The Ethio Djibouti Railway SC (EDR) says it is low on working capital because one of its two shareholders, Djibouti, did not settle its portion when they formed the company.
The railway line which replaced the century old, Emperor Minilik II system was officially inaugurated in 2017 and as of early 2018 began transporting cargo from the central part of Ethiopia to Djibouti ports.
Even though the train began running, it faced several challenges including power outages and security issues. At the Logistics Conference on ‘Challenges and Prospects of Ethiopia’s Logistics Industry’ held on Monday October 28 Tilahun Sarka, Director General of EDR, said that shortage of working capital is one of the challenges that the company faces. He called participants, who attended the conference from Djibouti, to inform relevant bodies in their country to settle the payment expected from the Djibouti side.
The share company is formed by the ownership of Ethiopia and Djibouti, which has a quarter share in the company. In its formation process the initial capital was USD 500 million, of which USD 280 million was secured in kind and the balance was expected from the shareholders.
“The Ethiopian side has paid its portion and Djibouti said it would settle in the future,” Tilahun told Capital.
He said when he presented at the conference he raised this issue. The delay in the share payment is the reason for the working capital shortage.
The Djibouti side is expected to pay USD 125 million, which is one fourth of the share.
“The Ethiopian government has supported us strongly that is why we are continuing our operation,” he added.
The railway can accommodate 40 percent of the total cargo Ethiopia transports to and from Djibouti.
Currently the line inside Djibouti has been connected with two ports; Doraleh Multipurpose Port and container terminal located at Doraleh and also known as SGTD besides the main station at Nagad. The connection with the two ports shall shorten the time to transport cargo from the port to central Ethiopia.
The electric standard gauge railway system targets to boost the country cargo operation and modernize the logistics system but the railway has not yet begun transporting many bulk products like wheat, which is one of the major products the country imports every year.
The 760km railway line costs about USD 4 billion. The line was constructed by two Chinese construction giants, China Railway Engineering Corporation and China Civil Engineering Construction Company.
Based on the bilateral agreement signed on December 16, 2016 the railway share company was formed on January 11, 2017 and one year later, on January 1 the first day of operation started.