Addis Fortune (Addis Ababa)

22 June 2014

Ethiopia: Us Consultancy Earmarks Functionality Gaps At the Modjo Dry Port

The report is one of four, which will ultimately seek to assist in the development of a National Logistics Strategy

A study commissioned to the Washington DC based consulting firm, Nathan Associates Inc, has found a hole in the Modjo Dry Port facility, undermining the nation's efforts to build a fast and cost effective logistics operation.

The facility is a "major bottleneck in the supply chains serving imports of containerised cargo", while quality has proven to have a "few problems". It too has unnecessary delays due to "underinvestment, poor management and lengthy customs procedures", the study reveals. Presented to the industry operators, who met at the Harmony Hotel on Monday, June 16, 2014, the study was commissioned by the Ethiopian Maritimes Affairs Authority (MAA), under the directorship of Mekonnen Abera, a veteran expert in maritime operations.

Reports published by international organisations, such as the World Bank (WB), indicate that poor logistics is severely hampering trade and foreign direct investment. This is forcing the Ethiopian government to develop a more in-depth strategy for the logistics sector.

With this drive, the government commissioned Nathan to conduct the study. They won the tender floated by the Economic Policy Unit of the Prime Minister's Office to study the logistics situations of the country and come up with recommendations that will be used as the National Logistics Strategy. Nathan retained the tender for one million dollars, which is funded by the United Nations Development Program (UNDP), according to a source.

On presenting the recent report, Nathan's experts pointed their fingers at a number of reasons for the bottleneck at Modjo. These included; poor operational procedures and control, insufficient yard management systems, cumbersome customs procedures, underinvestment in equipment and facilities and failure to relocate abandoned containers.

The consultant, with more than 60 years of experience in consultancy services, used a method called supply and value chain analysis. Using this method, it picked six major export items and five import items and studied their value and supply chains.

The export items in the study include coffee, fruit and vegetables, flowers, oil seeds, leather and cotton. Import items picked for the study were petroleum products, grain, fertiliser, durable goods and fast moving consumer goods.

The study also assessed institutions and stakeholders involved in the transport sector, such as the Modjo Dry Port, Ethiopian Airlines Cargo and truck drivers who transport goods by land via the Ethio-Djibouti corridor.

In addition to pinpointing the problems at the Modjo Dry Port, the report also identified other "constraints that faced companies in being internationally competitive". These included; the challenges of the Ethiopian Commodity Exchange (ECX) for determining and disseminating price indexes that reflect market clearing prices, limited availability of financial instruments for export, uncertainty regarding foreign exchange for import and an old, inadequate, slow to load or unload and expensive to operate truck fleet in the country.

The import of goods before securing hard currency, insufficiency of cash upon approval, missing documents and the intentional store of goods due to the low storage fees for air cargo are also identified by the report for leading to "delays in the removal of goods, causing congestion and low productivity in the general air cargo terminal", the report finds. The construction of an additional warehouse by the air cargo unit "will not address the underlying issue", it stated.

The consultants were not immune to the wrath of critics from the industry, however. Chaired by the state Minister for Transport, Getachew Mengistie, voices from industry operators reveal the extent of their dissatisfaction over the inadequacy of the study itself, which puts Ethiopia's average freight growth at 22pc. The study does not deserve to be called a national logistics strategy, but one that deals with the Ethio-Djibouti corridor; it is devoid of elements to look forward and consider current investment changes in logistics patters, operators argued.

"It's simplistic in its approach," said an operator from the private sector.

"The study lacks consideration of the human capital," declared another. "It dwells enormously on the problems and little on the solution."

Industry operators have agreed that the study suffers from policy, structural, practical and regulatory consideration, while at the same time assumes Djibouti and Ethiopia are within a single sovereign state.

Kassahun Aberu (PhD), who has done his doctoral studies on transport logistics and is a shareholder of AKAKAS Logistics Plc, finds the whole study one that is "a cart before the horse" and devoid of demand analysis.

The report is not the final document sought from the consultant, in terms of the reference it was provided with upon winning the tender to conduct the study, said Temegen Yihune, logistics coordinator with the MAA. It is called a diagnostic analysis report, which is one of the four that Nathan is expected to submit within two years of its commissioning in June 2013.

After the diagnostics report has been presented, Nathan is expected to come up with a blue-print design for improving the logistics. Its third report will be expected to recommend concrete interventions, whether in the form of projects or regulatory change, while the fourth will be a more detailed implementation strategy.

In addition to submitting all of these, which is expected to be finalised after seven months, Nathan is expected to supervise the implementation and provide technical assistance over the following months, according to Temesgen.

"The report presented last Tuesday, June 17, 2014, is aimed at addressing the major problems of the logistic sector." He said. "The final national strategic document is yet to be presented."

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