Africa’s Port Infrastructure is Improving with a Burst of Local and Foreign Investment.
There is no question that capabilities and performance of the port system in Africa has needed improvements in many aspects for quite some time. The shaky and unreliable infrastructures have led to challenges which are resulting in a surge of investment. These investments aim to alleviate and improve the core challenges facing this sector and ultimately result in positive economic change.
While improvements are being made throughout the continent, significant focus lies in Western African countries such as Ghana, Nigeria, Congo, Togo and the Ivory Coast where the economic growth is promising. There have been a number of reports put forth by the IMF, Tuscor Lloyds, Drewry, Barclays and SeaIntel which highlight investment opportunities, concerns and foreseeable problems, expansion, trade and trends. The volatility of the port industry will no doubt continue but with a more solid direction will inevitably flourish.
“African ports have experienced extreme highs and lows and will continue to do so for the rest of this decade” – Victor Shieh, the Editor-in-Chief at SeaIntel.
The difficulties that exist encompass various aspects of infrastructure not only regarding ports but the entire transport sector, including roads and railways, as the system relies on a steady balance of support and integration to allow a positive effect to occur. There is a higher demand for African exports, namely oil and gas, as well as other natural resources. The support systems struggle to meet these demands efficiently.
Building technologies are ongoing and bigger ships are being built unsystematically and overcapacity and higher freight volumes are resulting in congestion. Supporting road and rail infrastructure has lacked funding and investment and competition and more ship calls have pushed the incentive to accommodate, even without the proper structure. Port Overview Africa has published a report with data back to 2012 on port incidents, developments, analysis of trends and performance statistics on Africa-Asia and Africa-Europe trades. The report will be updated every 6 months to allow shipping companies to access information to assist in planning their routes and schedules. Some have chosen to consolidate as a solution, such as Maersk and MSC, also due to the rising fuel costs.
The perpetuation of this problem is also pushed by poor customs operations, long wait and travel times and security issues. The pressure to meet these increasing demands can only perpetuate the problems without systematic investment and improvements.
Investment and Improvement
The IMF indicates that the growth rate for Sub-Saharan Africa in 2015 will be 4.5%; this can be illustrated with UK exports to this region which were roughly $12.8 billion US in 2013. Barclays Africa Trade Index Report has indicated that there will be even more trade opportunities with Ethiopia, Mozambique, Ghana, DR Congo and Tanzania, which they have named as the countries with potential. This opens the doors for investment in many areas throughout SSA.
African governments have put nearly $1 billion toward infrastructure and energy projects but are looking still to for expanded investment through private African companies and banks, as well as foreign investment. China is responsible for a significant portion of this investment which provides mutual benefits: boosting the infrastructure in the local economy while allowing for easier export as well as making it easier for Chinese companies already present to obtain resources. The WTO has made trade easier by working toward lower trade tariffs, thus providing higher accessibility to African markets. According to the Chinese Premier Li Keqiang “China expects to achieve $400 billion in trade with volumes with Africa and raise its direct investment in the continent to $100 billion by 2020”, which is through Chinese lending companies, such as BRICS bank.
China is strategically investing in ports which eventually fulfill their goal of a Maritime Silk Road (MSR). Chinese investment will put a dent in the $900 billion deficit and benefit local trade as well, with investments supporting the infrastructure at root levels, such as businesses as schools. Specifically, many ports will receive money for construction and improvements. Ports on the West coast will increase capacity significantly with what is expected to be a $99.5 million dollar spend; specifically Nigeria (2), Congo, Togo, Ivory Coast and Ghana. In addition, Ghana’s port has received multiple investments and is under construction by a Chinese company called China Harbor Engineering (CHEC) for the Atuabo Free Port Project and estimated to be operational by 2017.
This project aims to expand, and house multiple projects such as repair and support. A second project at Ghana’s Tema port is on the go for expansion through a Danish company called APM Terminals. The budget for this project is $1.5 billion, and increase form $1 billion. This is the result of a partnership between public and private companies who aim to support Ghana as a top GDP improving country.
With continued significant local and foreign investment and trade, Africa’s port improvements will boost their economy by accommodating the demands of trade and logistics for shipping companies. The individual port projects along with improved land infrastructure will provide a more efficient base for operation.
Photo: tuscorlloyds.com and afkinsider.com