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When I say Djibouti, what comes to your mind?
A lot of us had to go online.
Yeah, why that was yes?
And what if I told you that the small country situated in the Horn of Africa plays a major role in the troubled area of the Red Sea.
This is all Iran trying to cause troubles and trying to make its message that they're against what's happening in Israel without starting a full on war. They're letting its proxy, the Houthis and Yemen do it instead.
Since the reigniting of tensions between Israel and Hamas at the end of twenty twenty three, Jibouti has played a strategic role in the international community's effort to resolve the conflict while also managing its consequences. But when you're in the eye of the cyclone, how do you maintain neutrality? That's what we'll discuss this week with our reporter Simon Marx.
I'm Jennifer Zabasaja and this is the Next Africa Podcast, bringing you one story each week from the continent driving the future of global growth with the context only Bloomberg can provide. Simon thanks so much for being with us. So you're based in Kenya, but you just came back from a trip to Djibouti. I don't know many people who have actually been there. I myself have never visited the country. So can you just start by setting the scene for us and tell us what Jibouti is like On the ground.
Djibouti is kind of a sleepy place.
It's very hot, nestled right on the coast on the Red Sea, very picturesque in some ways, surrounded.
By blucy etc.
And yet as you go into the center, you're driving past a lot of embassies, you feel the presence of the international community. You have pretty slick roads, and you can see the ports. They have several ports. They actually have six different ports for this tiny little country. So you quickly get the sense that this place is playing a bit of an oversized role in a way.
And what exactly do you mean by oversized role?
Djibouti is this tiny little country on the tip of the Horn of Africa, which often isn't in the news. It goes very unnoticed, but it so happens to be really right at the cusp of this crisis unfolding on the Red Sea. It's literally kilometers away from where the Hooties are firing missiles at naval vessels, and it has a role to play in this crisis.
These ship attacks by the Hoothiets have caused chaos.
They started launching cruise drone.
Missiles attacking shipping in the Red.
Seat, and it's the latest in a continued at tax within the Red Seat that is one.
Of the most important shipping lanes in the whole world.
Clearly, Djibouti is playing an important role on a geopolitical level, and yet its coastline, as you mentioned in the story, is one of the most dangerous in the world.
One of the key cornerstones of Djibouti's sort of rationale I guess, and also its discourse internationally, is the absolute need for stability. It's really dependent on it, and yet it is completely surrounded, as you mentioned, by instability.
You know, recently you.
Have the crisis because of Hooti attacks on ships, but even before that you had a lot of instability. To the south in Somemalia, Al Shabab are very active. There is a lot of smuggling in the area, be it of drugs, of counterfeit goods and also of people. There's a huge migration crisis that goes through Djibouti from countries like Eritrea and Ethiopia. And then you have Eritrea to the north, which does not have a good relationship with Djibouti.
They have disagreements over territory over the border. So all in all, yeah, it's surrounded by forms of chaos.
Hence this messaging from the.
Government there that they are really you know, the one country the international community can depend on for bringing stability.
Is the government aware of how strategic the country is to actually maintaining stability in the region.
This is their selling point. This is something they literally sell through the form of granting land to foreign and militaries. There's five military bases, including French, the United States, the Japanese, the Italians, and the Chinese also, and the government are earning hundreds of millions of dollars every year from granting these bases. Really you can kind of see that their economy depends on it, right, they earn money from this
and their ports again depends on this stability. You know, without stability, there are no naval vessels coming in and actually you can see them taking advantage of what's happening on the Red Sea as we speak, because major vessels coming from Asia going north towards the Suez Canal are doing what you call transhipment, which is basically unloading from big vessels and putting containers onto smaller vessels as a way of avoiding the risk of being hit by missiles.
And Simon, was this happening prior to the Israel Hamas war or was this something that was really zeroed in on as this conflict has continued over the past few months.
The transhipment business at the ports was something that was sparked in direct relation to the Hooti attacks. So whereas before a lot of larger vessels would simply bypass Djibouty and either just go straight up through the Suez Canal or they might stop at Jeddah in Saudi Arabia, they're now being forced to take a bit of a detour and come into the port in Djibouty where they unload
onto these smaller vessels. I think the rationale there is that they're harder to attack just by the nature of their size, but also maybe the ownership structures of these vessels are different, you know, they might be linked two countries that aren't being honed in on by the who.
He's in Yemen.
So this is something the chairman of the port, when I spoke to him, he acknowledged, but he was also quite careful to say, you know, this is not a business plan that we want to see go on. You know, we'd rather sea stability on the Red Sea.
Which is why Simon I found it so interesting in your story. The Jibusian government says they don't want to be brought into a war. They explicitly said that to you, But they're essentially in the middle of a war. I mean, how are they able to maintain this neutral objective position as they describe it to you.
They're on a very tight tightrope here.
You know, they're navigating something that's very sensitive, and through our reporting, you know, we found out that the onset of the war on Gaza, the Americans actually did ask the Jibusians if they could conduct more sort of offensive like operations out of their military base in and the Jibusians turned round to them and said, under no circumstances, you know, as you go ahead and do this, do not bring us into this war.
They have been.
Clear with their partners that they have to remain neutral. But on the other hand, you know, they have to sort of play ball a bit. So you've seen them invite European naval ships into their ports from Sweden, from Greece, from Germany. They're allowed to refuel, they're allowed to use port services, so they are willing to help as long as the work attempts to secure the Red Sea are of a defensive nature, basically.
And do you think they're going to be able to walk this tightrope for much longer?
You know, I think probably they will be able to because they have the biggest character play in that is their geographical location.
And in the end, most people are willing to abide by Djibout's rules, so they kind of opened the door in some way to anyone, but within reason.
After the break, we discuss how the latest events in the Red Sea are indirectly benefiting the economy of Djibouti. We'll be right back, Welcome back, Simon. Earlier we talked about the strategic asset Jibouti plays globally, but for the country, the current geopolitical position actually represents to a certain extent and economic opportunity for them. Can you just describe that for.
US, revenues at the poor supposedly this year are going to go up quite a lot, you know, thirty forty percent as a result of this trendshipment business.
But you know, the Jibutis are quite keen to sort.
Of pain give another message whereby if there was stability in Somalia and if Ethiopian economy stabilized and there was less violence in Ethiopia, that would provide huge markets in East Africa. You know, there's one hundred and ten hundred and twenty million people in Ethiopia, and so if this economy can grow, that would mean so much more business Forgibiuty miles more than what you're getting from a bit
of transhipment off the Red Sea. So they're quite acutely aware that, yes, there's a short term benefit, but on the other hand, this market of East Africa is so much bigger if they, you know, can just stabilize a bit.
I wonder does the rest of the region see it that way?
Definitely.
Ethiopia, for example, have recently made moves to have port access, have access to the coast via Somaliland, which is a breakaway state of Somalia.
That's caused a.
Lot of apro Ethiopia sign a deal with Somaliland to gain access to the Red Sea. But the deal by landlocked Ethiopia risks heightening tensions in a region it's already racked by conflict.
The US, EU and African Union are calling on Ethiopia and Somalia to de escalate tensions.
The State of Somalia doesn't see this as legitimates.
They're not happy because they still consider Somali land a part of their sovereign territory and their timing the agreement is an act of aggression against their sovereign and territorial integrity.
So all eyes are on the Red Sea. It's a hugely coveted area. You have Russia making moves with their Atrayer at the moment to get access to the port's system there and perhaps a naval base.
So yeah, it's fair to say that Jibouti's coastline is very highly coveted.
They've also tried to bring on board the Sudanese port Sudan to have a concession. The Emiratis have wired a port in Somaliland already and were a number of years ago kicked out of Djibouti and replaced by the Chinese.
In general, actually this coastline is quite undeveloped. You know, there's not a huge amount of infrastructure, and yet there's these huge populations which are developing quickly and so widely speaking, from the United Emirates to the Chinese to the Russians, a lot of people are looking to sort of get a piece of.
This Pae and simon for the population in the country. Is this actually translating on the ground.
Yeah, I think this is perhaps could we say, you know, the biggest black mark against the Jubutian government, there isn't a huge amount of what you would call, I guess trickle down, you know, from the successes they've had through their ports, through their sort of role as an international mediator to the general or public. You know, a lot of the population is still very poor. You know, World Bank figures show extreme poverty up to about one and four.
So there's a massive job of integrating the population into the workforce, creating jobs from these success projects, and that again boils down to government policies and education on training, and you know, they say they are trying to diversify the economy into other sectors. Green energy is one, logistics is another. They have a large dry port which on paper could generate quite a few jobs.
Thank you so much, Simon Marx joining us there from Nairobi. Look Perhaps unlike any of the other fifty three countries on the African continent, Djibouti as an international asset is evident in its location, investment, and allies. But the future success of the small East African country and maybe even those around it, may just depend on its ability to
keep the surrounding chaos at bay. You can read more about this story at Bloomberg dot com, and don't forget to follow and review this show wherever you usually get your podcast. I'm Jennifer Zabasaja. Thank you so much for listening.