Air Cargo Facilities and Operations
Air Cargo Facilities and Operations
Business Model Description
Invest in new airport facilities and deal making with international and regional trade partners for air cargo and sea-air and air-sea transport connections.
Expected Impact
Enhance regional economic integration and intra-regional trade, as well as stimulate innovative job creation in Djibouti.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Djibouti: Djibouti (City)
Sector Classification
Transportation
Development need
Djibouti's growth is driven by maritime transportation and mega projects that envisage creating a major hub with multi-modal infrastructure in East Africa by 2035. Although the country's SDG 9 performance is low with a score slightly above 25 (out of 100) in 2021 (1), its Logistics Performance Index score rose to 2.63 out of 5 in 2018, up by 44 places compared to 2016 (2).
Policy priority
The Horn of Africa Initiative was launched during the World Bank / International Monetary Fund Annual Meeting 2019. Member States (Djibouti, Ethiopia, Kenya, Somalia and Eritrea) structure key programmes around four pillars, including "Interconnected Horn" (3). Djibouti plans to spend USD 15 billion over the next five years to build and improve its infrastructure network (4).
Gender inequalities and marginalization issues
Women's exposure to informal employment in non-agricultural employment is very high (84%) (5). Investment in transportation may lower the risk by providing increased and safer mobility as well as formal employment opportunities for women. Marginalization of youth is characterized by the age divide between population median age and age of people in leadership positions (6), and share of youth not in education, employment or training (31.8% in 2019) (7).
Investment opportunities introduction
Djibouti's Vision 2035 gives policy momentum to maximize the country's strategic position in the transportation sector. The Great Horn Investment Holding targets USD 15 billion investment in transportation (4). Regional Infrastructure Connectivity projects will attract USD 1.6 billion by 2021 to develop Economic Corridors in the region (22).
Key bottlenecks introduction
In order to promote accountable and sustainable development of the transportation sector, Djibouti requires to set clear monitoring processes for port authorities, support policymaking effort at national (and local) level and avoid customer concentration in port services (8). Active (or latent) conflicts in nearby regions pose a threat to continuity of trade services.
Air Transportation
Development need
Air freight is a significant alternative for landlocked countries such as Ethiopia (total air freight traffic was 2,450 million-tons in 2019) (9), Djibouti's main trade partner. The subsector (stagnant in Djibouti since 1990s) and integrated sea-air transport will increase the efficiency of trade activity by supporting multimodal transport services in the region (30).
Policy priority
The Djibouti Port and Free Zone Authority (DPFZA) oversees the planning and construction of Al Haj Hassan Gouled Airport with USD 385 million total investment that is expected to handle 100,000 tons of air cargo (10). Ethiopian Airlines signed an MoU in 2013 with Djibouti International Airport for the provision of sea-air and air-sea cargo services (11).
Gender inequalities and marginalization issues
Air freight could increase trade and economic relations among countries in the region and hence generate job opportunities for women. Developing transport infrastructure will improve women's access to education, health care, decent employment opportunities and economic resources (12). It will also offer women the opportunity to enter the formal sector (5).
Investment opportunities introduction
Djibouti's ambitious transportation development scheme includes two new airports, the Ahmed Dini Ahmed International Airport and the al Haj Hassan Gouled International Airport at Bicidle. Located 25 km from the capital, the latter is projected to handle 100,000 tons of air cargo (10).
Key bottlenecks introduction
Djibouti's airports are not equipped with active handling capability and temperature control services (13). Maintaining two-way air traffic may become overly dependant on imports. Digitalization and individual skill building within the subsector should be promoted as the country ranked among the worst in IATA Air Trade Facilitation Index in 2017 (14).
Air Freight and Logistics
Pipeline Opportunity
Air Cargo Facilities and Operations
Invest in new airport facilities and deal making with international and regional trade partners for air cargo and sea-air and air-sea transport connections.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
100 kilotons of cargo handled
Djibouti's Vision 2035 targets total investments of USD 15 billion in infrastructure and transportation projects, which also includes development in air cargo facilities. The new Hassan Gouled airport, set for such trajectory, will require USD 385 million total investment (10).
The planned Al Haj Hassan Gouled airport will carry 100,000 tonnes of air cargo, the project timeline is yet to be disclosed. An MoU between Djiboutian Authorities, Egis and Aéroport de Paris Ingénierie (ADPI) was signed in 2021 (15).
Ethiopian Airlines carried 181,000 tonnes of cargo in 2012, which is projected to increase to 820,0000 tonnes and generate USD 2 billion (18).
Indicative Return
15% - 20%
Based on benchmark projects from Indonesia's flag carrier airline indicate a minimum IRR of 17% (28).
Investment Timeframe
Long Term (10+ years)
Construction of the airport, development of the masterplan and agreement on timeframe are yet to be announced. As the project remains in the Government's Vision 2035, the opportunity is expected to generate return in the long term.
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Market - Volatile
Capital - Requires Subsidy
Impact Case
Sustainable Development Need
Although Djibouti presents potential to serve as a trade hub and primary entry point for the Ethiopian market, a sizeable portion of transportation infrastructure investments are led by the Government, which are weighing on the country's public finances (36).
Djibouti is positioned on a busy trade route and the transport sector and trade in goods and services account for 35% and 45% of GDP (36). The country's future in the sector lies in efficiently serving trade corridors to the Horn of Africa and remaining the prime gateway for Ethiopia (37).
Djibouti's services sector employs 70% of the population, a large proportion of which are employed in activities linked to transport. Yet the sector remains largely under-explored, presenting opportunities for job-creation, one of Djibouti's pressing issues (36).
Gender & Marginalisation
Air cargo facilities will facilitate new jobs that require developing technical and mechanical skills in the transportation sector. Developing transport infrastructure will improve women's access to education, health care, decent employment opportunities and economic resources (12).
Expected Development Outcome
Air freight and increased connectivity among different modes of transport contributes to regional economic integration and increase intra-regional trade.
Economic growth are expected along new routes established via air freight services. Alternative and increased employment opportunities in the country's dominant services sector in line with SDG 8 are created.
Enhanced total trade volume, variety of merchandise and diversified export channels with respect to infrastructural and innovative achievements foreseen by SDG 9 will be realised thanks to the air cargo facilities.
Gender & Marginalisation
Air cargo facilities increase the rural community's capacity to export primary products. Enhanced opportunities for women in terms of building skills and employment are created through the air freight opportunity.
Primary SDGs addressed
8.1.1 Annual growth rate of real GDP per capita
GDP per capita growth had been recorded above 6% in two consecutive years, before turning negative in 2020 (19). Unemployment rate has been high with 48.4% in 2012 (20) and 26% in 2017 according to national estimates (33). Informal work is common in the country (employment by sector in 2015; 59% public sector, 10% private formal, 31% private informal) (34).
Djibouti's Vision 2035 target rates of GDP annual growth are above 11% for each year between (2023 and 2034). It also specifies the goal of having an unemployment rate of nearly 10% by 2035 (20).
9.1.2 Passenger and freight volumes, by mode of transport
9.2.2 Manufacturing employment as a proportion of total employment
Djibouti does not have a viable air freight network in place. The opportunity may create a feasible, innovative and growing environment in the proposed mode of transportation.
Level of manufacturing employment as a proportion of total employment in Djibouti stood at 0.24% in 2017 (35).
Djibouti plans to handle 100 kiloton of cargo (10).
Manufacturing industry will contribute 7% to GDP by 2035, up from 2.7% in 2012 according to Vision 2035 targets (20).
Secondary SDGs addressed
Directly impacted stakeholders
People
Corporates
Public sector
Indirectly impacted stakeholders
Gender inequality and/or marginalization
Corporates
Outcome Risks
Air freight activity may result in increased carbon emissions as air cargo is prone to be more hazardous to nature than seaborne cargo due to high rates of emission and fuel consumption.
Impact Risks
Djibouti's limited operational experience in air cargo may increase the costs and cause delay in infrastructural investments, deteriorating market sentiments.
Planned investment scheme and training of personnel may not be delivered on time, which could hinder the realisation of the opportunity and hence limit the expected impact on people and the economy.
Impact Classification
What
Air cargo facilities and operations enhance regional economic integration and intra-regional trade, as well as stimulate innovative job creation in Djibouti.
Who
The air transportation industry obtains access to efficient cargo and operations systems, and youth and women access skill-building opportunities in an innovative sector.
Risk
While the model of air cargo facilities and operations is proven, implementation timelines and personnel skills require consideration.
Impact Thesis
Enhance regional economic integration and intra-regional trade, as well as stimulate innovative job creation in Djibouti.
Enabling Environment
Policy Environment
Vision Djibouti 2035, 2014: Acknowledges that aerial transportation is needed to link the country with global markets and international logistic enterprises (20).
Strategy for Accelerated Growth and Employment Promotion (SCAPE) 2015-2019, 2015: Accentuates the prominent role of transportation in the country's economy and growth strategy (21).
Horn of Africa Initiative Ministerial Roundtable, 2021: Joint Presentation by the African Development Bank, the European Union and the World Bank covers key messages and pillars for the regional development scheme, which includes infrastructure and air fright (22).
Financial Environment
Financial incentives: The World Bank announced support of USD 2 billion to the Horn of Africa through a lending programme under IDA19, which is the World Bank’s concessional financing window that provides low or no-interest loans and grants to the world’s poorest countries (29).
Fiscal incentives: Djibouti's Investment Code specifies three preferential regimes: Regime A, Regime B and Free Zone Code. The latter favours 100% foreign ownership, free repatriation of capital and profits, exemption from corporate and income tax, and flexibility to employ foreign nationals (26).
Regulatory Environment
Decree N° 2016-072/PR/MET, Modifying the Decree n°2015-272/PR/MET, 2016: Provides regulations on the organization and functioning of the Civil Aviation Authority (23).
Decree N° 2018-307/PR/MET, 2018: Establishes and organises the National Committee for the Facilitation of Air Transport (24).
Code Des Douanes, 2011: Provides customs information (25).
Law No. 186, 2017: Establishes Djibouti's Public-Private Partnership Act, following the Executive Decision No. 045 of 2016 to establish a Committee on the creation of a national legal and regulatory framework of 2016 (8).
Marketplace Participants
Private Sector
Great Horn Investment Holding (GHIH), Air Djibouti, Ethiopian Airlines, Turkish Airlines, Qatar Airways, Egis, Aéroport de Paris, China Merchants Group, Safe Air (Kenya).
Government
Djibouti Ports & Free Zones Authority (DPFZA), Horn of Africa Initiative (Djibouti, Ethiopia, Kenya, Eritrea, Somalia, Sudan).
Multilaterals
African Development Bank (AfDB), European Union (EU), World Bank (WB), Intergovernmental Authority on Development (IGAD).
Public-Private Partnership
Djibouti International Free Trade Zone (DIFTZ), Djibouti Damerjog Industrial Development Free Trade Zone (DDID FZE).
Target Locations
Djibouti: Djibouti (City)
References
- (1) Djibouti in Sustainable Development Report. 2021. https://dashboards.sdgindex.org/static/profiles/pdfs/SDR-2021-djibouti.pdf.
- (2) World Bank LPI Country Score Card: Djibouti. 2018. https://lpi.worldbank.org/international/scorecard/radar/254/C/DJI/2018#chartarea.
- (3) Horn of Africa Initiative, Key Priority Projects to Deepen Regional Integration. 2020. https://hoainitiative.org/wp-content/uploads/2020/11/HoA-Initiative-KEY-PRIORITY-PILLARS-Brochure_FINAL.pdf.
- (4) Great Horn Investment Holding. Chairman's Speech. 2020. http://www.ghih.dj/about-ghih.
- (5) UN Women Country Profile, SDG 8. 2021. https://data.unwomen.org/country/djibouti.
- (6) Financial Times. June 2021. https://www.ft.com/content/b9198e0f-379c-4c80-9171-58e1c820e655.
- (7) ILOSTAT. ILO Modelled Estimates, 2019. https://www.ilo.org/shinyapps/bulkexplorer55/?lang=en&segment=indicator&id=EAP_2WAP_SEX_AGE_RT_A.
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- (9) World Bank Data. Air Transport - Ethiopia. 2021. https://data.worldbank.org/indicator/IS.AIR.GOOD.MT.K1?locations=ET
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- (12) Task Force on Transport and Connectivity. Towards an enhanced Africa-EU. 2020. https://africa-eu-partnership.org/en/stay-informed/publications/report-task-force-transport-and-connectivity.
- (13) Station Capabilities: Details of Turkish Cargo Destinations. 2021. https://www.turkishcargo.com.tr/en/network/station-information.
- (14) IATA Economics' Chart of the Week. 2017. https://www.iata.org/en/iata-repository/publications/economic-reports/g20-leaders-and-iata-call-for-action-on-trade-facilitation.
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- (18) ET Maritime. Ethiopian Cargo Business Forecast. 2021. https://etmaritime.com/transportation/air-cargo-services.
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