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Africa Last Updated: Oct 15, 2019 - 10:30:59 AM


Title African port development could break investment logjam
By FurtherAfrica, October 14, 2019
Oct 14, 2019 - 11:33:54 AM

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Africa’s inefficient ports and harbours have long been a major obstacle to development, but now money is finally being spent on modernising the continent’s gateways.

Development economists have often said that Africa’s antiquated trade routes, which date back to colonial times, play a large part in chronic poverty. Raw materials were shipped out, and finished goods trickled in, bought by the rich few who could afford them.

“This is a problem common to almost all colonised nations as the infrastructure of colonies was purpose-built for the colonial export of raw materials to Europe primarily,” says Gayathri Iyer, a researcher at the India-based Observer Research Foundation’s Maritime Policy Initiative. “This infrastructure deficit will therefore continue guiding most countries’ trade outward rather than inward.”

Iyer says that of Africa’s 55 countries, 16 are landlocked and highly dependent on major port economies such as Nigeria, Morocco and Egypt. African ports are also notoriously inefficient, leading to long ‘dwell time’ for cargo vessels waiting to unload or take on board cargo, Iyer notes.

“The average cargo dwell time in large ports in Latin America, Asia and Europe is under a week. Most ports in Africa see rather long dwell times averaging between two to three weeks. It then takes between four to six weeks for the cargo to reach the landlocked African countries.”

For landlocked territories that have expressed interest in developing their own automotive assembly capacity such as Uganda and Rwanda, getting their products to market becomes near impossible.

“This has rendered many regional manufacturing companies that depend on shipments, uncompetitive in global markets and led to imports being more expensive for consumers,” Iyer adds.

For many potential investors and entrepreneurs, the difficulty of getting goods in and out of the continent make it simply not worth the hassle.

“There is a risk perception regarding Africa that is incredibly high,” says Geoffrey White, the CEO of Agility Africa. “This is a big disincentive for a lot of people to come and do business here.”

Agility Africa is a division of Kuwaiti firm Agility, a global logistics company that earned revenue of 1.55 billion Kuwaiti dinars (Dh18.7bn) last year that operates in more than 100 countries. Agility Africa hopes to help make ports more investor-friendly through setting up a continent-wide network of logistics parks – self-contained warehouses that clients can move into and expect full services such as water, lights, internet and professional security.

The company will spend at least $200 million (Dh734.5m) on each park, which will begin with a 25,000 square metre facility, with additional space of similar size added to each as demand grows.

Already, the Ghana facility that opened in 2016 is on phase 5 with further expansions planned, as demand grew so fast it took Agility Africa by surprise, Mr White says.

As a result, new logistics parks are being rolled out elsewhere; one has just opened in Maputo, Mozambique and is already fully occupied. Work is also nearly complete on its facility in Abidjan, Ivory Coast. Ground breaking will soon begin in Lome, Togo.

Meanwhile, parks in Ethiopia, Angola, Kenya, Tanzania, the Democratic Republic of Congo, Egypt, Morocco and Algeria are to follow. Even landlocked countries such as Uganda and Rwanda are being considered, for ‘dry ports’.

Another initiative that is transforming many of the 170 or so ports around the African coastline is China’s Belt and Road Initiative (BRI). Beijing hopes to create a trade route that spans the globe, with Chinese construction firms at the heart of it.

“Thanks to the BRI, soon it will be possible to drive in a coherent route all the way from Shanghai to Western Europe,” says Oxford University Chinese studies postgraduate Tom Fowdy. “It is this kind of infrastructure which makes regional integration and enhanced economic opportunity possible.”

Trade between China and Africa is substantial — it exceeded more than $200 billion in value last year, making China the continent’s largest trading partner. The vast majority of goods leaving Africa were shipped — more than 90 per cent of Africa’s exports travel by sea.

However, African shipping costs are high, ranging from 1.5 to 3.5 times more to transport a single container by ocean than in other regions, according to a recent report by PricewaterhouseCoopers.

Much of this is blamed on poor infrastructure and inefficiency. None of Sub-Saharan Africa’s facilities are among the top 40 as tabulated by Lloyds, in its One Hundred Ports 2018. Durban, which is Sub-Saharan Africa’s busiest, is the highest-ranked at 66th.

The BRI, it is hoped, will address many of these issues.

While the BRI spans the globe, Africa arguably stands to benefit most. A report just published by the African Development Bank (ADB) suggest that the continent’s infrastructure needs now amount to $130bn-$170bn a year, with a financing gap in the range $68bn-$108bn.

A Deloitte report published earlier this year, which tracked African Infrastructure investment between 2012-16 found that after African governments and multilateral organisations like development banks and the Infrastructure Consortium of Africa, China was the biggest investor in African infrastructure, pumping in about 15 per cent of the total.

The ADB says in addition to limited capacity in terminal storage, operation, and maintenance, many ports lack the capacity to handle large vessels. They are further hamstrung by inadequate infrastructure networks in the hinterland, such as railway lines and roads links that often lead to long delays at ports.

The lack of investment is costing the continent dearly. Poor infrastructure shaves up to 2 per cent off Africa’s average per capita growth rates, the ADB says. Only firms that have very high returns and engage in well-controlled markets can make a profit by operating in Africa, notably extractive industries in mining, oil production, and allied activities. Firms with high value addition, broad job opportunities, and wide sectoral linkages find the challenges of doing business in Africa more daunting and stay away, the ADB says.

A note of caution over Beijing’s largesse is necessary, however. Eric Olander, the Asia-based managing editor of the China Africa project, says Beijing has become a lot more reticent on offshore spending.

“A lot of African policymakers have become accustomed to being able to tap vast amounts of Chinese money to fund infrastructure projects but there’s mounting evidence that Beijing is pulling back and the days of easy money may now be over,” he says.

China has become wary of being overstretched at a time when global trade is on the wane. At the same time, African critics warn that countries risk losing autonomy in exchange for soft Chinese money.

Still, China’s vast spending power and the influence it buys, has not gone unnoticed. Rivals such as the US, Japan and (WHO?) have begun setting up special purpose funds aimed at Africa. Just this month, the EU released a report that urged it to copy the BRI, according to Bloomberg.

As a result, EU finance ministers will meet soon to discuss the creation of a “European Climate and Sustainable Development Bank” to consolidate the bloc’s development funding activities in Africa.

Money for port refurbishment therefore is likely to flow into the continent for some time to come. As it does, it can change the fortunes of African countries for the better. This will make it easier for companies hoping to take advantage of the one billion or so potential consumers waiting for goods and services.

“There’s no shortage of funding for infrastructure out there,” Mr White of Agility Africa adds. “It’s the execution that has always been the problem.


Source:Ocnus.net 2019

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