Somaliland: Putting out;Djibouti is investing to retain business as competition intensifies




The Horn of Africa is throwing off its drought-afflicted, war-ravaged image, as Aidan Grange discovers

13 August 2014

Economic prospects are picking up for countries located in the Horn of Africa as international investment in a range of resource, industrial and agricultural projects increases. Critically, though, the region is in desperate need of modern port and logistics infrastructure if it is to participate in and share the benefits that come from global trade.


The image of the Horn of Africa (Sudan, Eritrea, Somalia, Somaliland, Ethiopia and Djibouti) as a drought-afflicted, war-ravaged and piracy-ridden region is beginning to change. While problems still exist and political uncertainties in Somalia and Sudan and the increase in terrorist activities in Kenya are of concern, attention is increasingly focused on what needs to be done to generate economic growth, increase investment and employment opportunities and achieve social sustainability.


A clear sign of this came from the recent publication by DP World, the fourth largest operator of container terminals across the globe, and the Institute for Near East and Gulf Military Analysis of a white paper detailing the main conclusions of a panel discussion entitled “The Business Environment, Regulatory Reform and Key Economic Sectors for Investment in Somalia”, that recently took place in New York.


Mohammed Sharaf, chief executive of DP World, said: “With the success achieved so far in curbing pirate attacks off the coast of Somalia, we need to turn our attention now to developing a sustainable economy in Somalia and supporting the country so it can build its economy, attract international investment, create jobs and a future for its young people as an alternative to taking to sea as pirates.”


The report’s main conclusions included:


Somalia’s young people have to be given the opportunity to not just survive but thrive the need for a focus on systems that drive investment and build investor trust the need for robust and transparent regulation and governance across all sectors including ports.



Infrastructure investment


In terms of business sectors, the white paper suggested that investment in agriculture and fishing were capable of having “a great short-term impact” with better infrastructure seen as “essential for a viable business environment” to ensue.


In Ethiopia, Djibouti and northern Kenya, new ports, multimodal transport corridors and logistics ventures are being planned as a means of moving cargo into/out of the area more efficiently, cost-effectively and securely.


Bollore Africa Logistics (BAL), the largest operator of marine terminals and logistics ventures in Africa, is keen to expand its presence in the region and has discussed various projects with the Somaliland authorities. These talks have mainly centred on the construction and operation of a new general purpose port with dedicated container handling facilities and associated logistics infrastructure at Berbera.


BAL views such a development as not only expanding Somaliland’s economy but as offering importers and exporters based in land-locked Ethiopia a better gateway opportunity for their international trade. Ethiopia, which has a population in excess of 90m people and exports worth over $1bn annually, largely relies on Djibouti as it international maritime gateway, with smaller volumes routed through Mogadishu, Port Sudan and Mombasa.


It is business that Djibouti does not want to lose, but competition is intensifying.


For this reason, Port of Djibouti SA (PDSA) and the Government of Djibouti are actively engaged in projects, including with the private sector, to enhance the nation’s role as a regional maritime gateway and logistics centre. PDSA is itself 23.5% owned by China Merchants Holdings International, a company that is keen to expand its footprint in Africa.



Port focus


Central to this approach is further expansion and modernisation of the nation’s ports and transport systems.


Earlier this year, the OPEC Fund for International Development (OFID) signed a $7m public sector loan agreement with the Djibouti Government for the construction of a new port at Tadjoura.


Saad Omar Guelleh, general manager of PDSA, explains: “Tadjourah is a prelude to the government’s new road map that is focused on integrated regional development and the provision of a third transport corridor in our country. With this new multimodal platform in the north of Djibouti, we intend serving landlocked countries such as South Sudan, Uganda, Burundi and Rwanda.”


Meanwhile, a dedicated terminal for handling livestock is being developed at Damerjog at a cost of approximately $70m, and a new multi-purpose cargo facility is being constructed at Doraleh.


The latter facility will help to relieve pressure on the port of Djibouti and represents an investment of about $400m. The terminal will be built in two phases and its planned 15 or so berths with a combined quay length of more than 4km will have the capacity to process approximately 30m tonnes of general cargo, including ro-ro traffic, a year.



Doraleh expansion


The container terminal at Doraleh, which is managed by DP World, is also being expanded and its throughput capacity doubled to about three million teu a year. In 2013, 743,793 teu was handled at the facility with transhipment volumes accounting for 47% of the total. At the PDSA-run facilities, traffic amassed just 50,938 teu, resulting in a port total of just under 800,000 teu.


On the landside front, improvements are planned on various corridors including between Djibouti and Addis Ababa, with plans to extend this to main cities in South Sudan and Uganda, and between Ethiopia and Somaliland (Addis Ababa-Berbera).


In progress is construction of the $4bn railroad between Addis Ababa and Djibouti, which is scheduled to be finished before the end of 2015. It is estimated that the rail link will cut transit times for the near 800km journey from the week it currently takes by truck to just 10 hours. In addition to raising levels of efficiency and reducing costs, the rail service should be more secure than trucks which are subject to hijackings and pilferage.


Elsewhere, the Kenya Ports Authority’s (KPA) plan to build a large port at Lamu in Manda Bay in the north of the country is linked to the development of dedicated transport arteries between the port and Juba in South Sudan and Addis Ababa via the border town of Moyale (western Kenya).


While the project has been seriously delayed since it was first announced in 2012, the KPA recently confirmed that construction would start this summer. Overall responsibility for the $435m Lamu Port-South Sudan-Ethiopia Transport (Lapsset) project rests with China Construction and Communication Company.


KPA believes Lapsset will help to integrate the regional transport systems and infrastructure in Kenya, Uganda, South Sudan and Ethiopia with its burgeoning shipping sector while relieving congestion at its main port, Mombasa. In addition, Lamu is seen as a port that will enable Kenya to compete more effectively for Ethiopia’s transit trade compared with ports further north.


In 2013, Mombasa processed 894,000 teu and while this was 1% lower than 2012’s volumes, it was well above its design capacity. And over 30% of throughput was transit cargo which takes longer to clear.

Planned infrastructure projects and a string of new services connecting the Horn of Africa with global hubs offer hope and with it solid cargo growth prospects for the future.

Source:Port Stategy


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