Ewnetu Taye is Deputy Director of the Logistics Transformation Office (LTO), established to transform and solve lingering sectorial problems which have long hampered Ethiopia’s development. He sees Djibouti still holding the key position going forward even with its numerous military bases which are incomparable to benefits bestowed by economic relations with Ethiopia. Alongside developing sea outlets, liberalizing the sector within Ethiopia is registering heavy developments. EBR sat down with Ewnetu to learn about the current status of the logistics sector in Ethiopia.
Ethiopia is diversifying its port options. What is the reason?
The second-most populous African country with a huge economy should not only depend upon one corridor—Port of Djibouti—for a number of reasons. To start with, the route to Djibouti is not well connected with railway and road transport systems. On top of this, Galafi still remains the major logistics town along the Ethiopia-Djibouti route. Over 1,000 trucks pass through this town every day. This has created huge pressures on logistics due to high congestion. The problem was solved after the Ethiopian government, alongside their Djiboutian counterparts, opened the Port of Tadjoura. After this, the pressure on Galafi was somewhat alleviated and shared by Tadjoura.
There is no One-stop Border Post (OSBP) along the Ethio-Djibouti route, but rather multiple custom check points. This year, the two nations started installing such a post. The railway transport system between the two countries has commenced operations but its storage capacity is too small for Ethiopia’s large external trade volumes. Additionally, national rail coverage is limited. The Ethiopian Railways Corporation recently acquired additional wagons but still, it is not enough.
Ethiopia suddenly shifted to Djibouti when war broke out between Ethiopia and Eritrea. Is the nation ready for such a sudden hypothetical incident that could put external trade on hold?
This is one of the reasons why Ethiopia is diversifying its port options. If we have multiple sea outlets, we can avoid sudden catastrophes.
Does this mean Djibouti will no longer be Ethiopia’s primary outlet to the sea?
Even if we divert portions of external trade to other ports, Djibouti will remain the main artery for Ethiopia’s imports and exports. To remain the major outlet for Ethiopia, the Djiboutian government is currently expanding its port.
Amongst the ports and corridors along the Red Sea, which are better for Ethiopian traders?
What makes a corridor preferable is infrastructure and efficient management. Additionally, logistical distance, time, and cost are key. Assab, Djibouti, and Berbera can be better options for Ethiopia in terms of their close distance.
But all these countries charge expensive tariffs. On the other hand, even if far, tariffs charged by Port Sudan are very fair. Ethiopia uses that port to import fertilizer for farmers in northern parts of the country. Sometimes, ports with efficient management and service can be a better option than ports located nearby.
As of now, Port of Djibouti is the best for Ethiopia. Berbera is also becoming a preferable corridor. Ethiopia is a landlocked country but has many options and access to multiple ports. Rwanda and Uganda, also landlocked, are not as lucky in this regard.
Shipping container rental rates have almost doubled since last year. What is behind this?
In the post-Covid-19 era, the global economic recovery led to an abnormal increase in demand for containers while supplies remained the same. This created a shortage of containers. Ethiopia is one of the nations affected by this.
An increasing number of superpowers are establishing military bases in Djibouti. Does this pose a threat to Ethiopia’s foreign trade?
Superpowers are building military bases in Djibouti to protect their own political and economic interests. Although there are numerous bases in Djibouti, none are comparable to what Ethiopia offers Djibouti. Ethiopia’s international trade is the lifeline of Djibouti. Superpowers pay money to establish military bases there but it is not close to what the Red Sea nation generates by renting out its ports to Ethiopia.
Who are the major foreign firms involved in the development and management of ports in east Africa?
DP world is becoming the major player in the region. It has already committed USD2 billion to develop logistics corridors. Other foreign logistics firms are also expressing interest in investing in Modjo Dry Port’s expansion project. Overseas companies are now realizing that involving in the dry port business in Ethiopia is a lucrative endeavor. Some have even finalized feasibility studies and are waiting until the conflict in the northern part of the country is over.
Ethiopia recently liberalized the dry port and multimodal businesses. How many investments have materialized thus far?
One of the subsectors recently liberalized is dry port development. Although this was opened to private investors last year, directives and operational manuals have not been ratified thus far. Yet, we have received a few proposals from investors wanting to engage in dry port development in Ethiopia. There are also others who are undertaking feasibility studies.
Next to this, the government has also liberalized the multimodal transport system. It is now open for private investors. The directive outlining details is its final stages. So, we will soon start issuing licenses for this.
Logistics companies planning to invest in the development of dry ports and the multimodal transport system complain that the government is not giving them required land for their projects.
Most investors want land near the capital. This is very difficult to accommodate for now. However, it will be well addressed in the future.
How many private multimodal operator licenses will be issued?
The plan is to issue at least five multimodal licenses.
Is the government planning to privatize Modjo Dry Port?
For now, private operators are only allowed to partner with the government and invest in a joint venture to develop Modjo Dry Port. We are arranging and facilitating this. Close to four private operators are already doing cargo consolidation and deconsolidation works inside the dry port. Soon, private operators will be licensed to operate inside Modjo and other dry ports. In the future, the government will decide whether it will be privatized or not. EBR
9th Year • Nov 2021 • No. 101