Ethiopian Freight Forwarders and Shipping Agents Association

EFFSAA Weekly Newsletter, Vol. 02, No. 092

Railway Corporation Declares 9.7 bln Loss

The Ethiopian Railway Corporation (ERC) concluded the just ended fiscal year with a 9.7 billion birr loss, according to the Ministry of Finance’s report on state-owned enterprises (SOEs).

The just concluded fiscal year proved challenging for Ethiopia’s state-owned enterprises (SOEs), particularly the Railway Corporation. While profits before tax of SOEs grew a robust 59 percent, the ERC reported a significant 9.7 billion birr loss.

The government planned to earn 6.8 billion birr in pre-tax proceeds from 36 SOE’s this fiscal year. But the Enterprises outperformed targets, collectively pulling in 8.1 billion birr – in spite of the Corporation’s nearly 10 billion birr loss, according to the annual report presented to officials from the Ministry of Planning and Development, and other stakeholders.

Despite the loss, the Council of Ministers also authorized the Corporation’s request to raise capital to 221 billion birr.

The report provided an update on state ventures shepherded by Public Enterprises Holding and Administration (PEHA) but left out enterprises under Ethiopian Investment Holding’s (EIH) watch.

Foreign currency earnings for the SOEs came up short of the USD 1.5 billion goal, achieving only 37 percent or USD 540 million. This marked a 58 percent decline compared to the USD 1.23 billion foreign exchange contributed last fiscal year.

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Customs Bans Vehicle Imports for Returning Citizens

Only diplomatic rights holders are permitted to import fuel cars.

A new rule by the Ethiopian Customs Commission has put an end to the privilege Ethiopians permanently moving back to their homeland from abroad enjoying to import their vehicles.

The Commission’s decision to tighten importation of automobiles indirectly poses stronger risks on vehicle dealers in Ethiopia.

The move comes after the government’s decision last October to ban allocation of foreign currency for the importation of 38 items, which included fuel-based automobiles.

Despite the restrictions, a significant number of automobiles continued to be imported through various exemptions. The exemptions were granted to returnee Ethiopians, international organizations, diplomats, and individuals with letters of credit (LC) approved before the ban.

However, in a letter signed by Commissioner Debele Kabeta, dated August 17, 2023, and addressed to the branch customs offices, the Ethiopian Customs Commission eliminated these privileges, with the exception of diplomatic rights holders.

The Commission has intensified its ban on automobile imports in response to the discovery of “operational faults,” including a concerning number of vehicles being imported under the guise of returnees.

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Ban On Car Imports Triggers Rapid Price Increases

Ethiopia’s budding automobile market is facing turbulence in the wake of the government slapping unforeseen constraints on imported vehicles.

The Ethiopian Customs Commission introduced a new rule eliminating a long-standing exemption that allowed Ethiopian citizens returning permanently from overseas to import their vehicles.

In almost two weeks since the announcement, prices skyrocketed to unprecedented levels, leaving dealerships scrambling to adapt to the dramatic changes.

The unexpected consequences of the ban have effectively brought the car market to a grinding halt, leaving both sellers and buyers in limbo about what comes next.

Faced with dwindling options after the central bank prohibited the use of foreign exchange reserves to import 38 items last October, the automotive sector has relied on exception permits granted to allow returning citizens to bring vehicles into the country.

The permits provided an important lifeline for importers struggling to source automobiles from overseas in the wake of the currency ban, according to market insiders.

For months prior, car prices in Ethiopia had remained relatively stable, fluctuating modestly with supply and demand. But the new import restrictions have upended this delicate balance, sparking a price surge that has blindsided the industry.

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Panama Canal Restrictions Likely to Last for the Next Year

Panama Canal Restrictions Likely to Last for the Next Year
Panama Canal Restrictions Likely to Last for the Next Year

Restrictions on the draft of vessels and the number of daily transits at the Panama Canal appear to be the “new normal” for the operation.

In interviews with Reuters and Agence France-Presse, Panama Canal Authority executives said they expect to maintain their current rules for at least 10 more months as they seek to manage operations in the face of a drought and climate change. According to the executives by warning the shipping industry it will give carriers and shippers time to plan and adjust their schedules. This comes as shipping industry analysts have expressed concern regarding the potential impacts. They have predicted increasing shipping costs and are now “raising concerns about the ability of businesses to replenish their inventories in a timely manner due to the shipping delays,” said Christian Roeloffs, Cofounder of Container xChange, an online platform for managing container logistics.

Panama Canal executives acknowledge the concerns while noting that they are working to balance the demand noting that they are seeing an increase in the number of arrivals. Despite reports that container carriers have been consolidating their schedules between routes and blanking sailings to manage declining volumes, the Panama Canal continues to see a high demand. Their online data for example shows that as of midday on August 25 there are 35 ships arrived in the past day and waiting for transit which represents about a quarter of the total number of ships waiting.

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