Port Online Commodity Trading Platform
Port Online Commodity Trading Platform
Business Model Description
Develop and operate a commodity trading platform as part of the Djibouti Port Community System (DPCS) to provide access to online trade related services, such as ports, air cargo terminal and customs services, and associated e-payments.
Expected Impact
Improve trade efficiency and decrease costs related with ports and logistics processes.
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)
- Djibouti: Tadjourah
- Djibouti: Arta
- Djibouti: Obock
Sector Classification
Services
Development need
Djibouti's economy is dominated by the services sector generating 70% of growth (5). Transport services, especially port activities, are the main growth source and employ most of the workforce (1). As services are becoming more tradable, expanding and diversifying international service exports provide significant opportunities for developing least developed countries (2).
Policy priority
The authorities are continuing the country's development with the goal of setting up a regional hub for trade, logistical and financial services (3). One such attempt is the inauguration of the Djibouti International Free Trade Zone (DIFTZ) in 2018, which is set to be the largest free trade zone in Africa once complete (9).
Gender inequalities and marginalization issues
Consumer services are key to promoting inclusive growth. They provide jobs for the poor, form the backbone of the economy, and offer key opportunities for growth through trade in Djibouti (6).
Investment opportunities introduction
Strong export growth especially in transport and logistics services is expected to improve the current account balance to 2.6% of GDP by 2024. An output growth of 7-8% is expected given the country's strategic location and potential to serve the East African region, especially with logistics and transport-related services (4).
Key bottlenecks introduction
Value added by the services sector, which usually generates 70% of Djibouti's growth, increased only 2% in 2020 compared with 8.2% in 2019 due to the COVID-19 pandemic (5). The absence of efficient services, such as telecom, internet, finance, accounting, legal services and transportation and logistics, hinders overall economic growth and business operations (2).
Consumer Services
Development need
Djibouti's economy is heavily dependent on imports due to the underdeveloped industrial and agricultural sectors, and a large number of companies operate in import and trade activities (8). Future development of the country requires its transformation into a hub for trade, logistics and related services (3).
Policy priority
Djibouti seeks to position itself at the heart of the African trade. The Djibouti International Free Trade Zone (DIFTZ) is set to be the largest free trade zone in Africa once complete (9). Among the priorities of the National Strategy for Social Protection is the promotion of sustainable growth and diversifying the economy through key sectors, including trade (10).
Gender inequalities and marginalization issues
Fewer opportunities for women to participate in trade-related jobs and high levels of unemployment can have a serious impact on the economy, leading to lower consumption, higher poverty and declining well-being of women and their families (7).
Investment opportunities introduction
The Horn of Africa Initiative has launched the Multi-Donor Trust Fund (MDTF) with a capital of Euro 30 million, which includes support for More Trade, More Growth, More Jobs focusing on trade and economic integration covering trade facilitation, regional value chains, and improvements in the investment climate (11).
Key bottlenecks introduction
Prevalence of illicit and informal trade especially in the borderland regions, cross-country clan and ethnic affiliations hindering activity, inadequate public and private investment to support trade are challenges within the consumer services subsector (12).
Professional and Commercial Services
Pipeline Opportunity
Port Online Commodity Trading Platform
Develop and operate a commodity trading platform as part of the Djibouti Port Community System (DPCS) to provide access to online trade related services, such as ports, air cargo terminal and customs services, and associated e-payments.
Business Case
Market Size and Environment
> USD 1 billion
415 import licenses granted to foreign companies in 2015
Djibouti recorded USD 2.837 billion merchandise exports and USD 3.314 billion merchandise imports in 2020. Merchandise trade in the country amounted to 181.75% of the GDP in 2020 (15).
In 2012, services trade contributed to 37% of GDP mainly through transport and government services (16), which are captured with the proposed port online commodity trading platform.
Djibouti generated 415 licenses for trade companies in 2015, with 379 for general imports, six for alcoholic beverages, two for fish and shellfish, and five for stationary and bookstore items and for fabrics (17), which could all make use of the suggested trading platform.
Indicative Return
> 25%
A benchmark investor, COSCO Shipping Ports (CSP), which is engaged in port online commodity trading platform services recorded a gross profit increase by 49.6% year-on-year in the first half of 2021 (32).
Global trade Services (GeTS), which is a subsidiary of CrimsonLogic Group that is one of the developing partners of the port online commodity trading platform CALISTA, recorded an annual sales of USD 4.1 million and revenue of USD 5.7 million in 2019 (18).
Investment Timeframe
Short Term (0–5 years)
Online platforms and data-driven services in logistics are easily scalable and require little fixed-cost investments (19).
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Market - Volatile
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
Djibouti's economy is highly dependent on imports due to the undeveloped industrial and agricultural sectors, and a large number of companies operate in import and trade activities (17). Service related activities generate 70% of the country's economic growth (21).
Pastoralism and trade, the dominant livelihoods in the Horn of Africa, require the easy movement of people and goods within and across borders but continue to heavily rely on cross-country clan and ethnic affiliations in Djibouti and the region (20).
Effective coordination and collaboration between public and private players forming the port community is essential if cargo is to be delivered to its destination on time and at a competitive price (28), which is currently hampered by inefficient systems.
Gender & Marginalisation
Young women tend to be particularly disadvantaged by the Horn of Africa region's labor market and limited number of job opportunities (20), including in Djibouti.
Women are highly involved in informal trade in the Djibouti's borderland regions, including kerosene, cooking oil, grain, pasta, cloth, and luxury items, such as electronics from ports on the Indian Ocean (20).
Over half of the informal cross-border traders in the Horn of Africa region are women (20).
Expected Development Outcome
Increased efficiency and productivity related to sea/airport operations and customs regulatory documentation through the implementation of an online port community system (13).
Use of technology to transform Djibouti into a logistics hub of excellence, by serving and facilitating trade for the community of cargo owners and logistics service providers.
Improved security, reduction of costs and improved competitiveness for users through automation and the reduction of paperwork for trade activities (13).
Gender & Marginalisation
Trade can dramatically improve women's lives, creating new jobs, enhancing consumer choice, and increasing women's bargaining power in the society (25).
Trade can expand women's role in the economy and decrease disparities with men by giving more and better employment opportunities (25).
Primary SDGs addressed
9.1.2 Passenger and freight volumes, by mode of transport
Container port traffic in maritime transport is estimated at 932,000 twenty-foot equivalent units (2019) (33). Djibouti's logistics performance index is 2.79 (2018) (34).
Long-term objective based on average of best performers for logistics performance index is 3.8 globally from a range of 1 to 5 (34).
8.1.1 Annual growth rate of real GDP per capita
GDP per capita growth in Djibouti had been recorded above 6% in two consecutive years, before turning negative in 2020 (23).
Targeted rates of GDP growth are above 11% for each year between 2023 and 2034 (24).
17.11.1 Developing countries’ and least developed countries’ share of global exports
2.837 billion USD merchandise exports in 2020 (15).
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Indirectly impacted stakeholders
Planet
Outcome Risks
Increased reliance on digital systems may create maritime cybersecurity risks, which Djibouti's authorities may lack the capacity to address, including due to limited data protection laws.
Impact Risks
Low internet penetration, limited digital literacy and high associated costs may prevent access to online port community systems for smaller enterprises and limit the impact from larger corporates.
Much of the trade in Djibouti's borderland regions is informal and illicit, which may prevent access to formal channels included in the port community system, and hence limit expected impact.
Impact Classification
What
A port online commodity trading platform improves trade efficiency and decreases costs related with ports and logistics processes.
Risk
While the model of the port online commodity trading platform is proven, cybersecurity risks and potential integration challenges of smaller and informal businesses require consideration.
Impact Thesis
Improve trade efficiency and decrease costs related with ports and logistics processes.
Enabling Environment
Policy Environment
Djibouti Vision 2035, 2014: Sets the goal of becoming a leading center of commercial exchange through the establishment of modern port infrastructure (29). The launch of the Djibouti International Free Trade Zone (DIFTZ), adjunct to the Doraleh Multi-Purpose Port, is in line with this vision (27).
Djibouti Development Plan for Infrastructure 2012-2017, 2011: Proposes six ports needed to be developed and/or finalized, namely Doraleh Container Terminal, Djibouti Multipurpose Port, Horizon Oil Terminal, Ghoubet Salt Port, Tadjourah Potash Port, and Damerjog Livestock Port (30).
Strategy for Accelerated Growth and Employment Promotion (SCAPE) 2015-2019, 2014: Strengthens Djibouti's logistics platform and port sector through the transport chain and infrastructure to serve the Ethiopian market and the Common Market for Eastern and Southern Africa (COMESA) (31).
Financial Environment
Fiscal incentives: The Establishes the Djibouti Ports & Free Zones Authority (DPFZA) free zones provide incentive schemes for industrial and commercial firms: 100% foreign ownership permitted, free repatriation of capital and profits, exemption of corporate tax, and exemption of income tax (30).
Other incentives: Djibouti has a license programme dedicated to import companies and granted 415 import licenses in 2015, which are classified as general imports, fish and shellfish, alcoholic beverages, and fabrics (17).
Regulatory Environment
Law No. 083, Maritime Transport Act, 2000: All-encompassing legislative document in the port sector, concerns all commercial undertakings relating to vessels or the cargo shipped by said vessels in the maritime domain of Djibouti (30).
Law No. 098, 2002: Establishes the Djibouti Ports & Free Zones Authority (DPFZA) with a mandate to manage all matters pertaining to the Free Zone, including the administration, implementation of laws, licensing of operators, and managing and coordinating public and private operators (30).
Law No. 196, Port Reform Act, 2012: Transforms the state-owned Port Autonome Internationale de Djibouti (PAID) to the public limited company Port of Djibouti SA, which assumes the role previously held by PAID, namely the management and exploitation of the Port of Djibouti (30).
Law No. 063, Ports and Free Zone Act, 2015: Establishes the Djibouti Ports & Free Zones Authority (DPFZA), which assumes authority over all port-related affairs. DPFZA reports directly to the Office of the President (30).
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 (30).
Marketplace Participants
Private Sector
Djibouti International Container Terminal, Great Horn Investments Holding, Port de Djibouti SA.
Government
Djibouti Ports & Free Zones Authority (DPFZA), Djibouti Roads Authority, Ministry of Economy and Finance.
Multilaterals
International Port Community Systems Association (IPCSA).
Non-Profit
Djibouti Chamber of Commerce.
Public-Private Partnership
Originally established as a public company managing the Port of Djibouti, Port Autonome International de Djibouti was transformed in 2021 to a private company with 23.5% of shares held by China Merchants Holdings International and the remaining owned by DPFZA (30).
Target Locations
Djibouti: Djibouti (City)
Djibouti: Tadjourah
Djibouti: Arta
Djibouti: Obock
References
- (1) International Trade Centre (ITC). Services Snapshot Djibouti. 2012. https://www.intracen.org/uploadedFiles/intracenorg/Content/Redesign/Sector/Global_Services_Network_blog/Djibouti.pdf.
- (2) International Trade Centre (ITC). Trade in Services. 2021. https://www.intracen.org/itc/sectors/services.
- (3) AfDB, OECD, UNDP and UNECA. African Economic Outlook - Djibouti. 2012. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Djibouti%20Full%20PDF%20Country%20Note.pdf.
- (4) International Monetary Fund (IMF). Staff Report and Statement by the Executive Director for Djibouti. 2019. https://www.imf.org%2F~%2Fmedia%2FFiles%2FPublications%2FCR%2F2019%2F1DJIEA2019002.ashx&usg=AOvVaw1RvQ6tvZvxKs6LwvWu6SyA.
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