12 January 2014

Ethiopia: Djibouti Backs Down From Ultimatum On Cargo Clearance

Photo: allAfrica.com
The port city of Djibouti.

Ethiopian authorities pledge to push businesses to live up to their promises

The government of Djibouti has backed down from its earlier decision to change cargo clearance procedures, a week before its ultimatum comes to an end.

In addition to this, a demand from its negotiators to amend a 2003 bilateral agreement on port utilisation, signed Ethiopia, has been rejected by trade negotiators of the latter.

The dispute centred on how quickly port users had to pay for services. The port utilisation agreement requires Ethiopian forwarding companies to transfer fees paid for port handling, vessel agents, container demurrage and storage for cargo left for more than eight days, two week after invoices are issued by their Djibouti business partners.

Freight forwarding companies inDjiboutipay on behalf of their Ethiopian partners, in order to secure the release of cargo in transit toEthiopia.

They then send original receipts, including invoices claiming commissions. They can access foreign exchange only after they produce these receipts and invoices to commercial banks, and they are the only authorised agents to order transfers.

However,Djibouti authorities, in late November 2013, issued a directive instructing port officials not to release cargo before freight forwarders in Djibouti do not produce bank certified notes confirming the transfer of these funds. Signed by Aboubaker O. Hadi, chairman of Djibouti's Ports & Free Zones Authority (PFZAD), the government placed an ultimatum for December 7, which was later extended to January 15, 2014.

The decision infuriated Ethiopian importers and those active in the freight forwarding business.

Alarmed by the ensuing crises in the corridor - the only commercial sea outlet forEthiopia-the administration of Prime Minister Hailemariam Desalegn sent a high level delegation toDjiboutilate last week for a two-day visit.

Led by Transport Minister Worqneh Gebeyehu, a former federal police commissioner, and comprising of seven senior officials, including Mekonnen Abera, director general of Ethiopian Maritime Affairs Authority, Ethiopia's negotiators succeeded in reversing the decision, while rebuffing demands from Djibouti officials to amend a provision in the port utilisation agreement giving Ethiopian importers a two-week window to transfer funds.

"I'm rather pleased to see the spirit of our bilateral relationship restored," Worqneh told Fortune, upon his return fromDjibouti.

While in Djibouti, the delegation met with Moussa A. Hassan, minister of Infrastructure & Transport ofDjibouti, Illyas M. Dawaleh, minister of Economy, Finance & Planning, and Aboubaker.

In return, Djiboutian officials received a promise from Ethiopian authorities that the outstanding 20 million dollars owed to their businesses in arrears will be cleared.

"Ethiopian businesses have to honour their obligations to their business associates inDjibouti," said Worqeneh. "We'll make sure this will happen."

Djibouti authorities have also received pledges to see the bureaucratic bottleneck in providing foreign exchange to Ethiopian freight forwarding companies sorted out.

An Ethiopian businessman is pleased with the outcome.

"Now we can get back to business," said the Ethiopian businessman who manages a freight forwarding firm here in Addis Abeba. "I'm glad to see the foreign exchange shortage is being addressed, too. But more importantly, it's refreshing to see Djiboutian authorities learning that they can't just twist the arms of a country likeEthiopiato get their own way."

Djiboutian authorities, whose country is responsible for 20pc of the 800,000 units of containers and 85pc of the eight million tonnes of general cargo in transit to Ethiopia every year, have not been available for comment, despite repeated efforts by Fortune.

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