Djibouti’s has the potential to become a transhipment hub due to its strategic location and an increase in its port capacity, a report by the Oxford Business Group (OBG) has claimed.
Currently, the port mostly acts as an entry and exit point for cargo to its landlocked neighbour Ethiopia, handling roughly 95% of its imports, which has forced port infrastructure to adapt to rising volumes.
With this strategy, container volumes have risen rapidly from 193,000 teu in 2005, to 504,000 teu in 2009 and reaching 928,000 teu in 2017.
However, by reinforcing the existing port network, the country will be able to expand its market presence in other areas of the shipping sector, the report said.
Mamadou Ndione, senior economist at the World Bank told OBG: “One way to diversify is to become a transhipment point. At the moment 80% of transport activity is from Ethiopia. But Djibouti is well positioned on the main international maritime routes.”
Out of a total 12.6m tonnes of import merchandise in 2016, only around 1m tonnes were attributed to transhipment cargo although this was a 30% increase on 2015 figures.
Due to its location on the Strait of Bab el Mandeb and its link with East African markets, OBG has claimed that transhipment is a natural extension for the sector.
However, Djibouti could possibly face rising competition in the region as Somalia and Tanzania have made upgrades to their infrastructure in recent years including the Dar es Salaam upgrade that is projected to increase annual capacity by 28m tonnes by 2020.
Djibouti itself has seen a number of upgrades to its maritime infrastructure in an effort to keep up with the surge of cargo.
In May 2017, Doraleh Multipurpose Port, funded by the Djibouti Ports and Free Zones Authority (DPFZA) and China Merchants Holding, was inaugurated.
A lot of the increased container activity was supported by Doraleh Container Terminal (DCT) which, up until February 2018, was managed by UAE-owned DP World. However, the government terminated the company’s concession of the terminal, claiming mismanagement as the cause.
DP World has disputed this and in August a London court ruled in favour of DP World, saying that the company’s contract with the government was ‘valid and binding’.
Despite this judgement, DP World has not regained control of the nationalised port and has warned other companies not to take it over.
Recently, two US Senators expressed concern that the Chinese state may take over the port as Djibouti is heavily indebted to China and may one day offer the port in exchange for debt reduction. The US and China are competing for influence in East Africa.