Somaliland and DP World celebrate new 30-year port concession

15 May 2017 — The Republic of Somaliland has built a reputation as an oasis of political stability and security in a volatile region. Facing the challenge of sustaining growth, the country of 3.5 million, nestled in the Horn of Africa between Somalia and Ethiopia on the Gulf of Aden, is now presented with an opportunity to diversify its economy and sustain economic growth through port and maritime services, logistics, and related sectors.

The opportunity comes in the form of the development of its Port of Berbera (in the city of the same name) by the DP World Group, the United Arab Emirates-based maritime services leader. DP World’s commitment to the $442 million development of the port was celebrated in a ceremony on 12 May, 2017, in Berbera, attended by President of Somaliland Ahmed Mohamed Mohamoud and DP World Group CEO Sultan Ahmed bin Suleyman, along with local dignitaries. DP World and Somaliland have agreed a 30-year development and management concession, with March 2017 having marked the initial phase of development.

“This DP World investment in the Port of Berbera will strengthen the relationship between the Republic of Somaliland and the UAE which existed for many centuries in the past,” said President Mohamoud at the ceremony.

The Port of Berbera is part of more than US $1.2 billion in port investments DP World Group is making in 2017. The company is notably working to upgrade capacity in its flagship Jebel Ali Port in Dubai to 18 million TEU, and develop its Dakar, Senegal container terminal and London Gateway deep-water port and logistics hub, with the aim of improving on its present 85 million worldwide TEU capacity.


DP World Group’s Jebel Ali Port in Dubai, UAE

Jealous neighbours?

Somaliland Foreign Minister Dr Saad Ali Shire indicated to Walta Information Center that Berbera will be “an excellent opportunity for Ethiopia to use for import and export,” citing an advantageous land route between Addis Ababa and Berbera.

Dr Shire noted “the main barrier is the facility at the port; the port has not been built to handle container traffic. It has been mainly designed to handle general cargo. And most of the traffic today is containers. That is why the Dubai developer comes in to expand it to be container terminal. We agreed with the developer to make it a container terminal and able to handle container traffic from Ethiopia.”

Of particular interest to Somaliland is DP World Group’s concurrent operation of the Doraleh Container Terminal (DCT) at the Port of Djibouti, just 700 kilometers northwest of Berbera. DCT is the most high-tech container terminal in Africa, but Berbera is projected to overtake its 1.2 million TEU annual capacity.

DP World conceives of the two ports as harmoniously facilitating Red Sea trade and servicing the African interior. However, the ports may realistically compete to facilitate trade and transit, particularly of goods from Ethiopia to foreign markets, and more generally between Asia, Africa, and the Mediterranean.


The Port of Berbera on the Gulf of Aden, prior to DP World’s development

Outlook

The Port of Berbera project represents a chance for DP World to shore up its long-term position on the key Red Sea transit route that links its Jebel Ali Port (and much of Asian maritime trade) to Europe. After divesting from a container terminal in Aden, Yemen, in 2012, and with high-profile legal wranglings with Djibouti’s government leading to some long-term uncertainty around DCT, Somaliland’s geographical position and stable investment environment make it a natural landing place for the group.

For Somaliland, a country whose $450 GDP per capita ranks it among the least prosperous places in Sub-Saharan Africa, the port is an opportunity to diversify an economic base heavily reliant on foreign remittances and agriculture. At present 80% of the country’s labour force is employed in agricultural and rural activities, while Somaliland’s diaspora accounts for most incoming investment. While the impact on labour may be incremental, President Mohamoud and the Government of Somaliland believe long-term collaboration with DP World will transform the country’s economic fundamentals and “will bring back and highlight the commercial position and importance of the Port of Berbera as a Red Sea gateway for the Middle East and Africa.”

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