Long neglect takes toll on Ethiopia’s main trade artery

Uusmiir · August 2, 2023, 7:32am

Disrepair on the Addis Ababa-Djibouti trade corridor, which handles 95 percent of Ethiopia’s trade, is costing drivers hundreds of thousands of birr in repairs and endangering lives, according to a new study.

Despite contributing significantly to both countries’ economies, the longest Ethiopia-Djibouti trade corridor faces ongoing issues that continue to irate businesses.

The Ethiopian Logistics Sectoral Association survey released Thursday chronicles chassis fractured, suspensions shattered, vehicle chassis, suspensions, shocks, tires, dashboards and truck bodies severely damaged from road defects.

Parking shortages and road safety concerns also plague drivers. Most said dealing with infrastructure challenges and security risks is common.

Breakdowns cost truckers 200,000-600,000 birr to relocate vehicles and goods, drivers said, due to expensive cost of local technicians.

Poor road conditions caused back pain, kidney failure and breathing issues, according to the study. Drivers cited horrific murders, illegal inspections, harassment by border authorities and residents, and needless stops as major problems.

Over 85 percent called the Galafi to Dikil stretch in horrible shape. 15 percent said Galafi to Dire Dawa Turn-off is rapidly deteriorating.

Vehicle maintenance costs have surged from poor roads, raising logistics costs.

Officials of the Association expressed concerns that drivers may soon be unable to work, disrupting supply chains and deterring business, given the severe safety issues and hazardous conditions.

Businessman Tsedeke Yihune (Eng.) cited huge logistics costs importing through Djibouti. He says the claims that shipping from China to Djibouti was one-third of the total cost, with the rest from Djibouti to Addis Ababa, was erroneous.

Dereje Largesse of the Transport Employers Federation said poor roads significantly increased maintaining 12,000+ trucks. He decried the safety risks and neglect, urging officials to address bureaucracy hindering business.

“It is particularly concerning to see the driver’s safety put at risk and road safety neglected,” he said, calling on Ethiopian and Djiboutian officials to streamline unnecessary bureaucracy that hinders the business climate.

The Association urged the government to prioritize the trade corridors and safety, noting they are points of entry for most imports and exports. It requested adequate funding to maintain excellent road conditions.

Despite reforms under Prime Minister Abiy Ahmed (PhD), Ethiopia continues to face poor trade logistics and difficulties improving its business environment. As a result, the country’s global trade remains low due to supply and demand constraints.

A new USD 730 million International Development Association (IDA) grant aims to significantly upgrade the Addis Ababa- Djibouti corridor as part of the Horn of Africa Initiative’s Regional Economic Corridor Project.

The project will improve the route between Ethiopia and Djibouti, particularly the section between Mieso and Dire Dawa, to shorten travel times, boost safety, cut costs and reduce pollution.

As Ethiopia seeks to diversify its ports, the corridor currently handles around 95 percent of the country’s trade.

Uusmiir · November 27, 2023, 8:53am

Despite the Ethiopian Customs Commission (ECC) intervening in the cargo delay that took place in Djibouti at the end of last month, the freight forwarders from Ethiopia and Djibouti assert that the issues still persists.

According to sources in the Ethiopian and Djiboutian logistics sectors, Djibouti Customs has implemented a new strategy that it claims aims to control under invoicing problems on inbound cargos. Private logistics companies from both nations said that the problem was first noticed in late October. They informed Capital that containerized freight with an invoice of less than USD 20,000 is unable to get clearance from Djibouti Customs.

Freight forwarding businesses state, “The Djibouti Customs says that the new procedure is come from the Ethiopian side rather than the initiative of the Djibouti authority”, adding, “The customs claimed that the cargos with less than USD 20,000 invoice would not be clear on the suspicion of under invoice.”

Furthermore, the forwarding specialists asserted that the under invoice problem is a mandate for an Ethiopian regulating agency rather than even the authorities in Djibouti having the capacity to govern the same.

Experts in the field have stated that the problem began when the National Bank of Ethiopia implemented new policies pertaining to letters of credit (LCs), ordering that an LC be used exclusively for a single purchase as opposed to the numerous shipment plans that Ethiopian importers typically employed. The central bank and the ECC asserted that the new policy’s goal was to regulate the flow of unlawful foreign cash and under-invoiced import goods.

Experts countered that Djiboutian Customs, “who does not have a concern for transit cargos that go to Ethiopia,” could not be involved in this instance. Since then, containerized consignments worth less than USD 20,000 have reportedly been delayed in their transportation to Ethiopia by the Djibouti authority’s new system, according to freight forwarders in Addis Ababa. Ethiopian freight forwarders have complained that the problem has interfered with their business, as have their Djiboutian partners.

Capital has learnt that the Ethiopian Freight Forwarders and Shipping Agents Association notified the ECC and other pertinent bodies about the problem a few weeks ago. According to sources who spoke with Capital, the Ethiopian diplomatic mission in Djibouti has discussed the matter with the Customs Commissioner in order to confer with Djiboutian authorities on the situation.

On November 13, Hassan Houmed Ibrahim, Djibouti’s Minister of Infrastructures and Equipment, met with Ethiopia’s ambassador, Berhanu Tsegaye (Amb), who said that they had discussed Djibouti Customs services.

In a same vein, Djibouti Customs and Indirect Tax received a letter from Debele Kabeta, Commissioner of ECC, on November 10th explaining the customs process and laws that Ethiopia follows. Experts claim that the letter, which courteously describes the process for the inbound cargo, indicates that the Ethiopian parties intend to resolve the issue amicably.

According to a copy of the letter that Capital saw, the under-invoicing issue brought up by its Djibouti counterpart was the reason why clients and the Djibouti coordination office of the company told the commission that they were experiencing shipment delays.

The letter explains how the problem affects local firms, saying, “We have been able to identify the fact that our importers and manufacturer are incurring additional costs and facing shortage of raw materials.”

The letter goes on to provide more details and explanation regarding the procedures that must be followed in order for the import and export transit service to adhere to international standards and principles.

The Customs Proclamation, which governs importers’ customs procedures, has also been cited on the letter.

The letter mentioned Customs Proclamation 859/2014 article 5 sub-article 1 that stated promote a self-assessment system whereby importer and exporters present the value of goods and pay duties and taxes by themselves, “then the examination of documents and goods will undertake by customs after termination of transit determines and the appropriate duties and taxes to be paid based on the adjusted price.”

“We believe that requesting real invoice price for transit cargo cannot expedite freedom of transit cargo,” the letter signed by Debele argued, adding, “Accordingly, we are conforming you that ECC will take all the necessary measures about the issue of goods during clearance time.”

“Therefore, we are requesting your honorable office to understand such issues and give us your usual support and sincere cooperation on this matter,” it concluded.

But, freight forwarders from Ethiopia and Djibouti with whom Capital talked to on Friday claimed that the issue remained unresolved. They stated that, in addition to the external expenses to importers and the nation, their activity is impacted by the “very limited cargos release that we observed in the past few days however at the current stage transit cargos are still on hold in Djibouti which are supposed to be transported in Ethiopia.”