Kenya and Djibouti may have little to talk about on trade and development cooperation.
Kenya doesn’t feature on Djibouti’s list of important trading partners.
Djibouti mainly exports sheep and goats, wood charcoal, coffee and refined petroleum to Saudi Arabia, Yemen, Egypt, Spain, and Finland.
It imports wheat, trucks, vegetables, fertilisers and steel bars from China, Ethiopia, India, Saudi Arabia and United States.
This context perhaps explains why President Uhuru Kenyatta’s meeting with Djibouti leader Ismail Omar Guelleh on the sidelines of the recent African Union meeting in Addis Ababa didn’t capture headlines.
The leaders agreed to strengthen cooperation in trade and security.
One of the areas they singled out was the livestock sector, which would tap into the Djibouti connection to penetrate the oil-rich Middle East and North Africa, which has an economy of over $3.1 trillion.
Its population estimated of 450 million has a purchasing power of more than $7,600 per person (compared to Kenya’s $1,400).
Besides boosting Kenya’s exports, increased trade with the Middle East would support Kenya to develop leather value chains and boost growth of the manufacturing sector.
It would also improve the economy and livelihoods of pastoralists in the arid and semi-arid regions.
Djibouti’s attractiveness lies in its strategic location on the Red Sea, stretching out to the rest of the world through the Gulf of Aden.
It is a gateway for trade and exchange between the Horn of Africa and the Middle East, which has developed networks tapping into Asian and European markets.
With a population of under a million people and an economy valued at $1.7 billion (World Bank, 2015), Djibouti has become an important international logistics centre.
Port and transport services are the key drivers of its economy, which grew at 6.5 per cent in 2016.
The Port of Djibouti is a bunkering centre for international shipping lines and has also benefited from military logistics facilities established by the United States, France and Japan to protect merchant ships from piracy off the Somali coast.
The expansion of the port and the construction of a railway line between Djibouti and Ethiopia would increase opportunities to offer transit logistics for Kenya’s imports and exports.
Kenya is likely to experience a few challenges in deepening trade links with the Middle East through Djibouti.
The long distance between the two countries is a constraint due to the time and cost of transporting or transshipping imports and exports.
Kenya doesn’t share a border with Djibouti.
The transport options available, include the road from Mandera through Ethiopia to the Port of Djibouti, a distance of 1,500km or about two days of driving.
The other option is the current shipping route from Mombasa along the Somalia coast, covering 1,800 nautical miles that would take over seven days for a ship sailing at 10 knots.
Even though shipping is much cheaper than road transport, the massive investment in high speed railway networks might provide a faster, more efficient means of connecting the markets.
The other challenge Kenya needs to deal with is the quality of livestock, which impacts on the quality of the leather.
Export of live animals and livestock products is subject to stringent regulations that ensure the products are safe for human consumption and prevent transmission of livestock diseases.
Establishing facilities to vaccinate livestock before export would strengthen compliance with World Animal Health Organisation’s safety standards and World Trade Organisation regulations on safety of animal products.
Dealing with these challenges will enable Kenya to explore the transit logistics model offered by Djibouti to increase export earnings from livestock and improve the livelihoods of families in the pastoral region.