Ethiopia - Distribution and Sales ChannelsEthiopia - Distribution and Sales
Ethiopia requires that all imports be channeled through Ethiopian nationals registered with the Ministry of Trade and Industry (MOTI) as official importers or distribution agents. The importer or agent is required to apply for an import license, and register with the MOT as well as the National Bank of Ethiopia (NBE) for a foreign exchange permit. Access to foreign exchange is the leading obstacle faced by Ethiopian importers seeking to source goods and services from the international market. Importers often wait for months to open a letter of credit for imports and receive an allocation of U.S. dollars due to an acute scarcity of foreign exchange. Companies working in “prioritized” sectors, including manufacturing, agro-processing, and pharmaceuticals, may receive preferential access to foreign currency.
Most distribution in Ethiopia, particularly to regional towns, is conducted through informal business arrangements. For example, after being cleared through customs, many goods will be sold to wholesalers in Addis Ababa's (and Africa’s) largest open market (Merkato) and then distributed to retailers and small vendors.
As a landlocked country, Ethiopia relies heavily on the port of neighboring Djibouti for the import and export of goods. Port Sudan in neighboring Sudan and Berbera in neighboring Somalia are used to a lesser degree. In March 2018 Ethiopia concluded an agreement with the Somaliland Ports Authority and DP World to acquire a 19 percent stake in a joint venture developing the Port of Berbera, which may result in expanded shipping routes to Ethiopia via Berbera. In July 2018, Prime Minister Abiy Ahmed signed an agreement with President Isayas Afeworki to restore diplomatic and trade relations, which also signals the potential for Ethiopian bound shipping to transit via ports at Assab and Massawa in Eritrea.
Ethiopia has built seven inland ports in Modjo, Kallity, Semera, Mekelle, Dire Dawa, Gelan and Kombolcha with an installed handling capacity of 22,000 containers. The dry ports, notably Modjo approximately 70 kilometers from Addis Ababa, serve as intermediate logistics destinations for cargo. Most goods are transported by trucks from the ports to Addis Ababa and other parts of Ethiopia. Ethiopia's state-owned companies dominate the truck transportation market. The overall number of trucks is presently insufficient to meet demand.
A Chinese-led infrastructure project to revamp Ethiopia's rail system, which connects Djibouti port to Addis Ababa began operations in 2018. This rail system has a capacity to move 3,500 tons of cargo on a single trip. The Ethiopian Shipping and Logistics Service Enterprise (ESLSE) claimed the new rail system has significantly enhanced its logistics capacity by reducing freight costs as well as shortening cargo delivery delays from more than three days to just 10 hours. Contacts on the ground, however, report that, due to myriad and ongoing implementation issues associated with the new railway, the vast majority of goods continued to be transported by truck. Logistics costs constitute 30% of Gross Domestic Product (GDP) and the Government of Ethiopia (GOE’s) goal is to reduce it to less than 22% by 2020 and to reduce port dwell time from 40 days to 3 days. Ethiopia has recently signed a memorandum of understanding with Somalia that will enable it to use the Berbera port for shipment of goods. The port of Berbera is finalizing preparation to handle this trade.
The construction of the Lamu-Garissa-Iolo road linking Kenya to Ethiopia now provides significantly improved access for landlocked Ethiopia to the Port of Mombasa. The road corridor will also be key in supporting the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) corridor.
Ethiopian Airlines is the leading airline in Africa with 115 international destinations and over 100 aircraft. Ethiopian Airlines operates state of the art cargo facility with a capacity to handle one million tons of goods. It operates direct flights to major destinations in the United States, namely Washington D.C., New York and a flight to Chicago that commenced in June 2018. Flights to Houston, with a stop-over in West Africa, will also commence in 2019. The Addis Ababa Bole International Airport is the major gateway for air shipments and the airport has cold storage houses that facilitate shipment of perishable goods such as cut flowers, fruits and vegetables.