Africa Maritime

Growth of Berbera Port a Concern to Djibouti

Djibouti government is concerned about the growth of the Somaliland Port of Berbera despite remarks by the President saying they are not threatened with the developments.

In what is seen at a swipe at the DP World rather than ignoring the growing influence of Berbera port, Djibouti President Ismail Omar Guelleh accused the Dubai based maritime developer of creating abuzz but doing little to show for its work.

When asked if Berbera Port which is being developed by the DP World was posing a massive threat to the Djibouti Port, Guelleh said: Massively? I haven’t heard anything of the sort so far, other than project proposals. DP World excels at creating buzz, but then, in the end, nothing happens. You don’t even see the slightest crane in the sky. We are paid to know.

However reports have indicate that Berbera port, once complete will compete for a large chunk of maritime business in the Red Sea currently dominated by Djibouti.

There is no love lost between the Djibouti government and DP World who are engaged in a legal tussle after the Guelleh led leadership ended its contract with DP World to run Doraleh Container Terminal (DCT) in February 2018, following a dispute between both parties. DP World called the move an illegal seizure of the terminal and moved to international arbitration and won the case.

The Dubai operator has turned to the  justice system in the UK in its efforts to recover $485m from the Djibouti government.

The Berbera port growth is said to be giving Djibouti some headache as it offers an alternative base for material and fuel supply chains for operators in the Suez Canal and the case lodged by DP World is not making matters any smoother for the tiny former French colony.

According to Guled Ahmed, a Non-Resident Scholar with MEI, a renewable energy and water infrastructure expert, and an entrepreneur, Berbera and Zeila, two of the Horn of Africa’s ancient trading cities, have long attracted the interest of global powers because of their strategic location near the Bab el-Mandeb Strait connecting the Gulf of Aden and the Red Sea. This location makes Somaliland’s coastal ports among the region’s most valuable real estate and an alternative to Djibouti as a key player in terms of trade, development, energy, and water security for the Red Sea and Horn of Africa.

Ahmed further says there are concerns over the future of Djibouti’s port, which the IMF categorizes as at a “high risk of debt distress,” comparable to the Sri Lankan Port of Hambantota  which was built with Chinese financing and which Beijing took control of after Colombo failed to meet its debt obligations. As of 2018, it was estimated that Djibouti owed at least $1.2 billion to China.

Under President Ismail Omar Guelleh, the one-party state is partway through what started out as a $12.4 billion infrastructure development program, much of it funded through loans from the Export-Import Bank of China.

China has taken major stakes in some of those projects. Ten percent of the free-trade zone is owned by the Port of Dalian Authority, China; 30 percent by China Merchants, which owns about one-fifth of Dalian port; and the rest by Great Horn Investment Holding, a wholly owned subsidiary of the­ Djibouti Ports and Free Zones Authority.

China Merchants owns 23.5 percent of a Djiboutian holding company that in turn owns the Doraleh Container Terminal, Djibouti Dry Port, and the Doraleh Multi-Purpose Port built on $580 million in loans from the Chinese EximBank.
President Guelleh however says the country is in control in the management of its debts. “Our “Chinese debt” is much lower than what some have said. It amounts to $450m, compared with Ethiopia’s $16bn and Kenya’s $20bn. We have worked really hard on debt restructuring and servicing. The company managing the Addis Ababa-Djibouti railway line, which is the main source of this debt, will be privatised, with Ethiopia and Djibouti retaining ownership of the infrastructure.”