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Djibouti shakes off the dust
African Business / February 2001

By Larry Luxner

DJIBOUTI -- Colorful, brightly painted wooden dhows and huge Iranian freighters jostle for berthing space in the main port of this tiny African desert nation that, until recently, seemed forgotten by time and ignored by much of the outside world.

But now, the Port of Djibouti hopes to make a name for itself, not only as landlocked Ethiopia's principal lifeline to the Indian Ocean, but also as a transshipment hub for all of East Africa.

Last June, the government of Djibouti, a former French colony that won independence in 1977, signed an agreement with Dubai Ports International in the United Arab Emirates. Under the 20-year concession, DPI will boost efficiency and vastly expand container-handling operations at the port, which is situated at the entrance to the Red Sea.

There was no competitive bidding, and terms of the deal are unclear. But Djibouti's president, Ismail Omar Guelleh, said in an interview that his government is investing $50 million in the project, and that DPI is getting only $400,000 a year for its role in managing the port.

"They want to help us," said Guelleh, noting that DPI already manages the ports of Beirut (Lebanon); Jedda (Saudi Arabia), and Jebel Ali in the United Arab Emirates.

Luc Deruyver, director-general of the Port of Djibouti, politely refused to discuss the DPI arrangement or say how much revenue the port generated last year, insisting that such details were "strictly confidential." He did, however, tell African Business that since his Dubai-based management team took over six months ago, "we have almost doubled the performance of the gantry cranes, jumping from 10.2 container moves an hour to 19.7. We hope to be at 23 by the beginning of 2001."

The Port of Djibouti, which covers 80 hectares, boasts four post-Panamax gantry cranes: two manufactured by China's ZMPC, and two made by Italy's Reggiane. The brightly painted blue-and-orange cranes are about the only signs of modernity in this otherwise impoverished, dusty port city, home to most of Djibouti's 650,000 French, Arabic and Somali-speaking inhabitants.

Deruyver, originally from Belgium, said that in 1999, the government-owned port handled 126,000 twenty-foot equivalents (TEUs) of cargo. Of that total, Ethiopia accounted for 95,000 TEUs and Djibouti itself for another 10,000. The remaining 21,000 TEUs represented transshipments to East Africa -- mainly Dar es Salaam and Mombassa.

"The ships are working twice as fast as they used to, so they're in port only half the time," said Deruyver, adding that "this year, we will improve our performance by eliminating dead time and improving logistical support on the ground, pre-planning of the yard and inventories. We hope to become a major transshipment port for East Africa. By improving our performance, other ports will have to start competing against Djibouti."

Since May 1998, when a fierce border war erupted between African neighbors Ethiopia and Eritrea, the Eritrean ports of Assab and Massawa have been off-limits to Ethiopian importers and exporters. As a result, Ethiopia -- a nation of 60 million people -- has become totally dependent on Djibouti for everything from weapons to wheat.

Abdulrezak Sherif, chairman of the Ethiopian Coffee Exporters Association, says 100% of his country's coffee is exported through Djibouti. Upon arriving by truck, coffee sacks are loaded onto vessels bound for Germany, Japan, Saudi Arabia and other export markets.

"Since we're using Djibouti, we've seen a lot of improvement," said Sherif. "Everything is going smoothly. Before, we used Assab and we had a lot of problems -- shortages of cranes, delays of shipments and theft."

Adds a diplomat here who asked not to be identified: "When they closed the Port of Assab because of the war, Djibouti really profited. It's a lot more efficient than any place else around here."

The Port of Djibouti is working 24 hours a day to handle the increased business, which in 2000 consisted of roughly two million tons of bulk cargo, mainly food shipments;1.6 million tons of containerized cargo; 1.5 million tons of oil products, and 150,000 tons of miscellaneous goods -- everything from soap to steel to automobiles.

Amer Daoudi, regional logistics coordinator for the United Nations' World Food Programme, said that in 2000, his agency supervised the shipment of 1.2 million tons of food aid to Ethiopia, which is in the midst of a three-year drought. A similar amount is expected in 2001.

"The Port of Djibouti reacted well to the diversion of traffic from Assab and Massawa. It has proven to be a viable option," said Daoudi, whose agency recently spent $2.4 million to build a new movable warehouse in order to avoid congestion and facilitate the smooth flow of cargo.

About 60% of all food aid destined for Ethiopia comes from the United States, where Midwest grain is loaded onto barges, floated down the Mississippi River to New Orleans, and then shipped to Djibouti. From there, the grain is loaded onto trucks for the grueling, 10-hour road trip to Addis Ababa, the Ethiopian capital.

In mid-December, Ethiopia and Eritrea signed a long-awaited peace treaty, paving the way for renewed use of Eritrean ports by Ethiopia. But President Guelleh says that Djibouti has already carved out a market niche for itself that's unlikely to disappear with the end of hostilities.

"Before 1998, the port handled only 7% of Ethiopian imports and exports. But the port has developed very quickly because of transshipment activities," said the president. "So even if Ethiopian traffic goes back to Assab someday, the port will continue to develop anyway."

According to Deruyver, Djibouti's biggest single customer is Mediterranean Shipping Co. Ltd. In second place is Pacific International Lines of Singapore, followed by the Beacon Consortium, (which includes P&O Nedlloyd, Andrew Weir and others) and finally by Ethiopian Shipping Lines.

Despite Djibouti's membership in the Arab League, blue-and-white containers belonging to Zim Israel Navigation Ltd. can also be seen at the port, though not as frequently as in years past.

"Zim Lines used to have a larger presence here, but for performance reasons they now bypass Djibouti and use Mombassa," said Deruyver. "There is no political reason for this as far as I can see."

The Port of Djibouti, which ranks 104th in the world in terms of shipping volume, provides work to 1,100 people directly and another 2,000 people indirectly, making it Djibouti's biggest single largest employer. Some of them are civil servants, others working under contract for DPI.

Walking around the docks, it's easy to spot workers lounging around, smoking cigarettes and not appearing to do much work. One official who asked not to be named said the port payroll includes stevedores who are blind, crippled or otherwise not employable.

"It's a fact that Djibouti is in the midst of a severe economic crisis. There are no natural resources here except for the salt industry," says Deruyver, who's under pressure not to fire unneeded laborers in a country already suffering from 35% unemployment. "We are trying to better utilize our workers. We're trying to avoid any social conflicts."

One thing observers won't see at the port are dockworkers with their mouths full of qat, a narcotic-like plant whose leaves are chewed by virtually the entire Djiboutian population. One of the first things Deruyver did upon assuming his new job was prohibit qat-chewing.

Says the port manager: "Any form of substance that diverts you from your job cuts down on efficiency."

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