Tuesday, May 21, 2024
Interview“Ethiopia needs multiple gateways”

“Ethiopia needs multiple gateways”

Supachai Wattanaveerachai is the chief executive officer of DP World for Berbera Port, Somaliland and was in charge of operations in East Africa and the Middle East in 2009. He was tasked with managing the Port of Berbera, which is being refurbished for an investment capital of USD 442 million, since 2016. With the first phase of the expansion completed, Wattanaveerachai hopes Ethiopian traders would greatly benefit from the project, which will significantly increase the capacity of the port to handle two million TEU (20 feet containers). Wattanaveerachai sat down with The Reporter’s Samson Berhane during a media visit at the Port in Somaliland.

The Reporter: Can you give us an overview about the project?

Supachai Wattanaveerachai: Based on the concession agreement signed with the Somaliland government, we committed to invest USD 442 million. We took over the port in March 2017 and one and half year later, we started the expansion project.

The first phase of the project has already been completed and we have spent approximately USD 240 million, beginning operations in July of last year.

What does that mean to Ethiopian traders and the country as a whole, since there is an overreliance on Djibouti ports?

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More than 95 percent of Ethiopia’s cargo is being handled by Djibouti ports. If you see Berbera, four or five years ago, the capacity to serve Ethiopian cargo was not there. But today, the port can handle half a million TEU. We have become an alternative gateway for Ethiopian goods. We do believe Ethiopia needs multiple gateways.

Doing business in Ethiopia is really tough. And one of the reasons that are discouraging many is logistical problems. It takes two or three months to import goods from Europe, while it could be completed within a matter of two weeks in countries like Rwanda. What change could the Berbera Port bring to Ethiopia, in preventing logistics hurdles?

When you rely on one gateway, you cannot expect much efficiency. That comes through competition. So now when Ethiopia uses Berbera, it will be an alternative option for traders based in the country. That would create a competition, and Berbera and Djibouti will work more on increasing efficiency and decreasing the cost.  

I saw an Economic Zone being constructed nearby the Port. I heard there are opportunities for Ethiopian traders to capitalize on inside the Zone. Can you tell us about that?

Inside the free trade zone, you are not required to pay import and export taxes. All suppliers targeting Ethiopia can set up their warehouse and sell their product without being taxed in the free zone. As its name indicates, it is free zone. And when Ethiopian traders want to order goods, they just come here and take it.

The most important thing is “time.” Normally, for traders, buying directly from factories takes at least five months but if the supplying factories have an inventory here, Ethiopian traders just come here and take the goods. It is much better in terms of planning and working capital. You spend less money and get the raw materials or the goods you want immediately.

Can you tell us other infrastructural projects that are underway? Also while visiting Somaliland; I saw that a new road is being constructed to connect Hargessa with Togochalle, Ethiopia. How is it progressing and who is financing the project?

Currently, there are two ongoing road projects. The first project, the Berbera Corridor, is a 250 km road project connecting Berbera to Togochalle. It is funded by the government of the United Arab Emirates (UAE) and is going to be completed by the end of this year. The road from Hargessa to Berbera is almost 100 percent completed.

The other project is the construction of the Hargessa bypass, which will allow trucks to travel to Ethiopia without crossing Hargessa. This will improve the capacity of the road connection. The bypass is planned to be completed by the end of this year.

The Administration of Abiy Ahmed (PhD) has an intention to develop a port by its own, with deals signed with Sudan and Somalia soon after he assumed power. Is there an intention from DP World to work with the Ethiopian government in this regard?

We have a joint project with the government. DP World and the Ethiopian government have signed a Memorandum of Understanding (MoU) in the middle of last year to develop the logistics sector. Developing ports in other countries require the decision of a third party. So I cannot comment on that.

Let me take you back to Berbera Port. Everyone in Ethiopia assumed that Ethiopia still has a 19 percent share in Berbera Port. But the government of Somaliland, while briefing journalists this week, told us the country does not have a share at the moment, as it failed to fulfill conditions before the expiry of the offer.

Today, there are two shareholders for DP World Berbera. 65 percent is owned by DP World, whereas 35 percent is under the ownership of the government of Somaliland. We have committed to invest USD 442 million and DP World has financed the entire investment.

So far you have not involved in the port development projects in Eritrea, though the country has a big potential in that regard.

We don’t have any projects in Eritrea so far.

Let’s talk about the global shipping market now. After the coronavirus pandemic emerged, the shipping industry has faced challenges, leading to a surge in shipping costs and delay of the whole shipping process as well. Were you impacted by the change?

It has definitely impacted our operations. The price of a container has more than doubled. It has almost tripled since the coronavirus pandemic. That is because of the imbalance in the global container supply chain. The demand from the US and Europe was getting too high, with all the container cargos going to them. And they are not able to send the empty containers back to the countries of origin, which end up with a less number of empty containers.

The demand for Africa remains almost the same, while it has surged in the US and Europe. And there was a case in the Suez Canal, where a big vessel blocked the flow of ships. Many were forced to go back to China after that, creating an imbalance in the availability of empty containers.

Are you currently facing the same thing?

There is still a shortage but not as much as last year. The cost is less than last year but it is still twice what was during pre-COVID period.

Does that not make recouping your investment more difficult at Berbera?

DP World is looking at something long-term and sustainable. We want to see our projects to be sustainable. Our concession is not for two or three years. We are taking 30 years and the free zone is 50 years. So we are okay.

During our visit in Hargessa, you were saying that there is a plan to reach landlocked countries other than Ethiopia. Do you have a plan to serve South Sudan and Uganda using the Berbera Port?

It is possible. Traders will see the advantage. They will know where to come in terms of cost, time and efficiency. But I do believe Berbera is the best for the eastern part of Ethiopia.

We can serve South Sudan but it is still too far. The distance from Berbera to Addis Ababa is 900 km. And in case of Mombasa, it is more than 2000 km.

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