As recent events in Douala, Cameroon have demonstrated, we are now in the era of concession renewals and there is not always a guarantee of continuity for existing incumbents, writes Mike Mundy.
Terminal Investment Limited (TIL), the terminal arm of the major liner operator Mediterranean Shipping Company (MSC) has been awarded the concession for the Douala Container Terminal following the removal of the existing operating consortium of Bollore-APM Terminals from the bidding process for the new concession term.
In general, it is true to say that concession renewal with the existing operator is the sensible option. If such an operator can be seen to have done a good job – invested properly, raised service levels, applied good health and safety standards, engaged positively with all stakeholders and paid concession fees on time – then there is little incentive to remove such the incumbent party.
This is easy enough to measure in terms of monitoring vessel turn-round times, over the-quay box moves, dwell time on the terminal and other proven industry indicators.
There are, however, a few host port authorities who despite seeing such benefits opt for the tactic of offering a concession to the market again rather than a straightforward renewal.
In such circumstances the motivation for doing so seems questionable – and may indeed be the result of a subjective decision at a senior port authority level as opposed to an objective decision.
This can also incorporate some sort of outside influence ‘below the radar.’ When this happens, it is perhaps worthy of a closer look by the government agency that sits above the port authority concerned – a Ministry of Transport, for instance.
Often a lot of trouble is taken to offer new concessions with the assistance of independent advisors or arms’ length government bodies but strangely this type of independent appraisal is not yet a major feature of concession renewals, which invariably involve a bigger business than a new concession offering.
Not to say that there is not a case for offering a concession to the market on the expiry of an existing concession’s term but the bonafide grounds for this are clearly poor performance or undue exploitation of the asset to the detriment of the terminal’s customers and a country’s broad economic objectives.
It also doesn’t help if the concession holder falls into a major dispute with the host port authority – such as the one APM-Bollore has with the Port Autonome de Douala (PAD), involving an amount of €37.5 million which PAD says is owed for breaches of the concession terms and for charges relating to vessel calls. Such circumstances do promote the idea of concession renewal to a new operator.
Where original concession holders have clearly done a very good job, however, there are less grounds for removal and if this is proposed then there is a strong case for scrutiny of the motivation in this respect.
