Globally, seaports are gateways for 80 percent of merchandise trade by volume and 70 percent by value. The gap created by the African governments has guaranteed massive investment opportunities to foreign investors imposing long-term concessions
By Kelvin Kamande
In Summary
- China through the Belt and Road Initiative, the Silk Road Economic Belt, and the 21st century Maritime Silk Road has invested heavily in the continent.
- Chinese investors are currently operating Port Sudan in the Horn of Africa region through strategic partnerships.
African governments are grappling with corruption, internal conflicts, failure in health and education sectors while at the same time trying to catch up with the urgent need for infrastructure development. This is 50 years after gaining political independence.
This has caused a huge delay in the infrastructural development of seaports. Consequently, most of the African countries remain dependent on ports built before the 1960s, while the current demands and standards are completely different. Currently, larger deep draught vessels require a depth of 10 or more meters while previous vessels required a minimum of seven meters.
In addition, the previous establishments are often major trade hubs that are congested and lack basic handling equipment in rapidly growing economies, coupled up with poor and corrupted managing systems of the existing ports. According to a PWC report, new port development is multifaceted in that they are increasingly multi-sectoral in nature, involving a number of ancillary projects across the broad range of sectors linked by other modes of transport.
Basically, seaports and terminals compete on the basis of price leadership or value addition services. This has led to an increase in the number of special economic zones as well as free zones globally offering competitive economic-driven initiatives and enhancing the appeal of the port and the economy within the jurisdiction around the port and the host country.
In the World Economic Forums’ global ranking for port infrastructure in 2013, only four countries — South Africa, Morocco, Namibia, and Kenya — were given a satisfactory mark for proper port operation.
This opened a door for foreign investors to persuade governments and other stakeholders in the ports and logistics sector to consider outsourcing funds for the development and operation of the ports for sustainable and adequate returns to the economies.
The Chinese and the Middle East port operating entities have dramatically increased their appetite for African ports, offering tempting and sustainable development to Africa.
China through the Belt and Road Initiative, the Silk Road Economic Belt, and the 21st century Maritime Silk Road has invested heavily in the continent. Chinese investors are currently operating Port Sudan in the Horn of Africa region through strategic partnerships.
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China Merchant Holding International has a 50 percent stake in Lomé container terminal, Togo in West Africa with an expansion of the LCT to four berths with a terminal capacity of 2.2 million TEUs (twenty-foot equivalent unit).
The same investors offered funds and infrastructural development to Tanzania with the construction of a $460 million seaport with a capacity of 20 million TEUs.
China Harbor Engineering Company won a contract to expand work at Ghana Eastern port of Tema, increasing the 400-meter berth to 1,000-meter berth. Sierra Leone received $708 million to expand Freetown Queen Elizabeth II Quay through China’s Tidfore Group.
Other notable Chinese investments are the port of Luanda in Angola, Cameroon’s Port of Kribi, where china built a controversial $1.3 billion port to open up the iron ore and cotton commodities to the world market, Nouakchott port in Mauritania and Ivory Coast according to Center of Strategic and International Studies.
Port of Berbera in Somaliland, Dakar Port in Senegal, Maputo Port in Mozambique, Djen-Djen and Algiers ports in Algeria, Kigali Logistics Center in Rwanda, and Sokhna Port in Egypt are currently operated or are under development by DP world and Dubai’s Jebel Ali Free Zone Authority based in the United Arabs Emirates according to Arabian Business daily. This accounts for 70 percent of Africa seaports exclusively or partly under foreign control.
Globally, ports are gateways for 80 percent of merchandise trade by volume and 70 percent by value. The main exports from Africa are largely commodity-based, which includes crude oil, coal, iron ore, precious metals, cocoa, palm oil, tea, coffee, and timber.
The gap created by the African governments has guaranteed massive investment opportunities to foreign investors imposing long-term concessions to develop and operate the gateways to the economies, while at the same time giving an upper hand to the investors to negotiate the raw products to the international market.
What’s next for Africa maritime, shipping, and logistics sector? Only time will tell.
Kelvin Kamande is Operations Associate, DP World
