Addis Fortune Newspaper (Ethiopia): Labour Union Sues Shell Over Severance Benefits

By Issayas Mekuria
Fortune Staff Writer
Sunday, December 2, 2007
Front page and continued on to page 15

Shell Ethiopia’s Labour Union filed a lawsuit at the Federal First Instance Court, Kera Area Labour Bench, alleging that the company has illegally changed its retirement policies in order to save money on lay-offs ahead of a possible closure of its operations in the Country.

The Complaint, filed by the Labour Union against Shell on November 22, 2007, stated that Shell Ethiopia scrapped its ‘Special Early Retirement Scheme’, which pays up to 55 months salary to employees who have been terminated or have voluntarily resigned from their jobs.  The company has instead replaced the scheme with a ‘Voluntary Severance Package’.

Going by the statement made by the company’s labour union in the court, the new policy would cut the amount of money to be paid to the departing employees by 70%.

“Having intended to close down its Ethiopia’s offices by selling the properties, Shell has introduced the new package such that it would minimize the expenses as much as it could,” the labour union stated in the filed complaint, requesting that the Court intervene to force the company to reinstate the previous scheme.

One of the first multinationals in Ethiopia, Shell Company (Read Sea) Limited and incorporated in London, started operations in the country in 1929. Shell Ethiopia Ltd currently employs 144 people, 124 of which are unionized. Until last year, the petroleum company opened 280 filling stations across the country and has installed three depots. However, in 2006, Shell has sold out 63 of its petroleum stations as well as two depots for Kenya’s Kobil, which recently entered in the Ethiopian market.

After 75 years of constant possession over Liquefied Petroleum Gas (LPG), Shell had sold LPG for Ghion Industrial Group in 2004.

According to information obtained from Ministry of Trade and Industry (MoTI), at the end of 2005 Shell was dominating at least 54% of the oil market in Ethiopia, though its current share of the market has since fallen below 30%.

Shell is vying for the country’s oil products market with new and old rivals such as TOTAL Ethiopia, National Oil Company (NOC), Yetebaberut Beherawi Petroleum (YBP) as well as the newcomer, Kobil.

For almost eight decades, the oil market in Ethiopia was dominated by four of these petroleum companies: Shell, TOTAL, Mobil and Agip. These four companies has exclusive rights to the market owing to policies by successive governments to prevent new entrants into the sector.  However, when such policies came to an end in 2003, and the door was opened to more competition, Agip was the first of the four formerly dominate companies to pack up its offices in Ethiopia.

Agip sold its properties to Shell Ethiopia, followed by Mobil, which sold out all of its assets to TOTAL and left Ethiopia about two years ago.

“Now Shell Ethiopia has been identified by its parent company as one of 10 country subsidiaries to be placed under review for possible actions that may include liquidating the assets,” said the union’s complaint.

As a result, Shell has been placed under a special managerial structure. By the same token, the company has taken it first step toward closing down, the allegations brought by the labour union stated.

By having replaced the previous scheme with the new package, Shell Ethiopia would save about 5 million Br, the labour union argues. 

According to the union, the move by the company would hurt their morale; above all, it compromises the welfare of the employees. Having stated this fact, the labour union has been trying in vain to convince Shell’s local and international managers.

In the case that Shell sells its properties in Ethiopia, the labour union is asking for each employee to be given the option to either hold on to his or her position under the new ownership, or to take the compensation offered by the previous scheme.

“Since Shell Ethiopia is out to compromise the welfare of members of the labour union who sued this company, let the Court ensure the previous scheme is reinstated,” the labour union said in the court document.

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