Thinking About African Ports

The other day a buddy sent me a link to a Calculated Exuberance post on Djibouti. The author sees a bright future for Djibouti as a future financial center. Source of the exuberance? A proposal by Tarek bin Laden for what would be the longest bridge in the world across the Gate of Sorrows from Djibouti to Yemen. The author suggests that this could pave the way for a mega port in Djibouti serving as a hub for Northeast Africa and the Middle East. I see several problems with this.

The estimated cost for the bridge is way beyond bin Laden's means, and even the Economist has suggested that the people he is in bed with hint that the bridge might be partially funded by the US government in order to secure the Red Sea. Thus it becomes more of a security device for this troubled region which includes Sudan and Somalia. Add in the poverty of the area and China's large role in Sudan, and the possibility of financial center under these circumstances looks even smaller.

If the purpose of the bridge is to actually serve the Middle East, then I'd guess it would be for outsourced food sources in Africa. Reportedly, Qatar and Abu Dhabi are both considering Sudan, Djibouti's neighbor, as an investment target for farms to feed the citizens of their desert cities. But, the same reports also point out that Sudan has a history of failing as an agricultural exporter. Thus this also seems unlikely.

If the point is to actually turn Djibouti into a major port for the East, I ask why? The oprt already has a monopoly on Northeast Africa, but the neighboring countries are poor. East Africa is geographically rough, being dominated by the Great Rift Valley, making logistics difficult. All that the area really has going for it is China's close ties with Sudan, but even that relationship is being strained.

In a recent article, the Economist had this handy map of Africa's logistics lines:



There are some major lines there, but this sentence sums up Africa's big transportation problem:

A study by America’s trade department found that it cost more to ship a ton of wheat from Mombasa in Kenya to Kampala in Uganda than it did to ship it from Chicago to Mombasa.

Several companies have been trying to crack Africa's logistics problems. The major breakthrough has come in Cote d'Ivoire at the port of Abidjan. This is less useful for serving the East, though.

For a more economic mega port to serve the East, I'd look towards the planned port in Dar es Salaam, Tanzania, or expansion in Mombasa, Kenya. The logistics networks are stronger, and the wealth of the region is greater. Dar es Salaam might be a slightly better bet than Mombasa just because Dar es Salaam serves a dual function of financial center and trade center, while Mombasa serves as a trade center and Nairobi serves as a financial center. But, Nairobi's exchange is more sophisticated than Dar es Salaam's. Sub-Saharan Africa has unrest, but our social institutions tend to break the Second Law of Thermodynamics, and move towards greater order. As greater order takes hold in sub-Saharan Africa, exportable goods should increase and logistics should improve. The greater wealth of the region relative to the Horn would hopefully bring even greater returns in both export and import opportunities. Though there's plenty of money to be made in the region, I wouldn't plan on seeing anything big until at least 2015-2020. Somethings just take time.