Port logistics in Africa are rapidly shifting from conventional transport to containerisation. A number of modernisation projects are under way at existing ports, and new infrastructure is emerging. While containerisation is already a reality across North and South Africa, it is much less well established in the West and East of the continent. However, very few of the investors and operators who will benefit from this trend are actually African.
Over the past 10 years, Africa’s GDP has grown by 5% a year – one percentage point higher than global growth – and the continent is closely tied in to the global value chain (GVC). Between 1995 and 2014, Africa’s share of global commerce grew from 1.4% to 2.4%, while that of the US, Asia and Europe fell slightly. However, Africa remains primarily confined to the role of raw material supplier and unable to transition to that of a production platform. It runs a trade deficit, with imports – mostly of manufactured goods – exceeding exports, 80% of which are primary products: oil and gas, and mining, agricultural and forestry products.
Globally, between 2005 and 2014 international transport costs averaged 9% of the value of imports; for the African continent however this figure was 11.4% (UNCTAD, 2015). GVC is dependent for 90% on transport by sea and is therefore constrained by the costs and limitations that characterise this mode of transport in Africa, including logistical problems, delivery delays, and poor intermodal infrastructure. For example, it has recently been reported that “it costs USD 2,055 to export a 20-foot container in Kenya and USD 1,531 in South Africa compared with just USD 577 in Morocco and USD 500 in China” (AfDB/OECD/UNDP, 2014).
Since the early 2000s, Africa has seen exponential growth in containerisation and, with it, modernisation of infrastructure and changes in port administration. The pace and nature of these changes vary widely from region to region, however.
AN OVERVIEW OF PORT MODERNISATION IN AFRICA
North Africa has a privileged position: along its Mediterranean coastline, Tanger Med in Morocco and Port Saïd and Damietta in Egypt are transhipment ports serving the most integrated economies in the region. With a third container terminal coming on stream, operated by Marsa Maroc, Tanger Med is a vibrant trading hub. Meanwhile, Algeria and Libya are oil- and gas-exporting countries that import a wide range of goods, while Tunisia – which is less rich in raw materials – is reliant on international outsourcing and subcontracting.
Since the early 2000s, Africa has seen exponential growth in containerisation and, with it, modernisation of infrastructure and changes in port administration
In sub-Saharan Africa, and particularly in Western Africa, the falling cost of crude oil has triggered a decline in imports coming through ports. The economies best able to deal with this are the most diversified. Côte d’Ivoire exports most of its cocoa beans through the port of San Pedro, which will become one of the entry points to Mali once the planned motorway linking San Pedro, Boundiali, Zantiébougou and Bamako is built. A logistical base funded by EUR 20 million from the CMA-CGM group (specialised in container transport) will also improve supplies to Mali and Burkina Faso. As well as opening up markets in landlocked countries, gaining access to production areas is an integral part of the major maritime operators’ strategies. Links with inland areas are a major factor in competitiveness, along with access to deep-water ports capable of receiving ships with a capacity equivalent to 8,000 TEUs. Lomé comfortably leads the field in this regard, with an annual capacity of 2 million TEUs. In some ports (Dakar, Cotonou, and Pointe Noire), the upgrading of the port system implies a modernisation of quaysides, while in others, such as Tema, Lomé, Freetown and Conakry, the focus is on extensions of various sizes. And new sites are being developed or planned, such as in Sao Tomé and Kribi (Cameroon), while the Nigerian city of Lagos is scheduling new, high-capacity deep-water ports. Total port traffic in West Africa, from Dakar to Luanda, is currently 7.5 million TEUs, with a capacity of 10 million TEUs. The new projects coming on stream will double this capacity over the next few years.
South Africa is the undisputed leader in Southern and Eastern Africa, with three container terminal ports: Durban (which has a capacity of 2.6 million TEUs and primarily serves the Far East, Europe and the United States), Port Elizabeth, which serves nearby agricultural regions, and Ngqura, which was set up in 2009. With its Doraleh terminal, developed as a public-private partnership by the Dubai-based company DP World, Djibouti has evolved from a regional hub to a recognised driver of economic growth in Ethiopia. Further south, DP World is also involved in the port of Berbera in Somaliland. The acceleration of port traffic containerisation across Southern and Eastern Africa is largely the result of Chinese exports, a development that brings its own problems. For example, the Kenyan port of Mombasa almost exclusively handles imports, and between 2000 and 2012, global traffic increased by 118%, creating a major bottleneck and stifling the economies of landlocked countries.
THE PLAYERS IN THE AFRICAN TRANSFORMATION
Over the past 10 years or so, USD 50 billion has been invested in ports in sub-Saharan Africa by a small number of global players: APM Terminals, the Maersk group port subsidiary; Mediterranean Shipping Company (MSC); CMA Terminal, a subsidiary of CMA-CGM; the Bolloré group, which operates 16 container port concessions across Africa; and, increasingly, the maritime conglomerate China Merchant. While DP World has a base in Dakar, the two port handling giants, Hutchison Port Holdings (HPH) and the Port of Singapore Authority (PSA), are conspicuous by their absence from the region. By contrast, the Philippines-based International Container Terminal Services, Inc. (ISTCI) is involved in Matadi (Democratic Republic of Congo) and especially in Lekki (Nigeria). This handful of players operates either as partners or as competitors, depending on the nature of their West African concessions.
Over the past 10 years or so, USD 50 billion has been invested in ports in sub-Saharan Africa.
The presence of major industry players and significant investment partly explain the increase in the number of megaport projects in the region. However, other factors also contribute to this development. For example, there are plans for a new port in Lamu in Kenya to serve a rail link between the Indian Ocean and the Gulf of Guinea. The project also involves building a liquefied natural gas plant, a refinery, a desalination plant and several new towns. Whether a genuine regional development project for Africa, or merely a vanity project of the governement with the support of Chinese construction partners, the project is far from receiving unanimity from the population. It also throws up numerous potential difficulties, among them the threat of pollution, potential property speculation, the impact of the simmering civil war in South Sudan, and terrorism in Somalia.
Other gigantic projects being funded and built by Chinese partners are springing up across Africa, including in Bagamoyo in Tanzania and Technobanine in Mozambique. Furthermore these projects also target the domestic markets of landlocked countries, with plans for major rail routes linking the new ports with, in particular, the African Great Lakes and Southern Africa. While these Chinese turnkey projects, especially in the Gulf of Guinea and the Indian Ocean, are unquestionably part of Africa’s modernisation, they are also resulting in over-equipping the region with ports. Time alone will tell whether this new infrastructure has conferred a real benefit or merely a relative one.
FOREIGN COMPANIES DOMINATE
It is significant that the companies managing the regular lines to Africa, and the constructors and operators of port infrastructure on the continent, have one thing in common; all are foreign businesses. Indeed, the African market remains fragile: among other factors, competition is intensifying, port infrastructure is close to over-capacity, markets are dispersed, and some lines either fail to be profitable, or are insufficiently so. Operators considering investing in Africa therefore need to be particularly robust, especially in response to proposals for ever more ambitious projects. These companies also seek to reduce their risk by cooperating with others and creating partnerships. Moreover, operators across the logistical chain are increasingly vertically integrated (in terms of land-based organisation, purchase of raw materials, etc). Such bold action may nonetheless be rewarded when concessions are up for negotiation. However, all this does mean that African investors have only scant opportunity to play a part in their own right within the constellation of port operators.
The conditions are in place for port projects ranging from simple modernisation to mega-projects that also extend to landlocked countries.
Despite this, ‘local’ initiatives are taking shape, such as plans by the Economic Community of West African States (ECOWAS) to launch a pan-African maritime company, Sealink, with support from the African Development Bank and the Federation of West African Chambers of Commerce and Industry. Sealink will provide transit for goods and passengers in West Africa to make traffic more fluid and promote intra-African trade.
The conditions are in place for port projects ranging from simple modernisation to mega-projects that also extend to landlocked countries. A wide range of stakeholders are taking an interest in the African maritime sector, including international funds, Chinese developers and European operators. Their origins and profile illustrate just how weak is the African presence in the sector: local partners with direct involvement at operational level are confined to a few local port authorities and companies. Taking a more optimistic perspective, however, the current modernisation of African ports will help develop the continent and encourage economic tools that will, eventually, find their way into the hands of local stakeholders.