The November 02, 2012, issue of Addis Zemen had a long list of importers that have goods stored at the Modjo Dry Port, published by the Ethiopian Shipping & Logistics Services Enterprise (ESLSE). Seeking to solve the backlog of imports sitting at the dry port, the Enterprise took this as one of the measures to help importers to clear their goods.
It is one of a series of actions the Enterprise has taken, after the government launched a full scale implementation of the Multimodal Transport System (MTS), which caused chaos and delays in the delivery of shipments.
Through MTS, the Enterprise is solely responsible for the shipment of goods, starting from the point of origin, until the time it delivers the goods to the inland dry port.
Lack of capacity and shortage of transporters had led to failures in picking up shipments quickly enough. In July 2012, almost 22,000 containers were stockpiled at the Port of Djibouti, and although the Enterprise managed to clear piles of containers, it still had to reckon with another one: the congestion of dry ports at home.
Whereas previously it was the Enterprise's customers that were complaining that their goods were not arriving at their final destination on time, it is now them doing all of the complaining.
The Enterprise, in collaboration with the Ethiopian Revenues & Customs Authority (ERCA), has asked importers, both from the private sector and the government, to pick up their goods from dry ports. Ideally, the goods would be picked up within 15 to 20 days of their arrival.
Though it had tried to provide a solution for some of the challenges - like that of financing and lack of accessible information about the arrival of cargo, it has not helped the situation much. This has led the Enterprise and other stakeholders, including the ERCA and the Ministry of Transport (MoT) back to square one to try to figure out the underlying problem.
Four months on, the congestion at the dry ports shows no sign of lessening. As of last week, there were 5,600 containers, with an average staying time only brought down by six days - from 55 days, in November 2012, to 49 days.
The Modjo Dry Port currently has the capacity to hold 6,300 of twenty feet equivalent units (teu) containers, on 8.4ha of land. One 40 feet equivalent container is counted as two teu.
"Though not yet full, at the rate it is going all the available place will be swamped soon," Getaneh Abat, general manager of Modjo Dry Port & Terminal told Fortune.
Currently, the number of containers transported to the Modjo Dry Port averages 120 teu containers each day, whilst 80 teu go out, according to him. This means there is a backlog of 40 containers piling up daily.
As of March 27, 2013 there were a total of 7,229 teu of containers piled up at the Modjo port and the satellite ports that the government has set up temporarily to accommodate shipments. There are satellite ports in Addis Abeba; Dire Dawa, 317Km east of Addis; Gelan, in Oromia Special Zone, 25Km east of the capital; Kombolcha, 380Km north of Addis and Mekelle, 780Km north of Addis.
One part of the problem is that there are still some companies whose names have been published on the November 02, 2012, issue of Addis-Zemen, who have still not picked up their goods.
One of them is Palm-Ethiopia, producer of soap and detergent brands, such as Diamond and Dolphin, which has operated in Ethiopia for the past 11 years. In Addis Zemen it was written that the company has not picked up its goods for more than 50 days. Four months on, there are still some shipments at Modjo dry port that Palm-Ethiopia has yet to pick up, making the stay of these containers exceed 100 days.
"We have some financing issues," the marketing manager of Palm Ethiopia told Fortune, although he failed to clarify how much money the company needs to pay, in terms of port and customs fees.
Financing problems are one of the most common reasons that the Enterprise comes across when talking to businesses. During three different discussion forums chaired either by the ESLSE or the Ministry of Finance & Economic Development (MoFED), importers were asked to state their reasons for not picking up their goods on time.
"Most of them had said that since a lot of containers had come back to back after a long delay, it had put a burden on them financially," said Getaneh.
Another problem importers repeatedly mentioned was lack of knowledge about the arrival of goods at the dry ports. In answer to this, the ESLSE has started publishing a daily arrival list of goods on its official website.
Measures have also been taken to solve the financing issue. Both the Enterprise and the ERCA offered the release of goods on credit, provided that they bring a letter of guarantee from banks, in order to eliminate the risk that importers will not pay the appropriate taxes for the goods that they are importing.
The Enterprise agreed to release goods without taking transportation, port and container demurrage fees, if presented with a letter of undertaking. The offer is for containers that arrived at the port up until January 8, 2013. The ERCA has also agreed to provide a 15 day credit service, for goods that have arrived during the same period. It would later extend this to March 9, 2013.
Despite these offers, however, the congestion at the dry ports seems to go on unabated.
"Only six importers have made use of the credit facilities so far," Getu Legesse, customs procedure accomplishment process coordinator, at Modjo Dry Port & Terminal told Fortune.
Importers give different reasons for not using this incentive to pick up their shipments.
"We were not aware of the financing option," the manager of palm Ethiopia told Fortune. Another company whose goods have been at the Djibouti port, East African Tiger Industries Limited, also cited lack of financing as a major problem.
"Financing was indeed a problem, because when the backlog of goods suddenly started arriving back to back, it constrained our ability to mobilise funds," a manager at East African Tiger told Fortune. However, banks still use the same procedure as they did before in providing finances which sometimes takes a long time.
"In the end, we opted to mobilise funds from within our company and lift the goods," he added.
East African Tiger currently has 15 containers that have stayed at the port for more than 30 days.
"We are in the process of lifting the goods, so it will not be a problem," the manager of East Africa affirmed.
A task force, comprised of officials from the MoT, the ERCA, the ESLSE and the Maritime Affairs Authority (MAA), have been meeting twice a week since January, 2012, to come up with a solution for the congestion at dry ports.
The recent duty the task force has embarked upon is collecting information on importers from banks.
The information shows that of the 750 importers who have goods available at the dry ports until March of 2012, only 345 have used a letter of credit (LC) to open the dry ports whereas the 405 have used cash against document (CAD).
When using CAD, goods tend to stay for longer periods at the Modjo Dry Port, since banks are in possession of title deeds and have not loaned any money. In such situations they do not find it necessary to repossess the goods and sell them at auctions.
The task force is now analysing results and trying to come up with other reasons and solutions for the congestion problem. However, many officials internally suspect it may be likely that companies are using the ports as storage space.
"The demurrage fees are much lower and paid in local currency, unlike in Djibouti," Getaneh told Fortune. There are some companies, including government enterprises that he refused to disclose, that have indicated as much, according to him.
A container can stay for eight days without any demurrage cost at dry-ports within the country. For the next eight days, an importer is charged 56 Br for a 20ft container and 104 Br for a 40ft container. Another consecutive five day stay at the dry ports would bring up the demurrage cost to 73 Br daily for 20ft containers and 135 Br for 45ft containers. The costs further go up to 95 Br and 176 Br, respectively, until the 30th day a container stays at Modjo. After that it is charged at 124 Br and 229 Br, daily.
Based on these calculations, a single container at Modjo will be charged around 1,464 Br for a 30 day stay at Modjo. In Addis Abeba, rental fees for a 200sqm warehouse to store goods costs 25,000 Br, and a 500sqm space, 50,000 Br, according to warehouse brokers that Fortune talked to around Senga Terra and Tele Medhanialem.
A 200sqm space can hold around 15 teu containers. Whereas if it stayed at Modjo, the containers would cost around 21,960 Br, excluding the cost of leasing containers.
Open 200sqm spaces may cost less in the outskirts of town, in places like Kaliti, or areas outside of Addis, like Legetafo or Sebeta. Such rentals may go down to 5,000 Br a month and customers must bring their own containers, since goods are kept outside, according to the brokers.
The ESLSE charges 5,000 Br for 20ft and 10,000 Br for 40ft containers if customers do not want to return them. This would add another 75,000 Br for those that want to store containers, making it easier to keep containers there.
Mulu Asfaw, integration & logistics coordination process head at the MoT, also suspects that some importers are opting to leave containers at the dry ports for this reason.
"Although this is not supported by research, my guess is that they either use the Port as storage, or are negligent about the containers, because they are not needed immediately."
Supporting this view is the fact that there are some customers who do not pick up their containers even after the ERCA and ESLSE have given clearance.
"Some importers wait for 15 to 20 days to find transporters and claim their goods, even after clearance," Tsegaye Tameru, container case team coordinator at the Customs Office in Modjo Dry Port & Terminal, told Fortune.
Another evidence for this is the fact that government institutions, who do not have financial troubles, keep their goods for long time at the dry ports, according to Tsegaye. Upon the ESLSE's request the MoFED has called a meeting with government institutions and public enterprises that have imported and not cleared their goods from the dry port.
"The Minister, [Sufian Ahmed], had given a strict warning to all government institutions, to clear their goods within the specified time," a senior official at ESLSE told Fortune. Back then, the Ministry of Education (MoE) and Ministry of Health (MoH) had a lot of containers at the dry ports, according to data from the MoT.
The MoH for example had 18 containers of ambulances (each container carrying two), that had arrived in the country, but remained unclaimed for four months.
"The problem is that they had been sent to the Metals & Engineering Corporation (MetEC) compound and we had to process it from there," an official from the procurement office at the MoH told Fortune. "But after the meeting at the MOFED we have taken action to expedite the process," he added.
Six containers have already arrived at Kaliti, [the customs office is currently being used as a satellite port] and we are going to process it from there, an official from MoH stated. But, still, this is only a small amount of the containers that have been piled up at the dry port for a long time by different company.
The task force is already planning another meeting to discuss the results of the report from banks. The MoT and MAA directive, which will define when government enterprises can repossess containers that have been unclaimed at the ports, is in its final stage.
Though there is a customs law which enables the ERCA to repossess goods 60 days after their arrival, if taxes have not been paid, this has not been applied since the implementation of MTS. Once the directive is ratified and implemented, there will be a way where at least we will be able to take some action, officials of the Enterprise told Fortune.