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New Directive Demands Dollars for Shipping

By admin, on July 22nd, 2010

A new directive issued by the National Bank of Ethiopia (NBE) mandates that importers pay the state owned monopoly, Ethiopian Shipping Lines (ESL) SC, in dollars for freight services starting July 1, 2010.

As per the directive, which was issued a month ago by the NBE, importers are to pay the money into any one of ESL’s foreign currency accounts it has opened in 15 banks since the issuing of the directive.

An ad hoc committee, composed of marketing and finance mangers from ESL and foreign exchange officers from selected banks, was set up on July 6, 2010. Two days after its formation, the committee prepared a protocol to handle the procedure change.

“The committee was established to create a uniform procedure for the implementation of the directive,” Birhanu Getaneh, president of United Bank, told Fortune.

The new procedure requires importers to bring a performa for the freight payment from ESL to the bank, which collects the payment and deposits it into ESL’s account, making the foreign currency available.

The NBE issued a directive, 10 years ago, which obliged imports through sea transport to be done solely by the country’s flag carrier, ESL. The directive ordered banks not to open letters of credit (LCs) unless bills of loading were issued by ESL. Close to 10,000 importers used to pay ESL in local currency at its headquarters in Addis Abeba.

The ESL, which registered a profit of 420 million Br in the last nine months and expects to reach half a billion Birr by the end of the year, pays close to 80pc of its costs in foreign currency. These costs include buying fuel and spare parts, and paying for services such as slot chartering in cases where ESL transports goods on other liners.

“Customers will settle freight in US dollars through their banks, instead of the local currency, which used to be the case,” Ambachew Abreha, managing director of ESL, told journalists at ESL’s head office on July 16, 2010.

Some of the importers Fortune talked to, had no clue about the process and the issuance of the directive.

“I have not heard anything about it yet,” Tamene Alemu, general manager of Tamene Alemu Customs Clearing Agent, told Fortune. “As long as the amount of the foreign currency in banks is sufficient, the effect may not be felt by importers,” Tamene said.

However, where there are shortages of foreign currency, processing LCs could take a long time, which will affect importers in the form of delays, according to Tamene.

“Particularly those engaged only in import activities might be the ones to be affected [most],” he said.

Ambachew, however, sees no difference from how things used to be.

“Just as they [importers] allocate dollars to purchase goods they can also allocate dollars for the freight payment which is only less than 10pc of the total cost,” said Ambachew.

The ESL has been undergoing business process reengineering (BPR) studies for two years which will go to full implementation within six months time, according to Ambachew. The BPR, which introduces the one window processing system, also incorporates provision for computerised services, including online services.

The company operates with nine vessels, which are owned and managed under the flagship of Ethiopia. The company is also negotiating with Chinese companies to build nine additional vessels at a cost of nearly 290 million dollars and is currently in negotiation with the Chinese government to secure loans to finance this.

By MIKIAS SEBSIBE

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