Ethiopia enters the Port of Berbera and gains sea access in Somaliland
9 May 2018

Ethiopia becomes a shareholder of the company that will build the port of Berbera in Somaliland, one of the fastest growing countries in the world. Near the entrance to the Red Sea, in the city situated on the Gulf of Aden, Ethiopia finds an alternative access to the sea rather than that of Djibouti, which is strategic for import-export. Addis Ababa will become a shareholder of the infrastructure following an agreement signed in Dubai in early March with the Emirate company DP World and the port authority. DP World, a shipping company, will hold a 51% participation, with 30% for the Somaliland government and the remaining 19% for Ethiopia. The financial details have not been divulged.

DP World is one of the biggest port operators in the world with a client portfolio of over 77 maritime and land terminals, supported by 50 companies and active in 40 countries and 6 continents. In 2016, the company, presided and led by the sultan Ahmed Bin Sulayem, obtained a license to manage and develop the port of Berbera for 30 years. In addition, it promised to invest 442 million dollars to develop the candidate city to become the new maritime hub in the Horn of Africa.

The agreement will help Addis Ababa guarantee additional access for its increasing commerce driven by the growing population and economy. In Ethiopia there are about 110 million people. Upon Eritrea’s independence in 1993, Ethiopia became a landlocked country and therefore dependent on its neighbors, in particular Djibouti, for access to international markets. This dependence hindered the country from becoming the uncontested regional power in the Horn of Africa. Currently, 95% of imports and exports from Ethiopia transit through Djibouti, but the port can no longer sufficiently sustain the growing volume of imports and exports due to a GDP of 10%. Therefore, Berbera will be strategic in serving the country’s potential in the future. The other economies in the region are growing at such a fast pace that the development of more points of arrival of goods and the extension of the port of Berbera will increase the ability of the region to cope with the increase in trade.

Ethiopia is very interested in the project and said it will invest in infrastructure to develop the Berbera corridor as a trading port in Somaliland. The Ethiopian government pledged to build a road of about 250 kilometers from the site to the border. The total length of the road connecting Berbera to Addis Ababa is 937km, only 250km within Somaliland and about 700km within Ethiopia. These great distances are the reason for which a new company is to be established, with the shares being divided between the three governments. Developing access to and from the port will improve profitability.

There are also plans to build another dock at the port of Berbera consistent with the general plan that DP World has already begun to implement, adding new equipment to improve efficiency and productivity. The first cranes will arrive by the end of the year. The president and CEO of DP World Group said that the projects will fuel the commercial and employment opportunities in the region.

A free zone has also been planned which will support trade and generate jobs. Modeled on the Jebel Ali Free Zone (Jafza) of DP World in Dubai, it was designed to encourage economic growth and the establishment of small and medium-sized businesses.

Somaliland celebrated its 16th anniversary of Independence last year and has been showing consistent economic growth for over a decade. The Somaliland government had branded the agreement as illegal and therefore null.