North Africa Ports Infrastructure – A Gateway to land-locked African markets

(Focus Markets  – Djibouti, Somalia, Eritrea, Sudan & Ethiopia)

The combined population of Djibouti, Ethiopia, Eritrea and Somalia and Sudan are almost 200 million people which accounts for  15% of the total African continent population.  Geographically, the eastern most countries are strategically located but some of the countries are under developed and still lagging behind economically.  The road infrastructure and rail networks are poorly developed, which as a result makes logistics and transport cost expensive and unattractive for private investment. In addition, the constant armed conflicts and civil wars in this region have resulted in instability which makes it risky for  trade and foreign investors.

Among those countries, Djibouti is blessed with huge port investment especially from UAE and China which turned the country into one of East Africa’s highest capacity port infrastructure. The Port of Djibouti is a port in Djibouti City, the capital of Djibouti. It is strategically located at the crossroads of one of the busiest shipping routes in the world, linking Europe, the Far East, the Horn of Africa and the Persian Gulf.  Apart from this the investments has also facilitated other infrastructure developments such as railway and road which connects Djibouti port into Addis Ababa in Ethiopia.  This  port has become a trade gateway to the landlocked Ethiopia.

While Djibouti and Ethiopia economy are progressing well, Somalia, Eritrea and Sudan are among the 10  poorest countries in Africa.  Most of the countries are relying on services sector as their main GDP contributor which accounted for 30 – 70% of the total GDP of the country. 

Agriculture is the source of livelihood and income to 80% of the population, but the sector is poorly developed.  They  rely heavily on rain  but seasonal drought has  affected the progress of the agriculture sector.  Only Somalia is dependent on agriculture as their main source of income, and the sector contributes to more than 60% of  the economy and livestock export is the main source of the country’s foreign exchange revenue. In Ethiopia, agriculture contributes 38.5% to the country’s GDP where coffee exports is the main source of export earnings.  Other agricultural products that earn foreign exchange include oilseeds, dried pulses, hide and skin as well as live animals. The young flower industry is also becoming the source of foreign revenue.

Oils and Fats Import Potentials

These five countries are homes for 200 million people and their consumption of oils and fats per capita is between 5 – 9 kgs with the total oils and fats consumption  at least 1.2 million MT. 

Ethiopia is the market leader for oils and fats due to its sizeable consumer market.  Its 115 million people consumed  500,000 MT and the volume is on the low side as their per capita consumption is only 5kgs.   Sudan, amarket with 50 million people is also an important market and currently absorbs almost half a million MT of oils and fats.  The market potentials in this area has not been fully maximized and can be further expanded.

Oils and Fats Consumption

Source: Oilworld

These markets have always been dependent on imports of oils and fats to supplement the domestic requirement due to limited agricultural land to grow oilseed.  While the consumption is growing in tandem with population growth, imports has always been influenced by their financial constraint.

Over the last five years imports of oils and fats are trending upwards and palm oil accounted for the bulk of  vegetable oils imported with a market share of more than 80%.  The remaining balance is made up of sunflower oil (17%), soybean oil (1%) and corn (1%).

Oils and Fats Imports

Source: Oilworld

Out of the total oils and fats market size, Malaysian palm oil export into the market supplement 50% of the requirements.

Malaysian Palm Oil Export to Selected North Africa Markets

COUNTRY 2014 2015 2016 2017 2018 2019
Somalia 55,765 61,306 80,381 82,322 77,929 93,456
Ethiopia 51,435 94,050 136,232 173,591 148,647 64,757
Djibouti 29,266 54,764 80,213 137,995 216,190 52,316
Sudan 3,801 5,377 3,422 14,647 4,359 7,457
Eritrea 1,820 4,816 7,512 9,563 5,940 4,936
             
Grand Total 542,399 498,724 527,464 666,379 571,911 346,182

Source: MPOB

Ethiopia has emerged as an important Malaysian palm oil export destination in  the Northeast Africa market and the country relies on  Djibouti to transport  Malaysian palm oil into the market since it is a landlocked country.  Djibouti handles almost 90% of the import of Malaysian palm oil by Ethiopia.

Somaliland / Somalia are also  important  Malaysian palm oil export destination. Most palmoil came into Somaliland through Beira Ports which has now served as an entry into Ethiopia market.  For Somalia, Mogadishu ports serve as entry point for the market.

Port Facilities

At the moment, the surrounding ports are capitalizing on the Ethiopian, Sudan and Somaliland/Somalia markets.   There are six major ports in the region namely Port of Sudan, Sudan Masawwa and Assab Ports in Eritrea, Berbera, Somaliland and Mogadishu, Somalia.

The center of this maritime trade is Ethiopia and in fact, Ethiopia has some stake in Djibouti Ports, Berbera and Port of Sudan.  The proximity of Eritrean Ports to Ethiopia has also increased the chances of diverting some Ethiopian trade to Eritrea ports.

Port of Djibouti

Currently, Djibouti is the main entry port of palm oil into Ethiopia and the country relies on Port of Djibouti to handle about 95 percent of its foreign trade turnover; and 70 percent of the cargo at the port is of Ethiopia trade.

The port handles an estimated seven million MT freight annually, out of which 20 percent is bulk food.  However, due to other competing demands, vessels offload food commodities at most at four berths at any one time. In addition the port does not always operate at  full capacity and discharge shipments due to different technical and logistic problems that are directly related to the port itself (discharging difficulties) and those related to logistics capacities in Ethiopia.

Ports Facilities in the North Eastern Africa

Port of Doraleh was inaugurated in 2017 with a total annual capacity of 8,779,000 MT per year. It is an extension of the Port of Djibouti. The multipurpose port has terminals for handling oil, bulk cargo, and containers. It is owned and operated by DP World and China Merchants Holdings. The Port has a total of 15 berths over a 4km-long quay. All the terminals have direct access to the Addis Ababa–Djibouti Railway  which was inaugurated in 2017 and  provides landlocked Ethiopia with railroad access to the sea port. The capacity of the port includes 20-hectare area for Bulk Terminal and 57 hectares for General Cargo Yard. The mass terminal of the Doraleh port can handle 2 million MT of cargo per year. It also offers space to store 100,000 MT of fertilizer, grains and warehouses for other goods, as well as handle 6 million MT of cargo per year.

Berbera Port, Somaliland

There are four major operational ports in Somalia, i.e. Mogadishu, Berbera, Kismayo and Bossaso. Three of these are deep water ports, and all four operate throughout the year. Mogadishu and Berbera are two active ports while very little activities are registered at Kismayo.  Despite the vagaries of war and time, the infrastructure at the major ports appears to be in reasonably good condition but operating performance is poor with low handling speeds.

In 2015, Ethiopia started using Berbera Port based on an agreement reached between the two countries. This port serves Somaliland and the eastern portions of Ethiopia. The port has an annual cargo capacity of 1.2 million MT and it possesses nominal capacity to accommodate up to four bulk grain ships of 25,000 MT at a time. However, realizing this potential is limited by its limited discharge capacity, which has a bagging capacity of only 1,200MT per day. Absence of other quayside bulk offloading equipment is another constraint. Consequently, the port practically handles one 25,000MT bulk grain ship at a time and for about a month. Nevertheless, this port is often used by World Food Program (WFP) and government of Ethiopia with the  latter havingplans to increase its use of the port.

Port of Sudan

Port Sudan has a capacity of handling 9 million MT of bulk cargo per year and  is a well-equipped facility. It is divided into three areas: The North Port with 15 berths handles bulk cargoes including grain, cement, oil, and molasses. The South Port with four berths handles bulk grain, containers, and oil products, and a roll-on-roll-off berth. The third one (Green Harbour) has  four berths and handles dry bulk (fertilizer and grains), seeds, and containers. These areas also have alongside storage and discharge facilities. Ethiopia started using Port Sudan for the importof 50,000MT of fertilizer in early 2015. Since then, it has been increasingly used for importing bulk  chemical fertilizers and some other commodities including petroleum.

Eritrea Ports

Eritrea has ended its confrontation with Ethiopia and seized the opportunities to capitalize on the growing Ethiopian economy.  The peace agreement between the two countries will be an added advantage to Ethiopia as Eritrea will be an important outlet for the development of Northern part of Ethiopia through Massawa and Assab Ports as well as Port of Sudan.

The Massawa port is the primary port for import of cargoes for the Eritrean market. The port has exclusive history, being based around a natural and protected series of bays with safe anchorages and good communication to the Eritrean hinterland. The current port was founded during 19th century and was initially developed by the Italian and British during colonial times. The port is currently under the management and control of the Eritrea government, and is undergoing major rehabilitation and restoration of facilities and services.

Despite the initiative, it is unlikely that Eritrea will become the centre of maritime commerce unless their internal conflict is resolved and a proper infrastructure is developed. 

Potentials

The region has assumed its importance due to its strategic location which attracted huge investment from Gulf States investors especially UAE, as well as Turkey, USA, and China.  At the moment, Djibouti ports has the most advanced infrastructure which could be expanded and further developed to connect with Dar Es Salaam, Maputo or in fact as far as Durban Ports. 

China, the USA, France, Japan and Saudi Arabia have established its military based in Djibouti presumably for piracy control and protection especially around the Somali coast.

Despite several ports along the coast of Sudan, Eritrea, Djibouti, Somaliland and Somalia, the potential of palm oil going into the area is heavily dependent on the overall economic progress of the region. The development of ports infrastructure helps the country to progress through the incoming trade and investment especially by the foreign investors.

The volume of Malaysian palm oil going into the market does not grow significantly over the last five years and the volume was very much influenced by the economic situation.  In order to strengthen Malaysian palm oil position, Malaysian companies should consider a joint investment in the area which would give advantage insofar as access into the hinterlands.

Prepared by: Fatimah Zaharah

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