Time to deliver in East Africa
Talk of the region's potential is getting tired, finds Felicity Landon
‘Potential’ is a word that crops up pretty frequently when discussing developments in East Africa’s ports sector. Certainly there are a number of significant projects moving ahead to provide deeper water, expanded facilities and entirely new ports.
But for this region, ‘potential’ stretches far beyond national borders. In the tussle to serve landlocked countries, a port’s success is as much about its hinterland links and IT infrastructure as it is about straightforward quays and cranes. As such, there is significant investment in rail, bridges and inland terminals and dry ports.
“There is a lot of investment in Africa, particularly from the Chinese. I am sure the potential is there – but how many years have we been saying Africa has potential?” says Dean Davison of London-based ClipperMaritime. “Certain ports benefit from their geographical location but they can’t control other factors such as national economic developments, local population and levels of demand.”
Sultan Ahmed Bin Sulayem, DP World’s chief executive, recently said: “Africa’s trade potential is enormous, evident in the 400% increase in trade between Africa and the rest of the world in the last two decades. Infrastructure development is more important than ever to maintain and increase this growth momentum.”
Public-private partnerships (PPP) are the route to progress in Africa, he said – they are an effective model to fund projects, especially those on infrastructure, "while robust government policy and transparency are essential to its success".
In all of the countries where DP World has operations in Africa, it has partnered with local governments. Among them is Maputo in Mozambique, which is an example of the power of partnerships, he said. “It’s well located to drive growth and a gateway to southern Africa’s vast economic hinterland. It has had a significant impact on the economy, employing 2,000 people directly and 10,000 indirectly, while port volumes have grown 286% since 2003.”
The Mozambique port plays a major role in linking regional production, mining and commercial hubs to the markets of South East Asia, says DP World. It is almost entirely focused on origin and destination throughput and is the main shipping terminal for landlocked regions such as Gauteng Province, Swaziland, Botswana, Zimbabwe and Malawi.
Across the region
As well as Maputo, DP World’s East Africa operations are at the Port of Berbera in Somaliland and the Doraleh Container Terminal in Djibouti.
The Doraleh terminal, opened in 2008 in a joint venture between DP World and the Djiboutian government, has capacity of 1.6m teu, quay length of 1,050 metres with depth of 18 metres, and eight super post-panamax twin lift cranes with 65 metres outreach.
“Doraleh Container Terminal is the best performing terminal on the east coast of Africa and the most modern and technologically advanced,” says a spokesman for DP World. “It is a leading enabler of trade, connecting local markets to the global supply chain.”
Djibouti’s strengths, located at the entrance to the Red Sea and in the second busiest shipping lane in the world, make it a port of choice for East African markets as well as a regional hub for transhipment, he says, and in addition it acts as an important gateway for landlocked Ethiopia.”
DP World’s newest investment in the East Africa region is in Somaliland; it officially started operating at the Port of Berbera, in a 30-year concession, last year. In November 2017 it signed an agreement with the government to develop a greenfield economic free zone to tie in with the development of Port of Berbera. The ambition is "to attract investment, encourage trade, create new jobs and position Berbera as a gateway port for the region".
The first phase will focus on 4 square kilometres of land out of 12.2 square kilometres that is earmarked for the project.
“Future phases will be detailed in a concept plan together with the projected capital investment required from DP World for its development. Each phase of the free zone will start once the previous phase has achieved 85% occupancy. It will target a wide range of businesses including warehousing, logistics, traders, manufacturers and other related businesses.”
Present and future
DP World says its operations at the Port of Berbera have seen substantial gains in recent months. In September 2017, the port recorded the highest container volumes in its history with a 40% increase compared with September 2016.
Meanwhile, the operator has begun implementing the Berbera master plan, which includes an additional 400-metre container terminal. It has also invested in a range of new equipment, including two reachstackers, ten internal transfer vehicles and five forklifts. The first cranes are scheduled to arrive next year.
“The Port of Berbera opens a new point of access to the Red Sea and will complement our existing port at Djibouti and serve Ethiopia, the region’s largest economy,” says the spokesman at DP World. “Total investment of up to $442m will be phased over time, dependent on port volumes, and will create a regional trading hub along with the scope for a free zone.”
The first phase of Berbera port will include a 400 metre quay and 250,000 square metre yard extension, gantry cranes and reachstackers to handle containers, taking capacity from the current 150,000 teu to 450,000 teu. Construction is due to start this year, and is expected to be complete in 2020.
Additionally, early in 2016, DP World was awarded a 25-year concession to develop and operate a new logistics centre in Kigali, Rwanda. This is a greenfield project, and the first phase will be built on 90,000 square metres with a 12,000 square metre container yard and 19,600 square metre warehousing facility. “Development of the first phase is under way and further development will be phased in line with demand growth.”
Estimated annual capacity at the Kigali centre is 50,000 teu, and 640,000 tonnes of warehousing space.
In Kenya, the Port of Mombasa’s second container terminal is up and running, and the building of the first three berths at Lamu port is under way.
Regional ports expert David Mackay, director of Varuna Consulting, says: “This year Mombasa is putting a great deal of focus and funds into upgrading its IT systems. With the second container terminal growing and import volumes expected to grow by over 10% this year, there is an urgent need to upgrade its key IT port management systems. The port is planning a significant upgrade of all of its software, for 21st century port operations.”
Phase two of the second container terminal in due to start in March, to deliver another 450,000 teu of capacity by 2021; the port is also implementing a green policy/environmental management system, and a port productivity improvement programme focusing on labour and equipment.
Also impacting on Mombasa, this year British oil explorer Tullow has started setting up equipment in the Turkana oilfields to separate crude oil from impurities, with exports due to start this year.
The temporary facility will be in use for two years, and during this period road trucks will transport 2,000 barrels of oil a day to Mombasa port.
Once its Turkana-Lamu pipeline is built, Tullow will set up a permanent central processing facility that will process up to 80,000 barrels daily for exports.
Lamu Port itself is planned eventually to have 23 berths with a depth of 17.5 to 18 metres. “So far about 50% of the construction of the first three berths is complete; negotiations are under way with a consortium to manage the port once they became operational and the port opens,” says Mr Mackay.
A number of major developments are moving ahead, tied in with Lamu. These include the building of inter-regional highways from Lamu to Isiolo and Juba (South Sudan), Isiolo to Addis Ababa, and Lamu to Garsen; crude oil and product pipelines; an international airport at Isiolo; and inter-regional standard gauge rail links Lamu-Isiolo, Isiolo-Juba, Isiolo-Addis and Nairobi-Isiolo.
Meanwhile, Kenya Ports Authority’s plans to expand the small harbour of Shimoni into a significant hub are moving ahead. Shimoni was originally a fisheries jetty – with a wide, sheltered deep channel, it is earmarked for expansion as a major port in the next two years, and seen as ideal for handling rising coastal trade volumes with destinations such as Pemba Island and Zanzibar.
Durban-based Grindrod International has operations in Mozambique as well as South Africa and Namibia. In 2016, Grindrod acquired the dry port in Nacala, Mozambique; in partnership with Terminals de Norte, it provides a container storage facility for the Port of Nacala.
An important part of this was having a base to develop cross-docking and a freight packing station for Syrah’s Balama Graphite Project, part of a logistics contract awarded to Grindrod.
The development includes building a 10,000 square metre warehouse and a 30,000 square metre container yard. Construction is well under way and expected to be complete in May, says a spokeswoman for the company.
RAIL CONNECTIONS STILL IN INFANCY
The new SGR railway system from Mombasa to Nairobi, built at a huge cost of $4bn, has been operational since the middle of 2017 – but while passenger services are running smoothly, freight services have been more problematic.
“The challenge they are facing is to achieve the right freight level to successfully compete against trucking operations as well as achieving efficient offtake in Nairobi for final delivery to receivers there and to wider areas including Kisimu,” says Varuna Consulting's David Mackay.
The Mombasa-Nairobi stretch was phase one; the second phase links to a planned dry port at Naivasha, northeast of Nairobi, with subsequent SGR phases continuing to Kisumu and Malaba.
The new SGR project, funded with a 90% loan from Exim Bank of China, will require 25,000 people to build the railway; the project is promised to create another 40,000 jobs in the supply of materials and services, and 6,000 new jobs in the service and leisure industry.
“The key benefits of SGR include reducing congestion at Mombasa, reducing the cost of transportation in the region, adding 1.5% to Kenya’s GDP growth, reducing wear and tear on highways, speeding up industrialisation and protecting the environment, reducing carbon emissions,” says Mr Mackay.
The present delivery time by road to Nairobi averages ten days. By SGR, the expected delivery time is four days. “Implementation of trade facilitation and customs clearance improvement measures should result in an estimated cargo dwell time of 3.5 days, down from the current 6.5 days.”
However, there has been opposition to SGR, including from those who protest that port services will be moved from Mombasa to Naivasha. Also, the project involves "eyewatering loan repayments over 20 years", says Mr Mackay.
As of February, new freight rates were being offered of $250 per teu, Mombasa/Nairobi. However, freight services are still struggling to attract high volumes and there are challenges with congestion at ICD Nairobi and with point to point delivery.
“SGR now needs to target approximately 35/40% of all inbound volumes to make the new project financially viable," concluded Mr Mackay.
TANZANIA URGES FASTER PICK UPS
Hutchison Ports’ Tanzania International Container Terminal Services (TICTS) handed more than 500,000 teu in one year for the first time in 2017. Total throughput at the Dar es Salaam terminal was 501,690 teu, an increase of 4.5% on 2016. The growth was due to a 35% rise of transit cargo over the previous year, says a spokesman.
However, the year was not without its difficulties. Space limitations within the port, combined with relatively slow pick-up of containers, was a challenge, says the spokesman. “Unless they are cleared, containers cannot be transferred outside of the port for storage. To address this issue, TICTS is working with the government to identify new sites to store containers that are awaiting clearance.”
At the start of this year, TICTS appealed to its customers to "expedite clearance of their cargo just after discharge in order that the terminal can be more efficient to handle increasing cargo".
As Tanzania’s main gateway port, Dar es Salaam handles around 90% of the country’s international cargo. It is also the gateway to the landlock countries of Zambia, the Democratic Republic of Congo, Malawi, Rwanda, Burundi and Uganda. “Several of the world’s largest shipping lines call at the terminal; TICTS serves as a key node for East Africa’s trade with the world,” he says.
An ongoing project is the Dar es Salaam Maritime Gateway Project. Funded by the World Bank, this will include infrastructure upgrades to enable the port to handle post-panamax-plus vessels. The contract for the first phase was signed in mid 2017; the first phase of construction will take 36 months and cost $148m. Work will include dredging, expansion of berths 1-7, and the construction of specialised ro-ro and container facilities.
TICTS has recently set up a regional office in Rwanda to step up its marketing in the landlocked countries it serves. This has resulted in a larger market share in some countries in the region, says the company.
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