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Djibouti faces new kid on the block
By James Jeffrey
Djibouti City, Djibouti
23 June 2016 Business
Despite Ramadan, there is no slackening at
Djibouti's ports. Under the relentless sun,
whippet-thin men glistening with sweat work
the docks, taking what refuge they can in the
shade cast by machinery and stacks of cargo.
By contrast, things are much quieter 300km
southwards in Berbera, on the Somaliland
coast, where dhows from Yemen carrying
crates of onions moor alongside a few larger,
more modern ships.
But Berbera Port's more sedate pace is set to
change drastically. In May, Dubai-based DP
World was awarded the concession to manage
and expand Berbera for 30 years, a project
valued at about $442m (£302m).
The deal could return Berbera to a major Horn
of Africa trading hub, providing competition
for Djibouti, which has come to dominate
trade in the region during the last decade.
But those running Djibouti's ports are not
overly concerned. In fact, they seem to
welcome Berbera's renaissance.
"East Africa needs more ports. We want the
region to get more done," says Aboubaker
Omar, chairman and chief executive of Djibouti
Ports and Free Zones Authority (DPFZA).
"Berbera is welcome to come and share the
business."
Africa contains 17 landlocked countries, with
those toward the continent's east coast
having fewer port options than those nearer
the west coast, Mr Omar explains.
Between Port Sudan to the north of the Horn
of Africa, and Mombasa to the south - a total
of 6,000km of coastline - Djibouti is the only
other major port.
"There is no competition, so you hear people
talking of Djibouti having a monopoly," Mr
Omar says. "That's not accurate, we even
handle shipping for countries with ports, but
with more options people can compare and
then appreciate our performance."
Banking on Berbera
DP World's gambit is the biggest single
investment in the self-declared but
internationally unrecognised republic,
representing both an economic and political
boon to Somaliland.
Cut off from global financial institutions,
Somaliland's government operates on a
budget of about $250m, with the private
sector responsible for rebuilding much of the
country's infrastructure since the end of a civil
war with Somalia in 1991 that left 90% of the
capital, Hargeisa, in ruins.
For now, the country's fragile economy
survives on huge remittances from its
diaspora and by exporting vast quantities of
livestock to the Middle East.
"The government does not have the funds to
develop the port," says Ali Omer, general
manager of Berbera Port Authority. "This
agreement will benefit the Horn of Africa and
boost trade with Arab countries."
According to the deal, Dubai will also support
Somaliland's fisheries industry, which has
about 850km of coastline waiting to be
tapped, and help refurbish the ramshackle
268km road running from Berbera to the
border with Ethiopia.
And Ethiopia could just be the start.
"It would be a gateway to Africa, not just
Ethiopia," says Sharmarke Jama, a trade and
economic adviser for the Somaliland
government involved in negotiations on the
port deal. "The multiplying benefits for
Somaliland's economy could be endless."
Ethiopian catalyst
"Ethiopia is the region's locomotive," says
Ethiopia-born Dawit Gebre-Ab, director of
Europe and North America for DPFZA, who
this month will receive an MBE for promoting
trade relations between the UK and Djibouti.
"With its expansion in manufacturing, Ethiopia
could become the China of Africa."
That means a lot of goods and raw materials
in transit. Already about 90% of Ethiopia's
trade goes through Djibouti: in 2005, this
amounted to two million tonnes and now
stands at 11 million tonnes. During the next
three years, it is set to increase to 15 million
tonnes.
Ethiopia's apparently relentless expansion
relies on access to the sea: a source of
immense strategic anxiety ever since Ethiopia
lost its only port to Eritrean independence in
1993.
As a result, Ethiopia has long been looking to
assuage its dependence on Djibouti, which
scoops at least $300m in port fees from it
every year.
Ethiopia has strengthened bilateral relations
with Somaliland, signing various memoranda
of understanding (MOUs) during the past
couple of years, including one stipulating
about 30% of its imports shifting to Berbera.
"There's enough going on in this region for
Berbera to get used without causing Djibouti
problems," says Ali Toubeh, a Djiboutian
entrepreneur whose container company is
based in Djibouti's free trade zone. "Demand
from Ethiopia will get so big, they're going to
need Port Sudan and Kismayo [in Somalia]
too."
Horn of Africa ports
Meanwhile, a new 756km railway running
between Ethiopia and Djibouti, with further
railway lines and joint projects such as an oil
pipeline in development, testify to the two
countries continuing to remain firmly
integrated partners.
Port of the moment
The Horn of Africa coastline has seen ports
come and go in importance throughout
history, often because of external influences.
Zeila, now a small sleepy rundown town on
Somaliland's coast, dominated trade for
hundreds of years until a power shift within
then-Abyssinia - present-day Ethiopia - saw
Berbera gain in importance during the 16th
Century.
Suakin, on the Sudan coast, once flourished
until subsiding into irrelevance by the end of
the 19th Century, when the British preferred to
develop Port Sudan, since its deeper waters
could take larger ships.
During the early 1990s Djibouti Port emerged
as an important transhipment hub of
containers for the Red Sea ports of Aden,
Assab, Massawa and Port Sudan. It then grew
even faster after 2000 when it came under
foreign management - DP World, no less.
There is palpable hope and excitement in
Somaliland about what the DP World deal
could achieve, reflective of a trend across
much of the Horn of Africa.
Increasing economic integration between the
likes of Ethiopia, Djibouti and Somaliland is
bringing mutual benefits and stability to a
part of the world long known for the opposite.
"The Horn of Africa has made dramatic
progress in the past two decades," says Matt
Bryden, a Horn of Africa political analyst and
executive chairman of Sahan Research, a
Nairobi-based research institute. "But there
remain numerous challenges."
These include Somalia cementing stable
governance, resolving the question over
Somaliland's statehood, the "cold peace"
between Ethiopia and Eritrea, and Ethiopia's
balancing act between its commitment to
developmental state ideology and
democratisation and human rights.
But it appears there is room for cautious
optimism.
"Economic integration will eventually benefit
Somalia," Mr Bryden says. "Eritrea will
inevitably be drawn into closer economic
union with the wider Horn of Africa region as
well."
By James Jeffrey
Djibouti City, Djibouti
23 June 2016 Business
Despite Ramadan, there is no slackening at
Djibouti's ports. Under the relentless sun,
whippet-thin men glistening with sweat work
the docks, taking what refuge they can in the
shade cast by machinery and stacks of cargo.
By contrast, things are much quieter 300km
southwards in Berbera, on the Somaliland
coast, where dhows from Yemen carrying
crates of onions moor alongside a few larger,
more modern ships.
But Berbera Port's more sedate pace is set to
change drastically. In May, Dubai-based DP
World was awarded the concession to manage
and expand Berbera for 30 years, a project
valued at about $442m (£302m).
The deal could return Berbera to a major Horn
of Africa trading hub, providing competition
for Djibouti, which has come to dominate
trade in the region during the last decade.
But those running Djibouti's ports are not
overly concerned. In fact, they seem to
welcome Berbera's renaissance.
"East Africa needs more ports. We want the
region to get more done," says Aboubaker
Omar, chairman and chief executive of Djibouti
Ports and Free Zones Authority (DPFZA).
"Berbera is welcome to come and share the
business."
Africa contains 17 landlocked countries, with
those toward the continent's east coast
having fewer port options than those nearer
the west coast, Mr Omar explains.
Between Port Sudan to the north of the Horn
of Africa, and Mombasa to the south - a total
of 6,000km of coastline - Djibouti is the only
other major port.
"There is no competition, so you hear people
talking of Djibouti having a monopoly," Mr
Omar says. "That's not accurate, we even
handle shipping for countries with ports, but
with more options people can compare and
then appreciate our performance."
Banking on Berbera
DP World's gambit is the biggest single
investment in the self-declared but
internationally unrecognised republic,
representing both an economic and political
boon to Somaliland.
Cut off from global financial institutions,
Somaliland's government operates on a
budget of about $250m, with the private
sector responsible for rebuilding much of the
country's infrastructure since the end of a civil
war with Somalia in 1991 that left 90% of the
capital, Hargeisa, in ruins.
For now, the country's fragile economy
survives on huge remittances from its
diaspora and by exporting vast quantities of
livestock to the Middle East.
"The government does not have the funds to
develop the port," says Ali Omer, general
manager of Berbera Port Authority. "This
agreement will benefit the Horn of Africa and
boost trade with Arab countries."
According to the deal, Dubai will also support
Somaliland's fisheries industry, which has
about 850km of coastline waiting to be
tapped, and help refurbish the ramshackle
268km road running from Berbera to the
border with Ethiopia.
And Ethiopia could just be the start.
"It would be a gateway to Africa, not just
Ethiopia," says Sharmarke Jama, a trade and
economic adviser for the Somaliland
government involved in negotiations on the
port deal. "The multiplying benefits for
Somaliland's economy could be endless."
Ethiopian catalyst
"Ethiopia is the region's locomotive," says
Ethiopia-born Dawit Gebre-Ab, director of
Europe and North America for DPFZA, who
this month will receive an MBE for promoting
trade relations between the UK and Djibouti.
"With its expansion in manufacturing, Ethiopia
could become the China of Africa."
That means a lot of goods and raw materials
in transit. Already about 90% of Ethiopia's
trade goes through Djibouti: in 2005, this
amounted to two million tonnes and now
stands at 11 million tonnes. During the next
three years, it is set to increase to 15 million
tonnes.
Ethiopia's apparently relentless expansion
relies on access to the sea: a source of
immense strategic anxiety ever since Ethiopia
lost its only port to Eritrean independence in
1993.
As a result, Ethiopia has long been looking to
assuage its dependence on Djibouti, which
scoops at least $300m in port fees from it
every year.
Ethiopia has strengthened bilateral relations
with Somaliland, signing various memoranda
of understanding (MOUs) during the past
couple of years, including one stipulating
about 30% of its imports shifting to Berbera.
"There's enough going on in this region for
Berbera to get used without causing Djibouti
problems," says Ali Toubeh, a Djiboutian
entrepreneur whose container company is
based in Djibouti's free trade zone. "Demand
from Ethiopia will get so big, they're going to
need Port Sudan and Kismayo [in Somalia]
too."
Horn of Africa ports
Meanwhile, a new 756km railway running
between Ethiopia and Djibouti, with further
railway lines and joint projects such as an oil
pipeline in development, testify to the two
countries continuing to remain firmly
integrated partners.
Port of the moment
The Horn of Africa coastline has seen ports
come and go in importance throughout
history, often because of external influences.
Zeila, now a small sleepy rundown town on
Somaliland's coast, dominated trade for
hundreds of years until a power shift within
then-Abyssinia - present-day Ethiopia - saw
Berbera gain in importance during the 16th
Century.
Suakin, on the Sudan coast, once flourished
until subsiding into irrelevance by the end of
the 19th Century, when the British preferred to
develop Port Sudan, since its deeper waters
could take larger ships.
During the early 1990s Djibouti Port emerged
as an important transhipment hub of
containers for the Red Sea ports of Aden,
Assab, Massawa and Port Sudan. It then grew
even faster after 2000 when it came under
foreign management - DP World, no less.
There is palpable hope and excitement in
Somaliland about what the DP World deal
could achieve, reflective of a trend across
much of the Horn of Africa.
Increasing economic integration between the
likes of Ethiopia, Djibouti and Somaliland is
bringing mutual benefits and stability to a
part of the world long known for the opposite.
"The Horn of Africa has made dramatic
progress in the past two decades," says Matt
Bryden, a Horn of Africa political analyst and
executive chairman of Sahan Research, a
Nairobi-based research institute. "But there
remain numerous challenges."
These include Somalia cementing stable
governance, resolving the question over
Somaliland's statehood, the "cold peace"
between Ethiopia and Eritrea, and Ethiopia's
balancing act between its commitment to
developmental state ideology and
democratisation and human rights.
But it appears there is room for cautious
optimism.
"Economic integration will eventually benefit
Somalia," Mr Bryden says. "Eritrea will
inevitably be drawn into closer economic
union with the wider Horn of Africa region as
well."
