The Berbera Port in Somaliland offers Ethiopia a valuable chance to boost its trade capacity and lessen reliance on current ports. By directing 30% of its cargo to Berbera strategically, Ethiopia can explore fresh trade paths, enhance efficiency, and fortify regional alliances.

Ethiopia is set to redirect 30% of its cargo to the Berbera port in Somaliland, as announced by the Somaliland Ports Authority.

Saeed Hassan Abdullahi, the Director General of the Somaliland Ports Authority, has disclosed details regarding an upcoming agreement between Ethiopia and Somaliland concerning port utilization. He stated, “Ethiopia is our neighbor, and we seek to engage in business with them. We are in the process of finalizing a port utilization agreement or transit agreement. Upon its signing, we will handle 30% of Ethiopia’s cargo within the initial year.”

Reports indicate that Somaliland authorities are planning to manage 30% of Ethiopia’s cargo at the Berbera Port, operated by DP World of the United Arab Emirates and the Somaliland government. To facilitate this, an agreement encompassing port usage and customs procedures must be established between Ethiopia and Somaliland.

Ethiopia's Trade Expansion, The Significance Of Redirecting Cargo To Berbera Port In Somaliland
Somaliland Ports Authority Director Saeed Hassan Abdullahi told Deutsche Welle that Berbera Port is expected to handle 30 percent of Ethiopia’s cargo in the first year when the necessary agreements are completed. Image Eshete Bekele/DW

The Somaliland Ports Authority has confirmed that the agreement is in its concluding stages and is expected to be signed within the next 60 days. The Chief of the Somaliland Ports Authority mentioned, “The agreement is nearing completion, with just a few remaining issues to be resolved. It is anticipated to be finalized within the next 60 days, following which we will proceed with the signing.”

Earlier this year, Ethiopia and Somaliland inked an MoU, a move contested by Somalia. The MoU would grant Ethiopia access to the sea through Somaliland, allowing for the construction of a naval base in Somaliland and the utilization of its port for imports and exports. In return, Ethiopia would acknowledge Somaliland as a sovereign state and provide a portion of the revenue generated by an Ethiopian business entity.

Ethiopia's Trade Expansion, The Significance Of Redirecting Cargo To Berbera Port In Somaliland
The port of Berbera, which is managed by DP World, which belongs to the United Arab Emirates, has reached the point where it can handle huge ships due to its extensive expansion over the past years.

The agreement between Ethiopia and Somaliland regarding port usage and customs procedures represents a significant development that stands to benefit both nations. Ethiopia, being landlocked, has heavily relied on the port of Djibouti for its import and export activities. By diversifying its options and utilizing ports in Somaliland and Kenya, Ethiopia can reduce its dependence on Djibouti and potentially lower shipping costs.

Since its inception, Somalia has opposed the MoU, citing it as a violation of Somalia’s sovereignty and territorial integrity.

Somaliland attained independence on June 26, 1960, and subsequently joined former Italian Somaliland on July 1, 1960, after its independence. This union was never formally ratified and was later dissolved. In 1991, a congress in Somaliland opted to withdraw from the union with Somalia and reclaim its sovereignty. Since then, Somaliland has underscored its unique colonial status and boundaries. While regional and international bodies have acknowledged colonial borders, they have also recognized independent states in post-colonial Africa. Notably, Somaliland has enjoyed independence for 33 years, surpassing its duration in union with Somalia.

An interesting development occurred in 2018 when the construction of the Berbera port commenced, with Ethiopia, DP World, and the Somaliland government as shareholders. However, Ethiopia failed to fulfill its financial commitment, resulting in a loss of shares in the port.

Ethiopia, a landlocked nation, has traditionally relied solely on Djibouti’s ports for its cargo operations. However, in recent times, the Ethiopian government has expressed its intent to diversify its port usage.

Ethiopia's Trade Expansion, The Significance Of Redirecting Cargo To Berbera Port In Somaliland
Berbera Port currently has a one-kilometer berth and three giant cranes for loading and unloading goods. Image Eshete Bekele/DW

Ethiopia is anticipated to commence operations at the Kenyan Lamu port this year. Senior Ethiopian delegations have already visited the Lamu port, with Kenya reportedly offering reduced tariffs to the Ethiopian government.

Djibouti’s economy heavily depends on port tariffs generated from Ethiopian cargo. The redirection of Ethiopian cargo to the Somaliland port is poised to impact Djibouti’s economy.

On the other hand, Somaliland stands to gain from increased revenue generated by port activities, potentially enhancing its international standing through recognition from Ethiopia. The agreement could also pave the way for enhanced infrastructure and economic progress in Somaliland, benefiting the local populace.

In essence, the agreement between Ethiopia and Somaliland holds the potential to be a transformative development for the region, unlocking new trade avenues and economic prospects for both nations. The finalization and implementation of the agreement in the forthcoming months will determine its actual impact.