Benefitting from several years of consistent macroeconomic stability and the roll-out of greater business-friendly regulation, Djibouti has attracted a rising amount of investment – equivalent to as much as 52% of GDP – with the vast majority of it being directed towards capital projects. This in turn is having a noticeable impact on Djibouti’s construction sector.

Urban renovation projects in the cities, especially the capital, are improving housing infrastructure while large-scale transport infrastructure projects aiming to better connect the country and establish its position as an international commerce hub are helping to reshape this small country in the Horn of Africa. New ports, railways, airports and power plants are breaking ground, all of which are transforming not only the economy’s long-term prospects, but also the construction sector’s short-term outlook.

Sector Structure

Since the early 2000s, Djibouti’s construction sector has played a major role in the development of the country’s economy. Although smaller than transport and logistics activities, the construction sector remains an important part of the Djiboutian economy, not only because of its triggering effect to open the country to more business activity, but also as a direct contributor to GDP and employment growth. According to the “2015 African Economic Outlook” report on Djibouti, published in May 2015 by the African Development Bank (AfDB), the weight of the construction sector on the country’s activity grew from 12.1% of GDP in 2009 to 12.9% in 2013, and represents the largest contributor to growth in the secondary sector.

Construction for the bulk of the country’s projects is done by overseas companies, but the manner in which they participate is usually broken down into one of two categories. On the one hand there are the large-scale projects financed by bilateral institutions, which in some cases come with construction companies tied to the loans, as is the case with a number of Chinese-funded projects. Djibouti also has launched a number of open tenders to the market in recent years, which involve competitive bidding. One example of this is the expansion of the Horizon Oil Terminal, which according to the US State Department, is to be divided into two different tenders with a total value of about $150m.

The current raft of projects – estimated to be around $14bn in value – are providing a shot in the arm, not only for the construction sector, but also the economy as a whole. “At the end of the 1990s, when we co-promoted the Djibouti Dry Port, it appeared to be a fairly risky investment. We would have never imagined the magnitude of the success it has actually attained. This type of infrastructure is contributing to the country’s development,” Marcello Mezzedimi, director-general at Cosmezz, a construction company, told OBG.

Affordable Housing

Alongside transport and energy infrastructure development, expanding options for adequate and affordable housing has also become a key priority for the government of Djibouti. Despite the improvements seen in the country’s overall infrastructure, it still suffers from a considerable housing deficit, caused both by an insufficient input of new housing construction as well as the low quality of a large majority of existing residential units in Djibouti. According to the Centre for Affordable Housing Finance in Africa (CAHFA), the demand for new housing stands at 2500-3000 units per year. It is estimated that only a third of the country’s housing needs are being met, which has led the government to focus on addressing the country’s housing needs through a variety of programmes, including the public real estate developer, Société Immobilière de Djibouti (SID), which has built nearly 2000 social and affordable units with the assistance of the National Housing Fund. “There should be extra emphasis on self-construction opportunities for Djiboutians in order to tackle the housing need. Whereas the land plots, made available with basic services such as water and electricity are ready and tax exemptions on imported materials have been put in place, not many Djiboutians have made use of this option,” Aboubaker Osman Boubaker, director-general of SID, told OBG.

The country also faces issues linked to the qualitative aspects of existing housing. Although the relative poverty rate has seen a reduction from 46.7% in 2002 to 40.8% in 2013, according to figures by the AfDB, the prevalent poverty rates impact the average quality of housing. This has been compounded by a large influx of displaced people from the region’s conflicts over the years. Although some displaced populations pass through the country and their pressure on existing infrastructure is temporary, other refugees have been forced to stay for longer periods. This has burdened housing infrastructure further. Poverty has also made it difficult to enlarge the base of the population eligible for commercial mortgage schemes. According to CAHFA, households in Djibouti face obstacles accessing credit due to collateral requirements, high-interest rates and insufficient saving capacity to afford the necessary down-payment on a home.

According to the government’s Strategy for Accelerated Growth and Employment Promotion (Stratégie de Croissance Accélérée et de la Promotion de L’Emploi, SCAPE), a policy platform intended to give a comprehensive direction to the country’s economic development efforts, around 50% of the country’s population live in homes built from low-quality materials, and only 26.2% of households live in homes made of concrete or other durable construction materials. CAHFA has estimated that only about 34% of housing in Djibouti is considered to be permanent.

Quality Housing

Authorities have been improving existing housing policies to set aside more land for low-income housing, as well as renovating existing neighbourhoods across the capital. Key cooperation agreements between the Djiboutian authorities and international financing institutions, such as the AfDB, the French Development Agency (FDA) and the World Bank have allowed the government to channel resources into slum renovation programmes in the capital city. The World Bank and the FDA have been working with the government to improve services to poorer areas of Djibouti City. Efforts are also being channelled into increased legalisation of land plots and property titles. The government owns the majority of land in the country, and there is a programme by the Ministry of Habitat, Urbanism and Environment to make a larger number of land plots available for housing development.

Foreign donors are also helping in other ways, for example by providing credit and special financing for housing development in urban and rural areas. “The government is trying to stimulate private sector involvement, especially in the building of social housing units and public infrastructure. The participation of international development funds such as those of Kuwait and Saudi Arabia provide financing loans for large-scale real estate projects that will improve Djibouti’s primary facilities,” Anwar Nassif, director of operations at Homan Engineering, told OBG.

Construction Costs

High costs for construction inputs affects housing development as well as larger projects, although for the infrastructural development, authorities have established a series of tax breaks of between 8% and 20% for imports of construction materials, according to the SCAPE document. These type of fiscal advantages are also increasingly being directed at real estate developers, especially those focusing on low-income housing programmes for the urban poor (see real estate overview).

The Djiboutian government is also trying to significantly increase local manufacturing capacity for construction materials in order to reduce the reliance on foreign imports, with some success, although the existing prices for energy – which are among the highest in the region (see Energy chapter) – are likely to be an obstacle in attracting additional energy-intensive cement or steel production to the country for the short term.

“The high electricity price is an urgent issue for construction companies, which many solve by getting private energy from Ethiopia. In the long-run, in order to facilitate not only the construction but also the industry sector, electricity needs to become more accessible and other energy sources have to be explored,” Jobi Sam, business development manager at Nael & Bin Harmal, told OBG.

An expanding field of energy production ventures is expected to start to bring electricity prices down, something that will benefit both industry development as well as the construction sector.

Local Content

With big construction projects dotting several parts of the country, the government is keen to ensure that the impact on local contractors is maximised, although this is sometimes challenging, due to the generally small size of Djiboutian companies, and the lack of sufficient numbers of adequately trained human resources in the workforce. While some companies might derive some benefits from large-scale projects, as sub-contractors, the majority have no involvement.

Energy Projects

While housing programmes have comprised one notable component of the government’s build programme, construction activity has been driven primarily by larger capital projects in the transport, utilities and energy sectors. One of the largest projects under development is a new pipeline for the transport of refined energy products between Djibouti’s port infrastructure and Ethiopia. The deal for the $1.55bn project was signed in 2015, and the infrastructure will be built by contractors Black Rhino Group and Mining Oil & Gas Services.

The new pipeline will be 550-km long, and the project also involves the construction of an import storage facility in Damerjog, with the capacity to hold 950,000 barrels of refined petroleum products. The 20-inch pipeline will have a daily transport capacity of 240,000 barrels. Financial closing for the project is expected to be finalised before the third trimester of 2016, and the pipeline is scheduled to be operational by 2018.

Construction projects for the renewables energy sector are also expected to multiply over coming years, as Djibouti has announced its intention to source all of its electricity from renewable energy sources as soon as 2020, according to international media reports. The country already gets about 65% of its energy from neighbouring Ethiopia’s large hydroelectric production capacity.

In January 2016 construction began on the first phase of a 300-MW solar energy facility in Grand Bara, south of the capital city. The €360m project will be done by Switzerland-based group Green Enesys, which will also operate the new facility. The overall construction project will be divided into six 50-MW phases, and is expected to be completed by the end of 2016.

The company is also set to sign a power-purchase agreement with Électricité de Djibouti, the country’s electricity company. Another 60-MW wind farm is expected to begin construction in 2016, according to Ali Yacoub Mahamoud, Djibouti’s minister of energy, quoted by international media. The wind project will be built by Shanghai Electric, in two 30-MW phases.

In October 2015 another energy contractor, Canada-based SkyPower, announced it had signed a deal with the government of Djibouti to set up a 200-MW solar energy production plant. Building the new facility is expected to cost $440m and should be completed in four years.

Water Development

As part of the government’s push to increase agricultural activity, as well as more broadly improve water accessibility for household consumption, a number of developments are breaking ground that look to improve the desalination and transport of water.

One project is the establishment of a pipeline to bring groundwater from Ethiopia into Djibouti. Construction work initiated in March 2015, and the 70-km link will allow Djibouti to receive around 100,000 cu metres of water per day. The main infrastructure will be connected to a 358.5-km pipe network that will take water to Djibouti City, Arta, Dikhil and Ali Sabieh.

Also under construction is a water desalination plant. The €46m project will be largely financed by the EU, through the European Development Fund, which has pledged €40.5m to support the project. The government of Djibouti will provide the remainder of the investment.

Initially the plant will have a capacity of 22,500 cu metres, which will eventually expand to 45,000 cu metres. The new plant is expected to provide a reliable water supply to 200,000 underserved people, according to EU estimates.


With more than four-fifths of the country’s economy dependent on trading and transport activity, the expansion of transport infrastructure currently occupies a large proportion of construction activity. Development of new transport modes to strengthen the existing trade connection between Djibouti and neighbouring Ethiopia is especially relevant. Recently completed was the rebuilding of the railway line between the two countries, which will allow freight cargo to move from the Port of Djibouti all the way to the Ethiopian capital, Addis Ababa.

The 752-km line was built and financed through Chinese investment. Construction of the railway connection was carries out by two Chinese contractors. China Civil Engineering Construction Corporation (CCECC) was responsible for the section between the Port of Djibouti and Miesso in Ethiopia, while another company, China Railway Group, built the link between Miesso and Addis Ababa. The total cost of the project was expected to reach some $579.5m, with the section going through Djibouti set to stretch for 98 km. The line was scheduled to be operational in early 2016, with a capacity of 3500 tonnes of cargo per trip.

The two countries are also planning to build another railway link, which will be used to export potash from Ethiopia’s northern region. The 280-km train connection will have a direct link to the port of Tadjourah, which is set to get its own mineral export terminal. The new railway line is expected to cost over $1bn, according to figures by Djibouti Ports and Free Zones Authority (DPFZA). Tender procedures for this project, however, have seen successive delays over recent years. In January 2015 a tender that had been launched by the Ethiopian Railway Corporation half-way through 2014 was cancelled, the fifth time this has happened, as a result of requests by contractors to better prepare their bids.

Several projects to expand Djibouti’s maritime transport infrastructures are also taking place across the country’s coastline. One of the most important construction projects for the transport sector is the $590m expansion of the Doraleh Multipurpose Port, currently underway. The project is a joint venture between the Port of Djibouti and Chinese contractors China Merchant Holding. The development, which started in 2013, is expected to be completed in 2017, and employ 300 people during the construction phase. The new port will substitute the existing Djibouti port nearby and is expected to be built in two phases.

Also launched in 2013 was the Damerjog livestock terminal, which is being built further south. The new $60m infrastructure project is set to be completed by 2017, according to information released by DPFZA, and will employ up to 150 people during the construction phase. Once fully operational, the 655-metre quay will have the capacity to handle 10m heads of livestock annually.

The recently completed $64m port of Goubet, which employed 600 people during its construction period, has boosted export capacity for salt to some 6m tonnes annually, while a new $3bn liquefied natural gas and oil terminal, which is currently under construction, is scheduled to be up and running by 2018. This project involves 600 workers in its building phase.

Airport Construction

In addition to the building of new infrastructure for land and sea transport, air transport facilities are also set to get a revamp. Two airports, financed by CCECC, will be built for a combined investment of $599m. The larger of them will be located 25 km south of Djibouti City, handling 1.5m passengers and 100,000 tonnes of cargo annually upon completion, and should be operational by 2018. The smaller facility, with a capacity of 767,000 passengers per year, is under construction in the north of the country and set to become operational by 2016. In all, the construction and operation of both facilities is expected to employ a total of 2000 people.


The construction sector has become an important tool for Djibouti to leverage its geographic and economic advantages. New transport, energy, water and urban infrastructure will be key for the country to solidify its economic integration with international markets, but equally important will be its impact on the overall improvement in living conditions in the country.

The construction sector is set to witness a rise in its competitive level. “The influx of foreign construction companies has led to increased competition and a larger balance between price and quality. The ability to source materials for a competitive price and keep primary costs as low as possible is essential,” Anwar Nassif, director of operations at Homan Engineering, told OBG.

Making the housing construction sector more dynamic will significantly help in the improvement of overall living conditions. Tackling the country’s prevalent housing deficit will remain a challenge.