Investment in Djibouti's new port infrastructure continues

Djibouti is currently undergoing an infrastructure expansion that will require the mobilisation of over $14bn, a large component of which will be allocated to the establishment of new ports and terminals across the country’s coast.

Long History

Djibouti’s has long played a key role in regional trade throughout the Horn of Africa, the Middle East and East Africa, sitting as it does on a major shipping lane and with easy access to several large markets. However, it has received a significant boost in activity in recent decades, in part a result of Ethiopia’s loss of coastline following a conflict with Eritrea, as well as the high headline growth rates of many of Djibouti’s neighbours.

While a number of large ports elsewhere in the region benefit from similar attributes, a number of circumstances – such as the instability in Yemen, which led to a decline in traffic to Aden port, and heavy congestion in Kenya’s Mombasa port – have played in Djibouti’s favour. Currently, Djibouti’s capacity is just over 850,000 containers per year, close to the capacity of the other major East African port, Mombasa, in Kenya. However, it does lag in comparison to some of the other large ports along the Red Sea and Indian Ocean.

It is a different story, although, for trans-shipment activity. “The most important trans-shipment ports in the region are Jeddah in Saudi Arabia and Salalah in Oman, which have a capacity of 4m and 3.5m twenty-foot equivalent units, respectively. We are very small comparably, at about 400,000 containers per year,” Warsama Hassan Ali, commercial director at DP World Doraleh, an international maritime terminal operator, told OBG. However, Djibouti’s facilities have traditionally focused primarily on import and export traffic, to and from both Djibouti and Ethiopia. The impact of this type of maritime trade is valuable, according to Warsama Hassan, “Having import/export traffic is what brings more revenue, trans-shipment doesn’t bring as much income,” he told OBG. “That is why the country is investing substantially in land infrastructure development to sustain the traffic from neighbouring countries.”

Maritime Drive

While Djibouti has managed to grow its share of regional trade flows in recent years, both as a result of domestic improvements as well as a drop in competitiveness from other nearby facilities, it is looking to significantly expand its overall capacity, as well as roll out specialised facilities that target a wide range of key segments. The new developments will not only help reduce congestion, costs and delays, but also help to position the country as a multi-purpose maritime traffic platform, capable of handling anything from containerised traffic, to minerals, liquefied petroleum or even livestock.

The establishment of the Doraleh Multi-purpose Port, next to Djibouti City, will be essential in expanding existing container and oil handling capacity. Designed to accommodate the projected growth in traffic, the facility’s first and second development phases are set to cost a total of $590m. The port will begin operations in 2017 and will accommodate seven berths and have a total length of 1200 metres. During its first phase, the structure will be equipped to handle 12m tonnes of cargo annually. A second phase will increase the number of berths to 15 and total handling capacity to 29m tonnes annually. The facility is part of a joint investment by Djibouti Port and China Merchants Holding.

To ensure that the country’s ports provide a full range of services and that transport operators are able to benefit from the expanded capacity, the government is establishing a 3500-ha free trade zone inland from the new Doraleh Multi-purpose port. The $3.5bn project will help leverage the country’s transport and logistics capacity and, it is hoped, impact the country’s economy in a profound way. The new area is expected to employ more than 200,000 people once it is running at full capacity. Operations are set to begin in Q1 2018, and the existing free trade zone will be included in the development.

Mining Exports

Near the Doraleh Multi-purpose Port, the Tadjourah region will receive a brand new minerals terminal. The new facility is expected to cost $160m and be operational by December 2016. With a focus on bulk mineral exports, the new terminal is being established to allow for the movement of potash from a new mining project in northern Ethiopia and will be able to handle 4m tonnes of potash per year. Other infrastructure developments will be linked to the expansion of port facilities in Tadjourah, which, in time, will be connected to northern Ethiopia by road. Currently under construction, the new road link will be used to transport merchandise to and from Ethiopia, serving as an alternative connection for commerce between the two countries.

To the west of Doraleh, the port of Goubet is being upgraded to serve as an export terminal for salt being mined in Lake Assal. The $64m project will establish an export capacity of 6m tonnes of salt per year of which the first stage is set to operational by March 2016. Additionally, construction of a new $70m port, focusing on the export of livestock, began in Damerjog in 2013 and is expected to be completed by 2017. The project includes the building of a 655-metre wharf which will allow the port to handle up to five livestock vessels at the same time. It will also have the capacity to handle 10m animals annually and account for revenues of up to $500m.

In light of the increase in energy consumption in both Djibouti and Ethiopia in recent years, energy platforms are also part of the overall scheme in Djibouti. In 2018 a new $3bn liquefied natural gas (LNG) terminal will begin operations near the Doraleh container platform. A new crude oil terminal is also being developed nearby. It is budgeted at $200m and operations aim to start in the fourth quarter of 2017. These will be used to export both crude oil and LNG into Ethiopia through pipeline systems.

Ancillary Activity

Efficiencies within Djibouti’s new port infrastructure will be galvanised by the development of other modes of transportation, with the establishment of new railways and airports. These will be critical to moving goods to and from northern Ethiopia, but also essential if Djibouti is to avoid congestion and delays. Part of the upgrades pertain to the aviation sector, where a total of $599m will be invested in two new airports, including one 25 km south of the capital, Djibouti City, with an annual capacity of 100,000 tonnes of cargo.

The potential of improving connections between the sea and the air is clear. “Djibouti, due to its geographical position, has become a regional cargo hub,” Ilyas Houssein Waiss, director-general of Djibouti Airport, told OBG. “A continuous expansion in infrastructure and training of staff could result in Djibouti becoming one of the most competitive destinations in the region for freight.”

Additionally, in a November 2015 interview in the local media, Aboubaker Omar Hadi, chairman of the APZFD, said that transporting goods by sea into Djibouti and then transporting them by air to neighbouring African destinations would be an effective option to move merchandise around the region .

Likewise, two large-scale railway projects are set to bring added logistics capacity to the country’s transport system. In the north, a 168-km railway link will connect the minerals port in Tadjourah to Galafi in Ethiopia, and eventually to Makele. The railway will be used to take potash all the way to the Djiboutian port. It is estimated to cost over $1bn and be operational in the first quarter of 2019. Another railway line, to be fully operating in 2016, will reinforce the main trade corridor between Ethiopia and Djibouti. It links the Port of Djibouti to Galilleh in Ethiopia, all the way to Addis Ababa. It is expected to add capacity, reduce time and make operations more efficient.

Increased traffic has also underscored the need to improve security. In late 2015 Moussa Ahmed Hassan, Djibouti’s minister of equipment and transport, inaugurated a regional maritime training centre in Doraleh to train human resources from 21 regional countries and support the fight against piracy, a challenge in this part of the world. “We have significantly improved the calibre of our human resources in the transport sector in recent years. Consequently our ports have one of the highest productivity levels in the world,” Moussa Ahmed told OBG.

With the large toll that the various infrastructure developments – particularly the numerous major port development projects – is expected to leave on the country’s finances, the pressure for the new infrastructures to perform and bring economic returns will be considerable. “Bilateral debt is big, and the future success of the country’s economic development will depend on the success of the new projects,” Tyler Joyner, economic and commercial officer at the US embassy in Djibouti, told OBG.

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The Report: Djibouti 2016

Transport & Logistics chapter from The Report: Djibouti 2016