Ethiopia: catalyst of the Horn of Africa

The Horn of Africa was long considered one of the most dangerous places in the world. It is increasingly known for growing trade and investment – with Ethiopia at the centre.


For a long time, Ethiopia was known as a country that needed others. But the tables appear to have turned. Now other countries need Ethiopia.

For the last 25 years, while the Horn of Africa (including Djibouti, Eritrea, Ethiopia, and Somalia) garnered a reputation as one of the most volatile regions in the world, Ethiopia has remained a relative oasis of stability. It is now one of the world’s fastest growing economies, an ascendancy that has also played a large part in Djibouti’s emergence as the dominant trade hub of east Africa, and has seen Somaliland peg its economic hopes for the future to Ethiopia’s.

“Ethiopia is the region’s locomotive,” says Ethiopia-born Dawit Gebre-Ab, director for Europe and North America with the Djibouti Ports and Free Zones Authority, which manages Djibouti’s increasing network of ports and logistic infrastructure. “With its expansion in manufacturing, Ethiopia could become the China of Africa. It possesses all the ingredients.”

Ethiopia has learned it cannot flourish in isolation and must interact with its neighbours – if for nothing else so that this landlocked country can reach the sea.  But the country has also proved savvy at realising what it has to offer that many further afield need (an affordable and relatively well educated labour force) and what it can provide its neighbours.

“It’s not that one depends on the other, rather it’s inter-complimentary,” Samir Aden, advisor to the minister for the Djibouti Ministry of Economy, Finance and Industry, says of Djibouti and Ethiopia’s relationship.

“We offer logistics and a secure commercial hub, while they offer what we need, such as water and electricity. Djibouti and Ethiopia are doing a great job together. There’s infrastructure integration between the two, lots of trade, and the governments are working towards a common agenda for developing, and a long-term vision.”

Increasing integration

“Demand from Ethiopia will get so big they’re going to need every port they can get,” says Ali Toubeh, a Djiboutian entrepreneur whose container company is based in Djibouti’s free trade zone. He indicates that a lot of Ethiopian trade will need to pass through Port Sudan and Kismayo in Somalia as well as Djibouti. Meanwhile, the development of rail links with the Kenyan port of Lamu illustrate Ethiopia’s increasing integration with the East African Community (EAC).

“Ethiopia’s projection of soft power, including trade relations with its neighbours, the development of cross-border economic infrastructure and sharing of services, is helping to bind these nations more closely together and demonstrate in tangible ways the benefits of integration,” says Matt Bryden, a Horn of Africa political analyst and executive chairman of Sahan Research, a Nairobi-based think tank.

In simple geographic terms, Ethiopia is well placed in the centre of the greater Horn of Africa and East Africa region, further allowing it to leverage its resources.

“It is becoming a major producer of hydroelectricity, and the strategy of integration includes the interconnection of neighbouring electricity networks,” says Robert Wiren, a French journalist who has covered the region extensively.  “Ethiopia is already exporting electricity to Djibouti, Kenya and Sudan, while the latter is exporting petrol to Ethiopia.”

Where the goodwill ends

But the apparent Ethiopian harmonising effect in the Horn vanishes around the border with Eritrea, where the situation harks back to days of the Cold War.

Eritrea gained independence from Ethiopia in 1993 following one of the longest-running civil wars in African history, close to 30 years. Many Ethiopians have never accepted what they view as the rupturing and desecration of the motherland, and the two countries clashed in a debilitating war between 1998 and 2000 – over disputed territory, primarily, but influenced also by various additional grievances – and have remained at loggerheads ever since. There was a clear reminder of this mid-June this year, with a spate of fighting breaking out along the shared border, including reports of heavy shelling. 

In the northern Ethiopian cities of Mekele and Adigrat close to the border with Eritrea, residents lament the lost market opportunities – the roads are there, as are a shared language and culture, as well as family links either side of the border. But for now the main “movement of goods” comprises young Eritreans crossing the border to escape the authoritarian regime in Eritrea’s capital, Asmara.

“Eritrea will inevitably be drawn into closer economic union with the wider Horn of Africa region as well, but in the near term its unresolved dispute with Ethiopia and its commitment to economic self-reliance are likely to leave the country isolated, and economically dependent on more distant trading partners,” Bryden says.

Relations between Ethiopia and Somalia are not as bad, but they are not that cordial either. Somalia has long claimed Ethiopia’s Ogaden region as part of a Greater Somalia, culminating in a disastrous defeat for Somalia in the Ethio–Somali War between July 1977 and March 1978.

“Economic integration will eventually benefit Somalia as well, albeit in different ways,” Bryden says. “Somalia is more geographically remote from Ethiopia’s core markets than either Djibouti or Somaliland, so the transaction costs associated with transit trade are higher. But Somalia has other sectors, such as telecommunications and money transfer services that are highly competitive and could serve the wider region.”

The enemy of my enemy

“The Horn of Africa has made dramatic progress in the past two decades,” Bryden, says. “But there remain numerous challenges.”

The saying “The enemy of my enemy is my friend” has long been used as a guiding principle by Horn of Africa countries, according to Wiren. He adds: “In the past Ethiopia helped South Sudanese rebels because Khartoum was assisting the Eritrean Liberation Front. More recently Eritrea has supplied weapons to Somali Islamist groups fighting Ethiopian troops.”

There is also the issue of Somaliland, where “to refuse formal recognition … amounts to punishing those who have been peaceful – a very bad sign for the stability in the Horn,” Wiren says.

Ethiopia has its own internal challenges, with recent Oromo protests demonstrating how political frustration may lead to dangerous upheavals. “Ethiopia’s progress toward stability remains a balancing act between its commitment to the ideology of the ‘developmental state’, democratisation and human rights,” Bryden says.

Towards a regional bloc?

The current state of the Horn of Africa indicates that claiming it is free of its darker days would be foolhardy. But when viewing how Ethiopia, Djibouti and Somaliland are developing together, there appears reason for cautious optimism – perhaps even some celebration. It does not seem far-fetched to imagine the countries of the Horn eventually becoming a regional bloc akin to the EAC, now the most integrated trading bloc on the continent.

Regional trade blocs make sense for Africa. National economies of many African countries are small, not helped by diminutive population sizes and internal markets – Djibouti, Somaliland and Eritrea being prime examples. Regional groupings have more clout, and, some suggest, could one day be the basis of a continental free-trade area. 

“This kind of integration between Ethiopia and Djibouti has been praised by the African Development Bank as an example for the rest of Africa,” Arden says.

James Jeffrey

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