In 2015, during the first ever visit of a US president to Ethiopia, Barak Obama described Africa as the continent with the greatest potential to become “the next center of global economic growth”.

Only two months later, Ethiopia unveiled the first phase of its $475m Addis Ababa Light Rail, the first electrified light rail transit system to open in sub-Saharan Africa.

The momentous launch however came at a time when Ethiopia is battling its worst drought in half a century. The drought, brought about by the El Nino phenomenon in June 2015, has caused widespread famine, wreaking havoc across the nation of 96 million, where the population still relies predominantly on agriculture. The deepening crisis prompted fears of “history repeating itself”, recalling the devastating famine that hit Ethiopia during the 1970s and 80s.

In response, the Ethiopian Government decided that the country’s first mega railway project – the Addis Ababa to Djibouti line – would begin its operations ahead of schedule to deliver essential food aid to the worst drought-stricken areas.

Successfully carrying its first freight on 20 November 2015 along the partially completed line to Merebe Mermersa, 112km south of Addis Ababa, the railway solidified its flagship status and strengthened hopes in its potential for future socio-economic development.
With its official opening expected in early 2016, the railway, it is hoped, will slash transit times for both freight and passengers, attract further foreign investment and ultimately catapult Ethiopia to a competitive force in the global marketplace.

Addis Ababa – Djibouti Line: an exciting development

Ethiopia has long suffered from a lack of railway infrastructure across its territory. Its first meter-gauge railway, built by the French in the 1890s, has over time deteriorated due to lack of maintenance, cutting Ethiopia’s direct access to the port of Djibouti. Today, Ethiopia still accounts for around 70% of the trade through the port, but all freight transportation relies on trucking.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData

Now, after a three-year long construction process, the nation’s biggest railway infrastructure project is on track to officially begin operating this year.

“Travel times between the two terminus points will be cut from several days to less than ten hours.”

The 700 km electrified railway runs parallel to the now abandoned Ethio-Djibouti railway. Once complete, the $4bn line will see passenger trains reaching speeds of 160km/h, while 3,000t gross capacity freight trains will run at 120km/h. The line is double-track for the first 115km, from Addis Ababa to Adama, while the remaining 600km to Djibouti is a single track rail.

As a result, travel times between the two terminus points will be cut from several days to less than ten hours. Its capabilities were demonstrated in November, when the first freight, hauled by a diesel locomotive, delivered more than 3,000t of grain from Djibouti port to drought-affected areas during a 16-hour journey.

Gaining the trust of foreign investors

“We are a niche market in a good geographical position,” said CEO of the Ethiopian Railways Corporation (ERC) Dr Getachew Betru in an interview with The Worldfolio. “This is why the railway mode of transport is called a game changer.”

“A few years ago nobody took us seriously. […] The reputation of Ethiopia with the drought, war and famine did not play in our favor. We had to articulate our case very carefully, addressing the issues of bankability,” he said.

But in 2013, ERC managed to secure $3bn in loans from the Exim Bank of China, with $2.4bn going to the Ethiopian section of the railway and the balance to be spent in Djibouti.

A big advantage playing in ERC favour was seeking foreign investment only after they had completed 30% of the project, at which point “people started taking them very seriously”, as Betru explains. Costs were further slashed due to ERC sourcing local resources such as the cement, sand and labour. The successful delivery of the Addis Ababa Light Rail project with no cost or time overruns served as a further guarantor to their credibility.

Two Chinese state-owned companies have been involved in building the new standard-gauge line: the 320 km stretch from Addis Ababa to Mieso is being built by the China Railway Group, while the 339 km section from Mieso to the Djibouti border is being built by the China Civil Engineering Construction Corporation.

As of January 2016, the construction was on track and over 90% of the project was complete.

Game-changer: the economic impact on Ethiopia

The Addis Ababa – Djibouti line falls within the Ethiopian government’s ambitions to transform the Horn of Africa nation into a middle-income country by 2025. After an average economic growth of more than 10% of GDP over the past decade, one of its aims is to have 5,000km of new-built rail lines working across the country by 2020.

“It is difficult to think of rapid economic development, industrialization and international competitiveness without efficient, high quality and modern transport infrastructure,” said Minister Workineh Gebeyehu at the 8th Ethio-Djibouti Railway Project Joint Commission meeting.

“It is difficult to think of rapid economic development, industrialization and international competitiveness without efficient, high quality and modern transport infrastructure.”

As such, the new railway, earmarked as one of Knight Frank’s top global infrastructure projects, will undoubtedly leave its biggest mark along the Djibouti-Dakar corridor, as it can influence all businesses within a 60km range of the corridor.

Firstly, reduced transit times will mean that consignment will be delivered in ten hours, with up to 3,000t of cargo transported in one go. This will also allow the landside port areas to be cleared quickly and avoid congestion.

Ethiopia will also be able to shift its attention to high-value imports, as the new transport corridor will be attractive to producers of perishables such as flowers, fruit and vegetables. In this context, Betru hinted at the possibility of branching out into business with the Middle East.

“By all standards, the Ethio-Djibouti project will change the way things work for any investor, particularly one who wants to get involved in manufacturing,” he said. “The transportation cost will be low and it will be very reliable.”

In ten years’ time, a $7bn Djibouti Free Trade Zone currently being developed by China Merchants Holding will provide a new profit opportunity for Ethiopia, along with a new Doraleh Container Terminal operated by DP World and the establishment of a Turkish processing zone to represent Turkey’s “major point of entry to Africa”, as described by Djibouti’s finance minister Ilyas Dawaleh.

Preparing future generations of rail professionals

However, the nation’s ambitions stretch beyond just this railway project. Ethiopia also keeps a close eye on its green credentials and its focus on the rapid transition from road to rail falls within this common international goal.

In April last year, Ethiopia put forward three Nationally Appropriate Mitigation Actions (NAMAs), a tool developed under the UN Framework Convention on Climate Change (UNFCCC) for developing countries to contribute towards global climate change efforts while moving forwards with their development in a sustainable manner.

The first NAMA proposes the establishment of a Railway Academy of Ethiopia for skilled railroad professionals, where people would be trained as managers, engineers, technicians, and researchers.
“Hopefully, by the end of 2020 all the railways will be made in Ethiopia by Ethiopians,” Betru said. “My generation is trying, but it is the next generation, the youth, that will transform Africa, and we will see the real impact on education, health and economy in the 2020s.”
The second transformational NAMA is the launch of a transit-oriented development (TOD) along the light rail. The pilot project, at an estimated cost of $8.9m, would look at removing barriers, increasing safety and accessibility, stimulating ridership and lowering the price of transportation for all.

A $150,000 vulnerability assessment for the railroad, with a particular focus on climate change adaptation was also put forward.
Nevertheless, the biggest transformational change, at least in the near future, will no doubt be delivered via the Addis Ababa – Djibouti line, an integral part of the “African Renaissance” as described as Betru.

“The creation of urban centers and integration of their resources through good transportation linkage will enhance the industrialization of Ethiopia and elevate its society to a better socio-economic environment.”