UK’s CDC targets inland infrastructure after DP World $1.7bn ports investment deal

By David Whitehouse
Posted on Thursday, 14 October 2021 18:20

Somaliland Emirates
A cargo ship docked at the Port of Berbera in 2018. (AP Photo/Malak Harb)

British development finance institution CDC Group aims to use its investments in three African ports as a springboard for the development of inland trade corridors, Tenbite Ermias, CDC’s Africa managing director, tells The Africa Report.

This week, CDC announced a partnership with global logistics company DP World that will make initial investments to modernise and expand ports in Dakar, Senegal, Sokhna in Egypt and Berbera in Somaliland.

DP World is contributing its stakes in the three ports and will invest $1bn through the partnership in coming years. CDC is committing an initial $320m with up to $400m to follow. The partnership will make further unspecified ports and logistics investments.

Investments [that] develop inland infrastructure to create corridors of trade are “absolutely fair game,” Ermias says. An obvious next step is to improve the inland road network in Somaliland, he adds. He expects that within three to five years, “significant parts” of new transport infrastructure networks will be completed in Somaliland. CDC is open to other partnerships to achieve its aims, Ermias says. “Partnerships are critical for us. It’s not about exclusivity with DP World.”

At Berbera, the aim is to compete with Djibouti port as a hub that can serve Ethiopia and the Horn of Africa region. Somaliland is a region of Somalia which is not internationally recognised as an independent state.

Berbera port was built with the help of the Soviet Union and the US in the 1960s and 1980s. Dubai-based DP World now owns 51% of the port, Somaliland 30% and Ethiopia 19%.

A new container terminal was opened at the port in June. The port can now handle the world’s largest ships, and annual capacity has increased from 150,000 containers to 500,000 containers.

Job creation

Africa’s ports lag behind global standards, with inefficiency serving as an effective tax on international trade. The continent has a sixth of the world’s population, but accounts for just 4% of global containerised shipping volumes. Ermias says improving the efficiency of Africa’s ports by 25% would raise the value of the continent’s exports by $2.6bn, while making its imports $3.2bn cheaper.

  • Ermias estimates that three port investments will create 140,000 direct jobs and support a further five million in areas such as farming, manufacturing and trading.
  • By 2035, Berbera port is forecast to enable trade equivalent to 27% of GDP and 75% of total trade in Somaliland. Ermias says 30,000 jobs will be created in Somaliland and 60,000 in Ethiopia, including indirect employment.
  • Berbera is a key port for the distribution of humanitarian aid, which CDC says reaches close to 2 million displaced people.

In Senegal, the expansion of the port of Dakar, worth nearly $1bn, will be the country’s largest-ever onshore foreign direct investment. Ermias is also aiming to improve transport infrastructure in Senegal, on which land-locked Mali relies for its imports. One investment that won’t be on the agenda is modernising the dilapidated railway line from Dakar to Mali’s Bamako.

That’s because the CDC’s mandate from the British government is to invest only in the private sector, Ermias says.

Bottom line

Port investments will need to be accompanied by inland infrastructure modernisation to achieve their full potential.

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