May 9, 2024 • 14 mins
Yemen's Iran-backed Houthi militants have disturbed global trade with attacks on commercial ships in the Red Sea. One African country has been playing a major role in Western allies efforts to contain those attacks.
This week on the Next Africa Podcast Jennifer Zabasajja and Simon Marks discuss why Djibouti's strategic importance in the region is providing the country with an economic boost.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:09):
When I say Djibouti, what comes to your mind?
Speaker 3 (00:13):
A lot of us had to go online.
Speaker 4 (00:15):
Yeah, why that was yes?
Speaker 2 (00:17):
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.
Speaker 3 (00:26):
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.
Speaker 2 (00:38):
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?
(01:01):
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.
(01:27):
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.
Speaker 5 (01:44):
Djibouti is kind of a sleepy place.
Speaker 4 (01:49):
It's very hot, nestled right on the coast on the
Red Sea, very picturesque in some ways, surrounded.
Speaker 5 (01:58):
By blucy etc.
Speaker 4 (02:01):
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
(02:24):
a bit of an oversized role in a way.
Speaker 2 (02:27):
And what exactly do you mean by oversized role?
Speaker 4 (02:31):
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
(02:51):
Hooties are firing missiles at naval vessels, and it has
a role to play in this crisis.
Speaker 2 (03:00):
These ship attacks by the Hoothiets have caused chaos.
Speaker 3 (03:04):
They started launching cruise drone.
Speaker 5 (03:07):
Missiles attacking shipping in the Red.
Speaker 1 (03:09):
Seat, and it's the latest in a continued at tax
within the Red Seat that is one.
Speaker 5 (03:14):
Of the most important shipping lanes in the whole world.
Speaker 2 (03:19):
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.
Speaker 4 (03:31):
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.
Speaker 5 (03:49):
You know, recently you.
Speaker 4 (03:51):
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
(04:12):
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.
Speaker 5 (04:34):
Hence this messaging from the.
Speaker 4 (04:36):
Government there that they are really you know, the one
country the international community can depend on for bringing stability.
Speaker 2 (04:44):
Is the government aware of how strategic the country is
to actually maintaining stability in the region.
Speaker 4 (04:51):
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
(05:12):
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
(05:34):
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
(05:55):
way of avoiding the risk of being hit by missiles.
Speaker 2 (06:00):
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.
Speaker 4 (06:11):
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
(06:32):
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
(06:53):
vessels are different, you know, they might be linked two
countries that aren't being honed in on by the who.
Speaker 5 (07:00):
He's in Yemen.
Speaker 4 (07:01):
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.
Speaker 2 (07:15):
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.
Speaker 5 (07:34):
They're on a very tight tightrope here.
Speaker 4 (07:38):
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
(08:01):
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.
Speaker 5 (08:09):
They have been.
Speaker 4 (08:10):
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
(08:34):
as the work attempts to secure the Red Sea are
of a defensive nature, basically.
Speaker 2 (08:40):
And do you think they're going to be able to
walk this tightrope for much longer?
Speaker 4 (08:44):
You know, I think probably they will be able to
because they have the biggest character play in that is
their geographical location.
Speaker 5 (08:54):
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.
Speaker 2 (09:13):
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
(09:36):
and economic opportunity for them. Can you just describe that for.
Speaker 4 (09:40):
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.
Speaker 5 (09:51):
But you know, the Jibutis are quite keen to sort.
Speaker 4 (09:54):
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
(10:15):
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.
Speaker 2 (10:36):
I wonder does the rest of the region see it
that way?
Speaker 5 (10:40):
Definitely.
Speaker 4 (10:41):
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.
Speaker 5 (10:53):
That's caused a.
Speaker 1 (10:54):
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.
Speaker 6 (11:06):
The US, EU and African Union are calling on Ethiopia
and Somalia to de escalate tensions.
Speaker 4 (11:12):
The State of Somalia doesn't see this as legitimates.
Speaker 6 (11:17):
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.
Speaker 4 (11:30):
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.
Speaker 5 (11:43):
So yeah, it's fair to say that Jibouti's coastline is
very highly coveted.
Speaker 4 (11:51):
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,
(12:14):
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.
Speaker 2 (12:30):
This Pae and simon for the population in the country.
Is this actually translating on the ground.
Speaker 4 (12:38):
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
(13:02):
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,
(13:25):
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.
Speaker 2 (13:41):
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
(14:03):
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.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:09):
When I say Djibouti, what comes to your mind?
Speaker 3 (00:13):
A lot of us had to go online.
Speaker 4 (00:15):
Yeah, why that was yes?
Speaker 2 (00:17):
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.
Speaker 3 (00:26):
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.
Speaker 2 (00:38):
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?
(01:01):
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.
(01:27):
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.
Speaker 5 (01:44):
Djibouti is kind of a sleepy place.
Speaker 4 (01:49):
It's very hot, nestled right on the coast on the
Red Sea, very picturesque in some ways, surrounded.
Speaker 5 (01:58):
By blucy etc.
Speaker 4 (02:01):
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
(02:24):
a bit of an oversized role in a way.
Speaker 2 (02:27):
And what exactly do you mean by oversized role?
Speaker 4 (02:31):
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
(02:51):
Hooties are firing missiles at naval vessels, and it has
a role to play in this crisis.
Speaker 2 (03:00):
These ship attacks by the Hoothiets have caused chaos.
Speaker 3 (03:04):
They started launching cruise drone.
Speaker 5 (03:07):
Missiles attacking shipping in the Red.
Speaker 1 (03:09):
Seat, and it's the latest in a continued at tax
within the Red Seat that is one.
Speaker 5 (03:14):
Of the most important shipping lanes in the whole world.
Speaker 2 (03:19):
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.
Speaker 4 (03:31):
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.
Speaker 5 (03:49):
You know, recently you.
Speaker 4 (03:51):
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
(04:12):
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.
Speaker 5 (04:34):
Hence this messaging from the.
Speaker 4 (04:36):
Government there that they are really you know, the one
country the international community can depend on for bringing stability.
Speaker 2 (04:44):
Is the government aware of how strategic the country is
to actually maintaining stability in the region.
Speaker 4 (04:51):
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
(05:12):
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
(05:34):
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
(05:55):
way of avoiding the risk of being hit by missiles.
Speaker 2 (06:00):
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.
Speaker 4 (06:11):
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
(06:32):
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
(06:53):
vessels are different, you know, they might be linked two
countries that aren't being honed in on by the who.
Speaker 5 (07:00):
He's in Yemen.
Speaker 4 (07:01):
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.
Speaker 2 (07:15):
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.
Speaker 5 (07:34):
They're on a very tight tightrope here.
Speaker 4 (07:38):
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
(08:01):
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.
Speaker 5 (08:09):
They have been.
Speaker 4 (08:10):
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
(08:34):
as the work attempts to secure the Red Sea are
of a defensive nature, basically.
Speaker 2 (08:40):
And do you think they're going to be able to
walk this tightrope for much longer?
Speaker 4 (08:44):
You know, I think probably they will be able to
because they have the biggest character play in that is
their geographical location.
Speaker 5 (08:54):
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.
Speaker 2 (09:13):
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
(09:36):
and economic opportunity for them. Can you just describe that for.
Speaker 4 (09:40):
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.
Speaker 5 (09:51):
But you know, the Jibutis are quite keen to sort.
Speaker 4 (09:54):
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
(10:15):
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.
Speaker 2 (10:36):
I wonder does the rest of the region see it
that way?
Speaker 5 (10:40):
Definitely.
Speaker 4 (10:41):
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.
Speaker 5 (10:53):
That's caused a.
Speaker 1 (10:54):
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.
Speaker 6 (11:06):
The US, EU and African Union are calling on Ethiopia
and Somalia to de escalate tensions.
Speaker 4 (11:12):
The State of Somalia doesn't see this as legitimates.
Speaker 6 (11:17):
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.
Speaker 4 (11:30):
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.
Speaker 5 (11:43):
So yeah, it's fair to say that Jibouti's coastline is
very highly coveted.
Speaker 4 (11:51):
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,
(12:14):
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.
Speaker 2 (12:30):
This Pae and simon for the population in the country.
Is this actually translating on the ground.
Speaker 4 (12:38):
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
(13:02):
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,
(13:25):
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.
Speaker 2 (13:41):
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
(14:03):
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.
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