Africa is on the rise. Over the next thirty years, the population is projected to reach 2.5 billion people and by 2035 the continent’s GDP is predicted to double. One of the most crucial pieces to unlocking the vast economic potential of Africa is Djibouti, a little East African country located on the Horn of Africa.
It may be small – only slightly larger than the American state New Jersey – but it’s Djibouti’s strategic location that has recently been catching a lot of attention.
Djibouti is situated on the Bab El Mandeb Straits at the entrance to the Suez Canal at the mouth of the Red Sea. The Suez Canal was created to link the Mediterranean Sea to the Red Sea, making it the shortest passage between the East and the West. This puts Djibouti at the center of world trade routes which connect Europe, Asia, and Africa, where a noteworthy amount of global shipping passes. Port related activity accounts for more than 70% of Djibouti’s GDP.
This crucial location also hosts military forces for France, Italy, Germany, Japan, and the U.S., and China will soon be added to that list. It is also frequented by the naval forces in South Korea, Spain, the United Kingdom, and many other countries.
Djibouti itself is rather devoid of natural resources so, as of late, its leaders have been capitalizing on its dual status as a hub for naval and military forces around the globe and as the premier gateway through which Ethiopia trades with the world.
Djibouti has acted as somewhat of a catalyst for the rapidly expanding Ethiopian economy by handling over 90% of its neighbor’s trade goods. Djibouti itself has also seen a rise in traffic, namely in its cargo sector, as a result of these trade agreements with Ethiopia. In fact, according to the World Bank, 85% of the cargo traffic in Djibouti is either coming from or headed towards Ethiopia, with 1,500 trucks each day exporting Ethiopian exports to the ports in Djibouti. As a result, congestion on the Djibouti-Ethiopian highway has become a major problem.
To relieve some of the strain on the ports and the Ethiopia-Djibouti highway, two new Chinese-funded railways are under development which will link Djibouti City and Tadjourah – the oldest city in Djibouti – with Ethiopia. Also currently under construction are two airports in Djibouti. The first of these – Hassan Gouled Aptidon International Airport – is slated to open in 2018 and is expected to transport 1.5 million passengers and 100,000 tons of cargo per year. The second – Ahmed Dini Ahmed International Airport – is expected to open in 2016 and carry 770,000 passengers a year. Also under construction is the Trans-African Railway which will span the continent and reach Dakar.
The overall cargo traffic to Djibouti will soon be mitigated by another project: a $1.55 billion, 550-kilometer pipeline that will be used to transport petroleum products and have the capacity to move 240,000 barrels of fuel a day.
Djibouti holds the power to become a vital cog in world trade operations, a position which will only get stronger with its new ways to import and export goods.
SALAAM African Bank is proud to be your partner for trade services and financing in Djibouti as it continues to become a vital economic center. We are located at the city center and offer documentary credits, bank guarantees, documents against payment, bills of exchanges, telex transfers, and more.