Logistics costs in Ethiopia account for 25-30% of commodity prices, making them up to 60% higher than in neighboring countries. The lack of direct sea access, infrastructure challenges, and reliance on the Port of Djibouti drive these elevated expenses. The government has introduced incentives for investors and plans to modernize the system to address the issue.
In Ethiopia, logistics costs represent 25-30% of the total price of commodities, far exceeding the typical 5-15% in other countries. These expenses are up to 60% higher than those in neighboring nations, driven by the absence of direct sea access and reliance on the Port of Djibouti. Such costs encompass the movement, storage, and handling of goods, with additional fees and delays from unreliable infrastructure inflating final prices.
Key contributors to these high logistics expenses include inefficiencies in infrastructure and management, bureaucratic hurdles, underdeveloped communication systems, heavy dependence on Djibouti, and limited competition in the sector. Transportation forms the bulk of these costs, which operators link to recent economic reforms and poor infrastructure, while customers point to insufficient market rivalry.
To counter this, the government has opened the sector to investors through regulations from the Ministry of Transport and Logistics. These allow participation in transit services, acquisition of duty-free transport equipment, construction of dry ports, and multimodal operations, aiming to foster multiple players and reduce dominance by single operators.
Looking ahead, enhancing logistics demands a multifaceted strategy. Developing integrated transportation systems and expanding the eight underutilized dry ports in Ethiopia could alleviate seaport congestion and cut demurrage fees. For context, Egypt, with a population of about 120 million and sea access via the Red Sea and Mediterranean, plans 33 dry ports. Adopting smart technologies for cargo tracking and real-time sharing, building stakeholder ecosystems, strengthening diplomacy with neighbors, bolstering the economy, and leveraging Ethiopia's geographic and resource advantages are also recommended. Internal conflicts exacerbate risks, raising insurance and informal taxation, which further burden commodity prices.