By Muluken Yewondwossen
Ethiopian Shipping and Logistics (ESL), a highly successful and established public company, has announced its plans to utilize the port expansion project in Somaliland. A pact was signed between the leaders of Somaliland and Ethiopia on January 1st, granting Ethiopia a 20-kilometer direct access to the sea through a 50-year lease agreement.
Under this agreement, Ethiopia will have the opportunity to engage in both commercial and naval operations on the leased property, providing the landlocked nation with a peaceful maritime exit to the sea. Prime Minister Abiy Ahmed has advocated for Ethiopia’s need to have a secure and calm maritime route for its over 120 million people.
Ethiopia’s naval force was dissolved in the early 1990s following political changes and Eritrea’s independence. However, the current government, which assumed office around five years ago, has since reestablished the naval force. Prior to the border dispute with Eritrea, ESL, the Ethiopian commercial vessel operator, operated out of Eritrean ports.
In the absence of access to Eritrean ports, Djibouti has been the main hub for Ethiopia’s import and export cargoes over the past two decades. Djibouti has developed its facilities and logistics capabilities to meet Ethiopia’s demand, taking advantage of its strategic location at the entrance of the Red Sea.
However, Prime Minister Abiy’s administration has consistently advocated for Ethiopia to have its own port in the region through a mutually beneficial approach, including the possibility of exchanging and sharing assets such as Ethiopian Airlines, Ethio Telecom, and ESL.
Ethiopian Investment Holdings (EIH), a newly established sovereign wealth fund overseeing 26 public firms, including Ethiopian Petroleum Supply Enterprise (EPSE) and ESL, has initiated discussions to acquire a share in the Damerjog Liquid Bulk Port (DLBP) located in Djibouti. This marks the first overseas investment project for the sovereign wealth fund. DLBP is a modern oil port facility situated in southeast Djibouti near the border with Somaliland, capable of accommodating the latest generation of vessels.
Aboubaker Omar Hadi, Chairman of Djibouti Ports and Free Zones Authority, which owns Great Horn Investment Holding, a recently established sovereign wealth fund in Djibouti, and Mamo E. Mihretu, former CEO of EIH, confirmed that discussions have been ongoing to reach an agreement, as reported by Capital a year ago.
Both parties have also signed a memorandum of understanding (MoU) to explore opportunities in the field of oil storage facilities. Reports indicate that the investment holding will receive its share through EPSE, Ethiopia’s sole petroleum supplier.
To facilitate Ethiopia’s development of a maritime outlet, Prime Minister Abiy and President Musa Bahi Abdi of Somaliland signed a similar Memorandum of Understanding earlier this week. Following this agreement, Redwan Hussien, the prime minister’s national security advisor, informed selected media outlets that the final agreement is expected to be reached within a month. The designated coastline area is likely to be between the northeastern coastal town of Lughaya and Berebera, an established sea port in Somaliland.
Berisso Amallo, the CEO of ESL, expressed his delight during a press conference held on January 2nd, representing the logistics giant. He emphasized that while the current agreement opens up opportunities for the country, previous political leaders had unintentionally or intentionally closed off these possibilities.
Owning ports has been a challenge for Ethiopia in the past, but it now presents a significant opportunity for ESL, as its vessels will be able to operate more efficiently in the port under its administration. The company has faced challenges with rules imposed by port operators, tariffs, and demurrage rates, which have impacted its operations and income. The CEO stated that having an owned port will reduce transportation costs and logistical burdens, directly benefiting citizens.
Berisso mentioned that ESL has been preparing to establish a modern and capable logistics company in the region that Ethiopia will occupy. The agreement will not only increase the company’s logistics handling capacity through the use of modern technology but also enable it to operate more vessels and handle larger cargo volumes. This will result in increased income, job opportunities, and expertise for both Ethiopia and the host nation. ESL is currently the only company in Africa that owns and operates deep-sea vessels.
Over the next five years, ESL plans to expand its fleet by acquiring larger and newer ships to accommodate its growing business. This expansion will include extending its cross-border trading with clients in the area, in addition to serving Ethiopia’s needs.
In related development, the African Union on Thursday, joined the United States and the Arab League in appealing for calm in the Horn of Africa after regional tensions soared following a contested deal on between Ethiopia and the breakaway region of Somaliland. AU Commission chair Moussa Faki Mahamat issued a statement appealing for “calm and mutual respect to de-escalate the simmering tension” between Ethiopia and Somalia. He called on the two nations to engage in a negotiation process “without delay” to settle their differences. Faki also urged them to “refrain from any action that unintentionally may lead to a deterioration of the good relations between the two neighboring Eastern African countries.” “He stresses the imperative to respect unity, territorial integrity and full sovereignty of all African Union member states,” the statement said. The memorandum of understanding (MoU) gives landlocked Ethiopia, Africa’s second-most populous country, long-desired access to the Red Sea through Somaliland. Somaliland’s leader Muse Bihi Abdi has said that in exchange, Ethiopia would “fully recognise” Somaliland.
Somalia also urged the head of the East African Inter-Governmental Authority on Development (IGAD) to withdraw a statement made earlier on the diplomatic tension between the two sides. Somalia expressed dissatisfaction with the statement, saying it “falls short of condemning the Ethiopian Government of violating the sovereignty and territorial integrity of Somalia.”
