In XIX century Djibouti had been a main magnet for World’s biggest geopolitical players. Even Moscow Tzars tried to lay their hands on it. In 1889 Russians Cossacks attempted to settle on the Horn but were stopped by the French fleet bombardment. In 1896Djibouti, under the name French Somaliland, had became the French Colony. It gained the independence back only in 1977.
Djibouti’s unique geographical location is its major economic advantage. Only 10% of Republic’s lands are suited for cultivation because of desert climatic conditions. Consequently, agriculture contributes a mere 3% to Djibouti’s GDP. Services sector (mostly transport and shipping industries) take 80% of economy. The rest is trucks and other machineries manufacturing. There are no substantial mineral deposits in Djibouti.
Rassemblement populaire pour le Progrès or RPP dominates Djibouti’s political arena. Together with pro-government coalition it controls 43 seats (out of 65) in the Republican unicameral Parliament (National Assembly).
Djiboutian bureaucracy is legendary among investors. Formally local government recognizes the importance of foreign capital and private businesses for economic growth. On practice, however, a licensing process alone can take years there. On top of that, there are hundreds other petty administrative requirements, red tapes and individual interests standing on the way of entrepreneurs in Djibouti. As a result, this country ranks very low on the world’s ease of doing business rating.
Almost 600,000 Djiboutians are living on $1 per day and 30% of it are illiterate. Country’s $4 billion economy is small and highly monopolized. Its administrative and legal systems are outdated. That presents a major barrier on the way of local startup economy’s growth. On the positive side, Djibouti’s geographical location makes it potentially attractive for high tech founders orientated on larger Eastern African markets.
Business Notes for Startups Founders:
- political climate: not friendly;
- economic climate: not friendly;
- regions to focus: Eastern Africa;
- industries to focus: e-commerce (transportation), FinTech, marketplaces;
- major limitations: 75% of Djiboutian are living below poverty line, very high level of illiteracy among population, local budget relies on trade tariffs and foreign assistance for revenues, high inflation (12%), high CB interest rate (11%), excessive regulatory and tax burdens on private businesses, low fixed Internet penetration rate (10%), shortage of qualified personnel, absence of VC and seed financing;
- stimulus: favorable geographical location, accelerating GDP growth rate (7%, mostly thanks to increased foreign investments in port facilities), low costs, low competition;
- opportunities: to build an e-business aimed on Eastern African markets.