Logistics has long been recognized as essential to economic development. Good logistics is more important than ever before, especially for developing countries, due to international trade becoming more dispersed through global value chains.
Given its importance to international trade, Ethiopia in recent times has pursued logistics-related reforms and investments to modernize its logistics sector. One of those acts was to merge Ethiopian Shipping Lines (ESL), Ethiopian Transit Services Enterprise, Dry Port Services Enterprise (DPSE), and Comet Transport, and come up with a new amalgamated company called Ethiopian Shipping and Logistics Services Enterprise (ESL).
The aim is to make the logistics service of the country more efficient, fast and cost-effective by reducing transit time and costs, said Asheber —- Director of Communications at ESL. The company brought together all the sectors and companies into one with the vision of providing its service in one window, he added.
This is crucial for Ethiopia’s economic growth because if the logistics system is not fast, the investments in Ethiopia will fail. “If you do not have a competitive logistics system, you cannot attract any investment.” And part of the new economic reform agenda considers overhauling the logistics, alongside with power and telecommunications sectors, identifying them as key enablers.
Given all this, the Company has conducted various reforms and studies to make its services more competitive and give Ethiopia the edge in attracting foreign investment. One initiative that was undertaken by the Company was, continued Asheber, to setup a multi-modal transportation system. It is a (transportation) system where goods are transported under a single agent involving different modes of transport (by rail, sea or road).
It was largely agreed that such mode of transport was pivotal for the economic aspiration of the country, and it has become operational beginning from 2012. “This was one of things we have planned as part of our goal to modernize the logistics sector.”
According to him, the benefits have been spectacular, especially once the employees became familiar with the technology. Now, there is no goods that are stored in Djibouti port, which is helping save the hard currency that would have been used to pay demurrage fee – a payment paid for failure to load or discharge goods from ships within the time agreed. Also, the amount of time that used to take for freights to reach their destination is vastly reduced.
Further, Asheber opined, the Company is constructing dry ports at various strategic places with the view of making the service more competitive. As the cost of demurrage for goods in neighboring countries’ ports is expensive, it was pivotal to build dry ports (inland ports) in strategic parts of the country. In addition to already existing ones like Modjo Dry Port, inland ports will be constructed in Hawassa, Dire Dawa, Mekelle, Kombolcha, Ambo, Humera and so on.
“An importer that is based in Hawassa, for instance, can go to nearby inland port and take out his goods and go about his business within very short period of time.”
Technology and modernizing port infrastructure/facilities is the other thing the Company is looking at to modernize its services and give the country the edge in the sector, Asheber noted.
ESL is also investing hugely on installing internationally recognized technology and buying in modern equipment. And there have been significant changes that are already witnessed as a result, the Director remarked.
“It used to take up to 17 to 20 days to fully unload goods, but now it only takes one day.”
“We are also working to bring down the number of days freight goods dock in Djibouti port, which used to take up to 40 days on average, to eight days, which is the number of days granted as grace period before demurrage fees starts to kick in. We have already cut tit down to 10 days, and our plan this year is to further cut it to five to eight days and avoid the demurrage fee we pay in hard currency.
The other thing ESL has been working on is to improve the coordination among sectoral agencies as it involves many agencies and stakeholders, beginning from importers and exporters, to customs, truck associations, to Ministry of Transport, which makes it important to bolster the coordination between these various sectors as the performance depends on it. “We cannot make the service fast, for instance, if the road from Djibouti to Addis is old or damaged. So, we really need to work together in collaboration” To this end, a committee that involves all the relevant stakeholders and actors has been setup.
Asheber states that there is fact-backed changes seen in the sector, in terms of revenue, transit capacity, and in shortening dwelling time, and the Company is growing fast. “The Company’s capital which was 20 million birr in 2012 now has risen to 3.7 billion, and its net profit has grown consistently.”
As a Company that can now create huge impact on the market, it is working to further modernize its service and give Ethiopia a much needed edge in both the services and manufacturing sector.
The Ethiopian Herald November6, 2019
BY STAFF REPORTER
