Issue No. 410

Published 22 Jun 2022

The success story of Berbera port and how it could realign regional relations

Published on 22 Jun 2022 23:39 min

The success story of Berbera port and how it could realign regional relations

The port of Berbera will soon be the second-largest port in the Red Sea-Western Indian Ocean region, after Mombasa. With the first phase of its expansion completed last year and the second phase underway, Berbera port is expected to transform commercial trading patterns throughout the Horn. 

An initial $442 million investment deal to renovate and expand the port, and construct associated port infrastructure, was signed in 2017 between the UAE parastatal DP World and the government of Somaliland. DP World would own a 51% stake in the port, while Somaliland and Ethiopia would have 30% and 19%, respectively. Work began in 2018, with DP World taking over management of the port. Just five years later, the port’s container capacity has increased from 150,000 Twenty Foot Equivalent Units (TEUs) to 500,000 TEUs annually, thanks to a new container terminal with a quay of 400m and three ship-toshore (STS) gantry cranes. Berbera is now ranked 184th on the World Bank’s port efficiency rating index, meaning it is one of the most efficient ports on the African continent.

Once the second phase – which involves extending the quay from 400 to 1,000m and installing a further seven STS gantry cranes – is complete, the port’s container capacity will increase four-fold (to two million TEUs a year) and it will be able to handle multiple large container vessels at the same time. Berbera will then be larger than the port of Djibouti.

Besides the port infrastructure, DP World is also developing the Berbera Economic Zone (BEZ), modelled on the UAE’s Jebel Ali Free Zone in Dubai. The BEZ is envisioned to host a range of industries, including warehousing, logistics, traders, manufacturers, and other related sectors. And, though not funded by DP World, there is also the Berbera Corridor road upgrade project, funded by the Abu Dhabi Fund for Development (ADFD) and the UK’s Department for International Development (DFID), and the Hargeisa Bypass Road, funded by UK Aid. The rehabilitation and expansion of the existing 270km road will facilitate the transport of cargo between Berbera and Ethiopia via the border crossing at Tog Wajaale.

With a deep draft of 17m, Berbera port will be capable of handling the world’s largest ships; a critical feature, because the initial investment was mainly intended to offer landlocked Ethiopia – Africa’s second-most populous country – an alternative to the port of Djibouti. Ethiopia relies almost exclusively on Djibouti for port access: 70% of the cargo at the port is shipped to or from Ethiopia, accounting for over 95% of Ethiopia’s foreign tradeHowever, Ethiopia’s precipitous economic decline – driven by global factors combined with the disastrous war in Tigray – as well as tensions with neighbouring countries have shaken up the initial Berbera port agreement. According to a statement made by the  Somaliland government earlier this month, Ethiopia forfeited its 19% stake due to its failure to remit its financial contribution for the construction of the port. Last week, Somaliland’s finance minister, Saad Ali Shire, told the Puntland Post, “Ethiopia failed to meet the conditions needs to acquire the stakes before the deadline. So it has no stake now, but it needs to note that ownership does not matter.” He added, “Under the Berbera Port Agreement, DP World owns 65% shares, Somaliland Administration has 35%.” According to Saad, there had never been a signed agreement regarding the shares, only a verbal agreement that had been made in the UAE. 

The implications of Ethiopia’s loss of its stake and, by implication, its exit from the deal, remain unclear. The Ethiopian Government has not yet officially responded to thisdevelopment. Because the details of the deal reached between Ethiopia, Somaliland, and DP World were never made public, the lack of transparency is likely to make the issue even more contentious and could strain diplomatic relations the two states.

The Brenthurst Foundation, a South African think-tank that seeks ways to fund African development and improve African competitiveness, held a two-day conference on security and state-building in Hargeisa earlier this month. While lauding Berbera port’s efficiency and the success of the project despite the various challenges it faced, it noted that many barriers to foreign investment remain: Somaliland is not recognised as an independent country, its currency is not convertible, its banking system is not part of the SWIFT network, and its telephone system does not have an international dialling code. Yet, by partnering with an international operator like DP World, Somaliland was able to unlock Berbera’s potential.

The success of Berbera port has also affected dynamics and relations across the Somali political spectrum. In 2018, the FGS rejected the agreement between Somaliland and DP world and banned DP World from operating in the country, stating that “DP World openly violated the independence and unity of Somalia.” At the time, DP World was already managing the port of Bosaaso, through its P&O Ports subsidiary, which in 2017 had signed a 30-year concession with the government of Puntland worth $336 million. From the FGS perspective, P&O Ports’ continued presence in Bosaaso was illegal and became one of several sources of tension between Puntland and the FGS.

On Monday, President Hassan Sheikh Mohamud arrived in the UAE and reportedly one of the main agenda items will be the status of DP World in Somalia. In 2018, Somalia’s then foreign minister, Ahmed Isse Awad, told Reuters that he urged the UAE to respect Somalia’s sovereignty: “We are asking DP World to reconsider these agreements, particularly the one in Berbera port since Somaliland is claiming to be a state independent from Somalia.” It is unclear whether Somalia’s position on the matter has changed, though circumstances certainly have. Now, Somalia is seeking Emirati financial assistance, in part to rebalance its foreign policy away from dependence on Qatar, and it may be willing to make concessions. Meanwhile, DP World’s independent dealings with Somaliland and Puntland are reportedly hampering the company’s plans to take over the management of other Somali ports, such as the port of Kismayo. 

Whatever deal emerges as a result of HSM’s visit to Abu Dhabi will indicate how his administration plans to handle a host of thorny issues: adopting a more neutral policy of international relations while, at the same time, finding alternatives to Qatari financial support; negotiating the status of Somaliland; and managing relations with Federal Member States (FMSs), especially in terms resource sharing and the rights of the FMSs to conduct foreign policy.

The Somali Wire Team

 

To continue reading, create a free account or log in.

Gain unlimited access to all our Editorials. Unlock Full Access to Our Expert Editorials — Trusted Insights, Unlimited Reading.

Create your Sahan account Login

Unlock lifetime access to all our Premium editorial content

You may also be interested in

Issue No. 127
Total War in the Horn of Africa
The Horn Edition

'Give Peace a Chance' was the title of a 1969 single written by John Lennon, recorded during his famous honeymoon 'bed-in' with Yoko Ono. Capturing the counterculture sentiments of the time, it was adopted as an anthem of the anti-Vietnam War movement in the following decade. Thirty years later, a provocative inversion of the title-- 'Give War a Chance'-- was adopted in a well-known Foreign Affairs article by Edward Luttwak in 1999, in which he argued that humanitarian interventions or premature negotiations can freeze conflict, resulting in endless, recurring war. Luttwak contended that war has an internal logic, and if allowed to 'run its course', can bring about a more durable peace.


27:16 min read 30 Apr
Issue No. 954
The Malian Mirror
The Somali Wire

A foreign-backed president, a besieged capital city, and a jihadist movement affiliated with Al-Qaeda-- this time not Somalia, but Mali. Late last week, Jama'at Nusrat al-Islam wal-Muslimin (JNIM), the transnational Salafist-jihadist group in Mali, stormed across much of the country's north, as well as entering Bakamo and assassinating the defence minister. The coordinated offensive-- in conjunction with the Tuareg separatist movement, the Azawad Liberation Front (ALF)-- has left the military junta reeling, and forced the withdrawal of their Russian allies from a number of strategic towns.


10:18 min read 29 Apr
Issue No. 329
Washington eyes Asmara
The Ethiopian Cable

Last week, a bombshell Wall Street Journal article revealed that Washington was exploring a reset in relations with Eritrea, with US envoy for Africa Massad Boulos having met privately with senior regime officials in Egypt. Any normalisation of ties now appears to be on ice, with the reaction to Boulos's meetings — facilitated by Egypt — having been met with short shrift. But the episode speaks to broader issues about American foreign policy in the Horn and the accelerating reconfiguration of the Red Sea political order, which will not go away simply because this particular overture may have stalled.


0 min read 28 Apr
Issue No. 953
A Coronation in Mogadishu – How Clans Stormed the Citadel
The Somali Wire

Last weekend, the Murusade, a major sub-clan of the powerful Hawiye clan family, staged one of the largest and most colourful coronations of a clan chief in recent memory in Mogadishu. The caleemasarka (enthronement) of Ugaas Abdirizaq Ugaas Abdullahi Ugaas Haashi, the new Ugaas or sultan of the Murusade, was attended by thousands of delegates from all parts of Somalia. Conducted next to the imposing and magnificent Ottomanesque Ali Jim'ale Mosque, on the Muslim day of rest, Friday, the occasion blended the Islamic, the regal and the customary; a restatement of an ancient tradition very much alive and vibrant.


21:22 min read 27 Apr
Issue No. 952
Fishy Business: IUU Fishing in Somalia
The Somali Wire

With all eyes trained on the Strait of Hormuz blockades and their geopolitical convulsions, discussions and concerns, too, have risen about the perils of other globalised chokepoints, not least the Bab al-Mandab. The threats to the stability of the Bab al-Mandab, the Gulf of Aden, and the Red Sea may not arise principally from the escalatory logic that the US, Iran, and Israel have been locked in, but the threats posed from collapse and contested sovereignty offer little relief. Off Somalia's northern coastline in particular, it is transnational criminal networks — expressed in smuggling, piracy, and, less visibly but no less consequentially, illegal, unreported, and unregulated (IUU) fishing — that define the character of offshore insecurity. It is this last phenomenon that provides the foundation on which much of Somalia's maritime disorder is built, and which remains the most consistently neglected.


21:07 min read 24 Apr
Issue No. 126
Russia in the Horn: Opportunism in an Age of Disorder
The Horn Edition

In the past months, a number of unsettling images and videos have emerged from the Russian frontlines in the Ukraine war. Within the horrors of the grinding "kill zone," where kamikaze drones strafe the sky for any signs of movement, yet another concerning dimension has emerged—the use of African recruits by Moscow in the conflict, often under false pretences. Particularly drawn from Kenya, many reportedly believed they were signing contracts to work as drivers or security guards, only to be shipped to the front lines upon arrival. Such activities are illustrative of several issues, including Russia's relationship with countries in the Horn of Africa, one shaped more by opportunistic realpolitik than genuine partnership.


28:23 min read 23 Apr
Issue No. 951
Federal Overreach in Baidoa Faces Pushback
The Somali Wire

Villa Somalia's triumph in Baidoa may yet turn to ashes. Since the ousting of wary friend-turned-foe, Abdiaziz Laftagareen, in late March, the federal government has ploughed ahead with preparations for state- and district-level elections in South West. Nominally scheduled for next week, President Hassan Sheikh Mohamud has chosen to reward his stalwart parliamentary ally, Aden Madoobe from the Rahanweyne/Hadaamo, with the regional presidency after some vacillation, naming him the sole Justice and Solidarity Party (JSP) candidate


0 min read 22 Apr
Issue No. 328
The TPLF versus the TIA-- again
The Ethiopian Cable

Another showdown over Tigray's political architecture is unfolding, with the future of the Tigray Interim Administration (TIA) once again at stake. For much of this year, fears of renewed war have loomed over Ethiopia's northernmost region, with the federal government mobilising substantial forces to the edges of Tigray.


19:44 min read 21 Apr
Issue No. 950
A City Without Its People
The Somali Wire

In Act III, Scene I of William Shakespeare's tragedy Coriolanus, the tribune Sicinius addresses the gathered representatives and, rejecting the disdain the titular character displays towards plebeians, defends them, stating, "What is the city but the people?" Capturing the struggle between the elite and the masses of ancient Rome, the line has remained politically resonant for centuries--emphasising that a city, democracy, and state rely on the people, not just their leader. Or perhaps, not just its buildings. It is a lesson missed by Villa Somalia, though, with the twilight weeks of President Hassan Sheikh Mohamud's term in office — at least, constitutionally — dominated by the government's twin campaigns in the capital: land clearances and the militarisation of Mogadishu.


20:32 min read 20 Apr
Scroll