delivery companies, were left on their knees in a frustrating situation due to the city’s fuel shortage, which had been escalating a few days after the initiative’s launch.

Alemayehu Bedada wins his bread serving transportation with his trikes motor, usually referred to as “Bajaj”, after an Indian multinational automotive manufacturing company that first introduced the three-wheel motors in Ethiopia, at Bole District around CMC Altad. He was tired of waiting in line for more than two hours, so he purchased benzene from the black market for as much as ETB180 per litre.

The Ethiopian Petroleum and Energy Authority strongly argues that there is no shortage; instead, it signals preparations for illicit acts.

On the other hand, drivers of state-owned buses like those operated by Anbessa Bus and Sheger City Bus began to voice their frustration over a lack of fuel. They claimed their daily fuel consumption had decreased from 200 litres to 50 litres.

Customers have reported problems such as slow transaction times and confirmation challenges. In contrast, retailers such as Mekonen Tiruneh station attendant at Oil Libya, with over 200 stations, claim a low digital literacy rate contributes to delays in the refuelling process. This development has sparked reactions and discussions among customers, officials, and experts.

“Some drivers have a propensity to forget their usernames and passwords. They frequently struggle with using one-time passwords (OTP) to confirm their purchases, which is another frequent occurrence,” Mekonen told EBR.

Customers have reported problems such as slow transaction times, challenges with confirming purchases, and a low digital literacy rate contributing to delays in the refuelling process. This development has sparked several reactions and discussions among customers, officials, and experts.

“The process is very exasperating, especially for drivers, since Unstructured Supplementary Service Data (USSD) takes around 15-20 minutes to get a confirmation message that they made their payments,” Mekonen said, adding that the system would have been better for both the customer and retailer if the network was not a problem.

USSD is revolutionising how people make payments, allowing users without a smartphone or internet connection to use banking, insurance, fund transfers, checking bank account balances, generating bank statements, purchasing insurance, and lending.

USSD has successfully unlocked financial inclusion opportunities for the unbanked and underserved in Africa, with an estimated 6.7 billion transactions worth USD 65.7 billion in 2020. The impact is significantly higher than the 5.7 billion transactions worth USD 21.4 billion in 2017.

According to the Global Competitiveness Report of 2019 by the World Economic Forum, Ethiopia has ranked 137th in ICT adoption and 100th in digital skills among 141 countries, behind Gabon, Zambia, Mauritius, Mali, Lesotho, Botswana, and Uganda. The situation shows that more interventions are needed to advance the call for digital literacy campaigns.

According to Solomon Kassa, a Tech- expert, and a TV personality, the Digital Financial System in Ethiopia, with figures drawn from the International Telecommunication Union (ITU), Ethio Telecom, the United Nations, the World Bank, GSMA Intelligence, and KEPIOS, underserved 65.2Pct of the adult national population in the financial services sector, leaving over 40 million people utterly unbanked in 2022.

The use case for advanced digital financial services was depicted in the report by Solomon as having even fewer users overall. The percentage of people who use online banking has remained at 0.4Pct over the past year, compared to 11.9Pct, 0.03Pct, and 0.6Pct who made digital payments, bought items online, or paid bills online during the same periods.

Given the use case penetration despite the lack of adequate infrastructure, Mignot Tariku, a freelance programmer who has worked on software and application developments, including enterprise resource planning ERP, is sceptical about the timeliness of digital transformation in the fuel vending industry. He argues that online banking still needs to be widely used. However, as technology and internet access continue to advance in the nation, there may be room for growth and increased usage.

In light of the definition of an electronic payment or digital transaction involving two parties and one or more e-payment modalities, such as ACH, cards, bank transfers, digital wallets, mobile payments, and others, she contends that the project’s implementation could be improved.

“However, the motive of the initiative appears to favour the state-owned enterprises”, she argues, adding that technology is about simplifying life, but what we are witnessing is limited in scope.”

“The government should have considered card payments via POS and other alternatives,” Mignot told EBR.

Currently, Telebirr, Nedaj, CBE Birr, and Coopay-Ebirr are the digital payment options drivers can use to pay for fuel. FinTech startups have also appealed to have their system among the digital payment options.

According to corporate business lawyer Daniel Fekadu, the government’s decision does not restrict buying or selling gas with the birr. However, it only changes the mode of payment to digital instead of cash.

Digital payment means the transaction is fully registered, which is critical to combat illegal practices. The government’s push for more digital payment is a good option as the economy currently has a cash shortage. However, Daniel criticised the government for not involving all financial institutions in this payment transformation. The digital payment systems have become a battlefield for the state-owned Ethio-telecom and the Commercial Bank of Ethiopia, leaving the more than 30 private banks off the show.

Despite the complaints, the state remains committed to going cashless and states that the situation will improve as more drivers become accustomed to it. A nationwide system rollout is expected to be implemented on July 8th, 2023.

11th Year • June 2023 • No. 118 EBR