Djibouti is a young country strategically located in East Africa and serves as the regional transportation and logistics hub for landlocked countries in the region and thus presents untapped opportunities. The East African country which is home to the only U.S. military base in Sub-Saharan Africa and the largest French foreign military base has one of the fastest growing economies in Africa. With the economy still growing, there are opportunities for investment in various sectors of the economy.
Logistics and Warehousing
The Djiboutian ports are vital to Ethiopia and growing in importance to South Sudan. Imports can sit at the port for 3-6 months before making it to the final destination in Addis Ababa. Prices for warehousing and transports are exorbitant such that, after six months, it is often more profitable to auction off goods than to store them longer. During the winter season (right after the Ethiopian rainy season), the port is further congested due to a major bump in imports and exports. The port bottleneck will only be relieved through expansion of the other ports, more affordable warehousing, and, in the longer term, better intergovernmental interaction over taxes and duties among other things.
Why come off the military bases? Djibouti is a welcoming city made in the reflection of its inhabitants. Locals generally speak French, Arabic and/or Somali with some locals sparingly speaking English. Accustomed to a large foreign presence, locals often will want to socialize to understand where you are from and what you think of Djibouti.
The country is also home to internationally renowned scuba diving places in the north. Unfounded and founded security concerns have kept the tourism sector from growing. At the same time, Djibouti’s touristic areas could use a heavy boost from investment in moderately priced, quality hotels as well as other touristic amenities (i.e., tour guides, moderately priced restaurants, etc.).
Djibouti’s telecom sector represents an untouched domestic market with various products including mobile services, fixed lines and broadband, where the state-owned Djibouti Telecom has the monopoly. GDP contribution is still low, therefore, competition is required. However, the country has potential to become the regional hub for telecommunications by providing an international network with undersea fiber optic cable systems.
Djibouti is home to Lac Assal (Lake Assal) which is the saltiest lake in the world and also sits at one of the lowest points in Africa. Prior to a joint venture investment in Salt Investment SA by foreign investors, including Emerging Capital Partners, Djiboutian salt production was limited to the demand of the Ethiopian market and constrained by the lack of iodization machinery, energy and water supply. While Salt Investment SA has faced an uphill battle, investors strongly believe in the potential of Djibouti’s salt production.
Djibouti’s banking sector is competitive and hosts 11 banking groups in total. Recently, it has achieved significant growth by providing an excellent macroeconomic framework for investors and now accounts for 10% of GDP. There are no restrictions except for the minimum capital requirement of $1.7 million to establish a financial institution. However, Djibouti lacks other financial services, including leasing and insurance companies, investment funds and microcredit organizations. In addition, Islamic finance is a growing trend and there are already four Islamic banks operating in Djibouti.