Aboubaker Omar Hadi
« We have a global ambition. »
President of DPFZA, Djibouti Ports and Free Zones Authority
The memorandum of understanding (MOU) signed between Addis Ababa and Somaliland on January 1st, granting Ethiopia 'autonomous' access to the sea, is reshaping strategic dynamics in an already delicate region. Aboubaker Omar Hadi delves into the competitiveness and medium-term aspirations of Djibouti's port infrastructure.
AM: According to perspectives highlighted by certain media, particularly in Addis Ababa, the port of Djibouti is deemed too expensive, limited in capacity, and burdened with transportation constraints to effectively support the Ethiopian economy. What is the reality on the ground?
Aboubaker Omar Hadi: Today, the six ports in Djibouti, namely the "old" port of Djibouti City, the Doraleh Container Terminal, the Doraleh Oil Terminal, the Doraleh Multipurpose Port (DMP), the Goubet Port, and the Tadjourah Port, boast a combined quay length of 6,578 meters, with depths ranging from 7 to 22 meters, and offer a handling capacity of 60 million tons of goods per year. This is substantial.
The Doraleh Multipurpose Port (DMP) boasts one of the world's highest-rated deep-water port complexes. The Doraleh Container Terminal has been recognized by the World Bank and the Container Port Performance Index (CPPI) as one of the top ports in Africa over the past three years.
In addition to these figures, we must consider the operational performance of the infrastructure, with a containerized unloading productivity of 30 movements per hour and unloading of 24,000 MT per day per bulk carrier. This efficiency also helps reduce vessel turnaround time and truck rotation time at various port terminals.
In terms of logistics, infrastructure, and operations, we unabashedly aim for the highest global standard: to be competitive in serving our customers to the best of our ability.
So, where do the difficulties and this debate about the "cost" originate?
The global average transit cost represents about 2.5% of the CIF price (Cost, Insurance, Freight). However, even with the rise in maritime freight prices, including insurance costs, and the maintenance of fixed port tariffs, handling in Djibouti's ports now accounts for less than 1% of the CIF cost of the value of the goods. So, we are far from being considered "expensive.
The difficulties and bottlenecks lie downstream in the process. Currently, Djibouti's ports are connected to the Ethiopian market via four main routes: three road corridors and a new 756 km modern electric railway line, inaugurated in 2016.
The railway (75% owned by Ethiopia and 25% by Djibouti) is still underutilized, especially in the face of competition from Ethiopian land transporters. And the costs in this segment are high.
For example, Djibouti's ports charge 320 USD per twenty-foot container (for handling, unloading, and loading onto trucks or the train). The documentation fees of Djiboutian forwarders amount to 60 USD per container, while Ethiopian forwarders' documentation fees are at 250 USD. Finally, the truck transport cost on the Djibouti-Ethiopia corridor averages 2,400 USD. This transport is handled by Ethiopian carriers at 98%.
Moreover, Djibouti's ports and logistics community are seriously affected by delayed payments from Ethiopian users, with nearly 30 million dollars in accumulated arrears.
Is the strategic and commercial partnership with Ethiopia, painstakingly built over more than twenty years, still as robust?
This cooperation dates back even further. The use of Djibouti's ports by Ethiopia was formalized through a strategic utilization agreement signed in 2002. This agreement, both unique and emblematic, facilitated the smooth flow of goods between the two countries, marking a significant milestone in the partnership.
Since then, Djibouti's ports have significantly contributed to Ethiopia's economic growth, with double-digit GDP increases over the past two decades. To support this emergence, we have consistently invested in our port infrastructure, providing modern and tailored facilities with recognized performance among the top in Africa.
In our perspective, there is no doubt: Ethiopia is our neighbor, a brotherly country, and a long-term partner with whom we are committed.
How does Djibouti assess the progressive competition from Berbera in Somaliland?
We are convinced that competition is beneficial and constructive for all parties involved, both for the ports and the clients. The region and Africa have immense needs, and all stakeholders have a role to play.
How does Djibouti's port industry position itself in the medium term? Are you entirely dependent on the Ethiopian market?
Ethiopia is a crucial partner and market that we are determined to serve to the best of our ability. However, we have a vision and ambitions on a broader scale. Due to its geostrategic position, directly in line with Asia, Djibouti serves the entire East Coast region of the continent, from Suez in Egypt to Durban in South Africa. We are actively developing transshipment activities. The Doraleh Container Terminal has recently invested in four new STC Malaccamax cranes, enabling it to handle 24,000 TEU vessels. In the medium term, we aim to generate 50% of our activity in transshipment.
Our port infrastructure also provides a hubbing service to maritime lines, transitioning large incoming vessels to coastal vessels. Finally, our ports serve as major gateways to the COMESA markets. Integrated into our port structures, the free zones offer a conducive environment for international trade, allowing businesses to pre-position their goods close to target markets, thus reducing delivery times and costs. This is the system of the free zone and the Djiboutian CIF.
Ultimately, today, the entire combination of "free zone, imports for our country, and transshipment activities" represents 70% of the traffic passing through our ports. The remaining 30% represents the flow destined for Ethiopia.
What are the major projects underway for the modernization and diversification of Djibouti's port platforms?
Our goal is to match our ambitions. We are investing to remain leaders and serve our markets, also acting upstream and downstream in the port sector. Djibouti aims to enhance the connectivity of its port and logistics infrastructure.
One significant project involves consolidating the road and railway connection of logistic platforms. We plan to construct the fourth road corridor to Ethiopia, linking our ports to Galilé-Dawaleh, the Ethiopian border, with a shortcut of 150 km. The railway connection to our oil terminals in Doraleh and Damerjog to maximize volume is also underway.
The Damerjog free zone, an integral part of the country's "Vision 2035," is set to host various sectors, including an oil complex. This strategically designed complex aims to increase the handling and storage capacity of petroleum products, leveraging Djibouti's prime location for transshipment and maritime services, thereby generating additional revenue. The pilot project includes the construction of an oil jetty with an annual capacity of 13 million tons and the development of a refined product storage park with an initial capacity of 1 million cubic meters.
To leverage the advantage of an integrated multimodal platform, the "sea-air cargo" model has been implemented, offering clients the opportunity to achieve significant cost savings and connect landlocked countries in the Great Lakes region and beyond. Goods in the free zone can be repackaged and shipped by air. Currently, we serve 19 countries and 22 cities in Africa (Johannesburg, Kigali, Bujumbura, Abidjan, Nigeria, etc.), and we aspire to implement this model towards Europe.
Djibouti is committed to the energy transition of its port and logistics infrastructure, in line with sustainable development strategy. This commitment is realized by the inauguration, in September, of a 60 MW wind farm and the ongoing deployment of 15 MW solar farms in the free zones.
Simultaneously, the commissioning of the new road corridor (RN18) significantly contributes to reducing greenhouse gas emissions, offering a 150 km shortcut. Additionally, investment in the "blue economy" is illustrated by the project to construct a ship repair yard. This facility will accommodate merchant ships, contributing to the promotion of sustainable practices in the maritime industry of the Red Sea.
Another development hub is the transformation of the old port into a center of business excellence, as well as a high-end recreation and residential center.
How are such ambitious projects financed?
We have gained experience and we work with various types of financing, notably through strategic bilateral partnerships with friendly nations. We make the best use of our resources, and our reputation holds value. The four new cranes at Doraleh, for example, were acquired using our own funds. The ship repair yard project is supported by commercial banks in the Netherlands. The Goubet wind farm was realized through a partnership between the AFC (Africa Finance Corporation) and FMO (the Dutch entrepreneurial development bank).