As one of the smallest countries in Africa, both by size and population, it rarely features in any of those “African top 10” lists. And for some reason, the IMF classifies it as a Middle Eastern country in its World Economic Outlook. But the Republic of Djibouti is indeed in Africa, strategically located in the Horn of Africa, bordered by Eritrea, Ethiopia and Somalia. It sits there at the southern end of the Red Sea where it joins the Gulf Aden, and just 35 kilometres from the coastline of Yemen. That’s the busiest waterway in the region, and one of the trouble spots, less affected these days by piracy, but the threat is still there, with one of the main problems these days being the conflict in Yemen.
So what Djibouti has done is massively expand its seaports, catering to various navies’ vessels, and also the main entry point for goods heading to and from Ethiopia. With no coastline of its own, Ethiopia is dependent on neighbouring countries for its access to the sea, mostly Djibouti (some supplies come through Somalia), from where a rail line runs to Addis Ababa. As a result, the ports in Djibouti are busy, and massive investment means that they are highly efficient.
Other commercial activity in Djibouti includes the new free zone, new shopping malls, anew airport for the capitalas well as one at Ras Siyyan, a planned new resort in the north of the country, new seaports, all with the potential of improving the physical, economic and social landscape of the country. And a project of extremely high importance is the revival of Air Djibouti, in partnership with a UK company, which will improve access to the country. Destinations in the first phase of operation will include London and Dubai.
In the tourism sector, Djibouti is virtually unknown, with some adventurers attracted primarily by the country’s natural attractions, which include Lake Assal, the lowest point in Africa with the second saltiest lake in the world, and the Day Forest national park. Maritime pursuits include game fishing and scuba diving, with the Red Sea offering some of the best diving sites, including the opportunity to swim with (totally harmless!) whale sharks.
Currently, Djibouti – that’s the country, not just the eponymous capital city - has just 1,000 rooms in 23 hotels, with high occupancies (80 per cent in 2014, 83 per cent Jan-Oct 2015) generated by business visitors, the army bases, NGOs, air crew and others. There are only two branded hotels there, the Sheraton and the Kempinski, which together accommodate 75 per cent of international visitors (there is virtually no domestic demand); as yet there is nothing in the chains’ pipelines in the country. The Ayla Hotels Company from the UAE has a 100-room hotel under construction in the capital, and a Chinese company is planning a hotel there and a resort in Ras Siyyan. Completion dates for these hotels are unknown – if they happen at all.
There is a huge need for new hotel investment in Djibouti. The lack of quality accommodation is a constraint to the government, and to the international investors that they are working with, in the achievement of their objectives. And at the end of the day, it is all about making money for the shareholders, and (essentially the same thing, because a country’s people are shareholders in the country) it is about creating jobs. To date, much of the investment has been in high capital investment projects, with a low labour requirement. There is the so-called Djibouti Paradox, with high economic growth, and considerable development activity underway, but with unemployment estimated at over 50 per cent.
A recent study identified the need for several new hotels, located in different regions of the country, not only to cater to the existing demand, but also to create demand, from MICE activity (Meetings, Incentives, Conferences and Events), and from vacationers. Whilst Djibouti City is the main location proposed for new hotel development, as that is where much (but not all) of the existing and new commercial activity is taking place, places such as Ras Siyyan, Lake Abbe, Lake Assal and Moucha Island are also identified, creating a circuit for leisure travellers. In Ras Siyyan, the government is seeking to attract investors to create a new destination resort, with multiple lodging establishment, and improved facilities for the diving activity – the nearby Seven Brothers’ Islands are well-known in the diving community.
Improvements in infrastructure will be required, and the government is tackling this in various ways, such as the revival of Air Djibouti, construction of new airports, including the one which will serve the proposed Ras Siyyan resort, and upgrading roads. The investment regime in Djibouti is generally fairly liberal, the political and economic scenario is stable, and incentives to investors, especially those creating jobs, include tax holidays. Companies can be wholly foreign owned, with no obstacles to repatriation of profits.
Djibouti is not on many people’s radar right now, but watch this space – the government is undertaking a massive investment promotion campaign, which will include seeking investors for new hotels and resorts throughout the country. That in turn will further improve the profile of the Republic of Djibouti.
W Hospitality Group, Lagos