Ethiopia: Djibouti Port Congested
Apr 8, 2008 - 7:30:00 PM
The Port of Djibouti is congested. This is the short and clear message its officials conveyed to members of the Ethiopian business community last week, following the two day visit by the new Chief Executive Officer (CEO) of the Port, Jerome Martins Oliveira, and the Commercial Director, Aboubaker Omar Hadi.
The land side of the port has been in full strain for the past few weeks, leading to trucks carrying outbound cargo staying unloaded for over 10 days. Two weeks ago, for instance, there were 175 trucks held up in Djibouti, although this figure was reduced to 90 last week, Ephraim Tufer, head of Port Affairs Department at the Ministry of Trade and Industry, told Fortune.
The two port officials agree.
Containers are kept for an average of 20 days (on sea port yard) and 45 days (inside the dry port), while vehicles stay for 28 days. Worse is break-bulk that is held up for two months. Although Port of Djibouti is believed to have a handling capacity of 22.5 million tonnes a year, it is with only one third of cargo pile-up that the congestion has occurred.
This costs Ethiopia, the largest user of the port, a considerable amount of money both in demurrage and opportunity cost, according to maritime experts. An Ethiopian senior expert in maritime transport estimated the daily losses due to warehouse fee at close to 200,000 dollars, while the opportunity cost from keeping cargo inside the port is estimated to reach 1.4 million dollars a day, says Mr. Hadi, the commercial director.
“Although I don’t have exact estimates, it is clear that we are subjected to unnecessary losses,” Ephraim confirmed to Fortune.
The port has rules that cargoes not cleared within 15 days are subjected to warehouse fees. Indeed, walking through the various sections of the port reveals how high containers are piled inside the dry port, located two kilometres away from the Port of Djibouti; heavy duty machineries, vehicles, and bulk cargo such as reinforcement bars lay on the side of the tarmac road outside of the port left to rust. Many of the state owned companies are blamed for their reluctance to clear their goods as fast as they should have.
The situation is so alarming that the Port of Djibouti has begun to refuse to receive transhipment cargo for the first time in its history, the officials told Fortune.
“Cargo isn’t moving,” said Mr. Oliveira, who took over the top position in Djibouti Port two weeks ago, after serving the company for eight months as Finance Head.
There is not as much agreement on why there is this congestion. Although there has been an increase of 30pc on all import, export and transhipment traffics, port officials blame Ethiopia’s slow clearance of inbound cargo for this problem.
“The main factor of port congestion is the high dwell time of import transit cargo,” says a two-page report these officials distributed to members of the Ethiopian business community last week.
Ethiopian operators attribute the problem to limited equipment available to operate containers - particularly on exports - and not functioning properly with those that are available.
“The main problem is that there isn’t enough machinery to move containers around inside the terminal,” Ephraim told Fortune.
This has alarmed Ethiopia’s Ambassador to Djibouti and prompted him to pay a visit to the country’s President, Ismael Omar Guelleh, according to sources.
“We would have stayed at home had the problem been entirely with shortage of equipment,” said the CEO. “We would not have come here.”
There were here, however, to explain to Ethiopian importers a series of measures the port is planning to undertake up until May 2008.
The first is the procurement of four container handling machineries from Europe at a cost of two millions dollars. Three of these machineries are scheduled to get to Djibouti in the first week of May 2008, said the officials who credited DP World, a Dubai based management company, for acquiring them. This will be followed by the development of a new operational area for stripping and un-stuffing of containers.
The existing 20ht dry port is reserved exclusively for the storage of containers, while a new area has been acquired inside the airport designated for vehicles in transit. The port is also in negotiation with DC World - sister company of DP World - to develop a new area of 60ht located at PK 12 (12Km from the port and where there is terminal for Ethiopian trucks) in order to create a zone for heavy equipment and automotive.
Port officials hope all these works - projected to cost three million dollars in capital expenditure - will be finalized by the end of May 2008.
“The congested situation may take several weeks more,” the report says.
Nonetheless, these officials promise not to revise tariff as a result of these improvements.
“We are not trying to recover costs, but to improve services,” said Mr. Oliveira. “[Introducing] quality in services has a cost; for 2008, we will have to absorb this cost.”
Ethiopian experts bank on the establishment of dry port in mainland Ethiopia as well as the introduction of a multimodal transport system, and the launching of operations of the new container terminal in Douraleh next December, as a long term solution to the congestion.
“Nothing will be as good as the new container terminal,” said someone who works at the port, representing a shipping company.
Source: Addis Fortune