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Djibouti: The rise of a major logistics hub

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Djibouti: The rise of a major logistics hub

The ports complex of Djibouti is not only a critical throughfare for international shipping, but part and parcel of the country’s economic strategy. Aboubaker Omar Hadi, Chairman, Djibouti Ports and Free Zone Authority, talked to us about Djibouti’s rise as a logistics hub 

How did Djibouti become such a major logistical hub in the region?

Let me contextualise the answer to this question within history. The location of Djibouti is of primary importance. This strategic location cannot be underestimated. It has always been throughout history an important gateway and international crossroad for trade.

This route grew even more in importance with the growth of shipping and the construction of the Suez Canal in 1869. This gave Djibouti a key role to play, effectively making the country an important hub for the movement of goods and exchange between Asia, Europe, the Middle East and Africa.

At the beginning, Djibouti was a bunkering platform, and used to refuel the ships travelling from Europe, especially Marseille, to the Indochina peninsula, and there was a depot of coal, because at that time ships used to burn coal as fuel (streamships). The ships also replenished on water and food to enable them to continue their journey. 

It is only later on that Djibouti was converted into a cargo hub. With the building of the railway line between Djibouti and Addis Ababa, between 1879 to 1917 – the first railway on the African continent – that offered new perspectives for Djibouti to become a transit country for Ethiopia and the hinterland. 

In the 1970s, we started adding to these activities relating to imports and exports, what we’d refer to as transhipment cargo, essentially transferring consignments on large vessels to smaller ships for them to distribute across the region. Transhipment activities represent today almost 50% of our throughput.

In the last three or four years, we have developed a further transhipment activity between much larger vessels. That means the exchange and coordination of the movement of a much larger quantity of containers – using Djibouti as a logistics hub, not only between Africa and the world but East and West, and North and South, all being coordinated out of Djibouti. This is transhipment but on a much larger and global scale. Djibouti Shipping for example has acquired a common user feeder vessel which will soon be ready to serve ports across the region.

As we grow, we are also now reviving our original business, which is that of bunkering. We are moving from what they call solid bunkering to what is now liquid combustible. And we are planning to move to LNG bunkering. We have managed, since 2017, to build very good volumes and we are expecting this activity to be an important part of our work. So today we are not only charging for loading and moving cargo but also supplying fuel to the ships, supplying ships’ summary to the ships, crew change and other services.We are now geared to become an international maritime centre.

For example, we are also developing a ship repair yard that will be operational in 2022. Given this increase in activity, we are also developing an energy production unit; even though that’s not our core business, it’s core to be able to help us conduct our business. 

Lastly, the Free Zones, which is a big part of our business. We’ve currently got 40 hectares but are developing the biggest on the continent and it will be 4,820 hectares. We have developed the pilot stage of that one. A $290m investment covering 240 hectares of a 600 hectare development. 

In the last four years, we have built three new ports and we are planning to build an additional two. A new container terminal and a new multi-purpose port. The old port will be transformed into a business district. 

By doing so, we will also ensure we free the city of traffic related to the port activities, reducing congestion and pollution, and meaning we can develop that site for other activities.

What role do you see yourselves playing in Vision 2035? 

We see ourselves as playing a central role, not just in the country being a logistics hub, but also investing across different areas to enable the vision to become reality. 

I mentioned energy: we are today developing wind power, renewable energy. We are involved in many discussions around inland transportation, working with different parties to ensure rapid, clean and cost-effective movement of goods, and to connect Djibouti with the hinterland. 

Our main focus will remain in the development of the maritime profession and everything that comes with it, but we are very much involved in job creation, economic diversification and the development of industries as a whole. 

But we also have to keep in mind, first and foremost, the needs of our two customers in our ports – shipowners and cargo owners. 

But as we close the port in the city and move its activities to the new infrastructure, this will create a whole new opportunity to redevelop the business centre of Djibouti, the downtown. 

We are not re-inventing the wheel. It has been done in many parts in the world. Yokohama’s old port was transformed that way. London docks on the Thames River. Cape Town waterfront is another example.

Are you worried Ethiopia is currently your largest customer and they appear to be looking at alternative access to the sea?

Diversification is key. And that’s why I mentioned the transhipment activities as well as bunkering. In the same way that it is legitimate for Ethiopia as a landlocked country to look at other corridors and seaports. So far, as I mentioned earlier, half of our throughput is transhipment traffic.

But what we believe is that Ethiopia’s population is 100m yet they only import and export six times the value of what we do in Djibouti, with a population of 1m. Trade from Djibouti – i.e. imports/exports – accounts for 17% of the throughput whilst that from Ethiopia accounts for 83%. So there is much room for growth on the Ethiopian side if we extrapolate numbers using population metrics. And using these metrics, we are not over-dependent on Ethiopia. But diversification and not an over-reliance on the Ethiopian market is a legitimate concern and one we have addressed.

What is your comparative advantage against Mombasa and Dar es Salaam? 

Our main advantage is our infrastructure. The depth of the water is very important for the ports to accommodate larger vessels. We are the fourth most connected port in Africa, after Suez, Durban and Tanger Med. That is in terms of shipping lines using our port.

Africa is a big continent so we are happy already being the biggest in the region. We are not in competition with Tangier or with Durban, looking to take business from them. And we actually do have transhipment activities with ships going from Djibouti to Durban. We are in a similar strategic location to Tanger Med – them in the strait of Gibraltar and us in Bab el Mandeb – but really we are – the ports that is – interdependent and complimentary. 

I should add that our big advantage today is our human capital. We’ve developed the skills and the experience, from the top down and throughout our business, this is a massive competitive advantage we have built over the years. Our big advantage today is our human capital. The infrastructure you can build but the experience and skills take years to be developed.

Read more articles from our special report on Djibouti

Putting Djibouti at the heart of global trade

Djibouti is 10 years ahead of rivals

The seven wonders of Djibouti

Sky’s the limit for Air Djibouti

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