East African competition to provide port and logistics services for landlocked Ethiopia is heating up between Djibouti and Somaliland.
Djibouti’s port is the main transit point for imports to and exports from Ethiopia, but the government in Addis Ababa wants to diversify its options. Somaliland, an unrecognised breakaway region of Somalia, is home to the Berbera port, where a major expansion is expected to be inaugurated in March of 2021.
Dubai Ports World – from Doraleh to Berbera
In 2016, Somaliland signed a 30-year contract with United Arab Emirates-owned DP World, the world’s third-largest port operator, to manage and expand the port at Berbera. The joint-venture Berbera deal is between Somaliland (30%), DP World (51%) and Ethiopia (19%).
To be a viable import-export option, Berbera will need infrastructure links. In 2019, a $400m road project to connect the Ethiopian border town of Togochale to Berbera was launched.
The road will compete with the Chinese-built Addis Ababa to Djibouti rail line. Somaliland is trying to increase foreign investment through additional infrastructure projects such as the Berbera Free Trade Zone and international airport.
There are commercial and diplomatic factors to the Berbera project. In its search for a second option after the Doraleh deal in Djibouti collapsed, DP World turned to Somaliland for its relative stability and the absence of rival countries such as Turkey, which is active in Somalia.
Rocky port road
DP World has had a rocky history in East Africa, having fallen out with the government of Djibouti, which cancelled the company’s Doraleh port concession in a high-profile investment dispute. “The UAE had a strategy of blocking the development of the Doraleh port. This includes [reducing traffic by] limiting the authorised tonnage. It was a way to squash competition and favour its own terminals in the Red Sea such as Port Khalid in Sharjah and Jebel Ali in Dubai,” Emmanuel Dupuy, president of the Institute for European Prospective and Security, tells The Africa Report.
“It appears DP World has learned its lesson and has understood the importance of a win-win partnership” according to Dupuy.
The UAE also plans to strengthen its regional influence by building an oil pipeline connecting Addis Ababa to Assab in Eritrea.
Aiming for a big share
The Somaliland government hopes that Berbera will deal with 50% of Ethiopia’s trade traffic in the years to come. Currently, about 95% of Ethiopia’s trade goes through Djibouti.
Some are even more optimistic about Somaliland’s potential. “There’s enough going on in this region for Berbera to get used without causing Djibouti problems. Demand from Ethiopia will get so big, they’re going to need Port Sudan [in Sudan] and Kismayo [in Somalia] too,” said Ali Toubeh, a Djiboutian entrepreneur whose container company is based in Djibouti’s free trade zone. Landlocked South Sudan could also turn to Berbera, which is closer than Djibouti.
Capacity, costs, ease of transport and other factors will influence the competitiveness of Berbera port.
The port of Djibouti container terminal, currently has a handling capacity of 350,000 ten-foot equivalent units (TEUs) per annum.
But Djibouti’s ports are congested, a problem largely due to the increase of trade with Ethiopia and logistical issues. The Addis Ababa-Djibouti railway built with Chinese assistance is one of many attempts to reduce the problem.
According to the World Bank: “97% of the volumes handled by the port of Djibouti either leave or arrive to the port via truck. This contributes to congestion problems in the city of Djibouti […] it is assumed that Djibouti’s share of Ethiopian cargo will decline about 10 to 15 percentage points in total over five years, starting 2021.”
Source: the africa report