EGYPT recently announced plans to expand the Suez canal. It will be the first major expansion of the crucial waterway in its 145-year history, a hugely important link that shortens Europe-Asia trade route by 9,600 kilometres.
When the 193-kilometre canal was opened in 1869, it had taken ten years to complete—but building technology has advanced a great deal since then, and Egyptian president Abdel Fatah Al Sisi has now given a one-year deadline to complete the new waterway alongside the existing canal.
Suez’s importance cannot be overstated: around 3.8 million barrels of oil pass through the canal from the Persian Gulf to the Mediterranean Sea and on to Europe and America each day, which comes to 5.5% of global oil output, along with 8% of global sea-borne trade.
Egypt, South Africa rule
Although Africa has a long history with seafaring (even longer than much of the developed world today) especially across the Indian Ocean to the Far East, today the continent’s 90 or so ports handle about just 6% of global traffic, and only six ports, three in Egypt and three in South Africa, handle over 50% of the whole continent’s container traffic. Though not often commented on, that translates into a lot of “silent clout” for the two countries.
Because it is narrow, by today’s standards, the Suez canal today only allows one-way traffic at a time; the new canal is expected to solve this problem by allowing two ships to pass side-by-side going in opposite directions, cutting the waiting time for ships from 11 hours to three hours.
But it will cost a pretty penny: The new canal is another of Africa’s planned mega infrastructure projects, coming with a $4 billion price tag. And like the Grand Renaissance Dam in Ethiopia—valued in the same neighbourhood, at $4.8 billion—Sisi isn’t looking for foreign funding to build it, instead planning to finance it through an infrastructure bond offering of 500 million shares, open to Egyptians only.
Insiders say that the Egyptian government is expected to establish a joint-stock company and file for an initial public offering (IPO) in the next few months, but details of the deal remain vague.
Canals and power
But even as critics wonder how Sisi will put it of (cash-strapped Egypt already has a debt-to-GDP ratio of over 90%, while economists usually start sounding the warning bells at 50%) his decision to pay for it using Egyptian money is reading from the same script as his predecessor from more than a century back, the khedive (or viceroy) of Egypt at the time of the construction of the original canal, Ismail Ali.
At the time, Egypt was a nominal territory of the Ottoman empire, and Ali was keen to assert Egypt’s position as an independent power in its own right.
But in his eagerness to “modernise” Egypt so that his country could sit at the table with other big nations, Ali spent huge sums of money constructing Cairo along the lines of a European capital, building railways and other infrastructure projects, and expanding Egyptian territory southwards to Sudan, leaving his country broke.
In desperation, Ali sold all Egypt’s shares in the Suez canal to Britain, and that set off a chain of events whose end was to see the whole of Africa colonised—the British were hell-bent on protecting the vital trade routes to India, the gem of the British empire, and securing Suez meant securing the entire Nile Basin, which meant trying to bring all the upstream countries under British control.
In the end, only Ethiopia escaped the British dragnet as Sudan, Kenya and Uganda fell under British colonisation, and other European countries soon joined in the scramble for Africa.
Today, even though the majority of Suez traffic is destined for Europe and Asia, Africa remains a key centre of global shipping.
African traffic up sharply
According to one estimate, half of the world’s container traffic is shipped across the Indian Ocean, so a good chunk of this is hovering around the African continent at one point or another. The traffic is increasingly coming from Africa itself—according to the latest UNCTAD Review of Maritime Transport the three countries registering the highest growth in container throughput in 2012 were all in Africa - Congo (44.6%), Ghana (30%), Kenya (22.7%).
Africa’s largest economy and most populous Nigeria is looking to bolster its standings and increase its footprint in the maritime sector to include ship building and repairs, ship breaking and recycle facilities. Underlying its influence, the country already accounts for 65% of the total maritime trade in West and Central Africa.
A Tanzanian agreement with China to build a $10 billion–$11 billion new port at the historical port city of Bagamoyo was announced in 2013. In Kenya, the government has set aside $12 million to buy land to develop Mombasa into a free port where manufacturers may undertake work at reduced tax rates, while in Abidjan, another Chinese deal will see a port expansion plans to increase container handling capacity to 1 million–1.5 million.
With the Suez expansion expected to boost sea trade along Africa’s eastern seaboard, along with the planned oil and gas exports from Kenya, Uganda, Tanzania and Mozambique in the next few years, sea power will become increasingly important for African countries.
According to the African Development Bank, port throughput in Africa will rise from 265 million tonnes in 2009 to more than 2 billion tonnes in 2040, while transport volumes will increase six- to eightfold, with a particularly strong increase of up to 14 times for some landlocked countries.
And African countries should look to the sea to provide much-needed jobs as they struggle to benefit from the anticipated demographic dividend. UNCTAD reports that in the UK, despite no longer being a major trading centre for merchandised goods, it is estimated that 262,700 jobs and $21.5 billion were generated in 2011 alone through the provision of maritime services. Britain’s maritime industry as a whole employed an estimated 2.67 million people, or 10% of the workforce in 2007.