Machiavellian Turn as Container Shipping Companies Line up Against Port and Logistics Group

DJIBOUTI – DUBAI – EAST AFRICA – It seems the row over the seizure in February of the Doraleh Container Terminal (DCT) from UAE based logistics specialist DP World by the government of Djibouti is about to get even more intense. When DP issued a legal notice with the intention of warning off any prospective managers or developers of the facilities at Djibouti Port after their staff were expelled, the likely candidates went unnamed. Now events have taken another Machiavellian turn with two major shipping lines revealed as the companies who are bidding to take over what DP World has claimed is legally theirs.

The Djibouti government has obviously chosen to make the most of its most precious asset, that of an ocean gateway to East Africa and the land locked countries of the region, plus the benefits the port offers in the way of revenue from the biggest US military base in Africa and other similar operations belonging to Italy, Japan and, most significantly France and China.

The reason these last two bear an added importance is complex. China is building its military capability in Djibouti, something that doesn’t sit well with the Americans who maintain a force of around 4,000 at Camp Lemonnier 20 miles inland from the port. From here the US controls drone missions over Yemen and Somalia and with the build-up of Chinese forces just ‘up the road’ General Thomas Waldhauser, commander of the US military has expressed concerns about the expansion.

The French and Chinese presences have another separate reason to give concern to DP World, the two companies which are negotiating for development of the commercial facilities have been revealed as CMA CGM and Pacific International Lines (PIL), the third and tenth largest global container carriers respectively according to the Alphaliner Top 100. CMA CGM is of course headquartered in Marseille and already operates up to five services a week to and from the Doraleh Terminal hitting points as diverse as Jeddah, Felixstowe, Malta and Shanghai.

PIL is a Singapore registered line with its roots (and routes) firmly in the Chinese market and currently ships hundreds of thousands of boxes through the Port of Djibouti with plans to expand this. It is PIL which is largely tasked with supplying the Chinese Navy facility.

Now DP World will doubtless be watching closely what it will undoubtedly see as illegal participation by the two shipping lines in developing facilities, something it has been seemingly backed by the Court in London as having the contract to do. The company first went to Court when a prosecution case of bribery was raised by the Djibouti government in 2014 alleging improper payments by DP World to the former port boss, allegations found to be unproven by the Court.

Despite losing the case the government went ahead and seized the assets of DP World but now brushes off press enquiries saying simply that they are ‘buying out the 33% of shares concerned’. For its part the UAE based operator says this is a clear case of stealing profitable assets. The company further angered the Djiboutians when they redistributed shares in the Port of Berbera in March.

That deal saw 30% of stock going to the government of Somaliland but 19% awarded to Ethiopia, DP World holding the 51% balance. Berbera is another potential entry point to this and other East African countries, with currently virtually all Ethiopia’s trade coming via Djibouti. Berbera of course has its own problems as it exists in Somaliland, a place not universally recognised as a country in its own right, and certainly not by Somalia which considers it a rogue state. Seemingly Ethiopia takes a different view and is developing a road trade corridor to Addis Ababa to relieve its reliance on Djibouti.

Djibouti meanwhile has already got strong infrastructure links with the Ethiopian capital with both road, and perhaps more importantly, rail and which fits well with the Chinese ‘belt and road’ mentality, with strong indications that this is the route China feels will give it optimum access to those East African markets, no matter how much it upsets the Americans, DP World or anyone else.

The actions taken in Djibouti have disgusted DP World with Group Chairman Sultan Ahmad bin Sulayem, quoted as saying ‘Africa needs infrastructure and if nations can change laws to take assets it will be difficult to attract further investment’. The proposals for the Port of Djibouti include a DCT expansion to handle up to four million TEU’s per annum (currently circa 1 million) in a port also capable of handling every type of bulk cargo including oil.

The overall cost estimates for all the Djibouti developments, including constructing an international airport, run to over $1 billion and it will be interesting to see who provides the funds and what actions the aggrieved DP World take against those they view as responsible for the company’s losses in this case.