African ports race to be regional logistics hubs, as wave of new investments looks set to drive growth

Data from the World Bank suggest that delays in ports add roughly 10% to the cost of imported goods, more than tariffs in many cases.

ON a continent where nearly 90% of international trade happens by sea, several African ports are in the race to be their respective regional shipping hubs - and for one ambitious city – Kigali – the ambition to be a logistics hub isn’t the preserve of coastal ports.

Lack of infrastructure and long ship waiting times continue to hamper productivity for the African maritime sector, but a wave of new investments look set to drive growth over the medium term, according to a new report from research consultancy SeaIntel.

The upgrades come as the global economy slowdown sends jitters through the shipping industry. Overall confidence levels in the shipping industry fell to a record low in the three months to February 2016, according to the latest Shipping Confidence Survey from shipping adviser Moore Stephens.

Of particular concern was the shrinking dry bulk market as less cargo is transported across regions. That has now led to an overcapacity problem, which is expected to lead to “price-cutting and eventually to financial difficulties for the weakest, the least well-prepared, or sometimes simply the unluckiest,” said Richard Greiner, Moore Stephens Partner, Shipping Industry Group.

“Shipping has had its share of bankruptcies, foreclosures and restructurings during the past few years, and it is likely that we will see more over the coming months, with negotiations doubtless enlivened by the fact that shipping’s purse-strings today are often controlled by an intriguing mix of private equity and traditional shipping finance,” he added.

Ramping up

Still, Africa is bucking the gloomy trend, and ramping up investments. Cameroon has basically thrown in the towel with Douala, its major port, whose inefficiencies and delays are notorious – average cargo dwell time in Douala is 22 days, according to the World Bank. That’s five times higher than the one of Durban, twice of the port of Mombasa, 1.5 times of Dar es Salaam.

“In major ports of Asia and Latin America, the global dwell time is on average less than a week,” the World Bank said in a 2015 study on the inefficiencies of the Port of Douala.

The delays are largely to do with the shallowness of the port of Douala. It’s an estuary port that requires constant dredging and has a draught of just 7 metres. It means that small ferries have to be used carry in goods from vessels larger than 15,000 tonnes, which cannot berth at the shallow port.

With that, Cameroon is looking to build a brand new port at Kribi, which would be the only deep sea-port in central Africa. Last week, authorities announced that the second phase of construction was set to kick off, with a $675 million financing arrangement secured with the Export-Import Bank of China.

The new port of Kribi, 150km south of Douala, will effectively replace the latter as the country’s principal port, and with a 16-meter draught, it will be capable of handling vessels up to 100,000 tonnes.

Meanwhile, neighbouring Gabon is looking to upgrade its port infrastructure. Two major ports, Owendo and Port-Gentil, handle 80% of Gabon’s imports and exports. Located 15 km south of Libreville, Owendo handles the majority of imports, while Port-Gentil deals mostly with exports, primarily oil.

In 2013 construction began for a new 500-metre quay in Owendo with a 13-metre draught. The structure will serve container ships on one side and bulk cargo ships on the other. UAE-based Divers Marine Contracting initially estimated the project at a cost of $62m. However, completion of the works, which was expected by mid-2015, has been delayed, says this report by Oxford Business Group.

Further on in West Africa, the Port of Lome in Togo has made significant advances in improving capacity and efficiency. Last January, shipping line MSC launched an eleven vessel service via Port of Lome to and from Asia. Seaintel data suggests that this significantly “ramped up” large scale West African transhipment traffic over the past year.

The race is on

Meanwhile, the race to be East Africa’s gateway is on between Kenya and Tanzania. Kenya is looking to upgrade Mombasa port and improve efficiency; last year Mombasa processed 1 million containers (or TEUs; twenty-foot equivalent units are the industry standard) in a year for the first time. There is also a planned brand new port at Lamu, which, it is hoped, will serve the oil fields as far as Uganda and South Sudan.

But Tanzania is firmly in the race too, with construction of a new port at Bagamoyo, north of Dar es Salaam, having broken ground in October. Tanzania says will be the biggest port in East Africa; it is hoped the new facility will handle double the capacity of the one in Dar es Salaam.

The project will cost about $11bn, with much of the funding for construction coming from a government-owned Chinese investment firm. It will take two years to complete, and includes building rail and road links.

Port of Durban, South Africa. (Photo/ File)

With such a high dependence on external trade, good ports are critical for Africa’s growth. The World Bank’s figures suggest that delays in ports add roughly 10% to the cost of imported goods, more than tariffs in many cases.

For exports the damage is worse. In northern Mozambique, the banana industry could be 20 times larger if Nacala—a natural deep-water port—were as cheap as those in Ecuador, reckons Jake Walter of TechnoServe, an NGO. Instead, perhaps 80% of containers leave Africa empty, says this article in the Economist.

According to the World Bank, in 2011 shipping a container from Africa was typically twice as time-consuming as getting one shipped from India and about six times as slow as doing it through an American port.

Still, SeaIntel’s report notes that schedule reliability and productivity has generally improved over the first six months of 2015 in most major African ports, but there were still “infrastructure deficits” in African hinterland connections, limited improvements in vessel waiting time and an overall increase in average vessel size calling at African ports.

‘One-in-two chance’

“Productivity at the quayside [has] improved at many terminals. However, actual container deliveries perform poorly with less than a one-in-two chance that your cargo will arrive on time at the customer,” said Victor Shieh, Editor-in-Chief at SeaIntel.

Sheih contrasted the remarkable progress achieved in the construction of the second canal at Suez, Egypt and the new rail link between Addis Ababa and Djibouti on one hand, with reduced draught in Durban, South Africa, the traffic gridlock on the Apapa-Oshodi expressway in Nigeria and a constant two-week wait to berth at Douala. The verdict for African shipping is decidedly mixed.

But getting ports right will go a long way in improving trade efficiency, as well as raising revenues for governments. Ports sequester trade where it can be regulated and taxed: in Kenya, for example, some 40% of government revenue is generated by the customs department.

And there are ambitions for “upcountry” cities, too. Global marine terminal operator DP World recently announced that it had been granted a 25-year concession to develop and operate a new logistics centre in Kigali, Rwanda.

The project will consist of a container yard and warehousing facility, with an annual capacity of 50,000 TEUs and 640,000 tonnes of warehousing space. Rwanda aims to be the logistics hub for its region, including Burundi and eastern Democratic Republic of Congo.

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