Djibouti faces new kid on the block

James Jeffrey

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.

James Jeffrey

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.

James Jeffrey

"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.

James Jeffrey- Ethiopian truckers will have more options if Berbera grows to rival Djibouti

"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."

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Horn of Africa ports

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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.

James Jeffrey -The road from Berbera to the border with Ethiopia needs a lot of work

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."