As Djibouti’s star wanes, Somaliland’s Berbera Port stands to benefit

A recent incident in which the critical link between Addis Ababa with Djibouti’s seaport was out of action for several days amidst protests has highlighted just how dependent landlocked Ethiopia has become on Djibouti’s infrastructure and transport connections. Although the closure was resolved after several days, it will not have escaped the attentions of those in power in the Ethiopian capital and will likely reinforce convictions in Addis Ababa that the country must diversify its access to international trade routes.

Such an outcome already appears to be on the cards as Somaliland’s Berbera Port, in which the Ethiopian government took a 19% stake, develops into a major regional hub. If the ambitious plans for Berbera are no doubt a cause for concern for Djibouti, which had hoped to establish itself as the “Singapore of Africa” thanks to its strategic seaside location, significant damage to that goal had already been self-inflicted by the Djiboutian government’s decision to unilaterally expropriate the Doraleh Container Terminal (DCT) from its operator DP World. That aggressive move, which has since been condemned by international courts several times over, undoubtedly alienated foreign observers including the Ethiopian authorities, who were already seeking to reduce their over-reliance on Djibouti – and Berbera could well be the beneficiary.

Unrest could bolster Ethiopia’s determination to diversify

The crucial trade route between Djibouti and Ethiopia – which has handled an estimated 3.45 million tons of goods during its three years of operation – was closed for over a week at the end of last month, after cross-border skirmishes ignited simmering tensions. A large number of Afar militia allegedly attacked and slaughtered hundreds of civilians from Ethiopia’s Somali region, prompting a backlash which saw youths disrupt rail and road channels. Eyewitness reports claim that railway carriages were looted and set ablaze, while freight vehicles were forced to decamp to the side of the road until the blockages were cleared.

Even though operations were eventually resumed, Addis Ababa will not have been blind to the dangers the temporary closure underlined. Ethiopia is dependent on its links with Djibouti for as much as 95% of its imports and exports, meaning such incidents could bring the country to a shuddering halt. The recent disruption to trade will only vindicate the steps that Ethiopian authorities have already taken to foster new trade links. Addis Ababa has already signed deals with ports in Kenya and Sudan, but it’s Somaliland’s Berbera Port which promises to be a gamechanger for Ethiopia and for the region as a whole.

A new container terminal opened at the site in June, complete with a 400m quay line and a deep draft of 17m. The freshly inaugurated terminal drastically increases the port’s container capacity, bringing it from 150,000 Twenty Foot Equivalent Units (TEUs) to 500,000 TEUs a year. The new facility is only the first step in what is shaping up to be a major project to upgrade Berbera and turn the port into a major industrial and logistics hub. Port operators DP World have pledged to invest at least $442 million in the port’s development; the next phase includes plans to extend the new quay from 400m to 1000m and installing new cranes to allow the port to handle as much as two million TEUs annually.

Djibouti’s objectives at risk

Following the first phase of the expansion, the Berbera port now has a greater capacity than Djibouti’s own facility. Djibouti once looked set to reap the benefits of its strategically important location on the Bab-el-Mandeb strait, home to 30% of the world’s trade. However, some serious missteps in its foreign policy may cost the diminutive country dearly. In 2018, Djibouti—by way of its seaport corporation Ports de Djibouti SA (PDSA)—took the shocking step of terminating its agreement with DP World, the same operator now pouring investment into Berbera, and seizing control of the port facility at Doraleh.

Several international courts have since deemed Djibouti’s expropriation illegal; in the most recent ruling from the High Court of England & Wales, PSDA have been ordered to honor the terms of its accord with DP World and pay the latter $2.3 million in legal costs. That sum comes atop a previous verdict which imposed a $485 million penalty on PDSA – a charge that has yet to be paid. These underhand wrangles have hardly painted Djibouti in the best light and have cast fresh doubt on whether the country, which has been ruled with an iron fist by strongman president Ismaïl Omar Guelleh for over two decades, is a reliable partner.

Somaliland an attractive alternative

As such, the news that Addis Ababa is collaborating with DP World to expand Berbera into a rival for the continent’s biggest trading facilities will surely be a blow to Guelleh and his government. With Djibouti stubbornly refusing to comply with international judgements and pay appropriate penalties for its seizure of the Doraleh port, its monopoly over Ethiopian trade looks to be less secure by the day. Given that the recent disruption to the Ethiopia-Djibouti trade link will only strengthen Addis Ababa’s determination to diversify its supply chain infrastructure, the signs look ominous for Djiboutian dreams of becoming an African Singapore, but encouraging for Berbera to reap the rewards.

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