The International Climate Fund (ICF) has signed an agreement with the Ethiopian Revenues & Customs Authority (ERCA) to provide 4.3 million dollars for the establishment of an Electronic single window system.
The system will be used to expedite international trade by helping stakeholders access documents needed for customs clearance in one location.
The deal was signed on Friday, December 13, 2013, at the Sheraton Addis, by Beker Shale, director general of the ERCA, and William Mkapa, CEO of the ICF. Mkapa was the former president of Tanzania.
The ICF's funding covers nearly 59pc of the 7.3 million dollar project. The ERCA managed to secure funding of 600,000 dollars from the International Financial Corporation (IFC) - the financial arm of the World Bank. The Ethiopian government is expected to cover the remainder of the cost, amounting to 2.4 million dollars.
The deal with the ICF has, however, taken over a year to materialise. A major impediment came with the change of leadership at the ICF, which halted the project for a while, according to a high level official at the ERCA close to the project.
The deal was not the ICF's first project with the ERCA. The former has previously worked with the ERCA to introduce e-filing systems. The ICF, which describes itself as a donor funded private sector development institution, is involved in improving the investment climate in Africa. It has also worked with the Ethiopian Commodity Exchange (ECX) in launching online trading.
The funding will be used for project implementation and the purchase of technology, which will enable traders to access all licenses and documents required for clearance from a single location.
This technology will establish a central data repository, which all stakeholders can access, as well as providing a platform for payments of duties and fees to be made electronically, according to the project overview document the ERCA disseminated at the signing ceremony.
"The depository will be helpful in developing trader profiles for risk management at different agencies," the document also states.
Although the Authority had called for and accepted proposals from four technology vendors as early as November 2012, a final decision on who will be the technology provider has not yet been decided, according to officials from the ERCA.
"For now, our focus will be on getting funding for the project," Beker Shale told Fortune at the signing ceremony.
There is also the possibility of conducting research and floating another Request for Proposal (RFP) to search for additional companies, Fortune learnt.
Some ERCA and ICF officials that Fortune talked to revealed, however, that the technology provider has already been selected, but that the final decision lies in the hands of a steering committee that oversees the implementation of the project.
The steering committee will consist of different government institutions involved in providing documents to importers and exporters for clearance.
These institutions include the ERCA, the National Bank of Ethiopia (NBE), the Ministry of Trade (MoT), the of Industry (MoI), the Ministry of Health (MoH), the Ministry of Communication & Technology (MoIT) and the Ministry of Agriculture (MoA).
"We have been waiting 10 to 20 years for such a single window system," Mulu Solomon, president of the Ethiopian Chamber of Commerce & Sectoral Association(ECCSA), stated during her speech. "It means less time, less money and less cost for international trade."
Ethiopia ranks 165 out of 189 economies in this category - one digit lower than the ranking in the previous year. It takes 44 days to export goods and costs 2,180 dollars for each container. This is higher than the sub-Saharan average of 31 days and 2,108 dollars. Taking 44 days and 2,760 dollars, importing goods into Ethiopia is also lengthier than the Sub-Saharan average of 38 days, though the cost is slightly lower, by 33 dollars.
"When I was in the business of exporting oil-seeds, my partners and I would find our prices to be less competitive by the time they reached the border for export because of the time and cost of imports" Mulu told Fortune after the meeting.
The import and export of goods is costly and time consuming according to the most recent 'ease of doing business' ranking by the World Bank. Published yearly, one of the indicators this ranking uses is the ease of trading across borders.
Part of the reason it takes so long for the import and export of goods is the number of documents importers and exporters are required to present. These documents are decentralised across different government organisations and take time to access. Seven and 10 documents are required for exports and imports, respectively, according to the World Bank ranking. It takes 27 days and 520 dollars to prepare these documents for exports, while 29 days and 700 dollars are needed for imports.
The technology, which is expected to take until October 2015 to implement, will be managed by the ERCA, after which ownership will remain with the different stakeholder institutions, Fortune learnt from the ERCA officials involved in the project.