Wednesday, September 4, 2013

East Africa set for port wars

East Africa set for port wars PDFPrintE-mail

Written by Shermarx Ngahemera
Monday, 02 September 2013 06:20

Freight to benefit from it
Foreign interests promote proxy wars
Bagamoyo port to rival Mombasa, Durban

Traditionally the two East African countries—Kenya and Tanzania, are rivals in many economic fronts—with the former always leading since 1977. But things are changing now and the latter has started to make gains in many aspects following extensive measures to overhaul its economy.

Their initial rivalry led to the collapse of the first East African Community (EAC) that used to provide common services in the socio economic platitudes of the three countries of the region including Uganda.

In the revised community, member states have increased to five—including Rwanda and Burundi.

The intrinsic rivalry stems from their geo-positioning and shared history of their origins that has created love and hate instinct in their relations.

For a very long time, East Africa meant Kenya and Tanzania with their safari wildlife country tours, pristine Indian Ocean Coast beaches; marvelous snow caped Mount Kilimanjaro, the juxtaposition Maasai Mara Game and Serengeti National parks that are engaged in rivalry and effective competition jostling to attract tourists.

It is this sameness and tilted development within the two countries that attracts both envy and hatred.

Now it’s a battle of the sea ports in East Africa, as Mombasa Port in Kenya, begins a $13 billion expansion to deal with competition from neighbouring Tanzania.

Mombasa in asymmetry arrangements with Uganda and Rwanda as East Africa’s biggest sea port, is expanding railways and building new mooring berths for boats to tackle congestion, which is seeing the port struggle to cope up with the ever increasing traffic from the bustling economies of Rwanda and Uganda.

Uganda has found wealth in the exploration of oil in Lake Albert that has recoverable two billion barrels of oil and more is being found.

It has been reported that Mombasa has lost its market share in port business in the region to Tanzania’s Dar es Salaam Port as railways and roads cannot cope up with cargo demands.

Economic observers say in the past three years, cargo meant for the landlocked countries of Burundi, Rwanda, Uganda and DR Congo passing through the port of Dar es Salaam, has grown by an average of 25 percent per year.

According to Trademark East Africa, although Mombasa has lower rates charges compared to Dar es Salaam, or Harbor of Peace, has increased its market share.

Dar es Salam has increased its share of Rwanda imports and exports to 68 per cent from 41 in 2008, at the expense of Mombasa that has to settle to 32 percent only from 59 percent.

For Burundi cargo, Dar port handles 89 per cent up from 76 percent in 2008 compared to 11 percent to Mombasa. The distance is longer from Mombasa than it is from Dar es Salaam. Business and trade analysts say Kenya’s poor performance is attributed to delays in goods clearance at the port, at weighbridges and border posts.

Bagamoyo port factor

The Tanzania Government, has stepped up its desire to prevail in port business in the region with the construction of a $11 billion port in the small town of Bagamoyo 60 kilometers north of Dar es Salaam. The planned Bagamoyo port is set to tilt the balance in favour of the country as it is bigger in handling capacity than Dar es Salaam and Mombasa combined. The capacities of the two ports are 500,000 TEUs and 600,000 TEUs respectively. Bagamoyo is expected to handle 20 million containers—making it the biggest port in Africa.

With a massive new port and railway construction link to the central corridor that is to be rebuilt by the Japanese from next year in a five year plan project implementation, Tanzania stands tall and would become an economic giant in the region.

Tanzania has signed a mega deal with the Chinese for them to bring ashore all their merchandise destined to Africa at the port—making it a business hub of greater dimension.

Bagamoyo port, already christened as ‘African Dubai’ will serve all East, Central and Southern African countries seeking goods and services from China.

Tanzanian authorities signed a deal with Chinese investors in February during china’s President Xi Jinping visit to Tanzania on transit to BRICS Summit in South Africa. The contract of running Bagamoyo port by the Chinese, will be for 15 years. The Chinese need the port to facilitate their extractive mineral business in DR Congo and Zambia.

The Tanzania move has thwarted the Kenya campaign to marginalize the country’s ports into feeder ports to Mombasa Harbour; a surviving ambition for the past two decades in consolidated cargo that would have killed Tanzania ports.

The Kenya plan, were it to succeed, would have turned Tanzania ports to feeder status and thus would have been served by smaller coastal ships and not big ocean going vessels and submitting them to Mombasa dictates.

It is alleged one agenda in President Uhuru Kenyatta’s talking with Chinese leaders, was to convince them to bring the port to Kenya and not Tanzania.

Statistics show that the Tanzania-China trade had reached 30 percent growth, equivalent to USD2.15bn in the last two years compared to 2010.

The Bank of Tanzania (BoT), has said that the increase in receipts from travel, manufactured goods and traditional exports has improved the country’s trade performance. The value of traditional exports amounted to USD907.7m compared to USD684.3m by the end of 2011.

Race for cargo

Uganda is looking for funds so that it can control the Tanga-Mwambani Port—a project that also included a railway line to Arusha, Mwanza and then through ferries in Lake Victoria to Port Bell in Uganda.

Kenya is frustrating the actualization of this project as it threatens the Mombasa investment by supporting environment nongovernmental organizations that have taken the Tanzania Government to the East African Court—claiming that the construction of the railway and a highway through Serengeti, would jeopardize wildlife and obstruct their movement and divert the wildebeest migration northern route. It is argued that it was against the Serengeti international heritage site interests. The NGOs won the initial case, but the Government has appealed and is ongoing.

Meanwhile, Kenya is erecting a new port at Lamu town north of Mombasa to link it with South Sudan—where an oil pipeline, a highway and a standard gauge railway line is to be built by the Japanese. It is hoped that this would re-orientate the economic setup of Southern Sudan from Sudan to East Africa with future branches to Somalia. South Sudan has applied for EAC membership.

Mombasa expansion

Intercontinental sea freight operators set to benefit from the battle of EA ports, as Kenya improves and expands its services to claw back its lost market share, while Tanzania entrenches on gains made over Mombasa in the past two years.

It is believed that years of under- investment has caused the widening problem.

A plan to construct the $13 billion railway project is being led by the President of Kenya Uhuru Kenyatta.

The railway will link Mombasa to the capitals of Uganda and Rwanda with possible extension to Burundi in the future.

The Kenya Ports Authority, last week launched its 19th berth costing more than $66.7 million and will invest $320 million in three more at a new container terminal. This will be more than double the capacity to 2.3 million containers and is the biggest upgrade to the port since 1980.

The government is also building a new facility at Lamu, on Lamu Island in the north east of Kenya.

Mombasa harbour serves the land-locked nations of Uganda, Rwanda, the Democratic Republic of Congo and South Sudan, which make up some of the fastest-growing economies in the world.

A Kenya Ports Authority statement in April, detailed its aim to “expand container handling capacity of the port of Mombasa in order to match future trends, stay competitive in cargo handling and facilitate economic development in the Eastern and Central Africa region.”

Kenyans fear that the Bagamoyo Port will make Tanzania the biggest hitter in terms of sea ports.

Kenya for a long while has been the main port of call, but now a battle is raging to create that super port that can meet the rising economic demand in Tanzania, DR Congo, Rwanda, Uganda , Zambia and Malawi that will enjoy Chinese goods and funding for the coming 30 to crown it when it emerges as the first global economy surpassing the US empire.

In March this year, transport minister Dr Harrison Mwakyembe, said the Government will spend $330m on rail upgrade that include track repair and upgrades plus changing the national network to standard gauge to make it compatible with those across Central and Southern Africa.

The move follows a tripartite agreement to harmonise operations between the Tanzania Zambia Railway Authority (Tazara), Zambia Railways Ltd and Societe Nationale des Chemins de Fer Du Congo Sarl of the Democratic Republic of Congo – the national railways operators for Tanzania, Zambia and the DRC respectively.

The deal is expected to facilitate smooth and seamless transportation of goods and passengers in the three states.

The central line, running westwards from Dar es Salaam through Dodoma, will be improved substantially this year. The upgraded railway line is expected to carry 35 million tonnes of freight annually to Rwanda, Burundi, Uganda and eastern DRC.

According to Damas Ndumbaro, Tazara’s Acting Managing Director, said the acquisition of new locomotives and other measures are expected to increase cargo haulage.

Charles Tizeba, Deputy Minister for Transport, said the Dar es Salaam-Isaka-Kigali/Keza/Gitega-Musongoti railway project, which is estimated to cost $5.2 billion, will take four years to complete and is expected to lower Rwanda and Burundi’s transport costs.

Rwanda and Burundi have had to bear high transport costs when ferrying goods from the ports of Mombasa and Dar es Salaam, which has increased the cost of doing business in the two countries.

The new railway line is also expected to reduce the time it takes to transport cargo from Dar es Salaam. Use of the road takes four days, while the railway will take just two days.

Tanzania is seeking $13.3 billion to finance infrastructure projects. These projects include the rehabilitation of the railway line from Dar es Salaam to Tabora –Kigoma and Tabora Mwanza to Kabanga nickel site in Ngara, Kagera region as well as the Kaliua-Mpanda line to Kasanga port on Lake Tanganyika to stimulate trade with Zambia.


By and large, infrastructure funding has been the preserve of the state following its slow nature of rate of returns on capital.

Economists say Africa needs private equity, if it is to benefit from the continent’s massive agricultural and mineral resource potentials and the increased infrastructure needs that in essence has become the state dominance.

According to the Emerging Markets Private Equity Association, private equity investment in sub-Sahara Africa was at an impressive $1.3 billion by the close of 2011 and growing.

The do or die in battle of ports has just begun, but clear to all, is the inherent freight reduction. It is not wrong to say the battles are foreign inspired and the EA nations are facilitating a proxy war.

1 comment:

Matthew Tudge said...

Haulage is extremely important to many businesses across the world as they need to get parts and components shipped to and from other countries.