Somaliland: Ports: the key to rapid economic growth?

SEF  London – Somalia is strategically based in the Horn of Africa and benefits from direct access to both the Red Sea and the Indian Ocean. This has led economists to contemplate in what capacity Somali ports could become dynamic and competitive regional hubs. However, for this to happen it is paramount that infrastructural development takes place and that Somali ports are able to attract Foreign Direct Investment (FDI). This will enable Somalia’s ports to make the transformative shift from underdeveloped & underutilised ports to dynamic, regional port hubs in East Africa and the Middle East. This is a feasible, long term aim as Somali ports benefit from their geographically advantageous position whereby the share a close proximity to African economies aswell as markets in the Middle East.

In recent years, there has been much activity in regards to FDI facilitation and the modernization of Somali ports.  A key example can be found in Berbera Port which contains a deep sea harbour and a 650-metre berth which is a remnant of Soviet and American investment in the 1970s and 1980s respectively. Crucially, Berbera Port is situated strategically at the mouth of the Red Sea which is a key artery in the multi-billion dollar oil transport and logistics route which passes through the Red Sea & the Suez Canal. According to the Financial Times; Bolloré Africa Logistics recently signed a deal with the Somaliland government to invest $677 million into Berbera Port and the accompanying “Berbera Corridor” which will ease access and trade with the landlocked economic powerhouse Ethiopia with its market of over 80 million inhabitants. The longer term aim of Bolloré Africa Logistics is to transform Berbera into a $2.5 billion logistics hub in East Africa. In addition, Mogadishu Port possesses the largest harbour in the country and it too has benefitted from a surge in infrastructure intensive FDI. Simatech through its subsidiary Mogadishu Port Container Terminal (MPCT) has proposed a $170 million container port expansion whereby it will modernize and significantly expand Mogadishu’s International Port. Importantly, this will prove to be a landmark deal as the Mogadishu Port accounts for the bulk of the Somali Federal Government’s revenue and it has the potential to be the engine of the country’s economic growth.

Other ports based in Somalia also require sustained infrastructural investment to enable them to reach their potential and expand their operations. A principal port is Bossaso Port which accounts for a major share of Puntland’s government revenue and it has an advantage over other ports due to its lack of bureaucracy and red tape. When Bossaso Port secures FDI for its port development it too can compete with other ports to become a regional port hub in East Africa. Indeed, if these ports are able to secure and finalize FDI then they will be able to compete economically with other established, East African, regional ports leaders such as; the Mombasa and Djibouti Ports.

The Somali Economic Forum (SEF) recently published the INFRASTRUCTURE REPORT 2014 which is a landmark, comprehensive report. The report focuses on infrastructure within Somalia and how it possesses great potential in regards to the state’s future rapid economic growth and development. It focuses on Somalia’s ports as SEF believes that they have the potential to become vibrant, regional hubs providing investment is obtained in this critical infrastructure. Thus the report touches on how modern ports can provide the state with economic dividends whilst increasing the frequency of international trade. Modern ports also provide major boosts in revenue generation aswell as creating a multiplier effect within the economy whereby economic growth and activity is filtered into various other sectors such as; banking & finance along with the oil and gas sectors. A crucial benefit of port development in Somalia is that it will enable job creation as these dynamic ports will be able to employ a substantial share of the population, thus alleviating labour market imbalances and chronic unemployment.  

Somalia’s infrastructure sector and particularly its principal ports require sustained FDI and SEF’s Infrastructure Report 2014 will act as an informative and detailed reference point for potential investors. Also, the Somali Economic Forum will be hosting its 2^nd Somalia Investment Summit (SIS) on April 6th – 7th 2014 in Dubai, UAE. The SIS 2014 will bring together major investors, academics, policymakers and leading CEOs and executives in the infrastructure and port logistics sector throughout Africa and other continents.

Somali Economic Forum