Bolloré Africa Logistics (BAL), the logistics arm of the Bolloré Group has proposed a new strategy to link land-locked Ethiopia to a port. BMI offers an overview of the proposal, investigates why Ethiopia is in need of new links to the sea and outlines the challenges the logistics corridor project will face.

BAL's plan would see a logistics corridor developed from the Ethiopian capital of Addis Ababa to the Somaliland port of Berbera. The company has outlined that EUR100-200mn would be needed to upgrade the road network from the Ethiopian border to the port of Berbera so that it is fit for road haulage purposes.

Ethiopia has been landlocked since Eritrea declared independence in the 1990s. The country is, however, heavily dependent on foreign trade. Its top export partners are Germany, Saudi Arabia and the US. The country receives the majority of its imports from Saudi Arabia, China, India and Italy, countries that can only be reached by sea. To cater for Ethiopia's sea dominated trade demands, the country is developing its maritime fleet. Ethiopia's national carrier Ethiopian Shipping Lines (ESL) is planning to double its fleet capacity in the mid term.

A Logistical Nightmare

Proposed Addis Ababa-Port of Berbera Logistics Corridor

Source: BMI

Ethiopia has become dependent on (its neighbor country) Djibouti's port. Approximately 85% of the 5mn tonnes that pass through the port of Djibouti are Ethiopian imports and exports. A 1,000km railway line connects Addis Ababa with the port. This reliance on the port of Djibouti does, however, place Ethiopia in a weakened position. In December 2008, Ethiopian shippers protested against a hike in port tariffs at Djibouti, while in July 2009 a row erupted between ESL and the port of Djibouti's operator DP World over the shipping company's use of specific facilities at the port.

BMI notes that Eritrea offers the possibility of an alternative trade route for Ethiopian imports and exports, as the country could use the Eritrean ports of Massawa and Assab. However, due to the current poor relations between the two nations - over a border dispute that requires a security zone to be patrolled UN forces - this places Eritrea's ports out of Ethiopia's reach.

BAL believes that its proposed logistics corridor between Addis Ababa and the port of Berbera could open up Ethiopia's trade options. World Cargo News quotes BAL's executive vice president, Dominique Lafont as stating: 'A country the size of Ethiopia, with a population of 80mn, should clearly have alternatives for foreign trade.' Lafont believes that even if Eritrea were to eventually open up to Ethiopia's use of its ports, a logistics link to the port of Berbera would still be a viable trade option for Ethiopia stating 'a country the size of Ethiopia justifies three ports'.

BMI notes that the development of a logistics corridor is a considerable undertaking and the odds are stacked against its success. On top of the development of the road network between Ethiopia and Somaliland, the port of Berbera will need upgrading, as the port is an ex Soviet navel base. This raises the question of where financing for such a project will come from, as the economic downturn has curtailed bank and investor lending. World Cargo News notes that development agencies may not be able to participate in the financing of such a project, as Somaliland is an autonomous region, which is not recognised internationally. BMI asserts that the development of such a project could also be hindered by the instability of the region, with Somali pirates operating out of Somaliland's neighbour, the Puntland - a factor that would discourage shipping lines from pulling into the port of Berbera.

BAL has, however, faced tough challenges before, and has developed to boast the title of Africa's number one integrated logistic network operator. The company operates a fleet of 1,500 tractors and trucks and 2,200 trailers. According to World Cargo News: 'BAL already provides successful long-haul trucking services to other parts of Africa and has developed what it calls a corridor approach. Examples include Durban-Lubumashi (2950km), Dar Es Salaam-Bujumbura (1780km) and Mombasa-Kigali (1670km).'