Ethiopia reaches out to Djibouti and Kenya to partner on mega projects

Ethiopia is pushing for an economic union with Kenya and Djibouti for joint investments in infrastructure.

In the past week alone, Nairobi has played host to Ethiopian Prime Minister Abiy Ahmed and the Djibouti President Ismaïl Omar Guelleh.

Ethiopia has also reached out to Sudan, and sought to strike similar deals with Djibouti. It wants to be part of the region’s ports, roads, energy, industrial zones, railways and aviation projects.

Chief of staff at Ethiopia’s Prime Minister’s office Fitsun Arega told The EastAfrican that Dr Abiy’s visit to Sudan and Djibouti would elevate Ethiopia’s “unique ties” to these countries into a meaningful economic union.

“Our private sector will need to seize the opportunities of expanded market created through regional integration. Djibouti, Ethiopia, Kenya and Sudan will now work towards a true economic union with joint investments and ownership of projects because our people’s shared prosperity and security depends on it. Dr Abiy’s visit to these countries is a testament to Ethiopia’s enduring commitment to this vision,” said Mr Fitsun, who served as the director-general of the Ethiopian Investment Agency till last month when he was tapped to the prime minister’s office.

Ethiopia-Kenya projects

Under the new partnership, Ethiopia and Kenya will work on joint projects including railway, electricity, roads and the Lamu Port, in a rejuvenated deal mooted two years ago but which never picked up.

Top on the joint projects’ drive will be the Moyale Joint City and Economic Zone project. The two countries also agreed to finalise the Ethiopia-Kenya interconnection transmission line, and to jointly supervise and inspect the Lamu-Garissa-Isiolo-Moyale and Moyale-Hawassa-Addis Ababa road networks.

“The two leaders committed to the development of Lapsset, the Northern Corridor including road network between Isiolo, Moyale through to Addis Ababa and the railway from Addis Ababa to Nairobi,” reads a joint statement after the meeting between Dr Abiy and Kenya’s President Uhuru Kenyatta.

The Moyale City project will have a special economic zone and the Lamu port, under the Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor.

Launched six years ago, the Lapsset project was estimated to cost at $20 billion but was slowed down by the financial obligations as each country was to source financing, which meant further delays, with a $3.1 billion bill for the Lamu port alone.

It is understood that Addis Ababa could be seeking a shareholding of the port — currently 42 per cent complete — as it has recently done with the Djibouti port of Doraleh, in a bid to push for its interests.

Port diversification

Landlocked Ethiopia is seeking to diversify its main gateway points to the international markets through the sea, as it moves to cut reliance on the port of Djibouti and reduce congestion at the seaport, as well as slash costs.

Addis Ababa has long been held back by overreliance on the congested Djibouti port which handles more than 95 per cent of its trade goods. Ethiopia is now negotiating more port agreements with neighbouring countries to give the country the much needed port diversification.

Kenya is expected to set aside land to enable Ethiopia to set up a logistics facility at its Lamu port in the clearest indication that Addis Ababa is eyeing the Kenyan port for its import and export activities.

“The Kenyan side will facilitate the formal acquisition of land at the Lamu port to be given to the Ethiopian government,” the joint statement reads.

The revival of the Lamu port deal with Kenya also comes days after Ethiopia struck a port deal with Sudan.

Last week, Ethiopia and Sudan reached an agreement allowing Addis Ababa to acquire a stake in the Port of Sudan, Khartoum’s largest seaport, after a meeting between the Ethiopian Premier and Sudan’s President Omar Hassan al-Bashir in Khartoum.

“The two countries have agreed to develop and jointly manage Port Sudan together. We have also agreed to expedite the implementation of an earlier agreement on joint port development and administration,” Ethiopia’s Foreign Minister Workneh Gebeyhu said.

The deal whose value was not disclosed, was reached just three days after Ethiopia sealed the deal with Djibouti.

In the deal, Addis Ababa will acquire an undisclosed stake in the Port of Djibouti, its main gateway for trade.

Djibouti had been seeking partners to invest in its port after it terminated previous agreement with Dubai state-owned ports operator in February, citing a failure to resolve a six-year contractual dispute.

In March, Ethiopia paid $80 million for a 19 per cent stake in Somaliland’s Port of Berbera, after reaching an agreement with the majority shareholder, DP World and the Republic of Somaliland in a controversial deal that has been heavily objected by the Federal Government of Somalia.

Livestock

For Djibouti, the development of the Lamu Port will also be a win for it, given that it is developing a $600 million new container terminal at the strategically located port of Doraleh, which connects the country to Asia, Africa, and Europe.

Last year, the country handled 55 per cent (four million tonnes) of the transshipments headed to Mombasa, Dar es Salaam and other Indian Ocean ports as compared with 200,000 transshipments that Mombasa port handled to other ports.

Djibouti, which has also pledged to open its Regional Livestock Quarantine Facility to Kenya that will help the latter access the international livestock market, means that it is angling to use its port to channel the Kenyan livestock, opening it up for further revenue income.

“The new leadership in Addis responsible for the continents third largest economy is rightly flexing its economic influence by smartly securing several port deals through ownerships,” said Zemedeneh Negatu, the chairman of Fairfax Africa Fund Ltd and a former managing partner of EY Ethiopia.

Airlines

The region could also now see a possible re-alignment in the airline sector, with more collaborations and partnerships after Ethiopian Airlines was granted a second frequency flight to Mombasa, with both sides offering unrestricted marketing to Ethiopian Airlines and Kenya Airways in Kenya and Ethiopia respectively.

This is a win for Kenya Airways, which in March announced that it was open to partnerships and joint ventures with African carriers.

“We have opened discussions with other airlines on joint ventures as they seek to fuel their revenue optimisation plans starting this year. We have started discussions with South African Airways that could see us join forces on aircraft repairs and route joint ventures. So far, we have discussed issues of mutual concern. For instance, we fly to similar destinations in Africa, so there’s a possibility we could probably share those routes,” Kenya Airways chairman Michael Joseph said.

Last week, Kenya Airways signed a memorandum of understanding with Djibouti Airlines that will see the former assist the latter in capacity-building and maintenance services, a revenue window for KQ.

On energy, Ethiopia is expected to supply 400 MW of hydro-power to Kenya annually once it’s 6,450MW Grand Ethiopian Renaissance Dam), which is now 66 per cent complete comes to fruition. Kenya is also angling to use its expertise to help develop Djibouti’s geothermal capacity through a joint venture initiative.