FROM MAGAZINE: It’s time for Africa to stack up container shipping capacity

Africa is on the move to build infrastructure to increase the continent’s containerised trade with the help of investment from international logistics companies and port authorities. While the continent is improving the hinterland connectivity and port capacity, there is a growing need to diversify the economy to propel its containerised trade, Nahida Jafferi reports.

Around 90 per cent of African trade is driven by the sea. Income must be created by the export of Africa’s abundant natural resources to pay for the imported goods that will enable the rapid expansion of the middle-class. The infrastructure at ports is not conducive for Africa to fully capitalize on its economic potential, but it is on its way. Africa has a significant contribution to global food and resource transportation value chain.

Africa accounts for seven percent and five percent of global maritime exports and imports by volume, respectively. Nearly 40 percent of goods exported from Africa by the sea in 2017 comprised of crude oil, while over two-thirds of imports were accounted for by dry bulks and containerized cargo, and 20 percent of imports were made up of petroleum products and gas.

Africa’s ports account for four percent of global containerised trade volume, much of which comprises imports of manufactured goods. According to PWC, of the 72 percent world container throughput commanded by developing countries, Africa collectively only sees 1 percent. Most of Africa’s shipping and ports do not match global industry standards.

In the 2018 Lloyd list of Top 100 global container ports, from Africa, only four container ports in Morocco, Egypt and South Africa, are listed.

African ports need to embrace innovation, automation and simplification to enhance trade with the world. For the same, investment is essential in the end to end transportation management, connected warehouse management, vessel and container track-and-trace, and inter alia, improved hub logistics.

The European Union remains Africa’s major trading partner. However, the EU’s share of trade has declined from about half in 1995 to one-third in 2017. China and Asia have incrementally cut into the EU and US share of African trade. This is opening new opportunities for the continent both as a consumer market as well as a potential manufacturing region, for example, as shown by growing textile and garment manufacturing activity in Ethiopia.

As per the United Nations Conference on Trade and Development (UNCTAD), shipping connectivity is below the global average in Africa. Africa’s intercontinental trade is dependent on ports and shipping services, as one-third of its countries are landlocked.

Hapag Llyod, the Germany-based shipping line, is witnessing a business boom in Africa, with a young population expected to double by 2050. Samad Osman, Managing Director-Area Africa, Hapag-Lloyd, said, “Hapag Lloyd witnessed a 25 percent average per year (based on the years 2014-2018) growth in container business in Africa, mainly due to the expansion into both coastal and landlocked African countries as well as fleet/service upgrades. There is a lot of growth: from 9 M TEU in 2014 to 13 M TEU by 2022.”

“Hapag-Lloyd currently develops mobile applications for Africa’s uniquely prevalent mobile economy. Another aspect that facilitates efficient container trade from/to Africa is the investments being made into building updated infrastructure to cope with the continents’ growth. Also, free trading zones within Africa like the Economic Community of West African States (ECOWAS) play a role in facilitating trade,” added Osman.

“One of the main challenges is the infrastructure development in terminal, road and rail. Also, internet connectivity is relatively low per person although it is the fastest growing in the world. Compliance is another challenge as well as language and cultural diversity,” cited Osman.

He observed that there are a lot of investments in the industry leading to several new or upgraded ports that are currently under construction across the continent. However, there is still too little investment into cross- border infrastructure (rail networks/roadways), which limits the growth of landlocked countries.

The African countries with best shipping connectivity are where international shipping routes connect to hub ports, in Morocco, Egypt and South Africa. They are followed by sub-regional load centres, notably Djibouti, Togo and Mauritius. Last year, Djibouti launched the first phase of Africa's biggest free-trade zone. In 2017, Djibouti unveiled three new ports and a railway linking it to landlocked Ethiopia, as part of its bid to become a global trade and logistics hub. Apart from its geography, what has helped these countries to be leaders in African container shipping is the public and private investments, port reforms, and improved transit to connect to neighbouring landlocked countries.

Only 13 percent of Africa's trade is with other African trading partners. African free trade zones and the removal of tariff barriers are essential for efficient cross-border trade. This is currently being implemented in Nigeria and Kenya significantly.

Interestingly, the cost of shipping both 20-foot and 40-foot containers to Lagos ports in Nigeria from New York in the US is the world’s most expensive, as per the analysis of MoverDB, an online resource for international shipping. This is mainly due to the congestion at the ports, slow pace of inspections and offloading cargo. Nigeria is the largest economy in Africa owing to its crude oil exports and heavily relies on imports. MoverDB analysis also stated that the ports’ inefficiencies have for years enabled corruption from middlemen promising to clear goods for a fee.

On the other hand, Kenya's Kisumu port plans to undergo a massive restoration to create a trade and logistics alternative to the port of Mombasa. Daniel Manduku, MD, Kenya Ports Authority (KPA) said, “We have launched the first phase of the rehabilitation project to remove the water hyacinth. After that, we shall start the actual construction work of the pier, extension of the quayside to 900 metres, a new office block, workshops, and a slipway.” The Kenya Railways Corporation (KRC) would also rehabilitate the old railway line from Nakuru to Kisumu. Kisumu is the third largest city in Kenya and a commercial centre with diverse and partly unexploited resources in agriculture, commercial, industrial, tourism and transport services.

Bollore’s initiatives
African ports need to accommodate larger vessels and ensure adequate cargo handling equipment is in place. Bolloré Transport & Logistics plans to invest the US $496.3 million in the second terminal at Port of Abidjan that will partly be financed by Maersk. Expected to be operational by 2020, the new terminal aims to boost the capacity by around 15 percent from its current roughly 1.2 million TEU. Asta-Rosa CISSÉ, Managing Director, Abidjan Terminal, Bolloré Transport & Logistics, said, “In sub-Saharan Africa, the logistics cost of imports and exports is about double the world average. The reason for these additional costs is the lack of economies of scale and the poor infrastructure along corridors. Designed to promote regional transhipment, the port of Abidjan will become a leading maritime hub. By operating mega-ships, the Port of Abidjan will have the effect of dragging down freight rates.”

“The second container terminal at Abidjan will bring additional capacity with 6 RTG (electrical rubber-tyred gantry cranes), 6 STS (ship to shore cranes) and 13 RTG (rubber tyred gantry cranes). Equipped with the latest technology, it will offer the first-class service to its customers and reduce the cost of the supply chain,” said CISSE. She further added, “The Port of Abidjan, like most African ports, is enclaved within the city which with today’s increased volumes brings congestion and is a burden on the supply chain. In partnership with the Port authorities, Bolloré Ports is taking a leadership role in defining a vision/strategy that harmonizes the logistics needs and urban growth for the future.”

In 2020, Ghana’s Tema port will provide over 3.5 million TEUs in annual throughput, after its expansion project is completed. Recently, Tema Port has received seven ship-to-shore (STS) and 20 RTG cranes recently and is set to open its first phase on June 28. This is a part of its massive expansion plan in 2019.

These were among the final pieces of a $1 billion investment by Meridian Port Services (MPS), the joint venture between Bolloré Transport & Logistics, APM Terminals and the Government of Ghana through the Ghana Ports and Harbors Authority (GPHA). The breakwater and access channel will be able to accommodate the world's largest container ships, and the first two deep-water berths are expected to receive commercial vessels by the end of June. Port infrastructure for receiving and delivering containers will also be ready. The third new berth would be operational in the first quarter of 2020.

Recently, Bollore Transport & Logistics inked a joint venture agreement with CLS Logistics to improve the supply chain of strategic sectors in Ethiopia, such as textiles, coffee, industrial projects and infrastructure following the partial opening of the logistics sector in the country.

As part of this agreement, the joint venture plans to invest 15 million euros to build a new, fully secure and modern logistics hub. Bollore also intends to support the Ethiopian authorities in the modernization and development of dry ports, and in particular, that of Modjo, in order to position it as one of the main logistics hubs of East Africa.

Another strategic deal that Bolloré Transport & Logistics entered into is with COSCO Shipping, for deepening their commercial relations while exploring new opportunities for cooperation in transport, logistics and port infrastructure. They share the common ambition to intensify international flows, particularly on the African continent.

Africa can improve its containerized trade and port traffic volumes, by diversifying its economies and enabling greater regional integration. As per UNCTAD, trade policy and regional integration initiatives such as the African Continental Free Trade Agreement (AfCFTA) will not be enough. Africa’s container ports and hinterland transport networks will need to upgrade infrastructure and services, and improving performance, to match international standards.