25 November 2012

Ethiopia: DP World Desirous to Manage Dry Ports in Ethiopia

Africa and Latin America will be primary focus for DP World, Mohammed Al Muallem, senior vice president and managing director for UAE, briefed journalists last week at DP World headquarters in Dubai. To his left is J. Hans de Jong, regional commercial director for Middle East and Africa Region.

Senior managers at DP World, one of the biggest companies operating ports across six continents, are keen to get involved in Ethiopia, building inland dry port facility near Addis Abeba and managing logistics along the Ethiopia and Djibouti corridor.

Joost Kruijning, vice president and managing director for Middle East & Africa, and Hans de Jong, regional commercial director for the same region, were in Addis Abeba back in October 2012. They spoke to Ethiopian officials in charge of companies active in the maritime sector, according to them. These officials have tabled a proposal to Ahmed Tusa, managing director of Ethiopian Shipping & Logistics Services Enterprise (ESLSE), and his deputy, Alemu Ambaye, soliciting deals from the government to involve in Ethiopia, they told Fortune.

The solution they proposed is to a problem that is considered a "rude awakening" to DP World and its partners inDjibouti, subsequent to an unprecedented congestion of ports inDjiboutilast July 2012.

"You can't afford not to think about the impact of congestion in mainlandEthiopiaon the efficiency of the port inDjibouti," said Kruijning. "You have an asset that could be utilised three or four times than its current capacity."

An organisational restructuring that led to the amalgamation of three state enterprises - Ethiopian Shipping Lines, Ethiopian Maritime Services Enterprise and Ethiopian Dry Ports Enterprise - and a change of guard in ESLSE had resulted in containers piled up inside the port, reaching at over 20,000 units.

Prime Minister Hailemariam Desalegn blamed lack of skill and poor capacity among those who are managing the ESLSE. This was a view echoed by senior managers of ESLSE, admitting failure in running the container operation.

"We haven't done much in scaling up and capacity building," Alemu told the bi-weekly Amharic, Reporter, back in October.

Such failure nonetheless has a huge cost. Turn-around time for vessels increased dramatically to 36 days, while Ethiopian importers were subjected to a total of four million dollars additional monthly fee for storages, according to sources knowledgeable of ports inDjibouti.

The issue of congestion has been addressed since then, according to Ahmed.

"As far as congestion at the DjiboutiPortand the temporary problems we faced during implementation of multimodal transport system over the summer season are concerned, we have successfully managed them," Ahmed said in his email response to Fortune late last week.

Ahmed sees the problem today rather structural in nature, "which we are working hard to address them step by step."

It is perhaps such structural issues the Prime Minister indicated in his address to Parliament last month, that his administration has been exploring options to find in the involvement of foreign companies. However, he was reserved from naming the companies or the countries they may come from.

"Whatever format they may want, we are happy to be part of the solution," Kruijning told Fortune inDubai last week. "We have the system, the information and the expertise to operate ports and dry ports."

DP World is a transnational company employing 30,000 people across the world, managing 60 ports, six of which are inChina,Ethiopia's biggest source of imports, and one inDjibouti, a gateway for its international trade. The company, established in its current form in 2005, handled 64 million containers last year.Ethiopia's containerised import and export cargo is less than one per cent of this volume, a volume less than 50,000 units of the 150,000 containers DP World manages daily.

The multimodal system that was introduced to reduce the average time a container remained at the port created havoc as many containers remain at the port for more than three months.

Headquartered inDubai, DP World operates the Jebel Ali Free Zone at its home base, handling 14 million containers last year brought by 16,000 vessels, in two terminals. There are no less than 6,000 companies from 130 countries doing business inside the free zone. When an ongoing expansion works are completed, at the third terminal, located behind the control tower, senior managers see handling capacity enhanced to 19 million containers.

"It's a model of customer service we developed and refined . . . and continued to replicate successfully throughout the world," said Sharaf.

DP World's first cruising out in the world in its bid to replicate its business model predates its current form. And it was inAfrica, in 2002.

"Our focus is in Africa andLatin America," said Mohammed Al Muallem, senior vice president and managing director for UAE Region.

Signing a 20-year management concession with the government of Djibouti, Ethiopia's gateway to international trade, was one of the two ports, besides a port in Saudi Arabia, the former Dubai Ports & Free Zone Authority begun its global venture. The company since then has developed a brand new port at Douraleh, in partnership with the government that owns 60pc, and widened its reach beyond theRed Sea.

It manages ports in the continent after signing concession deals with governments ofSenegal,Algeria,Egypt,Mozambique,South AfricaandAngola.

Says Sharaf: "Our aim is to provide world class service when and where our customers need us to be."

His deputies eyeEthiopiaas a potential place for such a customer.

"Ethiopiais going to be a source of the most growth in the region," Jong told Fortune. "As long as we can add value to the end user [the consumer], we are certainly interested. Our record shows that we are very competitive."

Senior managers of DP World pledge that they are keen to enter the Ethiopian market whether the government wants equity contribution to build a brand new dry port facility; management concession for the existing dry ports; or consultancy services to ease the current congestion at the port.

Managers at the ESLSE are currently reviewing bid proposals from international companies which will be hired to undertake studies to address the overall logistics capacity limitations, Ahmed disclosed to Fortune. A taskforce chaired by Samson Melaku, finance department head, is handling the shortlisting of bidders, sources in ESLSE disclosed to Fortune.

"If the government ofEthiopiaasks, we are very much interested to put what is needed," said Jong, who had managed in the past the ports ofDjiboutiand Douraleh, for DP World.

The company has the system and network to identify a vessel destined to Ethiopia the moment it leaves a port of call, thus work out the necessary details at the receiving end way ahead of time, claims Kruijning.

However, DP World is a company that insists having a long-term concession deals of no less than 20 years to provide such services. In fact, the average terminal concession period it has with several ports it currently manages is 43 years.

"We naturally become part of the communities we serve," says Sharaf.

DP World's alleged proposal is not among those being considered. In fact, Ahmed told Fortune that he has no knowledge of a proposal submitted to his or any of his deputies' offices from the Company.

"No one from DjiboutiPortor elsewhere came to us and presented the stated proposal to solve problems in DjiboutiPort," Ahmed told Fortune. "I personally didn't meet any of or both officials and no one from my office had discussion with them regarding this subject. We have no plan to do so."

Despite such conflicting claims over the alleged visits and proposals, maritime and logistics experts here and inDjiboutisee little coming from DP World in the absence of financial investment in improving facilities where it takes concessions. They point out lack of investment in managing the international airport inDjibouti, where the company lost its concession after few years for no improvement.

"WhatEthiopianeeds is resources to invest in upgrading its facilities," says a businessman inDjiboutiwith active involvement in maritime industry. "In the absence of that, talking about system and information has little to change."

An Ethiopian with several years of operational experience in the corridor agrees.

"I seriously doubt if DP World comes to Ethiopiawith resources to invest in physical infrastructure," he told Fortune.

Copyright © 2012 Addis Fortune. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.