maritime industry & developing world resources

  English           Français

Home Page
About us
Contact us
Press Releases & Articles
Links to other sites


CMR Exposed.



Congestion and arcane Customs procedures remain a problem in many African ports
(picture courtesy OT Africa Line)


June 2001

World Cargo News

Pursuing a private course in Africa

A high-level conference in London last month underlined the need for private sector involvement in the development of Africa's transport infrastructure.

Shipping lines continue to compete ferociously both on price and service levels to ensure cargo arrives in Africa within the shortest transit time, at the lowest price and with no damage. In many cases, however, the moment the cargo lands on the quay, the momentum stops and service levels decline.

Arcane Customs systems and an infrastructure unable to cope with today's demands exist in numerous African countries and combine to cause significant delays, cargo damage and increased delivery costs. These eradicate the benefits of competition on the sea leg and burden consumers with higher retail prices they can ill afford to pay.

Whether the final links in the delivery chain require only a local delivery or transit to a landlocked country, both are seriously affected if there has not been sufficient investment in infrastructure. Equally, improving this infrastructure will have only diluted benefit if Customs procedures at the port or cross border posts continue to cause delays.

The TransAfrica 21 conference, held 8-10 May 2001 in London, addressed these issues and covered business and investment opportunities in African transportation. An impressive line up of African government ministers and heads of African parastatals from eight countries detailed their policies and business plans for the restructuring, commercialisation, privatisation and expansion of their national rail and port sectors.

Attracting capital

Private investment in Africa's transport sector is still in its early stages, delegates heard, but the demand for Public Private Partnerships (PPPs) has been clearly identified. Rail in particular requires huge investments with no foreseeable returns.

Despite poor efficiency records and chronic under investment in publicly run railways and ports in many African countries, government control is generally seen as essential for economic, social or military reasons. Inviting the private sector to finance and manage rail and port infrastructure in Africa, therefore, requires a rethink of PPPs in a region perceived as being vulnerable to political risks.

But despite the drawbacks, there has been significant progress in the privatisation of railways, ports and other transport infrastructure in Africa. Peter Kieran of CPCS Transcom told delegates that many companies are planning for private investment in infrastructure but the process is taking up to five years to complete.

The railways have perhaps witnessed the most progress to date. In East Africa, notable examples of private sector involvement include the lines between Kampala, Uganda, and Mombasa, Kenya; Mwanza and Kigoma to Dar es Salaam in Tanzania; and Dar es Salaam through Zambia connecting to South Africa's Spoornet.

In West Africa, Bolloré and Maersk have brought improvements to the railways that separately link the ports of Dakar and Abidjan to Bamako and Ouagadougou, cities in the landlocked countries of Mali and Burkina Faso.

It was also noted that in the 1980s/90s, the two Ghanaian ports of Tema and Takoradi managed to attract an investment of US$109 mill, a significant sum for one of the smaller African countries with a population at that time of less than 15 mill people. The two ports and surrounding environments enjoyed economic growth as a consequence, but today more investment is required to ensure further increases in their capacity.

Problem areas

It is easy to forget that until the demolition of the Berlin wall, a number of countries in Africa had centralist governments. It has taken some years for them to recover from the burden this caused before they were able to move towards a market economy. Elsewhere, turbulent politics have meant that there has not been a consistent strategy to allow the privatisation process to develop.

One of the most common fears is that concerning loss of employment said Kieran. It quickly becomes a political issue especially in sectors where work is seen as a job for life. Furthermore, there are fears that the privatisation process may be corrupt and that it will bring tariff increases. Concerns are also often expressed relating to monopolies or safety issues.

Governments may also believe there is a danger of foreign control of strategic assets and that the real value of the property may not be realised.

Legitimate concerns

It is essential to recognise that these concerns are legitimate and to ensure they are dealt with for the privatisation process to make progress, delegates heard. Acknowledge the implied jobs for life and negotiate a settlement or, even better, encourage retraining packages for those affected.

And if tariffs have been subsidised in the past, the structure must take this into account. Governments should not be allowed to lump privatisation and the elimination of subsidies together. Provision of subsidies for mandatory non-commercial services should be ensured.

Furthermore, the abuse of monopolistic power may make consultative mechanisms weak so there is no place for affected parties to voice their concerns properly. Inviting customers to participate in the process is very important. Regulatory mechanisms must be well conceived. A tariff ceiling may be applicable. Generally customers are willing to pay a higher tariff for a better service.

The issue of safety is often ignored as it has always been left to the rail operators in the past, delegates were told. Private operators are likely to provide a safer environment and better records. However, accidents do happen so a system and process should be put in place to deal with them.

Getting a fair price for the assets also needs to be understood. There should be an impartial valuation of the assets and the bidding process needs to be fair and quick to encourage real competition

It was repeated many times during TransAfrica 21 that without investment in transport infrastructure, a country's economy is unable to perform. Infrastructure is essential for growth as well as well being said Richard Carborn, the then UK Minister for Trade.

Transport and infrastructure congestion modelling tools do exist and put a price on congestion. Companies like Scott Wilson, a leading international consultancy, regularly use such modelling tools. If these could be applied to the complete transport structure of developing countries, the conclusions would focus the minds of all those involved.

Government views

The theme from the government representatives at TransAfrica 21 was more or less the same: come on in, we are a stable country with good investment opportunities. Interestingly, Nigerian Transport Minister Chief Maduekwe, said that the measure of success would be when it is easier to hold seminars on African transport issues in Africa rather than Europe.

He continued that transparency is the key to success if time is to be made up for lost opportunities. He noted that a cross-border rail link between Lagos, Nigeria, and Accra, Ghana, was finally being discussed, with the possibility of an extension to Conakry and Dakar in Senegal.

Whilst he recognised that putting into practice the concept of a railway that crosses eight or more borders is a major challenge in any continent, Chief Maduekwe said there can be no doubt about the huge economic and social benefits it would bring.

South Africa lead

In South Africa, it is recognised that there is a need to create transport regulators that are independent and outside of government. Speakers said that increasing the efficiency of ports is key for South Africa's competitiveness and both rail and ports need to be improved. Growth is still considered too slow and lower input costs are needed throughout the economy via a managed liberalisation process.

Whilst this may result in lower charges in some areas such as wharfage, however, it might also mean an increase in cargo handling tariffs. Cargo handling is to be separated from the national port administration in South Africa and port operating concessions will be open to private operators. The provision of cargo handling services will also be opened to the private sector.

Behind these recent developments in South Africa, arrangements for infrastructure investment funding have been in place for some time. The South Africa Infrastructure Fund (SAIF), for example, is aimed at achieving medium to long-term returns through private sector investment in infrastructure projects throughout Southern Africa

Established in mid-1996, the SAIF has more than R800 mill in commitments from investors. Approximately R300 mill of the fund's investor commitments has been applied in making various infrastructure investments. The fund is managed by Southern African Infrastructure Fund Managers (Pty) Ltd, a joint venture between Old Mutual Asset Managers and Macquarie Bank of Australia.

African model?

If South Africa, with all its resources and investment funding, sees that further growth requires the need to offer port operation concessions and to open cargo handling services to the private sector then, a similar logic should apply to the other African countries, delegates heard

Perhaps it is necessary for a country to aspire to a particular growth rate for there to be sufficient urgency to bring about privatisation, or perhaps a government needs to achieve a certain level of confidence in its ability to govern before it is prepared to relinquish control of certain areas of its transport systems.

Whatever the required combination is, South Africa is leading the way and elsewhere in Africa the momentum is building. Proof of the success of privatisation and its benefits is essential. It will provide the stimulation and confidence to those less advanced African countries to finally take the plunge.


SATI sets the pace

A good example of the way that private investment is being used to upgrade transport infrastructure in Africa can be found in newly-formed SATI Container Services (Pty) Ltd, a subsidiary of SATI (Southern Africa Transport Investments (Pty) Ltd), which recently opened a specialist reefer container logistics, storage and maintenance depot near Cape Town. The new facility is claimed to be the first of its type in South Africa.

SATI itself was formed in August 2000 by Safmarine (Pty) Ltd, Maersk South Africa (Pty) Ltd and their parent company, the Danish AP Moller Group. The new company will be the vehicle used to seek further strategic investment opportunities in landside transport infrastructure in southern Africa, including the owning and operating of container terminals, the development of coastal depots and inland terminals and investment in stevedoring and logistics.

Developed in partnership with the Industrial Development Corporation (IDC) at a cost of R40 mill (US$5 mill), the new Cape Town depot offers a full range of repair and maintenance services for reefer and general purpose containers, storage facilities for all container types and pre-inspection of empty containers prior to delivery to shippers for the packing of export cargoes.

Equipped with a railhead with modern sidings and a two spur rail track, the facility covers 6.5 hectares, with a further 6.5 hectares available for development over the next few years in response to anticipated demand.


Tanzania - a case study

Railway development in Tanzania has major external advantages compared with many other African countries, delegates at TransAfrica 21 heard. There is a background of political and economic stability and Tanzania is investor friendly and mineral rich.

The main general external weaknesses are that, as a young democracy, not all institutions are fully mature, there is significant unemployment, the general state of infrastructure is poor and the work ethic leaves something to be desired.

Tanzania's road transport system suffers from many weaknesses common to other African countries. Roads are inaccessible and, due to axle weight limitations, cannot carry heavy vehicles. Many parts of the country are isolated, particularly in the rainy season, and roads are poorly maintained.

Water transport has its own problems. Dar es Salaam and Mombasa ports are congested and suffer badly from Customs delays; maritime and lake ferries are unreliable; and, of course, water transport is limited in its extent.

This leaves rail with significant modal advantages. It is the only mode able to reach remote areas and it is comparatively reliable even during the rainy season when roads are waterlogged. Effective rail transport is, therefore, essential for the country's future economic growth.

Simon Fourie, general manager of Trans Africa Railway Corporation in Dar es Salaam, discussed the challenges his company faced in the Central East African rail corridor, running from Mwanza and Kigoma to Dar es Salaam. The other links competing to serve the landlocked countries of Rwanda and Burundi are the Northern corridor from Kampala to Mombasa, and the Southern Corridor from Dar es Salaam south west through Zambia and connecting to Spoornet in South Africa.

The Central corridor rail system is dependent on the efficiency (or lack of it) of Dar es Salaam and Mombasa ports. The railway also has its own problems, however. Fourie identified major weaknesses in infrastructure, rolling stock, communication systems and labour attitudes and behaviour.

Rail trackage is limited to an axle load of less than 14 tons on many sections and the impact of El Nino is still visible on bridges, limiting their use. Train accidents caused by poor track conditions are frighteningly common - there were 71 in 1999 -and track maintenance is not carried out or is of low quality .

Locomotives are old, so that overall loco availability is just 68 per cent, with shunting loco availability at 53 per cent. In 1999, locomotive reliability dropped to 9902 km per unit. Low availability is the result of loco failure due to lack of spares and the fact that locos are out of spec due to their age. Diesel consumption on mainline locos is very high at 7.67 litres per km due to theft as well as age and poor maintenance.

There is also an acute shortage of wagons, due both to excess demand and poor maintenance scheduling. The M&R backlog has caused wagon availability to drop to about 75 per cent,

The lack of a modern work culture combined with locational problems and lack of investment make the railway difficult, but not impossible, to modernise, Fourie said. Rail does have major advantages in that there is demand and it can capitalise on economic growth because of its competitive edge over other transport modes.

Fourie concluded that improving staff morale depends on speeding up the privatisation process and, whatever the difficulties of the location, rail companies should never compromise on service levels

supporting your growth

115 Avenue Road, London W3 8QH
Email:         Tel: +44 20 8995 3555         Fax: +44 20 8995 1318         Mob: +44 7768 008036