Ethiopia Eyes Role in DP World-Managed Port in Somaliland

ADDIS ABABA (Capital Markets in Africa) – Ethiopia is in talks to acquire shares in a joint venture involving DP World Ltd. that will manage a port in northern Somalia, a Somali official said, a move that could give the fast-growing yet landlocked Horn of Africa economy its first stake in foreign docks.

Somaliland, a semi-autonomous territory that aspires to statehood, has agreed “in principle” to give Ethiopia a 19 percent share in the venture administering Berbera port, according to Foreign Minister Saad Ali Shire. Somaliland’s government and Dubai-based DP World, which has a 30-year concession to manage and develop the facility, will be the majority shareholders in Somaliland-registered DPW Berbera, he said in an interview.

If Ethiopia takes its share, Somaliland will hold 30 percent of the company, while DP World will have 51 percent, according to Shire. Berbera sits on the Gulf of Aden, a waterway that leads to the Red Sea and Suez Canal, and is also where Somaliland says the United Arab Emirates is leasing a military airport that may be expanded into a naval facility.

Ethiopia, Africa’s second-most populous nation, is pitching itself as an export-oriented manufacturing hub, with the International Monetary Fund forecasting economic growth of 7.5 percent this year, the fastest pace on the continent after Ivory Coast. Ethiopia’s transport and information ministers and Foreign Ministry spokesman didn’t respond to phone calls and text messages seeking comment on the Berbera share offer.

Share Structure
Shire said the venture is presently 65 percent owned by DP World, with Somaliland holding the rest, and nothing legally binding has yet been agreed with Ethiopia. DP World, which operates 78 terminals in 40 countries, announced it would hold 65 percent in the venture in September. It won’t comment on the share structure “for the time being,” spokesman Michael Vertigans said by email.

Shire said the Berbera facility will have a container terminal and be mainly used for container traffic as a transit hub for landlocked nations, particularly Ethiopia. Currently more than 90 percent of Ethiopia’s trade passes through another Red Sea neighbor, Djibouti, according to that country’s ports authority.

A new $4.2-billion, Chinese-built railway between Ethiopia and Djibouti is set to cut cargo-journey times to 12 hours, from three days by road. DP World has a 50-year concession to operate a container terminal in Djibouti, which the government unsuccessfully sought the rescission of at a London arbitration court, Dubai said in February.

Industrial Policy
Ethiopia’s industrial policy strategy sees the railway line transporting 7.5 million metric tons of cargo per year by 2020, and says one of the nation’s “major accomplishments” was its purchase of cargo ships that have enhanced the capacity of its maritime transport services. Somaliland is planning a 260-kilometer (162-mile) road from Berbera port to the Ethiopian border, according to Shire.

“A shareholding doesn’t necessarily mean recognition of Somaliland as a state,” said Mogus Tekle Michael, deputy director of the Ethiopian Foreign Relations Strategic Studies Institute and a former Foreign Ministry spokesman. Ethiopia would be “more than willing to grab any opportunity” to play a role in developing any port in the region, including Berbera, he said.

The planned U.A.E. military base in the Berbera area will “add value on the security side” to the use of Berbera port, Shire said. The use of Berbera, Somaliland’s only major harbor, to import materials for the construction of the U.A.E. facility is “just common sense,” he said. The U.A.E. hasn’t publicly commented on any of the plans for a base detailed by Shire.

DP World isn’t involved “in any way” with the base, “which is a matter for both governments,” Vertigans said.

Source: Bloomberg Business News