Significance of the new Berbera port to global Britain

January 23, 2020

Significance of the new Berbera port to
global Britain
By Adil Dirie
For centuries, Berbera has been a vital seaport for traders
traveling through the Gulf of Aden, which in the Middle
Ages was known as the Gulf of Berbera. Traders would
use this port to access the wider Horn and central Africa.
As early as the 25th century bc, the ancient Egyptians
were travelling this route and trading with people at the
Land of Punt to purchase frankincense and myrrh.
In the 15th century ad, China was one of the most
advanced naval countries in the world and built ships that
were 10 times larger than its European rivals. The great
Chinese Muslim explorer Zheng-He travelled extensively
around east Africa, including a voyage to the Somali coast,
where in the year 1415 he developed diplomatic relations
with the Ajuran Empire. During that voyage, he was given
a giraffe, which by some accounts symbolised the first
diplomatic agreement between China and an African
nation. China is once again a new superpower in the 21st
century and spearheading developmental projects in
Africa at a scale never seen before.
A comparison of Zheng-He’s flagship (Baochuan) with
Christopher Columbus’s Santa Maria to show the great
difference in size between the two. Courtesy of The Jan Adkins
Studio.
One of the primary motivations of Boris Johnson’s global
Britain is to counteract China’s new global dominance and
to make direct trade deals using the new freedom gained
from Brexit. In this new foreign policy, Johnson believes
that the UK will be unshackled from the EU-centric trade
and make new deals with far-flung countries across the
world to become a truly independent global nation.
To understand why global Britain is significant to Berbera,
we first need to understand what has been happening in
Berbera’s recent history.
Berbera’s first modern port was built by the Russians in
1969, with further investments by the USA in the early
1980s, when it became Somalia’s main exports port and a
vital part of the economy, which to this day is still
dominated by livestock trade with Saudi Arabia.
In 2016, a break-through deal was brokered between the
Somaliland government, DP World (an Emirati global port
terminals operator) and the Ethiopian government. The
deal was to rehabilitate the port of Berbera at an
estimated cost of $442 million USD, which is significant by
Somaliland standards, but the final cost is likely to be
much higher, as comparable ports cost a lot more in other
parts of the world. Alongside the new port, DP World
plans to set up an economic ‘free zone’ in Berbera and
optimise trade though zero taxes.
This newly formed company was widely reported to be
owned by the three parties, with DP World retaining the
lion’s share of the profits at 51%, whereas Somaliland will
take 30% and the remaining 19% is to be given to
Ethiopia. However, according to the Berbera ports
authority’s general manager, Mr Said Hassan Abdullahi, in
an interview with the Financial Times, Ethiopia has not yet
signed the full agreement, possibly due to their focus on
fighting a civil war with the Tigray rebels.
Berbera is a delicate matter for the new Ethiopia under
prime minister Abiy Ahmed. On the one hand, it needs to
seek new ports as its economy grows and to stop relying
too much on Djibouti, which currently handles about 90%
of Ethiopia’s imports and exports. The Berbera port will
bring it much needed relief from the risks associated with
a single corridor. On the other hand, Abiy Ahmed has
struck an alliance with President Mohamed Farmajo of
Somalia and is wary not to make major deals with
Somaliland behind Farmajo’s back. The current civil war in
Ethiopia has further complicated the Berbera port deal for
A tourist boat with the new port being built in the background.
Ethiopia, as the Tigray rebels have threatened to seek
independence like Somaliland, which will likely influence
Abiy Ahmed’s support for a new independent nation in
the horn.
When the deal was first announced in Somaliland, there
was a lot of domestic debate about whether the 19%
stake was a good deal for the country. There were even
complaints from disgruntled opposition parliamentarians
requesting more transparency, as the actual contract
signed with DP World was not shared with parliament.
As an internationally unrecognised country and lacking
adequate business regulations, there will always be
concerns regarding corruption, especially when it comes
to business deals between the government and private
companies. However, President Muse Bihi knows this too
well and has taken steps to crack down on corruption as
soon as he entered office. He was even given the
nickname Mr Padlock for his unwavering stance to protect
the public purse. Nevertheless, this is Africa and it’s easy
to throw around accusations of corruption without
evidence. Even President Mohamed Ibrahim Egal did not
escape these accusations when it came to public–private
partnerships.
Rubber-tyred crane and its operator.
Egal was the much respected second president of
Somaliland since its re-independence in 1991. He was
once embroiled in a controversy involving a deal he struck
with a French oil company to manage the Berbera fuel
storage facilities. In that deal, he was reportedly paid by
the French company a proportion of the monthly fuel
storage fees as special ‘Presidential payments’. Recently,
there was public outrage about a private insurance
company being given a monopoly by the government to
insure all vehicles coming through the port. The case was
taken to court by a competitor of the insurance company
and the monopoly was reversed. This shows that
Somaliland has come a long way and there are now good
checks and balances for businesses to compete.
Berbera fuel storage.
When it comes to regional competition, the
modernization of Berbera port by DP World has caused a
major disruption to the nearby port of Doraleh in Djibouti.
This port was also built by DP World in 2009 and cofinanced
by China at a reported cost of $590 million USD.
Soon after operations started in the newly revamped
Berbera port, the Djibouti government decided to
nationalise the Doraleh port and expel DP World, accusing
them of diverting traffic to Berbera. DP World ended up
taking the government of Djibouti to an international
court in the UK and after a lengthy process, Djibouti finally
agreed to compensate DP World for losing the 30-year
contract they originally signed. This experience has likely
motivated the heavy investment DP World is putting
behind Berbera.
It’s also likely that the Berbera port will strain the
relationship between Djibouti and Somaliland, which may
escalate to a diplomatic power game, since Djibouti is
home to the military bases of both China and the USA. To
complicate matters further, Somaliland has recently
formed a relationship with Taiwan, but time will tell
whether this may actually provide a diplomatic boost and
help Somaliland enter the world stage or just bring
unwanted attention from China.
Meanwhile, with Brexit repercussions to deal with, the UK
now sees Berbera as part of that new global strategy. In
October 2021, CDC Group, which is the UK government’s
developmental finance institution, announced that it will
be investing £18 million to build 22.5 km of the Hargeisa
corridor, which is part of the road that links Berbera to
Ethiopia. Making a strategic trade deal in Berbera is
nothing new to the British though, in fact the main
motivation for the British colonisation of Somaliland in
the late 19th century was to secure the supply of livestock
through Berbera to their regional administration in
Yemen.
However, the motivation for this new trade deal is more
altruistic, with a developmental agenda. With the global
supply and logistics shocks brought on by the COVID-19
pandemic, which is amplified by Brexit problems in the
UK, there is now the possibility for British companies to
use the port and source cheaper clothes from the newly
launched Ethiopian industry parks or for British
companies to supply technology equipment to that part
of the world.
An example of a British company that can benefit from
the port is Build Works Solutions Limited. This is a
medium-sized family business specializing in making
machinery for the construction industry. They are based
in the small market town of Stourbridge, which is 14 miles
west of Birmingham. This is the type of business that
made Germany the powerhouse of Europe and a model
that Boris Johnson would like to emulate. What makes
Build Works Solutions a unique company and of interest
to Berbera port is that their machinery does not require
electricity or fuel, but is manually operated. This is ideal
for places like Somaliland, where the construction
industry is booming, but the affordability of high-tech
machinery and the cost of fuel is a real problem.
Oliver Glendenning, the company’s sales director,
reported they already have some customers in Somaliland
and he sees the potential of the new port in reducing time
and cost to Berbera: “In terms of challenges with shipping
to Berbera, we have found it difficult to find an all in one
service who can handle delivery duty paid services to
Berbera and door to door to our clients other than via
DHL, which is a premium service,” says Mr Glendenning,
Machinery from the UK company Build Works Solutions.
Reproduced with permission.
“Hopefully more operators will be able to provide a door
to door service in the future.”
The port will also make it easier for British–Somali
businesses to trade though Berbera. Currently, the
process of sending products to Somaliland is either too
expensive through the airlines or too slow through the
cargo ships. If you are sending anything bulky, the Somali
owned courier companies will collect the goods, place
them in a warehouse and wait until they can fill a
container. The ship then sails to the port of Jeddah in
Saudi Arabia, where the cargo gets transferred to a
smaller ship that eventually makes the final journey to
Berbera. The whole process normally takes three months!
With the new port, there will be direct ships from the UK
to Berbera, if the demand is high enough. DP World is
confident the demand will be there, since they are
planning for the port to take on a total capacity of 2
million twenty-foot-equivalent containers when all phases
of the project is complete. This will be the same size as
the port of Mombasa and larger than Doraleh in Djibouti.
The main reason why ports in Africa are currently the
most expensive to ship products to is the lack of modern
port infrastructure. Therefore, this new UK investment
will boost Somaliland’s development, which is desperate
for more foreign direct investment. It will further
strengthen the security of the region and facilitate
economic growth and prosperity in Berbera and beyond.
• Adil Dirie is a member of our Editorial Board and a longstanding
member of the Society. He is an experienced business
development professional, focusing on the remittances and mobile
money industry.