Ethiopians pay more for commodities due to logistics costs

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.

Makala yanayohusiana

Ethiopia's Minister of Transport and Logistics, Dr. Alemu Seme, stated that training for young graduates in the logistics sector is continuing. This program aims to improve service delivery and support economic growth. Backed by the World Bank, it particularly empowers young women through skill development.

Imeripotiwa na AI

An unexpected policy change at Djibouti’s port has disrupted Ethiopia’s liberalized logistics sector. Officials have barred operators without their own vessels from issuing bills of lading, preventing new private multimodal companies from moving shipments. The informal decision has caught affected businesses off guard.

Egypt's Deputy Prime Minister Kamel Al-Wazir oversaw the signing of major cooperation agreements with Djibouti during an official visit, focusing on maritime transport, logistics zones, and green energy. The deals aim to strengthen bilateral ties and support Djibouti's infrastructure development with Egyptian expertise. This follows President Abdel Fattah Al-Sisi's visit in April 2025.

Imeripotiwa na AI

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