Ethiopia and Somalia are Scripting History With a Joint Infrastructure Project

• Somalia will set up a new a deep-water port on its northern coast the following month, with a road link establishing a new trade route between the city of Gara’ad and the southern region of Ethiopia.
  
• South Sudan is now eyeing to use Djibouti Port for imports and exports from the outside world through Ethiopia.

Foreign direct investment (FDI) in Africa has largely been devoted to the extraction and export of natural resources for more than a century. The tendency has reversed in recent years after a shift in the tide since the late 2000s. Market participants now tour Africa more routinely for its people along with its physical assets because of the potential they hold.

Petroleum and mining currently make up a smaller portion of long-term capital inflows as investors devote more of their emphasis in the telecommunications, retail, livestock, and services sectors.

This optimistic diversification and transformation is brought about by the continent’s expanding democracy and stability. Less people fall under the category of being extremely destitute, and democratic institutions are more well-established and respected. Although these socio-political developments are still in their nascency and are volatile, they offer a glimpse of the promising future that Africans will cultivate.

An Uneven Growth Model:

Despite the continent’s unparalleled rate of growth in the recent years, development is still uneven and opulence is still mostly confined to a small number of regions. For instance, coastal nations with integrated seaport hubs like Ghana, Cote d’Ivoire, and Senegal have GDP per capita that is about twice that of other nations. 17 of the 54 nations in Africa are landlocked, and as a result of their barriers to international trade and high transportation costs, these nations have poor levels of international competitiveness.

You see, due to their isolation from lucrative segments, reliance on coastal neighbours for access to the ocean, and lack of other viable transportation options, landlocked economies confront a range of economic challenges that render their infrastructure weak and susceptible to the policies of their neighbours.

When regarded from a larger perspective of the costs and benefits associated in other markets, the unilateral blockage policy to ocean access imposed on the landlocked countries by the coastal economies may not be optimum. Many reaearchers have argued that it is crucial for the landlocked economy to negotiate the domestic policies with its coastal neighbours in order to persuade them to agree to a lower degree of obstruction, making the landlocked economy less vulnerable to the caprices of its neighbours’ economies. Recently, it has been seen that several African countries without coastlines are embracing this growth model.

The latest case of Somalia and Ethiopia:

According to recent reports, Somalia will set up a new a deep-water port on its northern coast the following month, with a road link establishing a new trade route between the city of Gara’ad and the southern region of Ethiopia.

The development is part of a $531 million investment plan aimed at boosting the export of livestock, fish, minerals and agricultural commodities, according to Saed Faadi, the chief executive officer of Wadagsan LLC, the developer.

“The port will also provide easy access to food imports from the outside world,” Faadi said in an interview. “This will allow food to be less expensive and enhance food security in the region, which is plagued by droughts and famine,” he further added.

A win-win situation:

Bilateral cooperation between a landlocked nation and its coastal neighbour affords the chance for both nations to reform their internal policies in concert and thereby enhancing their own economies.

Landlocked nations’ advancements will also assist their seafaring neighbours through increasing trade and freight. For instance, when Ethiopia’s expanding potential is coupled with a trading route through coastal Somalia, there are tremendous opportunities for both the Horn of Africa countries.

You see, Ethiopia became landlocked and reliant on its neighbours, especially Djibouti, for access to global markets when Eritrea separated from Ethiopia in 1993. Ethiopia’s ambition to become the undisputed regional power in the Horn of Africa has been impeded by this dependence. Thus, having access to another port improves its strategic economic interests and security.

The infrastructure project is also very important to Somalia since it aims to support the country’s aspirations for increased international recognition, economic growth, and fulfilment of public expectations for better living conditions. For instance, in terms of the economy, investments will be made in Somalia’s transportation, hospitality, and fishing sectors.

The aforementioned case study makes it very evident that it is crucial to recognise the importance of economic interdependence between landlocked nations and their coastal neighbours. A collaborative atmosphere for development has rewards outside of the intended beneficiaries. African countries would advance more expeditiously as a whole and enter a new era of self-sufficiency if there is more cooperation between the coastal and landlocked countries of the continent. This becomes especially important in light of the global protectionism that COVID-19 has induced.

Furthermore, Africa’s aspirations for strategic autonomy would receive additional impetus if its reliance on Western powers were reduced. Make no mistake, if a continent with abundant natural resources like Africa makes rational choices, it can soon become a significant participant in the geopolitical arena.

South Sudan just solved its coastline problem with Ethiopia’s and Djibouti’s support

The Port of Mombasa in Kenya is one of the most important international seaports in the Eastern coast in Africa and the biggest port in East Africa.

The Mombasa port can be considered the gateway to East and Central Africa and is extremely crucial to serving neighboring landlocked countries including Uganda, Rwanda, South Sudan, and the Democratic Republic of Congo.

South Sudan has been heavily dependent on Mombasa as it is the main route for all consignments destined to the landlocked country and imports nearly all of its cargo through Kenya’s Mombasa port.

Increasing traffic at Mombasa port

According to reports, the Mombasa port has been almost running at its full capacity unable to meet demands which are leading to congestion. Especially after the challenges presented by Covid-19, when movement of goods from the port became difficult because of protocols developed by health authorities, the situation had worsened.

As the world has moved past the worst part of the pandemic, many countries are scrambling for Mombasa port as trade resumes.

To escape the increasing traffic at Mombasa, South Sudan has bought a piece of land in Djibouti for the construction of a harbour in its latest effort to find an alternative to the port of Mombasa.

Win-win for South Sudan, Djibouti and Ethiopia

Djibouti is strategically of paramount importance for South Sudan as it also helps it gain access to Suez Canal allowing it trade more smoothly with Europe as compared to Mombasa. The 193 km Suez Canal is the fastest and most direct maritime trade link with Europe and is critical for global trade.

Djibouti Port is located at the Southern entrance to the Red Sea, at the intersection of major international shipping lines connecting Asia, Africa and Europe. Thus it will immensely benefit South Sudan which is currently heavily reliant on Mombasa port.

South Sudan is now eyeing to use Djibouti Port for imports and exports from the outside world through Ethiopia. This will also strengthen the trade ties between the three countries. Further, it will be easier and cheaper to import as well as export goods through Djibouti Port as it is near to South Sudan compared to Mombasa Port in Kenya. Moreover, with this South Sudan can avoid crossing the territorial waters of Somalia overcoming the fear of Somali pirates.

Such bilateral cooperation between a landlocked nation and its coastal neighbour can result in tremendous opportunities for enhancing their own economies and that of the coastal countries by giving access to their harbours to the landlocked countries and can gradually reduce dependence on Western powers and become self-sufficient which can prove to be critical in Africa’s growth prospects in years to come.

It has been observed that this model is also being followed by many countries, Somalia and Ethiopia being two of them.

According to recent reports, Somalia too will set up a new a deep-water port on its northern coast with a road link establishing a new trade route between the city of Gara’ad and the southern region of Ethiopia.

Now, Ethiopia is also set to gain from both the ports in Djibouti and Somalia once it gives free passage to South Sudan for transportation of goods. Building roads linking the three countries for ease of transportation of goods will give a further impetus to Africa’s economy and infrastructure which will surely help in unlocking the tremendous trade potential of the African continent.

Source TFI Global