Africa and the Middle East

Scramble for ports in the Horn of Africa 7-21-18

Source - Economist, July 21, 2018: "Ports in the Horn"     

The northeast coast of Africa is underserved by existing port facilities. The UAE, China and private firms are all competing to build bigger ports, driven by the needs of 100+ million Ethiopians for access to international trade. 

Horn of Africa Detail

DP World - one of the world's largest shipping companies - is based in the United Arab Emirates (UAE). From their offices in the busy port of Jebel Ali (just outside of Dubai) they oversee their African ports, including Doraleh in the former French colony of Djibouti. Doraleh is Djibouti's biggest employer and handles 800,000 containers a year. Most of the business is Ethiopian - there are 105 million people in that relatively prosperous but landlocked country and 95% of all Ethiopian trade flows through Djibouti. China built the railroad (Belt and Road initiative) that connects Ethiopia to Doraleh. 

The monopoly Djibouti enjoys over Ethiopian trade maybe ending. DP World is building a large port in Berbera in territory claimed by Somaliland, a breakaway province of Somalia not recognized by any other government. The Berbera port is projected to handle 1.25 million containers per year - and is being partly financed by Ethiopia. The new competition could cost the government of Djibouti millions in taxes and transit fees.

China is heavily invested in Djibouti, lending the small country $1.4 billion over the last two years, more than 75% of Djibouti's GDP. China also owns 82% of Djibouti's external debt. China wants to build a large free trade zone in Djibouti and then use the port in Doraleh as a primary "staging post" on the Belt and Road. To do that, China needs to end DP World control over the port. And to that end, Djibouti seized the port from DP World in February of 2018, claiming DP Word had broken promises to expand. Now (perhaps) Djibouti can discharge some of its debt by turning over the port to China. A similar thing happened in Sri Lanka in 2017 when the Sri Lankan government handed over a port to China.