9 March 2009

Ethiopia: Congestion at Djibouti Port Makes Transport Cost Hit the Roof

This is a season when a series of vessels loaded with tens of thousands of tons of aid cargo and fertilizer arrive at the Port of Djibouti all at the same time. This time around though, there are two additions to the cargo - a huge amount of cement and tens of thousand of wheat government has imported to stabilize domestic prices - contributing to what industry operators say is an already congested the port.

There are close to 18 vessels under operation or anchored on the sea waiting for the harbour master's instruction to start off loading, according to port reports. The heaviest load has been brought in by a vessel named Mighty Michalis, carrying 48,934tn of wheat; it has a daily discharge of 2,676tn.

This amount is part of the total 290,980tn discharged at the port last week: The largest volume is cement (110,250tn) brought in by seven vessels, while three vessels are carrying 107,548tn of wheat. There are also a further three vessels loaded with 73,182tn of fertilizer.

The most affected are not only businesses. Aid cargo is not flowing as much as it should, creating uncertainty about the distribution of relief inside the country. Warehouses inside the Port of Djibouti and elsewhere in the town used by the World Food Programme (WFP) are all full, observers there disclosed. This was confirmed by WFP officials in Addis.

"A large quantity of WFP's food is at the port," Paulette Jones, WFP spokeswoman in Addis Abeba, was quoted by IRIN last week. "These [food] commodities are needed urgently to assist beneficiaries who are still suffering from the impact of the drought, high food prices and [low] global food stocks."

As a result, the transport cost per ton has risen to a record high of 70 Br, disclosed operators.

There are conflicting opinions on what actually caused the congestion. Some say it is due to insufficient number of trucks operating on the corridor.

"This is temporary and not as bad as last year," said a maritime expert from Djibouti. "The shortage of trucks happens at this particular period and things will ease in the subsequent months."

Others in the industry, however, blame lack of coordination among several agencies operating in the maritime sector.

Officials of these agencies, however, say they are trying to ease the cargo jam, moving as much cargo as possible by off setting the bureaucratic bottleneck. Heads of the Revenues and Customs Authority (RCUA), the Commercial Bank of Ethiopia (CBE), the Maritime and Transit Services (MTS) and the Ethiopian Shipping Lines (ESL) are expected to sign an agreement this week that would allow imports to enter mainland Ethiopia even though import formalities have not been fully completed, sources disclosed.

The agreement requires CBE to provide copies of bills of landing for customs officials to let cargo enter the country even though the importer has not paid the balance on the letter of credit and duty has not been paid to the authority. ESL would agree to surrender the cargo even when the consignee has not fully paid the shipping cost and MTS would process the transit for transporting cargo to the new dry port facility at the outskirts of Modjo town, 73Km east of Addis Abeba, in the Oromia Regional State.

Consignees would be required to pay warehouse fees to the new management of the dry port, and granted sufficient time to finalize all payments to the various agencies before they move their imports from the facility, disclosed industry sources.

The Modjo Dry Port facility lies on 61hct of plot and comprises two huge warehouses, as well as offices for customs, banks, insurance and maritime transit. Although the project was scheduled to be completed in July 2008, the completion date had been postponed. Construction work was under way last week, while one huge mobile container mover imported from Europe arrived at the facility two weeks ago.

It would be the first time that the government allows cargo to enter the country from Djibouti before customs duties are paid, and balances on letters of credit fully settled to commercial banks by importers. It is an attempt to spare the country from the cost in foreign currency paid to Djibouti as warehouse fees, and the subsequent auctioning of imported goods by the port's management every six months.

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