Ethiopian Freight Forwarders and Shipping Agents Association

EFFSAA Weekly Newsletter, Vol. 02, No. 071

Conflict in Ethiopia Balloons Djibouti’s Budget Deficit

Conflict in Ethiopia Balloons Djibouti’s Budget Deficit

The prolonged conflict in Ethiopia is estimated to create a budget gap of USD 70.7 million to USD 91 million on Djibouti’s economy in 2022, under the best case and worst-case scenarios, respectively. Domestic revenue fell by 18.7 percent, and the budget deficit ratio to the GDP reached 3.5percent, from the 1.6 percent registered in 2021.

According to an Economic Monitor by the World Bank on Djibouti, the budget gap for 2023 is also projected to reach between USD 51.1 million to USD 72 million, under the base case and worst case scenarios. Under the best case scenario, GDP growth is projected to ease to 4.3 percent in 2022, from the 5.1 percent registered in 2021, following Ethiopia’s economic slowdown, which is expected to reduce demand for Djibouti’s transport and logistics.

Under the worst case scenario, with further contraction in Ethiopia’s demand, the current account deficit is expected to widen to 7.1 percent of the GDP in 2022 and 8.8 percent in 2023.

The current account deficit is projected to deteriorate to 4.4 percent in 2022 from the one percent witnessed in 2021. This is driven by lower than expected demand for logistics and transport services from Ethiopia and continued disruptions of the Global maritime transport logistics.

Djibouti’s economy largely depends on revenue from port service charges it provides for Ethiopian importers, handling over 80 percent of the country’s total imports. Ethiopia imports commodities worth USD 16 billion annually on average. Djibouti’s economic rebound from the pandemic was also dampened by a fall in Ethiopia’s demand for logistics during the second half of 2021.

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Enterprise to Decide on Bidders’ Demand for Procurement of Two Vessels

The Ethiopian Shipping and Logistics Services Enterprise (ESLSE) will decide on the process of procuring two Ultramax vessels due to unusual demands of the three shortlisted shipping companies.

After passing the tender’s technical selection process, the three shortlisted companies requested the enterprise to allow them to continue the process of cargo vessel procurement, without providing a Cashier Payment Order (CPO) and performance bond as a guarantee.

The Enterprise is tendering to acquire two Ultramax vessels, with a load capacity of 65,000 tons each. If acquired, it will make it Africa’s only service provider with Ultramax vessels.

With over 20 companies expressing interest and half submitting bids by the deadline date, the enterprise chose three Chinese firms: Jiangsu Yangzijiang Shipbuilding Co., Ltd., New Dayang Shipbuilding Co., Ltd., and Nantong Xiangyu Shipbuilding and Offshore Engineering Co., Ltd.

After conducting its assessment, the consultancy firm sent the results of its assessment of the companies’ technical capabilities, which was supposed to be announced on the opening date of the bid earlier this week.

However, the bid opening date was pushed back by ten days to early April due to the companies’ reluctance to provide 10 percent of their offer value and around 500,000 birr in CPO.

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Ethiopia & Djibouti Agreed to Share Cross-Border Transport and Logistics Information

Ethiopia and Djibouti signed an agreement to share digital cross boarder transport and Logistics information.

The agreement was signed by W/ro Dagmawit Moges, Minister of Transport and Logistics and Mr. Hassan Houmed, Minister at the Ministry of Infrastructure in Djibouti.

The agreement also seeks to establish a cooperative framework for cross-border transport and logistics systems based on mutual benefit.

The information will be kept in a secured and legal way.

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ESLSE Started Transporting Multimodal Containers Destined at Kality Dry Port and Terminal

ESLSE Started Transporting Multimodal Containers Destined at Kality Dry Port and Terminal

The Ethiopian Shipping and Logistics Service Enterprise, in collaboration with the Ethio-Djibouti Railway Corporation and the Customs Commission, has started transporting multi-modal containers to and from Kaliti port and terminal by using Indode freight station in addition to the Modjo dry port and terminal.

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The Crucial Role of Private Sector to Realize LAPSSET Project

The Crucial Role of Private Sector to Realize LAPSSET Project

A number of projects are ongoing to realize the goals envisaged by the Lamu Port South Sudan Ethiopia Transport (LAPSSET) corridor. Launched last year, the ongoing projects include automation of cargo processing, enhanced equipping of Lamu Port, development of Lamu SEZ, and regional engagement with South Sudan and Ethiopia to secure business.

Experts emphasized the role of the private sector in LAPSSET development. According to the Director of the Transportation and Infrastructure Department at the Infrastructure Concession Regulatory Commission (ICRC), Mr. Emmanuel Onwodi, developing economies may not be able to provide the required funding for this project.

“It is, therefore, necessary to explore alternative means of funding, including Public-Private Partnerships (PPP), Loans and Grants from development finance institutions, and Tax Credits to corporate institutions,” Mr. Onwodi said.

The LAPSSET Corridor Program is a regional flagship project intended to provide transport and logistics infrastructure aimed at creating seamless connectivity between the Eastern African Countries of Kenya, Ethiopia and South Sudan.

The project connects a population of 160 million people in the three countries. Additionally, the LAPSSET Corridor is part of the larger land bridge that will connect the East African coast from Lamu Port to the West coast of Africa at Douala Port.

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MSC Signs €5.7 Billion Deal to Buy Bolloré Africa Logistics

MSC Group has confirmed that it has entered into a share purchase agreement with Bolloré SE relating to the acquisition of 100 percent of Bolloré Africa Logistics (including all of Bolloré Group’s shipping, logistics and terminals operations in Africa as well as its terminal operations in India, Haiti and in Timor-Leste) for a purchase price based on an enterprise value, net of minority interests, of €5.7 billion ($6.3 billion).

“The signing of this agreement follows a thorough and positive consultation process with representatives of employees of the Bolloré Group,” according to an official statement from MSC. “The Bolloré Group will remain strongly involved in Africa, notably through Canal+, and will also continue to develop on this continent its activities in numerous sectors such as communications, entertainment, telecommunications and publishing,” a statement from the group said.

The Bolloré Group had received an offer from the MSC Group to acquire 100% of Bolloré Africa Logistics in December 2021 for €5.7 billion ($6.3 billion). “The Bolloré Group has granted the MSC Group an exclusivity until March 31, 2022, to enable the MSC Group, further to an additional due diligence phase and contractual negotiations, to submit a put option,” Bollore had said on December 21, 2021.

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Shanghai Port Congestion At New High

There has been an almost five-fold increase in the number of ships waiting to load or discharge at Shanghai in the last two-and-half weeks, according to data from VesselsValue. Authorities in Shanghai imposed a strict two-stage lockdown of 26 million residents, closing bridges and tunnels and restricting highway traffic, following increasing Covid cases, Reuters reported.

With roads, bridges and tunnels between Pudong and Puxi areas blocked for at least a week, Shanghai International Port Group, which manages the city’s ports, released a statement saying other than in cases of extreme weather, 24-hour operations would be maintained.

It is unclear what impact Shanghai’s lockdown will have on the port’s vessel queue, whether it will worsen the backlog or clear it, wrote Vivek Srivastava, Senior Trade Analyst, VesselsValue, in his latest update. “However, supply chain managers and analysts around the world will need to start planning for knock on effects.”

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