Inside UAE’s plan to control African ports: From Djibouti on the Horn round the Cape to Egypt, the UAE logistics giant curates a route for goods to Africa in an intricate power game.
What you need to know:
DP World has offered to develop and operate transport logistics services in the ports of Mombasa, Lamu, and Kisumu, and Naivasha as the firm makes foray into the Democratic Republic of Congo, Somaliland, Djibouti, Angola, Senegal, and Egypt.
United Arab Emirates logistics major Dubai Ports World (DP World) has been caught up in the heat of the political campaigns in Kenya ahead of the August 9 election after a March 2022 deal with Nairobi to run three Kenyan ports became public last week.
The Kenya Kwanza coalition led by Deputy President William Ruto accused President Uhuru Kenyatta of clandestinely trying to auction the country’s assets, claims the government has rejected.
The news of the deal came three months after President Kenyatta visited the UAE. According to documents circulated widely, on March 1, Kenya entered into a concession deal with DP World, and later, on March 10, a UAE delegation visited Kenya to review the status of the plan.
While denying that the deal was secret, National Treasury Cabinet Secretary Ukur Yatani said DP World FZE offered to develop, operate, manage and expand transport logistics services in four Kenyan facilities – the ports of Mombasa, Lamu, and Kisumu, and the dry port in Naivasha.
The agreement, if implemented (Mr. Yatani says it’s up to the next administration), will see the Dubai ports operator or its subsidiaries run at least four berths at the port of Mombasa, the three completed berths at the Lamu port, and three special economic zones.
“This is part of the government’s long-term plan, and the Lamu Port-South Sudan-Ethiopia Transport (Lapsset) project has been with us for more than 10 years, which is why we are bringing more partners under a public-private partnership to develop it further. That is why we are encouraging a partnership with renowned port developing partners,” Mr. Yatani said.
“We have bilateral co-operation agreements with different governments and, in ports, we narrowed down to a number of sectors where the UAE has an advantage, such as logistics and port management.”
In the proposed deal, Kenya expects to benefit from the expansion of port projects, and create jobs and business, and the UAE will have a market to supply its products in East and Central Africa.
“Our dream is to make a huge economic zone in Lamu so that people dealing in imports from the hinterland as far as DR Congo can find a home in Lamu,” Mr. Yatani told local media on Wednesday.
Experts at the international think tank Crisis Group say the Emirates’ history as a trading coast informs its current economic outreach.
“The UAE’s model of economic diversification is built around its role as a logistics hub and regional headquarters. It is a model premised on freedom of maritime navigation, including through Bab al-Mandab, the narrow passage from the Gulf of Aden to the Red Sea, and the Strait of Hormuz.”
Analysts often describe these water bodies as chokepoints because they are easily closed to oil tankers and other cargo ships.
“Having co-operative, even like-minded governments along the Red Sea corridor is a strategic priority,” said Crisis Group analysts. “Africa is also a natural theatre for trade and logistical ambitions. It comes as no surprise that one of DP World’s first contracts abroad was in Djibouti, where it began to develop Doraleh port in 2006.”
Rivalries
But other analysts say the rivalries among Middle Eastern powers have informed UAE’s foray into Africa.
For instance, its rivals Qatar and Turkey have been in Somalia, so the Emirates turned to the semi-autonomous regional state of Somaliland to enlarge its power projection toward the Gulf of Aden and establish channels for long-term food supply.
In 2016, DP World secured the winning bid to develop Berbera port in Somaliland, worth over $400 million. The announcement was made around the time that the UAE was granted rights by the Somaliland government to set up a military base in the region.
In April 2017, DP World also won concession rights to develop the Bosaso port in Puntland, with a value of $336 million.
“While the Somali coast serves important purposes in the Emirati maritime security strategy, port access has also been guided by prospective investment opportunities in the far bigger Ethiopian market. As such, the Emiratis ensured that Addis Ababa was granted a 19 percent share of the port in Berbera (it has since lost the stake),” write Kyrre Berland, Chris Brew and Delia Burns in a paper titled Examining Emirati Foreign Policy Influence in the Horn of Africa published on the Fletcher School website.
In October 2021, DP World announced the creation of an investment platform in partnership with the UK’s development finance institution CDC Group, with the Emirates contributing its stakes in three existing ports initially and pledging a further $1 billion through the platform over the next several years.
CDC committed about $320 million initially and pledged another $400 million.
The platform will invest in origin and destination ports, inland container depots, economic zones and other logistics across Africa to increase trade, create jobs, and broaden access to essential goods, DP World said in a statement.
“It will initially be seeded with minority stakes in existing DP World assets, with significant capacity expansion plans, including Dakar (Senegal), Sokhna (Egypt), and Berbera (Somaliland). Trade enabled through the ongoing expansions is expected to create an additional 138,000 employment opportunities in the wider economy. By 2035, the ports are expected to support stable employment for around five million people indirectly.”
Connecting region
DP World CEO Sultan Ahmed bin Sulayem said: “By combining our in-depth knowledge of ports and logistics and CDC’s expertise in infrastructure investment in Africa, we can drive greater supply chain efficiencies, provide improved trade connectivity and ultimately enhance value for all stakeholders.”
Now, the potential entry into Kenya just months after entering DR Congo through the Atlantic port of Banana speaks to this ambition to connect the region and the continent, broadening its export market and opening up the continent for trade with the world.
East Africa and the Horn – where DP World has a footprint in Djibouti, Berbera, and Bosaso – is important as it is considered one of the key entry points to the African market by the leading exporters in Asia and the Middle East.
Port of Dubai link
The two Emirates, Abu Dhabi and Dubai, export a significant amount of goods to Africa and are a hub for countries and companies that seek business with the continent.
Millions of containers from Asian giants China and India destined for Africa arrive through the port of Dubai.
CS Yatani says Kenya wants to convert Lamu into “Africa’s Dubai” by making it a hub for vehicle imports. If this comes to fruition, it will give the Lamu port a much-needed shot in the arm, as it is threatened with dormancy. Since the port became operational in May 2021, in the first eight months it handled nine vessels and 1,619 twenty feet-equivalent units in its first berth, according to Kenya Ports Authority data.
Kenya Lapsset Corridor Development Authority chair Titus Ibui blamed the port’s poor state of affairs on lack of funding and insecurity because of Al Shabaab.
In the now controversial concession agreement dated March 30, 2022, addressed to Bin Sulayem and signed by CS Yatani who attended talks in Kenya and UAE, Dubai will develop a 500-hectare special economic zone next to the Lamu port, focused on agricultural value addition and servicing the Lapsset.
The Mombasa port — which is facing fierce competition from Dar es Salaam, especially during this electioneering period when importers fear disruption of transport on the Northern Corridor in case of an electoral dispute — will see a revamp of berths 11 to 14, which are currently unable to handle container operations, into a modern multipurpose terminal capable of handling one million Twenty-foot Equivalent Unit (TEUs).
The Kisumu port will also get a leg up amid drawbacks blamed on Uganda’s failure to expedite connected projects on its side.
The poor state of the Jinja and Port Bell piers in Uganda, a weak marine policy and the stalling of the Bukasa port are frustrating regional efforts to exploit the $60 billion trade potential of Lake Victoria, with Kenya and Tanzania pressuring Kampala to expedite implementation of its port projects.
This is meant to facilitate quicker and cheaper passage of goods – particularly fuel – to the Great Lakes region and South Sudan.
For Kenya, establishing Kisumu as a regional logistics hub makes economic sense. Nairobi has long touted Lake Victoria’s huge potential in cargo and passenger transport. The port is a major link between Kenya and its neighbors and is designed to facilitate easy transportation of petroleum products to Uganda, Rwanda, parts of DR Congo, Burundi, and South Sudan.
If the DP World deal is implemented, the operator will also develop a cold-chain for agricultural produce and fish exports and a logistics park in Kisumu.
DP World is also expected to develop a cold chain, logistics park and link the inland container depot in Naivasha to service central Kenya, and enable the transfer of cargo from the standard gauge railway to the meter gauge line to Kisumu.
Dubai is, therefore, looking to link Eastern Africa with the Great Lakes region, completing a trade corridor that will see the full exploitation of the resource-rich DRC and seamless supply of goods in the region through seaports and dry ports.
DP World first signed an agreement with Kinshasa in December 2021 and in February signed a collaboration agreement for the development of the $1.3 billion deep-sea port in Banana in the Central Kongo Province, west DRC.
President Félix Tshisekedi laid the foundation stone for the project on February 1, 2022, and in March, six Congolese ministers visited Dubai “to harmonize details of the contract”.
According to the Congolese government, the works will take three years, with the first phase featuring a 600-meter squared quay and 25 hectares of storage space. The first phase will allow the berthing of large containers.
It will also build industrial zones.
Kinshasa deal
Congolese authorities are upbeat about the project mooted in 1972 during the government of Joseph Désiré Mobutu.
Once completed, Banana could be a new gateway to the continent. The port will have an annual capacity of 32,000 containers, according to the Ministry of Transport.
“The Port of Banana will allow Congo-Kinshasa to connect to global trade routes and have access to a wide range of markets while reducing the DRC’s dependence on ports in neighboring countries,” said DRC Transport minister Cherubin Okende.
“It will be a world-class port and a game-changer for the DRC. It will attract more calls by larger vessels from Asia and Europe, greatly enhancing the country’s access to international markets and global supply chains,” said Sultan Ahmed bin Sulayem, DP World CEE.
At the laying of the foundation stone in February, President Tshisekedi termed it a historic moment for the DRC, “as our vision to develop the Banana port to transform our country into a regional trade hub becomes a reality.”
“It will grow our economy by creating direct and indirect jobs, provide new opportunities in the supply chain and attract more foreign direct investment,” he said.
DP World has been in Rwanda since 2018, offering bonded and inland container terminal services. Today, the Kigali Logistics hub is a one-stop-shop packaging center, allowing for the processing of products, packaging, labeling, and storage.
Rwandan avocado farmers have easy access to UAE and other Gulf markets through DP World services.
“At DP World Kigali, we’ve seen major growth in the number of high-quality local products making their way overseas, directly improving the local economy and the lives of the people here,” said DP World Kigali CEO Sumeet Bhardwaj.
DP World’s wholesale e-commerce platform DUBUY.com has a presence in Kenya, Rwanda, and Tanzania.
More than 120,000 tonnes of coffee and 100,000 tonnes of tea were exported last year through the platform, which is now being expanded to include three warehouses and other facilities on an additional 7.5 hectares.
In Luanda, Angola, the operator is investing $190 million in a multipurpose terminal to transform the port into a key trade hub.
At Ndayane near Dakar, DP World is investing over $1 billion to develop a modern port and economic zone.
Meanwhile, in Berbera, where it has operated for the past five years, the terminal launched last year is already delivering substantial benefits.
Berbera has seen volumes increase by 35 percent and vessel productivity by 300 percent, and reduced container vessel waiting time from four to five days to only a few hours, according to the firm.
But Ethiopia in June 2022 lost its 19 percent stake over failure to fulfill conditions required to complete the ownership deal.
As per the deal signed in 2017, DP World has a majority stake in the port, enjoying a 51 percent share, while Somaliland had a 30 percent stake and Ethiopia had 19 percent ownership. The Ethiopian government was supposed to develop a 260km road from the Berbera site to its border.
The agreement was reached a week after neighboring Djibouti ended a contract with DP World to run its Doraleh Container Terminal.
DP World and Djibouti had been in dispute since 2012 over DP World’s concession to operate Doraleh, located along strategic trade routes at the southern entrance to the Red Sea. But in 2018 Djibouti government retook the terminal and Dubai went to the London Court of International Arbitration (LCIA) where the court ruled that the company’s contract was valid and binding.
