Javier Fernández Arribas
When a massive cargo ship blocked the Suez Canal last week, the importance of the shipping industry came back into the popular imagination. The Ever Given held up the world’s supply lines and cost companies millions of dollars. But further down the map, in the African ports in the Gulf of Aden, corruption regularly deters business and robs ordinary citizens of the wealth they could be accessing.
Ports in strategic locations attract good and bad attention. They are critical gateways for companies diversifying their international sales. It’s clear that African ports have an essential role to play in sustaining and enhancing more resilient and diverse growth in their respective economies. But they get some bad PR as well. Arms trafficking in the state of Djibouti is a more common subject of public interest than its ports’ role in development.
For a dictatorship, a deliberately poorly-managed port can be a “cash cow”. Currency exchange offices are purposely being set up in the vicinity of the ports. Under these conditions, international companies are entering the African market from the free trade zones and many governments are increasing their budgets with customs revenues.
Many ports, which choose not to follow strict regulations and legislation as in a regulated environment, are conducive to the emergence of illegal trading: counterfeit money, bribery, profit from illicit transactions and encourage corruption and crime.
Djibouti is a particularly strong example, where DP World’s concession to run the Doraleh Container Terminal (DCT) was illegally terminated. Currently, money laundering is on the rise because Djibouti has no exchange restrictions. Companies are free to repatriate profits and there are no limitations on converting or transferring funds. Without any regulation, the money exchanges that support trade flows through the free zone are preventing the port’s economic activity from contributing to the country’s GDP, and ultimately to Djibouti’s population.
Corruption in this area, which provides much of the large personal fortune of the country’s current president and his family, is another feature of a brutal dictatorship which commits multiple human rights violations and enforces a total absence of press freedom. Dictatorships means that the country’s assets are within the hands of the family members and that the national treasury is their personal bank.
According to information gathered in Djibouti, the first lady’s fortune consists of the fishing port, the railway, the cement factory, the container loading station, the Al Buruj container transport company, the East Africa Holding company, the Bawadi Shopping Centre, the Hawk construction company, an electric power plant and the BCI MR headquarters.
In this respect, political opponents point out, the president’s actions have compromised the support he has received from China in the construction of various infrastructures, and leaders in Beijing and the United States, perhaps less so in France, have realised that maintaining the dictatorship jeopardises their own interests.
President Ismail Omar has to explain to international powers reports that he is financing the terrorist group Al Shabbab. Omar, in power since May 1999, intends to remain in office thanks to the elections scheduled for 9 April where he will have no opponents. The opposition leaders are in exile and consider the elections, and the pre-decided results, a farce. Corruption in Djibouti is well documented, having ranked 142/180 in Transparency International’s Corruption Perceptions Index in 2020, and there is little sign of improvement.
Considering that Djibouti’s $2 billion city-state economy is driven by its port, and that the country is almost entirely dependent on imports to meet its food needs, international trade is essential. Considering all this, the president could be expected to make trade a priority as Djiboutians head to the polls.
But, as the IMF reports, blanket tax exemptions aimed at attracting foreign investment within the trade zone have not generated the expected employment benefits. They have created an uneven playing field for investors, sidelining smaller, more labour-intensive domestic firms. And implicit subsidies for energy products through tax cuts have also resulted in lost tax revenues, disproportionately benefiting higher income groups.
Globally, 80 percent of trade in goods and 70 per cent of their value enters through ports. For Africa to realise the economic potential of its ports’ geographical advantage, it is vital to improve efficiency by tackling corruption. Corruption stagnates economic growth and productivity and increases inequality.
The continent’s seaports are strategically important and play a crucial role in all economies that rely on maritime transport to access the international market. Investment in the good management of seaports therefore equates to an investment in local prosperity, creating jobs and opportunities in those regions that depend on trade flows.
Port authorities, organizations and governments have a key role to play in achieving this goal and, in doing so, promote and safeguard the economic development of their countries. Until something is done about the corruption in these seaports, economies that rely on them for development will continue to stagnate, and citizens are robbed of the wealth that could be theirs.
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