Conference highlights Africa’s need for infrastructure

Feb 10, 2004
Author: P&S

SA Minister of Public Enterprises Jeff Radebe opens the 2nd Intermodal Africa Exhibition in Cape Town, while a beaming Siyabonga Gama, CEO of the National Ports Authority, looks on. Picture Terry Hutson.
Africa’s economic performance rates well below those of other developing regions largely because of poor transport infrastructure and inefficient transport corridors.

If there was an underlining ‘message’ from the 2nd Intermodal Africa Conference held in Cape Town last week (5-6 February, 2004), this was it. From the opening key-note address given by South African minister of public enterprises Jeff Radebe, to the conference closure, Africa’s need for better infrastructure and efficient transport corridors was made clear to all those ready to listen.

It’s therefore unfortunate that those who should be hearing this were not there - most of those attending the two-yearly conference are the already converted – people involved in the trade, the maritime, freight and transport industries.

Minister Radebe quoted at length from the recently issued Review of Maritime Transport, 2003 by the United Nations Conference on Trade and Development (UNCTAD). Other speakers with similar conclusions backed up his findings later in the conference.

Radebe said that according to UNCTAD the economic performance of African countries was generally below averages recorded for the rest of the developing world. “Political turmoil and conflict, even wars, in some regions of the continent resulted in the retraction or reversal of economic growth and development,” he quoted, giving the examples of Sierra Leone, Cote d’Ivoire, Liberia, Burundi, DRC and Rwanda, Chad, Gabon, Zimbabwe and parts of the Horn of Africa.

“The critical point however, is that notwithstanding the terrible cost in human lives, injuries and psychological trauma caused to people, such conflicts often take a heavy toll on infrastructure, transport and communication systems. Too often limited railway rolling stock and vehicle resources are taken over for military transport requirements and thus are lost to the economy that is already seriously disrupted through conflict and turmoil. Traffic is diverted away from war-torn or unstable areas towards other corridors, with the evident result that infrastructure that is already under pressure comes under even greater stress. These problems highlight again and again the need for Africa’s security needs to be addressed through practical action, and the causes of conflict addressed timeously and collectively.”

Radebe highlighted transport costs and its impact on the import bill as a critical component of Africa’s trade, and quoted from the UNCTAD Review:

“In 2001, the total freight costs of African developing countries as a proportion of import value was 12.65 %, which is considerably higher than the average of 8.7 % for developing countries. It is more than double the percentage for market economy countries and the world average.”

The Review divided the continent into regions, with North Africa having the lowest freight cost average at 11.21 %, and the island states of the Indian Ocean at 12.23 %. East Coast countries are slightly below the continental average at 12.35 %, but west and south the position, said Radebe, gets worse. West African freight cost averages are 13.9 % and Southern Africa some 16.42 %.

“The average cost for sub-Saharan Africa, excluding South Africa, stood at 13.84 % in 2001, but the highest cost was for landlocked countries at 20.69 %.”

Radebe said delays being experienced at border posts also impeded the development of a seamless transport system. In Southern Africa one survey suggests that delays range on average between 4 hours (at Pioneer Gate between SA and Botswana) and 36 hours (at Victoria Falls between Zambia and Zimbabwe), or 16 hours at Nkonde on the Tanzam border between Zambia and Tanzania. The cost to the region is estimated at some USD48 million annually (R332m)

The average cost to transport a container along the various road corridors in Africa is excessively high. In South Africa and Namibia the average cost along the main corridors from the ports is about USD1.40 per km, which is lower than in the EU but higher than the USA.

“Estimates for other African routes are generally much higher – for example to transport a container the 1,650km from Dar es Salaam to Kigali costs USD3.02 per km, the 1,600 km from Douala to Bangui is USD4.94 per km and the 1,000km from Lome to Ouagadougou costs about USD2.55.

“Significantly, non-distance-related costs such as port tariffs and border charges range between 12 and 40 % of the total costs of inland transport.”

The World Bank provides another example: It costs between USD1,000 to USD1,200 to ship a container from Baltimore in the US to Dar es Salaam or Durban, but to transport the same container from those ports to Bujumbura and Mbabane in turn costs USD10,000 and USD12,000 respectively.

“What does this mean in real terms? Simply put, excessive transport costs inflate consumer prices of imported goods that are essential items for consumption, construction and transport infrastructure. Furthermore, high transport costs bounce any exports from Africa right out of the competitive international market.”

Excessive transit costs are a more restrictive barrier than tariff regimes - Unctad

The UNCTAD Review concludes with the statement that the ‘major elements accounting for the high freight costs of landlocked developing countries include inefficient management of transport facilities, poorly maintained infrastructure and equipment, imbalanced trades, inadequate overall infrastructure and cumbersome government regulations.’

It adds that excessive transit costs to landlocked countries are a more restrictive barrier than the tariff regimes in major markets such as the US, Japan or the EU.

Another speaker, Paul van Eulem, who is the director of Maritime & Transport Business Solutions (MTBS), a joint venture between Royal Haskoning and RGroup Advisory in the Netherlands, pointed out that Africa, with an impressive coastline of 39 countries having direct access to the sea, and 95 ports handling international cargo, experienced total freight costs of 17 % of product value compared with a global average of between 8 and 9 %.

“Less than 5 % of total container trade is handled at African ports – 8.2 million out of 272m worldwide for 2002 (3 % actual – editor). Under-investment and under-capacity is a serious problem, leading to congestion in many ports.”

He said an additional 6 million TEU capacity was required by 2010 and suggested the solution lay with significant investment of between 1.2Bn euro and 1.5Bn euro until 2010. The focus should be on container terminals but also to include Ro-Ro facilities, cruise terminals such as at Mombasa, shipyards (ie Cape Town, Seychelles, Ghana and Lagos) as well as dedicated product facilities for grain, cement, clinker etc.

Van Eulem pointed out that private operators are responsible for less than 10 % of Africa’s container handling capacity compared with a worldwide average of 75 %. Between 1991 and 2001 some USD200m was invested in privately operated ports in Africa, which was between 1 and 2 % of global port investment in that period.

There was a significant lack of transparency over negotiations regarding privatisation or concessioning of ports and terminals with not enough open tenders, and negotiations usually took far too long. He questioned the political buy-in, particularly following an election.

In Africa there was a real concern over the involvement of shipping lines in bidding for port concessions, giving rise to worries about preferential rates, cross-subsidisation of less profitable liner activity and what happens if the routes are altered. Although there were a large number of projects available, there were only a limited number of players outside the shipping line-related companies.

Van Eulem said that nevertheless the privatisation projects offered both governments and investors important advantages, but it was important to improve the projects’ ‘bankability’. Financiers should be introduced early into the project, which should offer a sound and legal basis offering comfort to the banks. “Define your business case and define your financial structure,” he advised.

Container throughput will drop

Despite the continent having about 12 % of the world’s population, Africa contributes only 6 % of all cargo handled and just 3 % (8.2m TEU) of the container throughput, with South Africa providing 40 % of the latter. According to Drewry Shipping Consultants, Africa’s container throughput will drop to less than 2.8 % by 2012. John Fossey, Drewry’s director of container shipping made it clear that Africa was clearly under-performing and would erode even further in the future.

Containers handled at Africa’s ports in 2002:

East Africa 1,276,279
North Africa 2,552,240
Southern Africa* 2,281,740
West Africa 1,916,463
Total 8,279,722
(source Drewry Shipping Consultants)
* Southern Africa includes Mozambique and Namibia

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