Port users set for better services as Eastern Africa states battle for dominance
An observer said the competition has seen most ports invest in different modes of transport but noted a need to embrace the Multimodal Transport Treaty, which allows the carriage of goods by at least two different modes of transport, to reduce congestion.
Report by Anthony Kitimo, Apolinari Tairo, and Bob Karashani
A quiet, yet vicious battle for the shipping business is underway in Eastern Africa with Tanzania, Kenya, Djibouti, and Somaliland as the protagonists.
Tanzania, home to the most ambitious port project in the region — the $10 billion Bagamoyo Port — has announced plans to revive its construction, potentially turning the tables on its competitors. The project features a special economic zone and industrial park that are billed to attract at least 700 business units and dominate the freight business along Africa’s Indian Ocean coastline, eclipsing Kenya’s equally ambitious Lamu port project.
At a meeting with the Tanzania National Business Council in Dar es Salaam recently, President Samia Suluhu disclosed that her government had revived discussions with the Chinese government with the aim of resuming negotiations over funding for the project. The negotiations were torpedoed by President John Magufuli in May 2019 over what he described as unfair investment conditions proposed by Beijing. The project was mooted by Magufuli’s predecessor Jakaya Kikwete and as one of his key legacy projects. Now hope is rife in Tanzania that the project will soon come to fruition.
But in the Horn, DP World, a United Arab Emirates ports operator, opened its upgraded container terminal at Berbera, the main seaport in the Republic of Somaliland, putting Berbera in a head-to-head rivalry with the Port of Djibouti’s Doraleh Container Terminal for business from the Ethiopian market.
Coming at a time Kenya’s Lapsset anchor project, the Lamu Port, is still finding a footing as a transshipment hub, Nairobi is already rattled and is moving to shore up its business against the upcoming onslaught.
Such is the importance Nairobi and Dodoma have attached to this sector that in the current financial year they have put modernization of ports at the top of the list of priority investments with increased budgets meant to enhance efficiency and increase throughput.
This battle of the ports has come at an opportune time for users, who are gearing up for improved services and competitive rates and a range of choices on which port to use. Shippers Council of Eastern Africa Chief Executive Gilbert Lagat said competition is working to their advantage.
Mr. Lagat said the competition has seen most ports invest in different modes of transport but noted a need to embrace the Multimodal Transport Treaty, which allows the carriage of goods by at least two different modes of transport, to reduce congestion.
“To ensure cargo is delivered on time, we need to incorporate both road and rail in our transport system and, where possible, lakes. We cannot expect to decongest our ports to make them competitive if we depend on one mode to evacuate cargo from the port. But, with competition, we are seeing governments investing more in such infrastructure,” Mr. Lagat said.
Revival of Bagamoyo port
The announcement of the revival of the Bagamoyo port has excited players in the maritime business. Tanzania Private Sector Foundation said the port would ease pressure on the port of Dar es Salaam, which is fast running out of expansion space.
TPSF chairperson Angelina Ngalula said Bagamoyo is capable of hosting larger ships than Dar es Salaam due to its deeper waters while also having similar strategic links to the standard gauge railway now under construction across the Central Corridor as well as the Tanzania-Zambia Railway.
As Somaliland and Tanzania go for gold, Kenya is putting its money in the modernization of Mombasa port, construction of the Dongo Kundu Special Economic Zone in Mombasa, operationalization of the Lamu Port, and opening up corridors for cargo evacuation.
National Treasury Cabinet Secretary Ukur Yatani, while reading the $33 billion budget, allocated $69 million to the Mombasa port development programme. Part of the funds will go to the completion of the second container terminal at the Mombasa port, aiming to expand the capacity of the facility to handle more than 450,000 twenty-foot equivalent units (TEUs) to meet the growing demand. Some $800,000 will be used for the development of a freeport and special economic zone in Mombasa as the construction of Dongo Kundu highway to connect the Kenyan South Coast and Southern Tanzania through Lunga Lunga border is being done. The road is 75 percent complete.
Projections in the Mombasa Port Strategic Plan show the port will handle 47 million tons in the next 10 years, from the current 34 million tons, and eventually 110 million tons in the late 2040s.
After the commissioning of the first berth at the Lamu port, Kenya has set aside $69 million for the implementation of various projects in the Lamu Port South Sudan-Ethiopia Transport (Lapsset) Corridor. Already, the construction of Lamu-Garissa-Isiolo-Moyale road to connect with Ethiopia and that of Isiolo-Loruk-Lodwar-Lokichogio road, which will connect to South Sudan, have begun and are scheduled to be complete by end of the financial year. The two corridors will be an incentive to Ethiopia and South Sudan to start using Lamu port, which is currently doing transshipment.
Kenyan has announced incentives to encourage more shipping lines to use the Mombasa and Lamu ports as the gateway to the Eastern Africa region. These include exempting fuel supplied to shipping lines from import and excise duty, value-added tax, railway development levy, and import declaration fees.
In Tanzania, the Samia government unveiled a $15.7 billion budget, of which $1.3 billion has been allocated to flagship infrastructure projects in the 2021/2022 fiscal year. Finance minister Mwigulu Nchemba allocated funds to the ports of Dar es Salaam, Mtwara, Tanga, and Bagamoyo.
At the Tanga port, the government is investing in dredging from four to 13 meters, installation of navigation equipment, and completion of two deep-draft berths. On the Bagamoyo port, located about 75km north of Dar es Salaam, Tanzania in 2013 inked an agreement with China Merchants Holdings International to construct the facility and a special economic zone.
To woo users, Tanzania Shipping Agencies Corporation (Tasac) has already begun programmes which are part of the Tanzania Ports Authority to capture new markets and increase its throughput after heavy investment funded by the World Bank to expand port operations. From March, Tasac started clearing more products, including fertilizer, industrial and domestic sugar, edible or cooking oil, wheat, oil, liquefied petroleum gas, and chemicals.
Dodoma seems to have begun reaping the benefits of the $345 million World Bank grant to the new Dar es Salaam Maritime Gateway Project, which has significantly improved its port business.
Kenya and Tanzania are competing to position their facilities as the preferred entry points to the region, particularly inland markets in landlocked nations like Uganda, Rwanda, Burundi, South Sudan, and the Democratic Republic of Congo.
The latest entrant in the race, Somaliland, aided by DP World, comes with a new container terminal with a capacity of 500,000 TEUs a year. The second phase is expected to increase the capacity to two million TEUs a year.
The Berbera Economic Zone is meant to attract investment with an expanded port, economic zone, and Berbera Corridor to transform the port city into an integrated maritime, industrial, and logistics hub in the Horn of Africa.
The new container terminal with a deep draft of 17 meters, a quay of 400 meters, and three ship-to-shore gantry cranes, can handle the largest container vessels in operation today, though it remains way below in annual throughput, compared with Mombasa.
As part of the Berbera plan, modeled on DP World’s Jebel Ali Free Zone in Dubai, the economic zone is linked to the port and strategically located along the Berbera Corridor.
If the new negotiations are fruitful, the Bagamoyo project will bolster Tanzania’s plans to expand its marine transport portfolio both in the Indian Ocean and the Great Lakes region. The port is expected to handle 20 million shipping containers annually by 2045, which would be 25 times the amount of cargo currently handled by the port of Dar es Salaam.
Some $58.3 million out of Tanzania’s budget for 2021/22 has been allocated to implement several marine transport projects in Lakes Victoria and Tanganyika aimed at raising the volume of cargo and passenger movements between Tanzania and neighboring countries.
According to the Ministry of Works, a new ship with 600-passenger and 400- ton cargo capacity is being built to ply Lake Tanganyika from Kigoma Port and boost trade with Rwanda, Burundi, and the DRC alongside the 100-year-old, 70-metre-long MV Liemba, now undergoing rehabilitation.
Meanwhile, Dar es Salaam and the other key Indian Ocean ports, Tanga and Mtwara, are also being expanded, modernized, and upgraded to increase their capacity to accommodate big ships.
Seven of the 11 berths at the 2,600-metre Port of Dar es Salaam are being expanded from 191 meters to 327 meters and in-depth from eight to 15 meters. The Tanga port, which will be the exit point for Ugandan petroleum products through the up-and-coming East African Crude Oil Pipeline, is also being dredged from 3.5 meters to 15 meters and raise its cargo handling capacity to over one million tons per year.
Up to 90 percent of Tanzania’s international trade transactions depend on the port of Dar es Salaam. Uganda, Rwanda, Burundi, and eastern DR Congo are the target destinations for cargo offloaded at the Dar and Tanga ports while Mtwara port handles cargo for Malawi, Zambia, and Zimbabwe.
Rwanda is the leading EAC partner state using the Port of Dar es Salaam, with about one million tons of cargo recorded at the port per year, according to TPA figures. Burundi depends on the port for 99.2 percent of its international cargo while the figure for Rwanda is 86 percent, comprising both imports and exports.
In mid-June President Samia paid an inspection visit to the construction of the 3.2-kilometer Kigongo-Busisi bridge — the longest in East Africa— across the southern end of Lake Victoria and the 3,000-tonne MV Mwanza Hapa Kazi Tu cargo ship now being built to ply the lake.
Construction of the $308.88 million bridge is at 27 percent and is supposed to be complete in early 2024. It is being jointly built by the China Civil Engineering Construction Group (CCECG) and China Railway 15th Bureau and will cut transportation time across the lake from 35 minutes by ferry to just four minutes.
The $38.72 million MV Mwanza Hapa Kazi Tu construction project is being handled by South Korean firms Gas-Entec and Kangnam and is scheduled for completion by December next year.
President Samia also inaugurated a $15.53 million slipway at the Mwanza South port that will facilitate further ship construction projects for Lake Victoria. She said the aim was to make Mwanza a major hub of marine business in the Great Lakes region once the SGR project is complete, considering its strategic positioning.
Tanzania already has two major ships serving all three countries that share Lake Victoria — MV Victoria with a carrying capacity of 1,200 passengers and 200 tons of cargo, and MV Butiama with the capacity to carry 200 passengers and 100 tons of cargo.
Report by Anthony Kitimo, Apolinari Tairo, and Bob Karashani
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