Ethio-Djibouti Unwavering Relations

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Aboubaker omar (Photo: Anteneh Aklilu)

Djibouti’s logistics and infrastructure hub backbone, Djibouti Ports and Free Zones Authority (DPFZA), is the governmental body of Djibouti that administers and manages the Port of Djibouti and several other facilities in the country. It is not only a huge source of employment to its people but also a major hub for logistical business for Africa.
Aboubaker Omar Hadi has served as the Chairman of DPFZA since July 2, 2011. His career which spans over 30 years began in the Port of Djibouti where he worked in the Marine Department and Port Control, responsible for the port documentation in 1978. Throughout his career, he has also served as Deputy Manager in the statistics department, General Cargo Manager, Container Terminal Manager and Commercial Director of the port. Aboubaker has also been instrumental in improving trade relations between Djibouti and Ethiopia, to the extent where Ethiopia now uses Djibouti’s ports for over 90% of its foreign trade.
Finance mobilization and execution of mega projects which are registering monumental results have propelled Djibouti to the logistics giant it is today. Capital caught up with Aboubaker during his Ethiopia visit for the Joint Ministerial Commission meeting. Excerpts;

Capital: It has been three years since you convened for the joint ministerial meeting. Could you tell us the major talking points raised at the meeting and the reason for the long overdue?
Aboubaker Omar: It’s a pleasure to be here for the 16th Ethio-Djibouti Ministerial Joint Commission meeting. It is great to see the meeting resume, after a three year hiatus of course, due to the global pandemic. For this year’s meeting we have had very fruitful discussions on bolstering our relations. We touched upon at length on the cooperation between the two nations regarding political, economic, and transport and logistics issues. The latter being my area of expertise, we talked about ports, road, and clearance as well as the overall transport landscape. We had very interesting exchanges which were also forward looking.

Capital: What are the specifics of your discussion with regards to port and logistics issues?
Aboubaker Omar: We had a general discussion on both port and transport. We looked into the quality of our service, that is, our ports; which are performing remarkably well when compared to other countries not only in the continent but also across the globe. To this end, we want to keep the momentum rolling by providing top class services.

Capital: Were there challenges raised during the joint meeting with regards to logistics? What were the pathways discussed on addressing the challenges?
Aboubaker Omar: The road condition linking both countries was noted to be a major challenge. Of course this setback was as a result of harsh weather conditions catalyzed by heavy rains, which led to disruptions in road network access within our borders. We kept building and rebuilding the road, and the road was being washed out due to the heavy rains. Similarly, to some degree the rains also affected the railway transport, with cases of over-flooding. As the rains have subsided, we will begin the reconstruction soon.

Capital: There have been complaints amongst Ethiopian transporters and logistics actors with regards to Djibouti’s services in customs, documentation and so on. Were these issues addressed at the joint ministerial meeting?
Aboubaker Omar: Yes, and to solve such issues we are going to implement a single document for Ethiopia and Djibouti customs very soon. The customs will have different documentation including online documentation, so as to ease the process of documentation. Additionally, in Djibouti we have put in place a system called ‘the port community system’ which is also online; meaning you don’t have to go to the customs or freight forwards.
The online system allows for documentation and tracking with transparency in customs processing and cargo status and will be integral in ironing out the freight blame game.

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Capital: Connections are important for seamless transport. Which ports are connected to the railway line? What are the obstacles hindering such linkages?
Aboubaker Omar: For seamless transport, it is true that connections are paramount. The Ethio-Djibouti railway has been built in such a way that it passes close to the port. The point of contact between the port and the railway in most cases are between one to two kilometers apart. It is the port’s responsibility to make the final connections happen.
So, out of the three ports in Doraleh, two are already connected. The connection that remains now is of the oil terminal. For there to be fluid flows, it was also important on the Ethiopian end to connect the Awash Oil Depot. I believe Awash on their end have now started the construction of the connection, and we will do so on our end. We had stalled the construction on our side because we didn’t see it feasible linking the terminal on one end whilst the other end was not connected. Of course cost is always a huge obstacle to debunk, but nonetheless, we will work to connect the terminal. Currently, the DMP, multipurpose port and SGTD, the containers port, are connected.

Capital: How are the other mega projects coming along?
Aboubaker Omar: We have several projects in the pipeline with the majority being new ones. We have developed a huge free zone on PK 23 which is already operational and we are now building the second one in Damerjog which has free zones and ports.
Currently, in total we have six ports. We embarked on this journey in 2003, when at the time all activities were centric to just one port, the Djibouti Port; where we provided logistics for oil, containers, general cargo, and livestock. As the traffic quickly picked up, we decided to expand the activities outside the city.
We started out by developing an oil terminal, followed by containers, and a multi-purpose port; in that order.
Similarly, the new Djibouti Damerjog Industrial Development (DDID) free-trade zone is progressing smoothly. The jetty is currently being built as a part of a large storage platform for petroleum products and derivatives. The 3 km jetty will be located within a new oil terminal comprising a refinery and storage tanks for refined and crude oil; the construction of which falls within the first phase of the DDID project. The entire DDID project is scheduled to be built in three phases of five years each, and also includes a multipurpose port, a liquefied natural gas terminal, a livestock terminal, dry docks and a ship repair area, a power plant and a factory that will produce construction materials. The first jetty port will be ready in June, 2023.

Capital: These expansions are coming at a time where Ethiopia’s oil demand is growing. What are the distinguishing capacities of the new oil port with respect to the old one?
Aboubaker Omar: It is always great to cater for demands through expansions. Likewise having additional competition between Horizon and Damerjog is good since it will up the quality of service.
Recently, the Ethiopian Investment Holdings, through the Ethiopian Petroleum Supply Enterprise acquired 30 percent equity in Damerjog with Djibouti taking the rest. This of course is great for Ethiopia’s energy sector.
With regards to capacity, the old port, Horizon, has one terminal and one jetty whereas Damerjog which consumed USD 350 million to construct will have different terminals using one jetty. Damerjog also has a capacity of 13 million tons which is higher when compared to the old port which has a capacity of 4.5 million tons.

Capital: What about the livestock terminals?
Aboubaker Omar: We have made developmental progress with regards to finishing the livestock terminals; however we have not seen huge traffic of livestock export from Ethiopia.
Since it was insisted upon for us to invest on the terminal, we have made developments in the holding, rest area and transit areas for a livestock capacity of 2 million heads of cattle per year.

Capital: Ethiopia to a degree had a turbulent economy due to the global pandemic and internal conflict. Has this had a ripple effect to the port activities?
Aboubaker Omar: The port activity has declined by about 26 percent. The reason for the decline stem from the pandemic, the war in Ukraine, the strength of the US dollar amongst other factors. Lower port activities have also been attributed to higher import costs due the strength of the USD.
Nevertheless, the ports and free zone are performing efficiently and our container terminal has registered higher rankings in the recent World Bank study.
The rankings place Djibouti as the first in Africa and nineteenth globally. This is great as it shows that we are ahead of many countries including European and advanced economies like the USA. Currently, the most productive ports are in Asia and for us we want to keep on working on our services to reach at the highest levels.

Capital: Tells us about the Free Zone, and progresses made thus far?
Aboubaker Omar: It is actually interesting to note that with regards to the Djibouti Free Zone, we have been around for decades and we’re among the oldest in the world. We began the free zone in 1954. However, we never capitalized or utilized it successfully since on the other side of the water, the British and French businesses were already existent.
We bounced back again in the last 20 years to develop more free zones within the country. At the beginning, we faced problems in salary and energy expenses. At that time, Djibouti’s salary was very high compared to Asian countries. Now whilst we have maintained our salary cap, the Asian countries have been registering higher salaries when compared to us at a global scale.
We have also made progress by investing in electricity to generate six megawatts from the wind farm that is developed at Gulf of Ghoubet.
Today, we have over 400 companies investing in the compound which comprise majorly of Ethiopian investors. Likewise, Turkish and other European companies have investment at the zone too.

Capital: How is the operation of the recently formed shipping lines? Initially you planned to serve the Rea Sea but your vessel is now floating on the Mediterranean; is it profitable floating on a longer journey on such a small vessel that the shipping line owns? Do you have a plan to add more vessels?
Aboubaker Omar: We’re doing both the Mediterranean and Red Sea, and work is progressing well. When you put it to perspective, the Mediterranean is not far. When you go for long journeys such as Brazil, China, and so on, shipping lines take time and more often than not there are other big companies and big players, which make it difficult to break even.
Currently, our shipping line is not profitable. Nonetheless, it attracts work to our ports which as a result makes our ports to become a transshipment hub. Other ships bring their containers to Djibouti and then, our vessel redistributes to secondary ports in the region since the big ships are not able to anchor due to the water depth.
We have plans of adding vessels but the timing is dependent on the world economy, which sadly is now on the way to recession.
Business at the moment is strange, since there is little traffic yet transportation of price is very high. When there is less demand, prices often are low, but it’s the opposite now in the supply chain. There are plenty of ships but the crew is few owing to the pandemic and the conflict of Ukraine which is also another paradox since 30 percent of the ship crew come from Ukraine and Russia. Similarly, grain and fertilizer comes from those countries which add to the challenge.

Capital: Ethiopia recently opened a free zone in Dire Dawa. What advantages does this have for both countries and for the free zone in Djibouti, in particular?
Aboubaker Omar: With the exception of Hawassa Industry Park, the Ethiopian parks and free zone are constructed next to the railway line, which is similar to Djibouti. The introduction of the new parks and free zones has a good outcome in boosting the economic activity of both sides. With regards to the free zone at Dire Dawa, linkage to that of its counterparts in Djibouti I believe has the potential to brew economic prosperity.

Capital: How would you define your relation with the Ethiopian Shipping and Logistics Service Enterprise (ESLSE)?
Aboubaker Omar: We have great long standing relations with ESLSE. We know the staff, and the management for a long, long period of time. We have fruitful relations and we are looking forward to grow together in the future as well.

Aboubaker Omar

Capital: Some organizations and western countries have expressed that Djibouti is in debt distress. What’s your response to this?
Aboubaker Omar: When such a question is thrown around, you have to re-battle by asking; how about the debt in other countries?
Our debt is only 55 percent of the GDP. Initially a couple of years back, there were wrong calculations done which tainted the view of what our debt status looked like.
Then the World Bank two years ago, made calculations showing we had come down to 67 percent. We have also been diligently paying our loans back and our GDP has been growing which narrows debt in the long haul.
So we are not in any debt distress. Westerners always talk about Chinese debt, but when the Chinese take over the ports in France or Germany they go silent on the topic or disregard it. Which begs the question, do they think that Chinese money is good for them but not for us?

Capital: Lately, France has been showing investment interest in Djibouti. Can you elaborate further on this?
Aboubaker Omar: Indeed, France has shown investment interest in us. A group of French investors visited us last week, with focus on SMEs of different fields.
CMA CGM is the only one I think interested on the logistics sector whilst the rest want to open some manufacturing industries at the free zone; to produce and sell to the region.
The concept of the free zone is very interesting and lucrative. You manufacture the goods nearer to the market where the consumers are. Now, if you keep the factory let’s say in Malaysia, your order to Ethiopia would require a letter of credit and may take say two months to deliver the goods in Ethiopia. In contrast, if the factory is in Djibouti or in Ethiopia the delivery would take 24 hours.
So what makes the free zone interesting is less cash flow demand to trade with the rest of the world.

Capital: What are your views on Ethiopia-Somaliland agreements with regards to port partnership and possible competition?
Aboubaker Omar: Competition is out of the equation, because of one simple reason, geographical issues and demand. The Eastern coastlines in Africa run from Egypt to South Africa; similarly on the west from Morocco to Namibia where there are 21 maritime nations. Out of the 45 landlocked countries in the world, 17 are in Africa, of which 10 of those lie in our region.
Even if you build ten ports in the next 10 years, it would not be enough to cater for Ethiopia’s growing needs over the decade, thus there is great need. The population is growing, economy expanding and the demand rising so the need is much higher than the competition yet to be created in Barbara, Djibouti or Lamu ports.