The sight of Eritrea’s President Isaias Afwerki all smiles and arm-in-arm with Ethiopia’s Prime Minister Abiy Ahmed in July was a turning point.
It opens up potential for a new regional dynamic with Arab neighbours and creates an opportunity to isolate the militants wreaking havoc in Somalia.
A peace dividend – Ethiopia and Eritrea were in conflict since 1998 – should allow governments to prioritise development over security, and open new routes to global trade for landlocked Ethiopia.
The détente also illustrates the extreme geopolitical pressures that run through the Horn of Africa.
Balance of rival powers
Ethiopia plays a key role in the balance of rival powers. Ever since the Suez Canal was carved out of Egyptian soil in 1869, the Red Sea and Gulf of Aden have been a strategic choke point for global powers.Today, those include heavyweights like the US and China and a multiplicity of competing Gulf players: Turkey and Qatar on one side, and Saudi Arabia and the United Arab Emirates (UAE) on the other.
There are billions of dollars at stake, and the slightest missteps could quickly change the dynamic. For example, a dispute between the UAE and Djibouti – which in February nationalised the 800,000-container-a-year Doraleh Port built and operated by the UAE’s DP World – pulls in multiple players.
Some 90% of Ethiopian exports and imports transit through Djibouti, while China is also building new ports there.
The Isaias-Abiy peace also revealed some tough realpolitik. Emirati ruler Mohammed bin Zayed is using the Eritrean port of Assab to prosecute a war in Yemen, as well as building another port in Somaliland. Bin Zayed was crucial to the Eritrea-Ethiopia mediation, agreeing to inject $3bn into the Ethiopian economy a few days before the peace deal was signed.
However it gets there, Ethiopia could use the shot in the arm that diversifying its ports will provide.
Exports have flatlined despite much hype around an export-driven renaissance. By diversifying its routes through Eritrea, new projects become viable. A port planned by Eritrea in the Bay of Anfile will help Danakali to export from its $320m Eritrean mining project; fertiliser giant Yara may also be able to use it for its $700m Ethiopian potash mine on the other side of the border.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.
