african development report 2010

AFRICAN DEVELOPMENT REPORT

2010

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0 1 2 3 4

Port Elizabeth (South Africa) 190

Dar Es Salaam (Tanzania) 185

Dakar (Senegal) 184

Rades (Tunisia) 171

Port Louis (Mauritius) 161

Sokhna (Egypt) 158

Port Sudan (Sudan) 157

Abidjan (Cote d'Ivoire) 134

Mombasa (Kenya) 132

Alexandria (Egypt) 133

El Dekheila (Egypt) 127

Cape Town (South Africa) 115

Damietta (Egypt) 85

Tangier (Morocco) 83

Durban (South Africa) 41

Port Said (Egypt) 31 Port Said (Egypt) 31


Tangier (Marocco) 83

Damietta (Egypt) 85



Alexandria (Egypt) 133

Mombasa (Kenya) 132

Abidjan (Cote d’ivoire) 134

Port Sudan (Sudan) 157

Sokhna (Egypt) 158


Rades (Tunisia) 171

Dakar (Senegal) 184


Port Elizabeth (South Africa)190

Source: Containerisation International Yearbook, 2011.

Figure 4: Container traffic capacity in Africa (TEU mn) and world randing of selected ports

Executive Summary xxvii

CorrigendumAfrican Development Report 2010

124 African Development Report 2010

Map 4.4: Major African Corridors

CorrigendumAfrican Development Report 2010

AFRICAN DEVELOPMENT REPORT

2010

PORTS, LOGISTICS, AND TRADE IN AFRICA

PUBLISHED FOR THE AFRICAN DEVELOPMENT BANKBY

OXFORD UNIVERSITY PRESS

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Foreword ...................................................................................................................................ixAcknowledgments ...................................................................................................................xiList of boxes ............................................................................................................................xiiiList of figures and maps .......................................................................................................xivList of tables .............................................................................................................................xvAbbreviations and acronyms...............................................................................................xviExecutive Summary ...............................................................................................................xxi

Chapter 1: Trade and Trade Costs in Africa: An Overview ...............................................1

African trade: an overview ....................................................................................................3The geography of African trade ............................................................................................6Trade costs: a classification .................................................................................................11

Border-related costs ..................................................................................................12Transport costs .........................................................................................................15Behind-the-border costs ............................................................................................19

Trade costs and trade facilitation: “soft” and “hard” infrastructure ...................................21Why maritime trade and port efficiency are important .....................................................23Outline of the report............................................................................................................25

Chapter 2: Port Development in Africa ..............................................................................31

What is a seaport? ................................................................................................................33Hard and soft infrastructure in seaports .............................................................................34Categorization and location of African seaports ................................................................37Capacity and efficiency of African ports.............................................................................37

African regional port situation.................................................................................40Capacity: global comparisons...................................................................................41Efficiency indicators for African ports ......................................................................44

Investments for rehabilitation and expansion ....................................................................51Summary: The way forward for African ports....................................................................52Annex 2.1: Overview of African port facilities, capacity, and infrastructure

by subregion and country................................................................................................55(i) Ports in North Africa ........................................................................................55

(ii) Ports in East Africa...........................................................................................60(iii) Ports in Southern Africa...................................................................................62(iv) Ports in Central Africa .....................................................................................68

CONTENTS

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(v) Ports in West Africa..........................................................................................69(vi) Island countries ...............................................................................................72

Annex 2.2: African merchant fleet, by flag of registration and type of ship, asof January 2007 ................................................................................................................74

Chapter 3: Reforms and the Regulatory Framework of African Ports .........................76

Institutional set-up of port management in Africa .............................................................78Alternative forms of port administration .................................................................79

Port reform in Africa ............................................................................................................82Subregional trends ...................................................................................................84Implications of privatization ....................................................................................85

Regulatory framework .........................................................................................................87Regulatory institutions..............................................................................................88Regulation of the African shipping industry .............................................................89

Assessing reforms.................................................................................................................94Institutional reforms ................................................................................................94Efficiency of the transport logistics chain..................................................................98

Conclusions .......................................................................................................................103

Chapter 4: Connecting Ports to the Markets....................................................................107

The quality of connectivity and intermodalism in Africa.................................................109Roads......................................................................................................................111Railroads ................................................................................................................114Inland waterways and inland ports .......................................................................117African infrastructure: the pressing need for rehabilitation and

maintenance ......................................................................................................120The plight of landlocked countries ...................................................................................122

Transit and trade corridors in Africa .....................................................................122Trade facilitation measures ...............................................................................................127

National and regional measures ...........................................................................128Multilateral measures .............................................................................................132

The costs of deficient trade logistics in Africa..................................................................133Conclusions and policy implications ................................................................................136Annex 4.1: Logistics Performance Index (LPI) across African countries, 2010..............141Annex 4.2: Overview of the major African trade and transport corridors .....................143

(i) Trans-Africa Highway (TAH) .........................................................................143(ii) The Northern Corridor....................................................................................144

(iii) The North–South Corridor ..............................................................................146(iv) The Maputo Corridor......................................................................................147(v) Walvis Bay Corridors......................................................................................148

vi Contents

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(vi) West African Transport Corridors ...................................................................149(vii) CEMAC Trade and Transport Corridor ..............................................................150

CHAPTER 5: Contribution of the AfDB to Infrastructure Development.....................154

Policy formulation .............................................................................................................155AfDB operational approach to infrastructure development ............................................158Overview of AfDB investments to the sector ...................................................................159

AfDB investments in ports: lessons learned .............................................................161Bank’s private sector infrastructure investments.....................................................162Public sector infrastructure investments ................................................................164

The Bank Group’s regional integration activities .............................................................167Partnerships and the Infrastructure Consortium for Africa ...........................................170Conclusion..........................................................................................................................171Annex 5.1: Bank Group approvals in the transport maritime subsector, 1973–2000....174Annex 5.2: Examples of AfDB private sector port projects, 2000–2009.........................176

(i) Djibouti: Bulk Terminal Project (2003).............................................................176(ii) Egypt: Damietta Container Terminal Project (2007) ........................................177

(iii) Senegal: Dakar Container Terminal Project (2009) .........................................178Annex 5.3: Examples of AfDB-supported transport corridor projects ...........................180

(i) The CEMAC Trade Corridor Project (2007) .......................................................180(ii) Ghana: rehabilitation of sections of the Abidjan–Lagos Road Corridor...........180

(iii) SADC region: the Nacala Corridor .................................................................181(iv) Agona Junction–Elubo Road Study, Part of the Road Infrastructure

Project (Eastern and Western Regions).........................................................182

CHAPTER 6: Going Forward: Developing Regional Hub Ports in Africa....................183

Introduction ........................................................................................................................183Developing African Ports in Regional Hubs: Physical Characteristics and Policy Requirements...........................................................................................................184Comparing African Ports for Regional Port Hub Status ...................................................189

(i) Mediterranean Coast ......................................................................................189(ii) West African Coast .........................................................................................189

(iii) East African Coast ..........................................................................................190(iv) The Role of Public–Private Partnerships .........................................................192

The Role of IFIs in the Development and Improvement of Ports and RelatedInfrastructure ......................................................................................................................192

Provision and/or Facilitation of Expertise, Training and Education ......................192Arranging/Facilitating Financing Deals ................................................................193Provision of Other Catalytic and Direct Financing for Port Development ..............194

Concluding Remarks ..........................................................................................................195

Glossary...................................................................................................................................197

Contents vii

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This African Development Report 2010focuses on trade logistics in Africa, inparticular maritime ports, with the objectiveof exploring ways to unblock bottlenecks totrade, increase competitiveness, and createsustainable economic growth for Africancountries. Ports are gateways for 80 percentof global merchandise trade and yet thesecrucial infrastructure hubs often fail toreceive the attention they deserve. Thisreport aims at bridging the existinginformation gap, providing detailed informa-tion on port development, institutional andregulatory aspects, and issues of managingthe supply chains in general.

The report recognizes that Africa hassignificantly increased its trade both withemerging “new” Asian partners, such asChina, and the traditional markets, i.e. theEuropean Union and the United States.However, opportunities for enhancedmarket access in new as well as traditionalmarkets continue to be hampered by tradecapacity, severe supply-side constraints, andhigh transport costs, which severely affectthe competitiveness of African economies.Maritime and dry ports are one of the criticalelements in the transport logistics chain,which has a major impact on transport costs.

The remarkable growth in African tradeover the last decade has put pressure onexisting port capacity. As a result, manycountries are challenged to transform andmodernize their ports by equipping themwith appropriate infrastructure to meet this

growing demand, including the rise incontainerized traffic.

A number of key generic messagesemerge from this report, which can help toshape African port development goingforward. First, “hard” physical infrastructureis of poor quality and investment in thisarea is very low, leading to low portefficiency and chronic congestion. Second,the connecting infrastructure networks inAfrica are either dilapidated or underpressure of increased traffic, and this delaysand hinders the movement of goods. Third,“soft” infrastructure is weak and Africancountries experience institutional andregulatory constraints in the port sector thatcreate inefficiencies, hinder competition,and raise transaction costs. Lastly, there isthe specific challenge of the 15 landlockedcountries that are not only handicapped bypoor logistics to the hinterland, but also bycumbersome and lengthy customs regula-tions and delays at borders. For thesecountries, median transport costs arealmost 50 percent higher than the equiva-lent costs for coastal economies.

The African Development Report 2010challenges all of us and highlights theimportance of strengthening private/publicpartnerships, exploring future cofinancingopportunities, as well as putting in place astrong policy framework to facilitate newpartnerships.

At a time when the world economy isshowing tentative signs of recovery from

F O R E W O R D

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the global financial and economic crisis,boosting competitiveness will be crucial toAfrica’s economic growth.

I recommend this report to the readers.

Donald KaberukaPresident,

African Development Bank Group

x Foreword

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The African Development Report 2010 wasprepared by the staff of the AfricanDevelopment Bank. The report was guided inits overall preparation by the Bank’s ChiefEconomist, Louis Kasekende and MthuliNcube. The preparation was supervised bythe Director of Research, Leonce Ndikumanaand the Division Managers, Peter Walkenhorstand Abdul Kamara. The report team wascomprised of the Task Manager, ToniaKandiero, Principal Research EconomistVincent Castel, Senior Research Officer, andPauline de Castelnau, Consultant. BarfourOsei, Chief Research Economist also providedsubstantial inputs.

The report draws on backgroundanalysis by Jaime de Melo, Mark Pearson,Kennedy Mbekeani, Oliver Morrissey, andLourdes Trujillo. The Report also benefitedfrom data support from the AfricanDevelopment Bank’s Statistics Departmentand from Sylvain Dika, consultant, as well asextensive comments from staff in theDepartments for Research, Infrastructure,Private Sector, Policy and Compliance,Quality Assurance and Results, and NEPAD,

Regional Integration and Trade. Specialthanks are due to the peer reviewers, VictorDavies, Gil-Seong Kang, and IzaskunLejárraga. In addition, the Team is verygrateful for the external expert reviews byJan Hoffmann, Bert Kruk, and GaëlRaballand, as well as comments fromparticipants at the Global FacilitationPartnership meeting in Tunis, held onNovember 17–18, 2009. We are alsoindebted to the Kenya Ports Authority, thePort Management Association of Eastern andSouthern Africa, TransNet South Africa,Tunisia Tradenet, the Office de le MarineMarchande et des Ports in Tunisia, and theAgence Nationale des Ports in Morocco forsharing insights into challenges andopportunities they face in the ports sectorand related logistics.

The report team is also grateful for theeditorial expertise of Sandra Jones,translation coordination from AudreyVerdier-Chouchane, and administrativesupport from Rhoda Bangurah, JosianeKoné, and Abiana Nelson.

A C K N O W L E D G M E N T S

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LIST OF BOXES

1.1 The gravity model of trade...............................................................................................................................71.2 Estimating port efficiency by statistical analysis............................................................................................262.1 Types of ports according to function.............................................................................................................382.2 Port congestion in Eastern and Southern Africa............................................................................................392.3 South Africa: recent highlights in the development of port terminals .........................................................673.1 The role of the Port Authority ........................................................................................................................803.2 Obstacles to port efficiency: the case of the Apapa container terminal in Lagos .......................................873.3 Integrating labor force reforms into port reforms: the cases of Tunisia and Nigeria..................................903.4 Convention on Contracts for the International Carriage of Goods by Sea ..................................................913.5 Customs regulatory framework: key issues and questions.........................................................................1004.1 The Shire–Zambezi Waterway Project..........................................................................................................1194.2 Trade facilitation at the port: the case of Tradenet, Tunisia .......................................................................1294.3 Basic One-Stop-Border Post (OSBP) operating principles .........................................................................1304.4 Transports Internationaux Routiers (TIR) ....................................................................................................1314.5 The Trans-Africa Highway: the nine interlinked sections...........................................................................1435.1 Transport sector: the AfDB’s five lending priorities ....................................................................................1565.2 The AfDB’s environmental policy for infrastructure projects .....................................................................1585.3 AfDB’s Technical Assistance for a feasibility study of road/railroad linkages between Kinshasa

and Brazzaville (2008)...............................................................................................................................1635.4 The Doraleh Container Terminal project in Djibouti ..................................................................................1645.5 Mombasa–Nairobi–Addis Ababa Road Corridor Project Phase II ...............................................................1665.6 An infrastructure action plan for Burundi: accelerating regional integration ............................................1675.7 The North–South Corridor: an Aid for Trade pilot program.......................................................................1706.1 Basic transshipment requirements of a hub port ........................................................................................1866.2 Performance Based Maintenance (PBM) dredging contract .......................................................................193

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LIST OF FIGURES AND MAPS

FIGURES

1.1 Africa’s share of global trade, 2006–2008 ........................................................................................................31.2 Evolution of intra-African trade, 1990–2008 ....................................................................................................51.3 Evolution of the Potential Trade Ratio in a frictionless world relative to actual average distance of

trade, 1970–2005............................................................................................................................................81.4 Trade costs and trade facilitation — a classification .....................................................................................111.5 Freight costs as a percentage of import value by region..............................................................................161.6 Correlates of freight rates in the Caribbean...................................................................................................18

1.6a: Freight rates and distance................................................................................................................181.6b: Freight rates and transit time...........................................................................................................191.6c: Freight rates and number of carriers in the Caribbean..................................................................20

1.7 Evolution of an infrastructure index across developing country regions, 1962–2006.................................211.8 World seaborne trade, 1990–2007 ..................................................................................................................24 2.1 Ports at the heart of the logistics supply chain .............................................................................................333.1 The public–private balance of risk and regulation .......................................................................................823.2 Quality of infrastructure across regions .........................................................................................................953.3 Port infrastructure quality and income per capita.........................................................................................963.4 Institutional progress on reforms, regulation and governance ...................................................................983.5 Performance indicators for port concessions and rail concessions ............................................................993.6 Cross-border trade fluidity indicators per TEU container ...........................................................................1014.1 The vicious circle of African road/railroad networks ................................................................................1094.2 Quality of infrastructure and income per capita .........................................................................................1104.3 The condition of the African road network ...............................................................................................1134.4 Railroad traffic volumes, 2001–2005.............................................................................................................1164.5 Transport costs from selected cities to a European port (Rotterdam), 2008..............................................1234.6 Transit of goods along a corridor.................................................................................................................1254.7 Distances, journey times (and waiting times at borders) between the main towns on the

North–South Corridor................................................................................................................................1274.8 Worldwide distribution of trade costs and Ease of Trading index ............................................................1344.9 Estimated “ad-valorem equivalents” of an improvement in LPI and Doing Business indicators .............1365.1 AfDB investment in hard infrastructures in Africa, 1985–2008...................................................................1605.2 AfDB investment in hard infrastructures in Africa by subregion, 2008......................................................1615.3 AfDB maritime investments by financing instrument, 1973–2000 .............................................................162

MAPS

2.1 African ports and their characteristics............................................................................................................364.1 Road networks in Africa ...............................................................................................................................1124.2 Railroad networks in Africa ..........................................................................................................................1154.3 Major rivers in Africa.....................................................................................................................................1174.4 Major African corridors .................................................................................................................................124

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LIST OF TABLES

1.1 Intraregional imports and exports as a proportion of total trade, 2004–2006...............................................41.2 Main African exports and share of total exports, 2008 ................................................................................101.3 Tariff Trade Restrictiveness Index (TTRI) and Overall Trade Restrictiveness Index (OTRI) by region,

2003–2004 ....................................................................................................................................................131.4 Market Access (MA) indices by income group, 2006....................................................................................142.1 Age distribution of African merchant fleet compared to those of other regions ........................................392.2 Port capacity and value of trade in Africa .....................................................................................................402.3 Selected leading ports in the world by volume of containerized cargo, 2007 ............................................422.4 Container port traffic for selected developing and African countries, 2006–2007 ......................................432.5 Deployment of ship-to-shore gantry cranes by region and outreach, 2008 ................................................442.6 Efficiency indicators for selected leading ports by volume of containerized cargo, 2006..........................452.7 Efficiency indicators for selected African ports, 2006 ...................................................................................472.8 UNCTAD Liner Shipping Connectivity Index (LSCI), 2007–2009............................................................49–502.9 Africa’s top container ports, 2007...................................................................................................................562.10 North Africa — port infrastructure, capacity, and facilities.......................................................................58–92.11 East Africa — port infrastructure, capacity, and facilities .............................................................................612.12 Southern Africa — port infrastructure, capacity, and facilities .................................................................63–42.13 Central Africa — port infrastructure, capacity, and facilities ........................................................................682.14 West Africa — port infrastructure, capacity, and facilities ........................................................................70–13.1 Main types of organizational structures for Port Authorities (PAs) ..............................................................813.2 Port management models and regulatory agencies in selected Africa countries ........................................833.3 Age distribution of merchant fleets as at January 1, 2008 ............................................................................933.4 Port cargo-handling times across regions ......................................................................................................974.1 Logistics Performance Index (LPI) by region, 2010 ....................................................................................1114.2 Current infrastructure spending in Sub-Saharan Africa ..............................................................................1204.3 Corridors linking landlocked countries and ports.......................................................................................1254.4 Checkpoints on selected road corridors in West Africa ..............................................................................1264.5 Estimated interregional trade volume effect of road network upgrading (US$ million) in

Sub-Saharan Africa, 2006 ..........................................................................................................................1454.6 Rehabilitation and upgrading of the Northern Corridor’s existing railroad network ................................1464.7 Main characteristics of the African transport corridors............................................................................151–35.1 Strategic options for the promotion of maritime transport in Africa..........................................................157

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ABBREVIATIONS AND ACRONYMS

ADF African Development FundADOT average distance of trade AfDB / ADB African Development BankAFP African Financing PartnershipAfT Aid for TradeAGOA Africa Growth and Opportunity Act AICD Africa Infrastructure Country Diagnostic Study AMU Arab Maghreb UnionATA Air Transport AssociationAU African UnionAUC African Union CommissionBOO build, operate and ownBOT build, operate and transferBTB behind the border CAR Central African RepublicCEM Country Economic MemorandumCEMAC Central African Economic and Monetary CommunityCEWAL Central–West Africa LinesCICOS Commission internationale du bassin Congo-Oubangui-Sanghacif cost, insurance and freightCOD Central Operations DepartmentCOMESA Common Market for Eastern and Southern Africa COWAC Continent – West Africa ConferenceD depthDB Doing BusinessDEA Data Envelopment Analysis DFI Development Finance InstitutionDfID Department for International Development (UK)DPW Dubai Port WorldDRC Democratic Republic of Congodwt deadweight tonnageEAC East Africa CommunityECCAS Economic Community of Central African StatesEPZ Export Processing ZoneESIA Environmental and Social Impact AssessmentESMP Environmental and Social Management PlanEU European Union

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FDI foreign direct investmentFEFC Far East Freight Conferencefob free on boardft feetFTA free trade area GATT General Agreement on Tariffs and Trade GDP gross domestic productGVM gross vehicle mass HIV/AIDS Human Immunodeficiency virus/ Acquired Immune Deficiency SyndromeHS harmonized systemICA Infrastructure Consortium for AfricaICT information and communication technologiesIFI International Financial InstitutionIMF International Monetary FundIMO International Maritime Organization IOC Indian Ocean CommissionISPS International Ship and Port Facility SecurityJICA Japan International Cooperation Agency JPC Japan Port ConsultantsL lengthLFTZ Lagos Free Trade ZoneLI low-income LISCR Liberian International Shipping and Corporate RegistryLLC landlocked countryLLDC landlocked developing countryLPI Logistics Performance IndexLSCI Liner Shipping Connectivity Indexm metersMA market accessMARPOL International Convention for the Prevention of Pollution from ShipsMDC Maputo Development CorridorMDG Millennium Development GoalMEWAC Mediterranean — West Africa ConferenceMFN Most Favored Nation MoU memorandum of understanding mtpa million tonnes per annumMTS Medium-Term Strategy (AfDB)NA not applicableNCTTCA Northern Corridor Transit Transport Coordination Authority

Abbreviations and Acronyms xvii

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NEPAD New Partnership for Africa’s DevelopmentNEPAD-IPPF New Partnership for Africa’s Development — Infrastructure Project

Preparation FacilitiyNSC North–South Corridor NTB nontariff barrierNTF Nigeria Trust FundNTM non-tariff measureODA Official Development AssistanceOECD Organization for Economic Cooperation and DevelopmentOINF Infrastructure Department (AfDB)ONRI Regional Integration Department (AfDB)OPSM Private Sector Department (AfDB)ORPC Operational Resource and Policy DepartmentOSBP one-stop border postOTRI Overall Trade Restrictiveness Index p.a. per annumPA Port Authority PBM Performance Based MaintenancePIDA Program for Infrastructure Development in AfricaPMAESA Port Management Association of East and Southern AfricaPPI Private Participation in InfrastructurePPP public–private partnershipPSA Port of Singapore Authority PTA Preferential Trade AgreementPTP Pure Transshipment PortPTR Potential Trade Ratio QUAD Canada, EU, US and JapanREC Regional Economic CommunityRMC Regional Member CountryRMI Road Maintenance Initiative ROT rehabilitate, operate and transferRTA Regional Trade ArrangementSADC Southern African Development Community SOE state-owned enterpriseSOLAS International Convention of Safety for Life at Sea SSA Sub-Saharan AfricaSSATP Sub-Saharan Africa Transport Program STAP short-term action planTA technical assistance

xviii Abbreviations and Acronyms

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TAH Trans-African Highway TEU twenty foot equivalent unit (the size of a container)TF trade facilitation TIGA Technology in Government in Africa TIR Transports Internationaux RoutiersTRIPS Trade-Related Aspects of Intellectual Property Rights TTN Tradenet TunisieTTRI Tariff Trade Restrictiveness IndexUEMOA West African Economic and Monetary Union UKWAL UK-West Africa LinesUN United NationsUNECE United Nations Economic Community for EuropeUN-OHRLLS UN Office of the High Representative for the Least Developed Countries,

Landlocked Developing Countries and Small Island Developing StatesUNCTAD United Nations Conference on Trade and DevelopmentUNECA United Nations Economic Commission for Africa USA United States of AmericaWB World BankWCO World Customs OrganizationWEF World Economic ForumWITS World Integrated Trade SolutionWSS Water Supply and SanitationWTO World Trade Organization

Abbreviations and Acronyms xix

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Overall, Africa’s economic performance hasimproved markedly over the past decade,with the continent experiencing an annualrate of GDP growth above 5 percent for theperiod 2001–2008. However, as a result ofthe global financial crisis, the projected GDPgrowth for Africa decreased to 2.0 percentfor 2009 (1.1 percent for Sub-SaharanAfrica), although there are improved projec-tions for 2010, with forecasts of 4.1 percentfor both Africa and Sub-Saharan Africa(SSA).1 In terms of its trading position,Africa’s share of world trade has shown aslight improvement in recent years, risingfrom 2.85 percent in 2006 to 3.41 percent in2008.

Many of the slowest-growing economiesin Africa are “fragile states” that are eitherengaged in conflict or have recentlyemerged from conflict, which seriouslyaffects their ability to engage in the worldtrading system and grow their economies.Geography too plays a major role in shapingthe economic fortunes of African countries.Fifteen are landlocked countries (LLCs),making them both physically and econom-ically more remote from major worldmarkets. All these factors contribute to themuch higher trade costs for Africa, as shownin Figure 1.

In a world where outsourcing is increas-ing rapidly, high trade costs represent a

formidable handicap, isolating countries andpreventing them from reaping the benefitsof globalization, as their exports becomeless competitive and their imports moreexpensive. The worldwide reduction inbarriers to trade has facilitated exports formany countries; however for developingcountries, international transport costs oftenprove to be far greater impediments to tradethan the tariffs they face in developedcountries. These freight costs contributesignificantly to overall high trade costs forthe continent and constrain growth in tradevolumes.

If one looks at the factors influencingtransport costs, one major element is Africa’sextensive infrastructure deficit. A recentWorld Bank report (World Bank, 2009)concludes that poor transport infrastructure,including inefficient functioning of ports,represents a major bottleneck to sustainablegrowth. In SSA, a financing gap estimated ataround 5 percent of GDP needs to bebridged in order to overhaul the infra-structure sector. Because the capital invest-ments for hard infrastructure are so high, thereport estimates that US$31 billion perannum will be needed to close SSA’sinfrastructure gap (World Bank, 2009: 15).

Seaborne transshipment is the mainmode of transport for international trade,accounting for about 80 percent of the totalglobal volume. The maritime nexus isparticularly important for African countriesthat specialize in low-value goods, which

1 AfDB, OECD, UNECA, African EconomicOutlook, 2009.

E X E C U T I V E S U M M A R Y

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are rarely transported by air. Improvinglogistics to reduce trade costs is thusessential for African countries to improvetheir competitiveness, and since the bulk ofAfrican trade is extra-continental and transitsthrough ports, maritime costs are crucial.Improving efficiency in ports is one way toreduce these costs.

This report analyzes these problems —and draws the implications for the AfricanDevelopment Bank’s activities in thetransport sector — with a particular focus onports and the maritime sector. Chapter 1gives an overview of Africa’s trade, itspolicies, and the policy barriers African

exports face in destination markets. Thechapter also draws on relevant internationalexperience to situate Africa’s trade costswithin the broader international context.Chapter 2 describes the “hard” infrastructurecharacteristics of a seaport and deals with thecapacity and efficiency of African seaports,establishing the reasons for their generallypoor performance. The chapter also reviewsrecent investments for rehabilitation andexpansion of port physical infrastructureacross the continent. Chapter 3 focuses onthe need for a robust institutional andregulatory framework (“soft” infrastructure),which is also needed to improve a port’s

xxii African Development Report 2010

Figure 1: Freight costs as a percentage of import value

Source: UNCTAD (2007). All modes of transport. Estimates based on cif/fob comparisons on bilateral trade data.

Oceania

Asia

America

Africa

Developing Countries

Economies in Transition

Developed Countries

World Average

2005

2000

1990

0 2 4 6 8 10 12

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efficiency and to improve the business-enabling environment and attract privatesector investment. Chapter 4 focuses on thequality of connectivity in Africa throughtransport networks. It analyzes the state ofroad, railroad, and inland waterways that linkcenters of production and markets. Theimportance of trade corridors to improveregional integration, particularly for land-locked countries, is examined. Tradefacilitation measures to boost intra-Africantrade are also explored. Chapter 5 draws onthe key findings from previous chapters toassess the activities that the AfricanDevelopment Bank has undertaken in theinfrastructure sector, and more specifically inthe areas of ports and related logistics. Thechapter then draws some key recom-mendations for future Bank interventions inthe port sector.

Finally, Chapter 6 draws on key lessonsfrom the preceding chapters to point theway forward toward the development ofregional port hubs in Africa. It highlights thebasic necessities for African ports to becomeregional hub ports and examines thepotential of their attaining this status. It alsodraws attention to the investmentopportunities available for private sectorparticipation in the development andmodernization of African ports. The chapterthen discusses possible areas of interventionon the part of IFIs, to assist African countriesin the port development process.

A key premise of this report is that portslie at the heart of the logistics supply chain, linking African countries to their trade partners (Figure 2). The infrastructurecharacteristics include: (i) physical or “hard” infrastructure; (ii) regulatory or “soft”

Executive Summary xxiii

Figure 2: Ports at the heart of the logistics supply chain

(Hard) PhysicalInfrastructure

(Soft) InfrastructurePort Services

Other InfrastructurePipelines

Conveyor Belts

Road – Railroad – RiverInfrastructures

LandlockedCountries

Institutional Infrastructure and Regulatory FrameworkRegulation – Governance – Customs

HinterlandPortGlobal &RegionalMarket

Fleet

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxiii

infrastructure. Taken together, theseelements largely determine a country’scompetitiveness. Because of the importanceof connectivity in the trade logistics supplychain, overall trade costs are largely deter-mined by the weakest link in the chain. Thisfact is acknowledged by the AfricanDevelopment Bank in its selection ofprojects in the transport sector. Goodconnectivity to the hinterland is recognizedas a major factor in port development; itcontributes to reducing freight costs, andboosts trade and economic growth.

Key Findings and Recommendations

The report’s key findings and recommenda-tions are outlined below.

Despite increased South–South trade,Africa cannot fully exploit this newopportunity without improvements inport infrastructure to accommodate theincreasing containerization of trade.

Currently, 30 percent of Africa’s trade is withAsia, which has become as important as itstraditional trading partners, the EuropeanUnion (EU) and the United States (US). Inparticular, the volume of trade betweenChina and Africa has grown, exceeding US$100 billion in 2008. This was an increase ofaround 45 percent since 2007 and a tenfoldincrease since 2001.2 The share of manu-factured goods in developing countries’merchandise trade has increased from 20percent to 80 percent over the past twodecades. It is these goods that are largelyshipped in containers and which requirestate-of-the-art port infrastructure. Given

that China (and Asia more generally)imports raw materials and exports manu-factures — which is the opposite tradepattern to African countries — comple-mentarities between the two regions aregreat and the scope for an expansion oftrade is strong. However, this trade cannotsustain growth if the logistics, especially themaritime nexus, which is currently understress with bottlenecks in many Africancountries, is not improved.

Intra-African trade has also grown, but ata slower pace, for a number of reasons.Among them, the lack of complementaritiesamong African countries is well-known.Trade barriers other than tariffs, such asrules of origin that accompany Free TradeAreas (FTAs) as well as a host of behind-the-border measures, may also act as obstaclesto the free flow of goods. However, thisreport also highlights the role that high tradecosts play in curbing growth in tradevolumes.

Supply-side constraints, many relatingto a rising gap in trade costs relative toother global regions, account forAfrica’s trade performance.

Many African countries have reacted to theadverse conditions they face in the WorldTrading System (landlockedness, pooroverall connectivity to major maritimeroutes) by reducing policy-imposed barriersto trade that contribute significantly to hightrade costs. Consequently, the overall traderestrictiveness caused by all trade measures(tariffs and Non Tariff Measures [NTMs]) isaverage among developing regions; further-more African exports face lower-than-average market access barriers in destination

xxiv African Development Report 2010

2 Ibid.

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxiv

regions. Yet, contrary to other regions, theaverage distance of trade for Africa has beenfalling over the past 40 years, whereas it hasbeen rising elsewhere. This pattern isbroadly consistent with a relative deteriora-tion in trade costs for Africa which is relatedto high transport and transport-related costs.

Of the supply-side constraints impedingtrade expansion, trade costs are acrucial component. Trade facilitationmeasures (including those at theregional level) are key to reducing tradecosts, while improvements in portefficiency exert a strong positive effecton trade volumes.

Trade costs have been shown to be greaterthan the costs associated with trade barriers,which represent a major source of marketfailure, especially for low-income countries.One way to lower these costs is to fostercooperation at the regional level, to buildbusiness contacts among neighboringcountries. Regionally organized trade sup-port institutions, which are now beginningto emerge throughout the continent, canhelp to identify and disseminate relevantinformation.

Several other trade facilitation measures(which are classified as “soft” infrastructure)can help to streamline the three phases ofthe logistics trade chain: the buying process,the shipping process (including ordering andpreparation), and the payment process.Trade facilitation measures in these areasinclude: simplification of trade proceduresand documentation, harmonization of tradepractices and rules, improvements in thetransparency of information and pro-cedures, and recourse to new technologies

promoting international trade (and trans-action security).

However, because of the nature of thegoods transported, for low-income Africancountries, upgrading hard infrastructure isthe principal bottleneck. This is substant-iated not only by the data on congestion inmany African ports reported in Chapter 2,but also by the large delays in ports andalong the land infrastructure due to thedeficiencies in the “soft” infrastructure (e.g.road blocks and excessive red tape).

With respect to maritime transport costs,estimates derived from databases onstandard-sized 20-ft Equivalent Unit (TEU)containers reveal two major factors contri-buting to increased freight costs: longdistances and long delays in ports (one dayless in shipping time to the US is equivalentto a 0.8 percent reduction in tariffs). Aftercontrolling for related factors, the elimina-tion of market power (prevalent in Africanports where competition among shippingcompanies is low) could increase tradevolumes substantially. Controlling for a hostof factors that contribute to maritime freightcosts, recent large sample estimates suggestthat a 10 percent increase in port efficiencywould increase country-pair trade by 3percent.

African transport infrastructure net-works (including ports) are caught in avicious circle resulting in poor qualityinfrastructure, low trade volumes, andlow investment in hard infrastructure,especially for infrastructure connectingports to markets (Figure 3). Measures ofport efficiency throughout Africa arelow on a comparative basis, but in line

Executive Summary xxv

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxv

with per capita income levels, suggest-ing a reciprocal causality betweenefficiency levels and per capita incomes.

Transport infrastructure networks in Africaare weak whether it is ports or the infra-structure that connects ports to the markets(roads, railroads, and inland waterways). Thisreflects two specific features of the Africandemographic landscape. First, the geographicconditions and the low population densityacross the continent contribute to the smallscale of ports and the low density of theinfrastructure linking ports to markets. Thelow population density also explains the lackof industrial development, as it is oftencheaper to supply the sparse Africanpopulation with goods imported from abroad,in spite of high transport costs (Figure 3).

A low level of hinterland and inter-regional trade is one factor underlying thepoor level of investments (including main-tenance) in infrastructures like ports, roads

and railroads, which carry high fixed costs.The dilapidated condition of much of theinfrastructure results in high rehabilitationcosts. Moreover, the substandard state of theinfrastructure network results in delays, theslow movement of goods, and high main-tenance costs. As shown in Figure 3, all ofthese characteristics contribute to high tradecosts, which in turn lead to a low volume oftrade and low per capita income. Yet, in anumber of countries, the asset value ofinfrastructure in terms of GDP is highrelative to the continent’s income and henceits ability to pay for maintenance (WorldBank, 2009). This is reflected in the closecorrelation between several indices of theefficiency of infrastructure and per capitaincome shown in the report.

African ports are small and oftencongested, while fleets visiting Africanports are old. As a response, manyAfrican countries are investing in portinfrastructure, often with the participa-tion of major international containeroperators.

The African port situation is characterized bya large number of small ports, each with acapacity below 1 million TEUs, which is lowby world standards. As shown in Figure 4,container traffic capacity is low, with only twoAfrican ports (Port Saïd and Durban) in theglobal top 50 league. The report’s detailedreview of ports by subregion suggestswidespread capacity shortages across Africa,particularly in West and Central Africa. Thereport identifies several areas whereimprovements are urgently needed: (i) bettersubregional distribution of port facilities,

xxvi African Development Report 2010

Figure 3: The vicious circle of African

infrastructure networks

Poor and oldcondition

of infrastructure

Highrehabilitation

costs

Low trade leveldoes not justify

more investmentsin infrastructure

Low level ofhinterland andregional trade

Disincentive torehabilitate the

railway/roadsystem network

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxvi

particularly on the west and east coasts; (ii)increases in capacity via the rehabilitation,upgrading and construction of improved portinfrastructure such as bigger berths toaccommodate large container ships; (iii)better land access to road and rail networks toreduce congestion.

A positive development is that manyAfrican countries are investing heavily inport infrastructure to meet growing demandand improve port performance. This processhas been spurred by the awarding ofconcessions to private sector operators. This

is an approach that has been supported bythe AfDB during the past several years.

Around the world, the port sector hasbeen under pressure to contribute to alowering of trade costs along thelogistics chain. With a lag, significantprogress in port reform has also takenplace across Africa, but it has beenuneven. Africa is shifting toward thelandlord port management structure,which involves both the private andpublic sectors.

Executive Summary xxvii

Figure 4: Container traffic capacity in Africa (TEU mn) and world ranking of selected ports


Port Said (Egypt) 37


Damietta (Egypt) 99


Mombasa (Kenya) 137

Tema (Ghana) 157

Dakar (Senegal) 166

Port Elizabeth (South Africa) 169



Rades (Tunisia) 179


0 1.0 2.0 3.0

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxvii

Transport costs have become a much moresignificant factor in overall trade costsfollowing the reduction in government-related transaction costs. This has putpressure on the port subsector, which is akey component in the logistics chain. Theport subsector has gone through significantchanges at the global level. One of the mostnotable reforms is deregulation, which hasled to greater competition and a reduction inmarket power by a few major transportoperators.

As a result of the decentralizationprocess, a number of new ports haveemerged in Africa, which has increasedcompetition between ports at subregionaland national levels. Moreover, competitionfor the port market has intensified as privateoperators seek to win concessions. On theshipping side, the explosion of maritimeservices has led to the dismantlement of theliner conferences (which allowed com-panies to quote a single price on a route),which divided up the market with little or nocompetition. Finally, greater competitionacross different modes of transport has putpressure on the port subsector. If thesereforms have contributed to improvementsin efficiency and a reduction in the cost ofmaritime services, the results have beenuneven, varying across subregions andcountries, according to the institutionalenvironment.

Despite these institutional reforms, manycountries have not yet adopted global “bestpractice” methods, resulting in a greatdisparity across several measures of portefficiency (e.g. port costs and port transitdelays). To give an example, in North Africa,the average port cost for a 20-ft container is:

Euro 370 in Casablanca, Euro 210 in Rades-Tunis, and Euro 70 in Alexandria. On theother hand, average port transit delays total15 days in Alexandria, but only 9 days inCasablanca and Tunis. The report underlinesthat in an environment where competitionacross ports and across modes of transport isincreasing, it is important for port regulatorsto have autonomy when carrying outregulatory functions. Outside of SouthAfrica, there is little evidence of theindependent regulation of ports.

The standard reform package for theinfrastructure sectors calls for marketrestructuring through divestiture, increasedprivate sector involvement, and theestablishment of independent regulators.This package has been applied in severalAfrican countries to the port subsector aswell as to the other infrastructure subsectors(utilities, water, roads, railroads, and air-ports). The expected results from imple-menting this package of reforms areenhanced competition and increasedefficiency. However, as shown in Figure 5,according to information provided byshippers, Africa still lags other regions interms of efficiency indicators for the tradelogistics chain (ports, roads, railroads, andairports).

The regional averages in Figure 5 rankedin descending order indicate a strongcorrelation across regions for each indicator.While North Africa ranks fourth, closebehind the East Asia and Pacific region,Africa as a region ranks last, particularly forthe landlocked countries in SSA.

A similar pattern emerges from Figure 6,which shows that in 2008, North Africa wasthe best performing subregion in the

xxviii African Development Report 2010

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxviii

continent for cross-border trade fluidityindicators. For example, in Morocco in 2008it took about 14 days for exports to clearcustoms procedures and 19 days forimports, compared to the Central AfricanRepublic’s record of 57 days for exports and66 days for imports. However, more recentdata indicate that in 2008–2009, 14 Sub-Saharan African countries were rated as“most active” in the World Bank’s globalDoing Business league for cross-border tradepolicy reforms. This was in part due to

enhanced donor support for aid-for-tradeinitiatives (World Bank, 2010).

The report gives many examples ofimprovements as a result of institutionalreforms. For example, Ghana, Mozambique,and Uganda reduced average processingtime through customs from several weeks toonly a few days and North African countriesare making serious efforts to reform theircustoms systems in conformity with theKyoto Convention and the agreements oninternational transport. However, a key

Executive Summary xxix

Figure 5: Quality of infrastructure across regions

Source: Portugal-Perez and Wilson (2009, table 2). Data are taken from the indicators in the World Economic Forum

Global Competitiveness Report 2008–2009 and the aggregate infrastructure index is constructed by factor analysis.

Notes: Regions ranked by decreasing quality of overall infrastructure. The infrastructure indicator is a simple average

of the 4 subindicators in the figure. The maximum value taken by the index is unity.

Infrastructure

Indicator

Quality of ports

infrastructure

Quality of roads

infrastructure

Quality of railroad

infrastructure

Quality of airports

infrastructure

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00High

Income

OECD

Middle

East

East Asia

& Pacific

North

Africa

Europe &

Central

Asia

South

Asia

Latin

America &

Caribbean

Total

Africa

Sub

Saharan

Africa

Landlocked

Sub

Saharan

Africa

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxix

unresolved issue is how successful aregulatory reform can be in an environmentwith weak governance at the sectoral level.

Landlocked countries are stronglyhandicapped. Transit and trade cor-ridors to improve connectivity deservefurther development. Trade facilitationmeasures at the national, regional, andinternational levels are needed torelieve the plight of landlockedcountries.

Africa is the continent with the highestconcentration of Landlocked DevelopingCountries (LLDCs), 15 in total. All estimatesshow significantly higher trade costs forLLDCs. Estimates for a standard 20-ft con-tainer show that the median landlockedcountry’s transport costs are 46 percent higherthan the equivalent costs for a median coastaleconomy. Moreover, distance explains only10 percent of the change in the transport costsbetween coastal and landlocked countries.Poor road infrastructure represents 40 percent

xxx African Development Report 2010

Figure 6: Cross-border trade fluidity indicators, per TEU container

Source: Time, number of documents, and costs computed from World Bank Doing Business data (2008).

Note: To ensure comparability across countries, these figures represent the official fees levied on a dry-cargo, 20-ft,

full container load expressed in US dollars and associated with completing the procedures to export or import the

goods. Costs include the costs of documents, administrative fees for customs clearance and technical control,

terminal handling charges, and inland transport, and exclude tariffs as well as other trade-related taxes.

East & South East Asia

South Asia

Latin America

European Union

North America

East Africa

South Africa

West Africa

North Africa

Central Africa

Coastal African

African Landlocked

60 50 40 30 20 10 0 1000 2000 3000 4000

Time for export (days)

Documents for import (number)

Time for import (days)

Documents for export (number)

Cost to export (US$ per container)

Cost to import (US$ per container)

0

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxx

of the transport costs for coastal countries and60 percent for landlocked countries.

These estimates are corroborated byother findings collected for this report,including the freight charges from differentglobal countries to Rotterdam (Figure 7), asposted on the Internet in 2008 by Maersk, aglobal shipper. Being landlocked imposes alarge premium on overall freight costs, for

shipping a standard 20-ft container carryingtextiles. LLDCs pay large premia above oceanfreight costs. It costs about twice as much toship a textile container from Bamako orKampala than from Montevideo, and only asmall portion in the overall difference in costsis accounted for by ocean freight costs.

The most promising approach toimprove landlocked countries’ access to

Executive Summary xxxi

Figure 7: Transport costs from selected cities to a European port (Rotterdam)

Costs, USD

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Kampa

la, U

GA

Bamak

o, M

LI

Nairo

bi, K

EN

Gab

oron

e, B

WA

Map

uto,

MOZ

Djib

outi, D

JI

Mas

eru,

LSO

Mom

basa

, KEN

Dar

es Sal

aam

, TZA

New

Delhi, I

ND

Abidjan

, CIV

Port L

ouis, M

US

Dak

ar, S

EN

Lom

é, T

GO

Asunc

ión,

PRY

Cap

e Tow

n, Z

FA

Dur

ban,

ZFA

Santo

s, B

RA

Bueno

s Aire

s, A

RG

Mon

tevide

o, U

RY

Izm

ir, T

UR

Algiers

, DZA

Beiru

t, LB

N

Tunis, T

UN

Alexa

ndria

, EGY

Cas

ablanc

a, M

OR

Additional charges

Inland Haulage Import

Basic Ocean Freight

Source: Maersk. Transport costs corresponding to July 2008.

Note: The data is estimated for carpets, floor coverings and textiles for one standard container of 40ft shipped on July

2, 2008.

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxxi

global markets is via transport corridors.This approach is gaining momentum andmost of the transport sector strategy in Africais based on the development of suchcorridors. Success depends heavily onregional infrastructure, linkages to ports,and improvements in transit logistics, asemphasized in the Almaty Program ofAction. For example, the development ofone-stop-border-posts (OSBPs) examined in the report are very promising. Fullimplementation would help LLDCs to obtainfreedom of transit enshrined in the GATTArticle V (“Freedom of Transit”). At the sametime, the successful implementation ofOSBPs necessitates “deep” cooperation atthe regional level, which in turn requires thedelegation of national authority to a supra-national body at the regional level.

Harmonization of safety (and other)regulations at the regional level is anotherarea that would help all African countries,particularly the LLDCs. One importantexample is road safety, which is a majorconcern in Africa. The report examinesseveral areas where harmonization wouldyield high-benefit cost ratios. These includeharmonizing regulations relating to axle loadsand road transit charges. Using a regionalcarrier’s license that would allow vehicles tooperate with one license, and using regionalthird-party vehicle insurance schemes wouldalso reduce transport costs substantially.

The Bank considers the lack of adequateinfrastructure, particularly in the trans-port infrastructure, as a key constraintto the growth momentum in Africa. ThisAfrican Development Report 2010highlights an opportunity for the Bank

to strengthen the transport sector, andports in particular, through public andprivate sector instruments in both“hard” as well as “soft” infrastructure. Toensure maximum development impactin these Bank transactions, a strongpolicy framework is necessary.

In 2008, the African Development BankGroup’s total approvals for the infrastructuresector amounted to US$ 2.17 billion,representing 45 percent of its total com-mitments for the year. This reflects theBank’s prioritization of infrastructure as astrategic area of focus, as outlined in itsMedium-Term Strategy 2008 –2012. Inrespect to the ports subsector, between 1973and 1997, the Bank embarked on 27 publicsector operations and the results werepositive.3 However, after 2000 publicinvestments in maritime transport declined.Since that time, Bank activities in ports havebeen supported by private sector instru-ments, in countries such as Senegal,Djibouti, and Egypt in order to support theprivate concession approach.

Going forward, given the enormouschallenges presented in this report in terms ofhard infrastructure requirements in Africanports and other modes of transport into thehinterland (such as rail, road, andwaterways), a large injection of public andprivate investment is required. In 2008, theBank Group contributed US$ 393.94 millionof its own funds to cofinance projects in thetransport subsector, and mobilized a furtherUS$ 114.41 million from external partners and

xxxii African Development Report 2010

3 AfDB, 2001 Review of Bank Group Operations inthe Maritime Subsector.

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxxii

private sector institutions, with another US$243.62 million of funding from governmentsand local firms. The Bank should continue inthis role of catalyzing investments from othermajor investment partners and developmentagencies. It should leverage all theinstruments at its disposal to strengthen itskey partnerships and scale up funding forinfrastructure across the continent.

Further, investments in soft infrastructure,such as strong regulatory frameworks andinstitutions (i.e. customs) are critical tofacilitate the movement of goods from portsto the hinterland. To support theseoperations, a revised policy framework inmaritime transport and related areas isneeded to guide the prioritization process andto improve the quality at entry of investments.

Finally, going forward, as many Africangovernments and port authorities engagein ways to strengthen their overall portcapacity and transshipment functionstoward becoming regional hub ports, itmust be underscored that investing inport capacity alone will not turn a portinto a regional hub.

Consideration must be given to having astrategic location, adequate water depth, andthe facilities and performance to ensure lowhandling costs. These enjoin governments todecide how best to foster and financeintegrated port and transport facilities andassociated land uses. In addition, building aconducive environment for port hubs entailsdetermining how best to develop state-of-the-art ports, equipped with appropriatetechnologies and management skills. Thisshould involve the international privatesector, particularly in the container terminal

business. As African governments pursuethese strategies for improving ports in Africa,they can be supported by IFIs, such as theAfrican Development Bank, throughfacilitating private sector participation as wellas providing finance for port development.

References

AfDB — COD. 2001. Review of the BankGroup’s Operations in the MaritimeSubsector. April.

AfDB, OECD, UNECA. 2009. AfricanEconomic Outlook. Paris: OECD/AfDB.

Lloyds MIU. 2009. ContainerisationInternational Yearbook. 40th edition,London: Informa.

Maersk website: http://www.maersk.com/en/Pages/Welcome.aspx, accessed in 2009.

Portugal-Perez, A. and J. Wilson. 2009.“Revisiting Trade Facilitation Indicators andExport Performance.” Mimeo, World Bank.

UNCTAD. 2007. Review of MaritimeTransport, 2007. New York and Geneva:UNCTAD.

World Bank. 2009. Africa’s Infrastructure:A Time for Transformation, Part 2 —Sectoral Snapshots. Flagship Report: AICDStudy. Washington, DC: World Bank.

——. 2010. Doing Business: ReformingThrough Difficult Times. PalgraveMacmillan, IFC and the World Bank,Washington.

World Economic Forum. 2009. GlobalCompetitiveness Report 2008–2009. Geneva.

Executive Summary xxxiii

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxxiii

(A) AfricanBank 2010 Prelims 8/10/10 10:30 Page xxxiv

Until the global financial crisis of 2008,world trade and investment flows hadgrown faster than world Gross DomesticProduct (GDP). An important feature of theongoing globalization was the rising shareof trade in unfinished goods, reflecting theincreasing importance of outsourcing in theglobal supply chain. These trends are likelyto continue once the global financial stormis over. During the period 1976–2006, Sub-Saharan Africa’s (SSA) share of world

exports dropped by nearly two-thirds, from2.9 percent in 1976 to 0.9 percent in 2006.1

This implies that if SSA’s share of worldexports had remained constant since themid-1970s, its export revenue would bealmost 10 times larger than its current value.

C H A P T E R 1

Trade and Trade Costs in Africa:An Overview

1 Figures for SSA computed from COMTRADEthrough the World Integrated Trade Solution (WITS)Database. For Africa, statistics from UNCTAD (2009a:169).

(B) AfricanBank 2010 Ch1 8/10/10 10:31 Page 1

In 2007, Africa’s trade volume — includingSouth Africa — stood at US$ 805 billion,which represents 2.9 percent of global trade.

Many of the slowest-growing economiesin Africa are either engaged in conflict orhave recently emerged from conflict, whichseriously affects their ability to integrate intothe world trading system. Geography tooplays a major role in shaping the economicfortunes of African countries. Fifteen arelandlocked countries (LLCs), making themboth physically and economically moreremote from major world markets, whichcontributes to their high trade costs. And it is these high trade costs that isolatecountries and prevent them from reaping thebenefits of globalization, as their exportsbecome less competitive and imports moreexpensive for essentials such as fuel andspare parts. In a world where outsourcing isincreasing rapidly, this is a formidablehandicap. For example, in the CentralAfrican Republic and Chad, importers paycost-insurance-freight (cif) prices that are 1.3to 1.8 times greater than the cost of theproducts at point of origin. As to exportsfrom these two countries, cif prices on arrivalin Europe are 1.7 times the production costof timber and 2.8 times that for coffee.2

Many African nations have reacted tothese adverse conditions by reducing thepolicy-imposed barriers to trade, whichcontribute significantly to high trade costs.However, a number of additional factors —low volumes of trade, barriers in exportingmarkets, weak domestic institutions, andespecially weak physical infrastructures alongthe logistics chain — serve to isolate African

countries from a successful integration intothe world trading system. Indeed, Africancountries face some of the highest trade costsin the world and several estimates put Africanfreight costs at twice the world average.

Seaborne transshipment is the mainmode of transport for international trade,accounting for about 80 percent of the totalglobal volume. The maritime nexus isparticularly important for African countriesthat specialize in low-value goods, whichare rarely transported by air.

With the recent growth in African tradeaccompanying the continent’s high GDPgrowth experienced over the past years,ports, and more generally overall tradelogistics, have grown in importance for theregion in the worldwide race to increasecompetitiveness. Africa’s real GDP growthremained above 5 percent for the period2001–2008 (standing at 5.1 percent in 2008— down by less than 1 percent from 2007).However, as a result of the financial crisis,this is expected to decline to 2.8 percent inreal terms in 2009.

This pursuit of lower trade costs hasseen the share of inventory expenditures intotal trade costs drop sharply. For the UnitedStates, this change has reduced the share ofinventory expenditures in total logisticsexpenditures from one-half to one-thirdover the past 20 years. As a result, transportexpenditures have increased from less thanhalf to almost two-thirds of total logisticsexpenditures. The same trends can beobserved around the world; indeed, formany developing countries, internationaltransport costs are now two to three timeshigher than the tariffs they face in developedcountries.


2 See World Bank (1995).


Improving logistics to reduce costs isessential if African countries are to scale uptheir competitiveness and participate in theprosperity created by the world tradingsystem. Since the bulk of African trade isextra-continental and since it transits throughports, maritime costs are particularlyimportant. This report diagnozes theproblems faced by the maritime sector andmakes recommendations for improvements.This chapter gives an overview of Africa’strade, its policies, and the policy barriersAfrican exports face in destination markets. Itlays the groundwork for the chapters thatfollow by identifying the components oftrade costs, and especially of maritimetransport costs, along the logistics chain. Thechapter also draws on relevant internationalexperience to situate Africa’s trade costs inthe broader international context.

African Trade: An Overview

The share of South–South transactions inworld trade has doubled since 1990, while theshare of manufactured goods in developingcountries’ merchandise trade has increasedfrom 20 percent to 80 percent over the pasttwo decades. It is these goods that are largelyshipped in containers. Figure 1.1 shows theevolution of Africa’s share of global trade from2006–2008, revealing an upward trend fromUS$ 674 billion in 2006 to US$ 1,015 billion in2008. This is largely due to increased demandfor Africa’s raw materials, particularly mineralsand ores, from China and India.3

Whereas in 2000, Sino-African tradevolume stood at US$ 10 billion, by 2008 ithad increased tenfold to US$ 106 billion,4

itself a 48 percent increase over 2007.Currently, 30 percent of Africa’s trade is withAsia, which has become as important as itstraditional trading partners, the EuropeanUnion (EU) and the United States (US).Given that China (and Asia more generally)imports raw materials and exportsmanufactures — which is the opposite tradepattern of African countries — complement-arities between the two regions are greatand the scope for an expansion of com-merce is strong. However, this trade cannot

Trade and Trade Costs in Africa: An Overview 3

3 According to recent estimates by UNCTAD(2009a, Table 2), while global exports fell from 8.5percent in 2006 to 2.0 percent in 2008, Africa’s exportposition showed a reverse trend, growing slightlyfrom 1.5 percent in 2006 to 3.0 percent in 2008.

4 http://www.chinadaily.com.cn/china/2009-02/11/content_7463268.htm

Figure 1.1: Africa’s share of global

trade, 2006–2008

Source: ADB Statistics Department (2009).

1200

1000

800

600

400

200

2006 2007 2008

0

674

2.9%

805

2.9%

1015

3.4%

Africa’s Share ofGlobal Trade (US$ Billion)

Africa’s Share ofGlobal Trade (percentage)


sustain growth if the transport logistics,especially the bottlenecks in the maritimenexus of many African countries, are notimproved.

Trade performance is not uniform acrossAfrica, with some countries performingmarkedly better than others. From a sub-regional perspective, North Africa, East Africa,and Southern Africa enjoy higher tradevolumes than West and Central Africa. Thereare a number of reasons for this disparity; theCentral Africa subregion is largely landlocked,which increases transport costs — andtherefore overall trade costs — particularlywith overseas markets. Moreover, as Chapter2 demonstrates, ports in West Africa havehistorically lagged in performance comparedto those in the other subregions.

Furthermore, the worldwide surge inSouth–South trade over the past 20 years hasonly partially translated into a corres-pondingly high growth in intra-African tradeflows. One reason that is frequently cited ishigh tariffs. However, not only have Africancountries lowered their MFN tariffs, but theyhave also established multiple Free TradeAreas (FTAs) across the continent, resultingin an elimination of tariffs for much Africantrade. Table 1.1 shows that intra-Africantrade as a share of total African trade stoodat less than 10 percent for the period2004–2006. This is well below the averagefor intraregional trade in other regions, bothdeveloped and developing, and indicatesthat trade between Africa and the rest-of-the-world is growing faster than trade withinAfrica.

There are several explanatory factorsunderlying these trends. Among them, thelack of complementarities among African

countries is well-known, and this contributesto the still relatively low volume of intra-regional trade. Trade barriers other than tariffs, such as rules of origin thataccompany Free Trade Areas (FTAs) may alsorepresent a barrier. However, it is likely thatthe high trade costs identified in this reporthave played a major role in constraininggrowth in intraregional trade volumes.

It is worth bearing in mind that althoughthe proportion of Africa’s intraregional traderemains low in comparison with otherregions, it has increased considerably overthe years, albeit from a very low initial level.It was stable through to the early 1970sbefore falling sharply in 1978, when intra-African exports were worth only 2.9 percentof total African exports (UNCTAD 2009b:20). Recovery began slowly in the 1980s, butpicked up in the 1990s and continued on anupward trend, until it started to level off in2007 (see Figure 1.2). This secular upwardtrend can be attributed to three main events.First, the adoption of structural adjustmentprograms in many countries opened upAfrican economies, creating a more


Table 1.1: Intraregional imports and

exports as a proportion of total trade,

2004–2006 averages (%)

Imports Exports

Africa 9.6 8.7

Developing America 20.9 18.5

Developing Asia 48.1 45.5

Developed America 23.3 39.8

Developed Europe 68.1 71.4

Source: UNCTAD (2009b: 21).


favorable environment. Second, the endingof apartheid in South Africa opened the wayto trading opportunities with its neighbors.Finally, the intensification of Regional TradeArrangements such as AMU in 1989, SADCin 1992, and COMESA in 1994 has led toincreased regional cooperation, integrationand trade. Currently, over three-fourths ofintra-African trade takes place withinregional trading blocs (UNCTAD, 2009b: 24),which suggests that they should be used fordeeper intra-African trade.

Overall, considerable potential exists forAfrica to scale up its trade flows both withinthe region and with the rest of the world,

especially Asia. However, as this reportmakes clear, to achieve this goal, a number ofobstacles will need to be removed. Inparticular, the evidence points to supply-sideconstraints, many relating to a rising gap intrade costs compared to other global regions.This analysis is substantiated by the evidenceon other components of trade costs reviewedin this chapter; in particular, the recentprogress made by African governments inreducing tariff and non-tariff barriers (NTBs).The fact that such measures have not led toan anticipated high growth in trade volumespoints to the criticality of trade costs otherthan policy-imposed trade barriers.


Figure 1.2: Evolution of intra-African trade, 1990–2008

Source: ADB Statistics Department, 2009.

US$ billion

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008


The Geography of African Trade

The gravity model (see Box 1.1) is thepreferred approach for analyzing thevolume of trade and is especially suitable fora report that focuses on trade costs and theefficiency of trade ports. In essence, thegravity model predicts that the volume oftrade between two countries i and j isproportional to the size of those countries’GDPs5 and inversely proportional to thetrade costs (TC) between the two countries:

where trade costs are usually proxied by thebilateral distance (DIST) (relative to theaverage distance across all trading partners)between the trading partners. The gravitymodel predicts that a relative fall in border-related costs (as happened under the currentwave of globalization that has reducedcommunication and transport costs, andbarriers to trade imposed by governments)should lead countries to increase the volumeof international trade relative to internaltrade. This prediction is largely borne out bythe data: since 1980, world production hasincreased by 75 percent while internationaltrade has increased by 300 percent(Berthelon and Freund, 2008). The gravitymodel also predicts that a reduction in allcosts related to distance (including better

information about distant markets) will leadcountries to increase their volume of tradewith distant partners. Conversely, if therelative costs associated with distanceincrease, countries will shift their tradetoward closer partners. Moreover, the modelpredicts that the patterns of bilateral tradewill depend on the evolution of trade costsbetween the partners relative to the evolutionof all trade costs. Consequently, an all-rounddecrease in trade costs will not necessarilylead to an increase in bilateral trade for allcountries if the trade costs between a groupof countries (for example, African countries)are falling less rapidly than elsewhere.

Figure 1.3 tests this prediction bycomputing the evolution of the PotentialTrade Ratio (PTR), that is, the averagedistance of trade that would be observed ina frictionless world according to the gravitymodel divided by the actual averagedistance of trade. If the gravity model is anapproximate description of the determinantsof aggregate bilateral trade, an increase inthis ratio is then an indirect indicator that theaverage costs of trade are rising. Asexpected, Figure 1.3 shows that for the low-income (LI) group of countries (the 40countries with the lowest per capitaincome), the bulk of their trade is with moredistant partners. This is especially the casefor the LI African group, whose averagedistance of partners was almost twice that ofthe entire sample of countries in 1970 (7,900km vs. 4,568 km). Since potential trade, aspredicted by the gravity model, has notincreased significantly for the LI countries(the effect of the increasing weights ofrelatively close Asian partners is small), therising PTR for these countries — especially


5 For example, South Africa is a more importanttrading partner to Madagascar than Madagascar is toSouth Africa. This is predicated on the fact that in2007, South Africa accounted for 3.6 percent ofMadagascar’s trade, while Madagascar accounted foronly 0.1 percent of South Africa’s trade share.

TGDP GDP

tc

GDP GDP

DISTij

i j

ij

i j

ij

= ≈( )( ) ( )( )


African LI countries — means that bilateraltrade is taking place with geographicallycloser partners. According to the gravitymodel, this is an indication of increasingtrade costs in relative terms. Since the PTR isconstant for the whole sample, this means

that it has been decreasing for high-incomecountries, as one would expect of fallingtrade costs under globalization. For Africancountries, the average distance of trade fellapproximately 25 percent over the period.This pattern in the raw data holds up when


Box 1.1: The gravity model of trade

The gravity model of trade is used to predict the aggregate volume of bilateral trade between countries. It

is especially well suited to isolate the role of various forms of trade costs from the more “fundamental”

determinants of trade, such as the size of trading partners and geographic characteristics. Estimates from

the gravity model are reported in several places in this report. In its most general form, the gravity model of

trade stipulates that bilateral trade between two countries is given by:

Where Ai, Aj are the characteristics specific to each partner, invariably including the GDPs but

occasionally other variables like population and country characteristics, and tcij are the trade costs between

the partners that in turn are assumed to be proxied by a measure of the bilateral distance between the

partners, Dij and zimj . (m = 1,...,M) is a set of binary dummy variables (usually invariant through time, such

as sharing a common border, a common language, etc.) capturing barriers to trade other than distance. In

some specifications, trade costs are augmented to include composite indices of the state of infrastructure

in the trading partners. The model fits the data well, hence its popularity. Typically, the range of estimates

for � — the elasticity of trade to distance — are in the range � = –1.4 [–0.7] so that doubling the distance

reduces trade by 63 percent [42 percent].

Figure 1.4 is an application of the simplest version of the gravity model, where the potential average

distance of trade (ADOTP) is predicted by a “frictionless” model of trade, i.e. one where the volume of

bilateral trade depends only on the product of the trading partners’ GDPs (the other relevant variables in

trade costs are omitted). Taking the ratio of this potential measure to the actual average distance of trade

(ADOT) gives the Potential Trade Ratio (PTR = ADOTP/ADOT). This ratio is then a measure of changes in

the costs of trade after controlling for changes in the partners’ GDPs. An increase in the PTR ratio suggests

that trade costs which reduce the ADOT are increasing more rapidly than potential trade, as measured by

the economic size of the trading partners.

In other results derived from the gravity model reported in this report, the model is augmented to include

policy-imposed barriers to trade (tariffs and the tariff-equivalents of NTBs) and indices of the quality of

logistics in each trading partner (e.g. the quality of physical infrastructure) among the regressors. Also the

estimation procedure exploits the possibility of zero bilateral trade flows (usually estimates of the gravity

equation discard information by excluding zero trade flows, thereby biasing the estimates), an important

dimension in bilateral trade flows including LI countries. In Box 1.2 below, which reports on the use of

statistical analysis to measure the efficiency of ports, the estimation is at the HS-6 product level, which

controls for product characteristics like weight, use of containers, and imbalances in bilateral trade.

XA A

tctc D zi j

i j

ijij ij

m

M

ijm m

, ;= = ( ) ( )=

θ γΠ1


a full gravity model with controls (see Box1.1) is estimated repeatedly for this sampleof countries over the period 1970–2005.

Further inspection of the raw dataindicates a change in the composition oftrading partners, reflecting a change in thenumber of zero trade flows. For LI Africancountries, the ratio of zero trade flows,which remained stable until 1990 at around45 percent (15 percent for the high-incomecountries), fell sharply by half. These newtrade flows (the “extensive” margin of

trade), took place with geographically closerpartners. The data also show that theregionalization of trade was also generatedby trade redistribution within the intensivemargin (i.e. products already traded) towardcloser partners.

This observed pattern could reflect acombination of changes. One would be ifthe closer partners were the ones whoreduced their trade barriers the most, andwhen extending trade to new partners, theLI countries selected those countries thatwere closest. Another variable might be theeffects of the regional trade agreementsamong the LI countries, especially acrossAfrica. Then, the regionalization of tradewould also reflect “deep” integration effects,as administrative and technical barriers totrade were removed more rapidly for the LIcountry group relative to others over theperiod, generating welfare-increasing newtrade flows.

A less optimistic view emerges if oneassumes that, over the period, a growingproportion of world trade is generated byvertical specialization and “just-in-time”production. In this case, trade costs could beviewed as a growing impediment in thesupply-chain production. Then, if LIcountries’ trade costs (in particular distance-dependent, such as large markups in inter-national shipping) remain high compared toother developing countries’ trade costs, theobserved regionalization of trade could beinterpreted as a marginalization of thesecountries.

Landlockedness is a second geographiccharacteristic of Africa (distance being thefirst). Compared to other continents, Africahas the highest proportion of landlocked


Figure 1.3: Evolution of Potential Trade

Ratio in a frictionless world relative to

actual average distance of trade,

1970–2005

Source: Adapted from Carrère et al. (2009).

Sample of 124 countries. Data points represent

five-year averages.

Notes: The Potential Trade Ratio (PTR) is the ratio

the potential average distance of trade (ADOT P)

predicted by a “frictionless” model of trade (i.e.

one in the volume of bilateral is given by the

product of the trade partners GDP) divided by the

actual average distance of trade (ADOT). An

increase in the PTR ratio implies an increase in the

cost of trade (see Box 1.1).

Average distance of trade in 1970 in parenthesis.

1,3

1,25

1,2

1,15

1,1

1,05

1

0,95

1970

1980

1975

1985

1990

1995

2000

2005

PTR-African LI (7900 km)

PTR-ALL LI (7216 km)

PTR-African (6714 km)

PTR-ALL (4568 km)


countries (LLCs). Thus 28 percent of theAfrican population lives in landlockedcountries compared to 3 percent of thepopulation in Latin America and 2 percent inAsia. In addition, the continent lacks riversthat are navigable by oceangoing vessels.Further, Africa has a very small coastlinerelative to its area and there is a shortage of natural ports along the coastline.Consequently, as shown in the averagedistance-of-trade estimates in Figure 1.3,most African countries (especially SSAcountries) are far removed from the majorworld markets (Europe, the United States,and now Asia).

Landlocked countries are also subject touncertainty for delivery times at bordercrossings. As argued in this report, theselandlocked countries should aim to becomeland-linked (one principal method is viatransport corridors) so that they developcommon infrastructures and cooperate on aregional basis to facilitate trade. Moreover,as shown at greater length in Chapter 3,landlocked LI countries face highertransport costs and this contributes to theirlower volumes of trade (in the gravity trademodel, bilateral trade between landlockedor island countries is always lower aftercontrolling for other factors).

This unfavorable geography is onereason why the elasticity of distance to tradein gravity models is found to be higher for African and landlocked countries. Forexample, in a well-documented study basedon a well-defined cargo, Limão andVenables (2001: 455) reported that the costof shipping a 40-ft container to variousdestinations increases from US$ 4,620 forcoastal countries to US$ 8,070 for land-

locked countries. Using these “true”transport costs in a gravity model of bilateraltrade, they estimated the shipping costs oflandlocked countries to be 55 percenthigher than those of coastal economies.Using an infrastructure index similar to theone presented in Figure 1.7 below, they alsoestablished that higher transport costs areassociated with low values for their index ofthe quality of infrastructure.

A third characteristic of African trade,shown in Table 1.2, is that African countriesmostly export primary commodities, all buta few of which (e.g. gold, platinum, dia-monds, and other high-value raw materials)are transported by ship. Apparel is the onlymajor manufactured product which isoccasionally carried as air freight; mostcommodities are shipped in dry bulk or ingeneral cargo (bags and pallets). Thus thebulk of African exports rely on maritimetransport. At the same time, African trade ismostly inter-industry rather than intra-industry. Exports of commodities are eitherdry bulk traffic (coal, grain, and somechemicals) or liquid bulk (mostly oil) whilemost imports are for manufactures shippedunder general cargo and container trade,with small import volumes as dry and liquidbulk. As a result, these traffic categories areunbalanced with export volumes (loadings)greatly exceeding import volumes for dryand liquid bulk, while imports exceedexports for general cargo. This imbalanceraises trade costs.

A fourth characteristic, which has impli-cations for transport costs, is that Africancountries receive a large share of GDP inforeign aid, which allows them to run largertrade deficits. This leads to increased




Table 1.2: Main African exports and share of total exports (2008) (mode of transport and

type of shipping cargo in parenthesis)

Product Countries Share in total Product Countries Share in

exports (%) total

exports (%)

Metals and Mauritania (iron ore) (1) 48.3 Crude Angola 96.9

Ores Mozambique (aluminum) (1) 37.6 Petroleum (3) Cameroon 41.9

Guinea (aluminum ore) (1) 59.2 Chad 93.8

South Africa (platinum) (4) 15.1 Congo 86.4

Tanzania (gold) (4) 30.4 Equatorial 76.9

Guinea

Niger (radioactive chems) (2) 22.7 Gabon 66.9

Zambia (copper) (2) 59.3 Nigeria 87.6

Senegal (inorganic acid) (3) 11.5 Sudan 94.5

Morocco (inorganic acid) (3) 13.6 Algeria 66.7

Egypt 14.8

Tunisia 11.2

Cotton (2) Benin 24.2 Live Animals Djibouti 18.1

Mali 78.9 (specialized Somalia 40.7

ships)

Coffee (2) Burundi 59.8 Cocoa (2) Ghana 49.3

Ethiopia 36.0 Sao Tome & 66.4

Principe

Rwanda 30.8 Togo 14.6

Uganda 29.6

Fish (2b) Cape Verde 32.6 Apparel (2 Lesotho 55.6

Seychelles 80.2 or 4) Madagascar 49.1

Edible nuts (2) Gambia 53.4 Tobacco (2) Malawi 54.2

Guinea Bissau 92.1 Zimbabwe 14.3

Sugar (1 or 2) Mauritius 15.4 Diamonds (4) Botswana 61.5

Swaziland 20.8 CAR 33.5

DR Congo 26.1

Namibia 26.2

Sierra Leone 49.1

Tea (2) Kenya 16.1 Resins etc. Eritrea 4.0

(2 or 2b)

Spices (2 or 4) Comoros 34.0

Source: ADB Statistics Department using World Integrated Trade Solution (WITS) Database, 2009.

Notes: Type of shipping cargo (1 to 4):

1: dry bulk 2: container, but also general cargo (bags, pallets). Coffee is increasingly containerized. 2b: reefer

(cold) containers 3: liquid bulk 4: air


transport costs for imports, since freightrates must also cover the cost of transportingempty containers or trucks back to theirplace of origin.

Trade Costs: A Classification

Trade costs — sometimes defined ascomprising everything but production costs— constitute the sum of administrativebarriers, trade policies (tariffs and non-tariffmeasures (NTMs), and transaction costs(transport and insurance costs). Trade costs

may also be analyzed along other dimen-sions. For example, Figure 1.4 distinguishesbetween border-related costs and behind-the-border (BTB) measures to identify thosetrade costs that are not a direct result of tradepolicies but that can be reduced throughother channels, notably via trade facilitationresulting from cooperation, often in thecontext of a regional trade agreement.6 Theleft-hand side of Figure 1.4 brings in anotherdimension. There trade costs are brokendown between trade frictions that are largely


6 The terminology “BTB measure” was first usedto distinguish between “deep” and “shallow”integration in Regional Integration Agreements:“deep” integration occurring when integrationextends beyond the removal of protection (i.e.

Figure 1.4: Trade costs and trade facilitation — a classification

Trade Friction

Government RegulationTrade Facilitation

(simplification,harmonization,

standardization)

(2) Transport Costs

(1) Border Related Costs(Trade Policy includingProduct Standards andTechnical regulations,

Customs Administartion)

(3) Behind-the-Border-Related Costs

(Quality of Institutions,Information and

Communication Costs)

Trade CostsGeography

(connectivity,landlockedness)

integrating factor markets, combining regulatoryinstitutions, harmonizing standards and cooperatingintensively on trade facilitation, e.g. reducing “redtape” for crossing borders).


exogenous (distance, geography of tradingpartners, different languages) and trade costsdue to government regulations, which aremore directly amenable to changes in policy.

The discussion on trade costs increas-ingly refers to trade facilitation (simplifica-tion of trade procedures, harmonization oftrade practices, and rules). These arerepresented separately in Figure 1.4 to signalthat the implementation of trade facilitationrequires some cooperation at the regionallevel or beyond. (The role of trade facilita-tion is treated below.)

The right-hand side of Figure 1.4classifies the trade costs that are amenable toreductions via policy actions. Three broadcategories are shown: (i) border-relatedcosts; (ii) transport costs; (iii) and behind-the-border-related costs. These costs are notindependent of one another. For example,transport costs depend on the efficiency ofports, which in turn depends on theefficiency of administration, the regulatoryframework, and the quality of a country’sinstitutions — all these are categorized asbehind-the-border costs. Transport costsalso relate indirectly to border costs, sincehigher border costs reduce trade. Because ofeconomies of scale in freight-related costs,lower volumes of trade raise unit transportcosts, which are also affected by geography(about which little can be done).

Border-related Costs

Traditionally, trade policy barriers in theimporting country (tariffs and quotas) havebeen considered the most importantelement of overall trade costs. With theunilateral and multilateral reduction in tariffsand the quasi-elimination of quotas, non-

tariff measures (NTMs) such as technicalstandards and phytosanitary norms imposedby OECD countries, have come to be con-sidered the most important policy barrier totrade. In African countries, tariffs have beensharply reduced over the past decade. Asshown in Table 1.3, average tariffs in Africaare no longer the highest among developingregions. Thus one can no longer attributethe low volume of intra-African trade toclosed trade regimes.

Barriers to African exports in developedcountries are often cited as contributing tothe continent’s poor trade performance.Two measures of barriers faced by a largesample of 104 countries are reported inTable 1.3, namely the Tariff TradeRestrictiveness Index (TTRI) and the OverallTrade Restrictiveness Index (OTRI). Thelatter index includes the effects of NTMs (i.e.price control measures, quantitative restric-tions, monopolistic measures, and technicalregulations) on the volume of trade. Bothindices produce the equivalent uniform ad-valorem tariff, which, if applied by a countryto all its imports, would result in a level ofaggregate imports equivalent to that prevail-ing under current policy settings. Sincemeasures of NTMs applied at the productlevel (HS-6 level) are generally found torestrict trade, the OTRI index estimate isalways higher than the corresponding TTRIestimate. Taken together, these indicesprovide summary measures of trade policiesaffecting a country’s imports.

Table 1.3 shows the estimates of thebarriers to trade on imports by developingcountries across regions, and the barriers totrade imposed by the QUAD (Canada, EU,US, and Japan) on their imports. This table



is based on data for 2003–2004, whichrepresents the most recent informationavailable on NTMs across a large sample ofcountries. Compared to other globalregions, Sub-Saharan Africa is in the middleboth for total protection and tariffs (with anaverage tariff of 8.4 percent, compared to11.9 percent for the Middle East and NorthAfrica and 14 percent for South Asia). Theaverages across sectors in the QUAD show

that the restrictiveness of NTMs can beimportant, but especially in agriculture, asector where African countries enjoy acomparative advantage. In the EU, the tariffequivalent of all tariff measures in agriculture(the TTRI) is only 5.9 percent, but this risesto 48.7 percent when NTMs are added (the OTRI index value). In conclusion, onaverage, SSA countries do not exhibitparticularly restrictive trade regimes.


Table 1.3: Tariff Trade Restrictiveness Index (TTRI) and Overall Trade Restrictiveness Index

(OTRI) by region, 2003–2004*

Region All trade Agriculture Manufacturing

Middle East and North Africa 21.6 32.3 19.4

11.9 12.1 11.8

South Asia 19.5 46.4 18.2

14.0 31.4 13.2

Latin America and the Caribbean 15.0 28.1 13.8

5.4 6.6 5.3

Sub-Saharan Africa 14.4 24.9 12.9

8.4 13.8 7.6

East Asia and Pacific 11.3 26.6 10.4

5.0 8.7 4.8

Europe and Central Asia 10.1 25.9 9.0

4.5 10.3 4.0

QUAD All trade Agriculture Manufacturing

United States 6.4 18.4 5.7

1.6 3.8 1.5

European Union 6.6 48.7 2.9

1.4 5.9 1.1

Japan 11.4 55.8 5.7

4.5 31.1 1.1

Canada 9.9 17.1 9.5

5.1 8.8 4.9

Notes: Tariff Trade Restrictiveness Index (TTRI) in italics. Overall (i.e. Non-tariff-measure inclusive) Index (OTRI) in bold.

* Most recent dataset available across a large sample of countries.



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What about barriers faced in exportmarkets? Table 1.4 compares market access indestination markets across groups ofcountries for the year 2006, classified by percapita income (country groupings in therows). Exporting countries are grouped eitherby region, or again by income-per-capitarange (country groupings in the columns).Composition effects are particularly importantfor SSA countries, which face the lowestmarket access barriers (around 5 percent) inall but other low-income countries. Thisreflects the patterns of specialization of theSSA grouping, which has an export pattern(partly influenced by the trade policies oftheir partners) geared toward products thatface low entry barriers in destination markets.According to these estimates, even if SSAcountries have been induced (by therestrictive policies of their partners) tospecialize in the export of products with lowmarket access barriers, it does not appear thattheir exports face unusually high barriers(except in other low-income countries).

In conclusion, the data do not supportthe argument that market access is relativelyless favorable for the African region in theirpartners’ markets; even if there are someinstances where trade restrictiveness inexporting markets have been found to besignificant (see Oyejide et al., 2000; Otsuki etal., 2001).

This report argues that for Africancountries, the most important component ofborder-related trade costs amenable topolicy intervention is likely to be admini-strative costs. These result from delays atcustoms, rather than from policy-imposedbarriers. Customs services are responsiblenot only for levying tariff duties, but also for

ensuring that imported goods comply withregulatory requirements, and for preventingthe importation of prohibited or unsafeimports (e.g., illegal weapons or out-of-datemedicines). In the case of SSA countriesbenefiting from duty-free access to the USmarket under the Africa Growth andOpportunity Act (AGOA), customs officialsmay also carry out physical inspections tocheck the conformity of shipments.

The World Bank (2008) Doing Businessdataset reports on the procedural require-ments for exporting and importing astandardized cargo of goods by oceantransport. This reveals that South Asia hasthe highest number of export and importprocedures, closely followed by SSA (seeChapter 3, Figure 3.6). Lengthy inspections atborders create delays in customs clearanceand so raise trade costs; they also increasetransport costs, since transporters have tofactor in the time lost due to delays. Recentestimates by Djankov et al. (2008) for a largesample of countries suggest that each day ofdelay at customs is equivalent to a countrydistancing itself from its trading partners byan additional 85 km. Keeping customsprocedures as simple and transparent aspossible helps to minimize the time neededto clear customs. As indicated in Figure 1.4,trade facilitation measures that reduce theseprocedures through simplification, har-monization, and standardization contributeto reducing overall trade costs.

Transport Costs

With inventory costs falling rapidly, transportcosts are becoming an increasingly importantelement in total trade costs. Until recently,most estimates of freight rates relied on



matched comparisons of cif (cost-insurance-freight) and fob (free-on-board) trade flows,based on United Nations (UN) andInternational Monetary Fund (IMF) tradestatistics. These estimates are used frequentlybecause of their widespread availability for alarge number of countries over time, eventhough their reliability has been challenged.7

Figure 1.5 uses these matched tradestatistics to show the evolution of average

freight costs across all modes of transport forvarious global regions and for countries atdifferent stages of development. Severalpatterns emerge. First, it is clear that distanceis only one component of freight costs, sinceAfrica’s trade costs are as high as those ofOceania, yet Africa is closer to its tradingpartners than is Oceania. Second, for bothregions, trade volumes are small, suggestingthat economies of scale in transport are farfrom exhausted. Small traffic volumes forboth regions contribute to the high freightcosts, which are close to double that of


7 With the exception of a few countries thatsystematically report individual freight rates for eachshipment (New Zealand and the US), freight rates arecomputed from trade data at the HS-6 level, asreported to the UN and IMF by exporting andimporting countries. Hummels and Lugovorskyy(2006) discuss their shortcomings. Raballand et al.

(2007) discuss the shortcomings of the freightpayments, notably for landlocked countries, used inFigure 1.5.

Figure 1.5: Freight costs as a percentage of import value by region

Source: UNCTAD (2007). All modes of transport. Estimates based on cif/fob comparisons for bilateral trade data.

12

10

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Africa

Amer

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Asia

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1990

2000

2005


competing regions. Third, Figure 1.5indicates that for Africa, freight costs arenow as important, or more important, thanthe costs associated with the policy-imposedtrade barriers they face in all destinationsexcept other low-income countries. Fourth,in Africa freight costs are rising rather thanfalling, unlike several other regions. (Fordeveloped countries, the small increase infreight costs likely reflects the shift towardsair freight for high-value products that arelighter in weight and often time-sensitive,e.g. fashion products.)

To reach a better understanding of thedifferences across these rough estimates, onemust identify the various cost determinants oftransport services. These can be grouped intothe broad categories outlined in Figure 1.4,including geography (e.g. connectivity)which, though largely exogenous, is a majorconributor to high transport costs in Africa.From this perspective, one may conclude thattrade flows will be higher for a smallCaribbean island than an equally small islandin the Pacific, since Caribbean islands arelocated at the crossroads of the majormaritime routes. Likewise, one can expecttransport costs to be higher for landlockedcountries, if only because freight costs forcoastal countries are measured at the harborof arrival, while for landlocked countries theyare measured inland at the country’s border.

Beyond the geography of African trade,high border-related costs also increasetransport costs directly, as shippers have tocharge for waiting time in ports. Behind-the-border costs (e.g. deficient physical infra-structure) also play their part in raisingtransport costs directly. Finally, Figure 1.4shows that both border and behind-the-border costs raise transport costs indirectlybecause high costs reduce the volume oftrade and hence reduce the demand fortransport services.

With the growth in containerization, ithas become easier to measure freight ratesdirectly. Several recent studies (e.g. Limãoand Venables, 2001), use the cost ofshipping a standardized container betweentwo destinations (usually the transport costper tonne of TEU) as a measure of freightcosts.8 These studies show that differencesin freight rates depend on a number offactors: distance, type and value of goods,imbalances in trade9, economies of scale inshipping, competition, and port facilities.Some direct evidence on these costs isavailable for Africa and is reported in thechapters that follow. Because Africancountries typically transport small ship-ments,10 it is instructive to consider thefindings reported by Wilmsmeier andHoffman (2008) on the cost of shipping 20-ft containers on 189 different routes in theCaribbean. These are provided in Figure 1.6,where each panel shows the correlationbetween the freight rate for a 20-ft containerand the corresponding variable on the


10 East Asian ports service vessels in the8,000–11,000 TEUs range, while most African portscannot handle efficiently vessels above 2,000 TEUs.

8 The usual yardstick is the TEU — the 20-ftequivalent unit.

9 Because of the imbalance in the trade of LIAfrican countries, partly resulting from the flow offoreign aid allowing for trade deficits, many shippingproviders are left with empty ships or containers toreturn to Asia or Europe, so the freight rates forAfrican exports are relatively low.


horizontal axis (size of shipment, distance,time at port, and number of shippers).

Figure 1.6a confirms that long distanceincreases freight rates, which explains whycountries often choose geographically closepartners. Long delays in ports also raisefreight costs, as shown by the scatter plot inFigure 1.6b. Using detailed US customs dataand controlling for the choice of mode oftransport (sea or air), Hummels (2001)estimates that each extra day saved in

shipping time reduces costs for manufacturedgoods equivalent to a 0.8 percent tariff.Applying these estimates to the data in Figure1.6b suggests that cutting 10 days in transittime in the Caribbean would be equivalent toeliminating an 8 percent ad-valorem tariff.Finally, the significance of competition infreight rates is shown in Figure 1.6c. Eachscatter plot reflects one of the contributingfactors to freight costs, i.e. it is a partialcorrelation. The suggestion of market power


Figure 1.6: Correlates of freight rates in the Caribbean

1.6a: Freight rates and distance

Source: Wilmsmeier and Hoffman (2008, Figures 1, 2, 3).

Notes: Freight rate per TEU on vertical axis in all figures; distance in km on the horizontal axis.

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in Figure 1.6c is confirmed in estimates byHummels et al. (2009), who isolate the effectof market power after controlling for value ofshipment, distance, and import demandelasticities. Their estimates rely on US time-series of shipping data and cross-tabulationof data for six Latin American importers(Argentina, Brazil, Chile, Ecuador, Peru, andUruguay). They estimate that the eliminationof market power would increase tradevolumes by 6 percent for the US, and by 15percent for the Latin American importers.

Behind-the-Border Costs

Trade costs are also augmented by acountry’s behind-the-border (BTB) costs,including its overall social infrastructure, asreflected in the quality of its governance (i.e.transparency, rule-of-law, and the businessenvironment). Weak institutions contributethrough several channels to raising tradecosts. First, they lead to a lower supply ofpublic goods, including the quality andquantity of “hard” or physical infrastructure.


1.6b: Freight rates and transit time

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Figure 1.7 shows the evolution of acomposite index of physical infrastructureover the period 1962–2006 across develop-ing country regions. The index is anunweighted average of the density of theroad network, the paved road network, therailroad network, and the number oftelephones per person constructed. Thefigure shows that SSA was below average in1962 and that its relative position in theclassification of countries deteriorated over

time, since it ended with the lowest indexvalue in the sample and with the lowestgrowth rate over the period (around a 20percent increase). This finding justifies oneof the stated objectives of this report: tohighlight the pressing need for improvementand a scaling up of investment in Africa’sphysical infrastructure, including ports.

Weak institutions are also reflected in alack of “soft” infrastructure. The effects ofweak institutions in many low-income

1.6c: Freight rates and number of carriers in the Caribbean


Notes: Freight rate per TEU on vertical axis in all figures; number of carriers serving the port of embarkation on the

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countries are evident at various points in thesupply chain. Because of a lack ofalternative sources of revenue from directtaxes, many LI countries apply relativelyhigh border taxes in an effort to raisegovernment revenue. The result is evasionand extortion at the border. Using data oncorruption and trade policy, Gatti (2004)shows that higher trade costs — in this case,tariff rates — are indeed associated with ahigher level of corruption. Similarly, Fismanand Wei (2004) report that in bilateral tradebetween Hong Kong and the Chinesemainland, higher tariff rates are associatedwith larger differences in declared valuesbetween export and import values, whichpoints to an important evasion effect. Usinga bilateral gravity model over the period1998 –2007, Musila and Sigué (2009)

estimate that if a country with Africa’saverage corruption perception index of 2.8were to improve its corruption level toBotswana’s 5.9 index value, its exportswould increase by about 15 percent and itsimports by about 27 percent.

Trade Costs and TradeFacilitation: “Soft” and “Hard”Infrastructure

The evidence above suggests that tradecosts are the most important element ofoverall transaction costs, and that trade costsdepend largely on transport costs. Transportcosts, though, are determined by manyfactors along the supply chain. Efficiencyalong the supply chain is closely linked bothto the “hard” infrastructure (dock facilities,connections to railroads and trucking lines,harbor characteristics) and to the “soft”infrastructure, as reflected in the border andbehind-the-border measures identified inFigure 1.4. Improvements in both types ofinfrastructure are required for Africancountries; indeed, it is difficult to estimatewhich of the two is more important sincethey are complementary and the situationwill vary across countries.

That said, the evolving pattern of globaltrade suggests that trade facilitation is crucial.With the change in world trade patterns, 80percent is now in manufactured goods, one-third is in unfinished goods, while about one-third is intra-company trade. With theexplosion of preferential trade agreements(PTAs) and transit trade, the competitivenessof a country’s export base is increasinglydependent on low transaction costs.

Trade facilitation measures relate to thethree phases of the trade chain, namely: the


Figure 1.7: Evolution of an index of

infrastructure across developing

country regions, 1962–2006

Source: Carrère et al. (2009), table A.2.1.

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buying process, the shipping process (includ-ing ordering and preparation), and thepayment process. Trade facilitation is aprocess that includes improvements in thefollowing areas: (i) simplification of tradeprocedures and documentation (e.g. one-stopborder posts [OSBPs]); (ii) harmonization oftrade practices and rules (e.g. implementationof the standards in mutual recognitionagreements); (iii) improvements in thetransparency of information and procedures(e.g. publication of laws and regulations,inspection before shipping); (iv) recourse tonew technologies promoting internationaltrade (e.g. electronic single windowimplementation); and (v) transaction security(e.g. use of risk assessment techniques).

Because of the nature of the goodstransported, for low-income African coun-tries, upgrading hard infrastructure is provingto be the major bottleneck. This is substant-iated by the data on congestion in manyAfrican ports reported in Chapter 2, eventhough part of the observed delays in portsand along the land infrastructure are due tothe deficiencies in the “soft” infrastructure(e.g. road blocks and excessive red tape).

Whereas the gains from PTAs aresomewhat ambiguous because of the pos-sibility of welfare-reducing trade diversion(when inefficient partners’ imports aresubsidized at the expense of non-MFNpartners), the trade facilitation measuresdescribed above involve only a reduction incosts and so are welfare-improving for thepartners involved. This is important becausethe new wave of “deep” Free Trade Areas(FTAs) in Africa has gone beyond eliminat-ing tariffs and quotas and has engaged intrade facilitation measures.

According to several estimates, trade costs (as captured by the DoingBusiness dataset of the World Bank) aregreater than those associated with tradebarriers.11 For example, information defic-iencies are a major source of market failure,especially for LI countries. Thereforecooperation at the regional level to providepublic support helps to build and strengthenbusiness contacts among neighboringcountries. Regionally organized tradesupport institutions help identify anddisseminate relevant information. SeveralRegional Economic Communities (RECs) andgroupings in Africa, including the CentralAfrican Economic and Monetary Community(CEMAC), Indian Ocean Commission (IOC),and the West African Economic andMonetary Union (UEMOA), have taken stepsin that direction (UNCTAD, 2007: Chapter 6).Many of the trade facilitation measuresidentified above, such as common standards,licenses, and trade documents, are moreeasily achieved at the regional than at theglobal level. The COMESA uniform CustomsDocument adopted by 15 members is oneexample of successful trade facilitation at theregional level.

At the same time, effective regionalcooperation requires delegation of authorityto a supranational body, which may provedifficult to achieve if there is a low level


11 Wilson et al. (2004) estimate large increases intrade for APEC members from improvements in tradefacilitation. Using Doing Business data on trade costs,Portugal-Perez and Wilson (2009) find that the ad-valorem equivalent of Doing Business export costsare usually greater than the ad-valorem equivalent ofall trade measures (tariffs and NTMs in exportmarkets).


of trust among trading partners, perhapsbecause of infrequent exchanges. Asdiscussed in Chapter 4, for the Africanlandlocked developing countries (LLDCs), itis essential to build the necessary trust todevelop trade corridors and so boost theirconnectivity. Equally pressing is a successfulconclusion of the World Trade OrganizationTrade Facilitation negotiations, launched inthe July 2004 package.

In conclusion, the benefits of tradefacilitation are manifold. First, trade facilita-tion measures are necessarily welfare-enhancing, as they cut costs rather thantransfer rents (as in the case of preferentialaccess). Second, trade facilitation enhancesoutsourcing and the fragmentation of theproduction process, which helps low-income countries to participate in thegrowing trade in unfinished products partlythrough increased foreign direct investment(FDI) inflows. The benefits of tradefacilitation are further examined in Chapter4 of this report.

Why Maritime Trade and PortEfficiency are Important

Worldwide seaborne trade has remainedroughly constant in volume terms over thepast several decades. Figure 1.8 shows theevolution of seaborne trade over the period1990–2007 across regions and by type ofshipments for all goods loaded (thedifference between goods loaded andunloaded is small). These trends reflect thegrowing role of South–South trade in theglobal market, with the rising share of Asia-Oceania largely at the expense of thedeveloped countries, especially since 2000.Africa’s share of global trade fell during the

1990s but has recovered in recent yearsbecause of increased trade with Asia. Thecomposition of goods loaded has notchanged much at the world level, with drycargo occupying about 70 percent of goodsloaded. A major shift took place in thedistribution of goods loaded across regions.Developed countries shifted away from drycargo toward containerized cargoes, whileAfrica’s share of crude oil shipments rose.

In order to reach a better understandingof the causative link between infrastructure(both soft and hard) and trade, one needs toexamine the functioning of the port sector.Given that over 80 percent of worldmerchandise trade by volume is carried bysea (UNCTAD, 2008), ports and theirassociated infrastructure serve as criticalnodes in the supply chain. The maritimesector offers the most economical andreliable mode of transportation over longdistances, especially for African countriesthat are not yet specialized in high-valueproducts (see Table 1.2). Ships can carrylarge volumes of merchandise and utilizefree highways in the seas, provided thatadequate physical infrastructure is availableat the seaports and along the inland logisticschain to producers and consumers to avoidcongestion. This makes maritime transportthe backbone for facilitating internationaltrade.

Poorly performing ports are likely toreduce trade volumes, particularly for smallLI countries. As foreshadowed in this chapterand discussed at greater length in the rest of this report, myriad factors contribute toport efficiency, including dock facilities,connections to railroads and trucking lines,harbor characteristics, customs clearance




Figure 1.8: World seaborne trade, 1990–2007

1990 Composition of Goods Loaded



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Asia-Oceania;24.9

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America; 13.1

America; 12

America;10.5

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Africa;10.5

Transition;5

Transition;4.6

Transition;3.5

Source: UNCTAD (2008).

Notes: Shares across types of cargo add up to 100% for world. In the breakdown on the composition of goods loaded,

shares of each category shipment add up to 100% over the five regions.


times, and labor relations. The sheer varietyof factors that influence a port’s efficiencymakes it difficult to attain an overview of thisvariable across regions. Box 1.2 summarizesresults from a recent study of bilateral tradeflows between 50 US ports and up to 100ports in 40 other countries over the period1991–2003. The study seeks to isolate portefficiency in overall maritime costs. Theestimates show great disparity in portefficiency both in the US and internationally.Controlling for a host of factors thatcontribute to maritime freight costs, thestudy suggests that a 10 percent rise in portefficiency increases country-pair trade by 3percent. Over the distribution of efficiencyestimates, a change in port efficiency fromthe 25th percentile to the 75th percentileleads to a 5 percent increase in trade. Sinceall African ports are in the 25th percentile ofthe distribution of container shipping costs(see Chapter 4, Figure 4.9), cost reductionsfrom improved port efficiency wouldincrease African trade substantially.

Outline of the Report

After this introductory chapter, Chapter 2analyzes the port situation in Africa,comparing its characteristics and perform-ance with those in other regions. Itestablishes that ports lie at the heart of thelogistics supply chain and compares themain characteristics of African ports:differences across subregions, capacityproblems, efficiency related to small scale,etc. The chapter shows that African ports arerelatively inefficient compared with those inother low-income countries and that theyrank low in the Liner Shipping ConnectivityIndex (LSCI), which measures the geo-

graphical location of ports as well asshipment volumes and other indicators ofefficiency. The findings suggest that, inmany instances, large productivity improve-ments could be achieved by improving theinfrastructure at existing ports. At the sametime, improvements in the regulatoryenvironment would be necessary. Improve-ment of port management, often implyingreform leading to the introduction ofpublic–private partnerships (PPPs), isneeded to procure the funding to carry outthe capacity increases and upgrading ofinfrastructure identified in the chapter.

Chapter 3 deals with constraints in the“soft” infrastructure of ports: namely behind-the-border bottlenecks that increase tradecosts and hamper the efficiency of ports. Areview of port management structures andtheir recent evolution around the worldshows a shift toward the landlord portmodel, where all but the hard infrastructureis in private hands. Albeit with a lag, Africais joining the trend with an increasedadoption of the concessioning processacross ports. At the same time, the extent ofprivate investment in physical port infra-structures has been low, reflecting a varietyof factors, ranging from the size of themarket to weak institutional support.

Typically, African ports are visited bysmall ships, implying transshipments fromthe port of origin before reaching destina-tion. This contributes to the higher freightcosts incurred in Africa. Evidence suggeststhat reform packages that include regulatoryreform, and that provide for independenceof the regulator from government inter-ference, are likely to yield the best results interms of port efficiency. Once these



measures have been put in place, privateshipping companies will be more likely tovisit these ports. Moreover the more conduc-ive environment for private investment will

induce the participation of key developmentactors to help finance the hard physicalinfrastructure essential to relieve thecongestion bottlenecks identified in Chapter


Box 1.2: Estimating port efficiency by statistical analysis

Quality data on import charges and on types/volumes of cargo are needed to effectively measure port

efficiency. Together, these statistical data allow the analyst to control for the composition of products, the

volume of trade, and other factors affecting freight costs, so that an estimate of port efficiency can be

extracted residually. Data Envelopment Analysis (DEA) uses production frontier techniques to measure port

efficiency relative to a frontier. Besides requiring that data be comparable across ports, the estimates

assume constant returns to scale, and do not allow for measurement error. This is why DEA estimates are

viewed as limited in scope and consequently most analysts rely on applications of the gravity model.

Typically, gravity-based studies have relied on a single point in time (e.g. Clark et al., 2004). However,

this does not allow the analyst to control for heterogeneity across ports and time-invariant omitted variables

that influence a port’s overall efficiency. Several studies have also drawn on the subjective, survey-based

efficiency measures of the Global Competitiveness Report for countries rather than ports (firms rank a

country’s port efficiency on a scale from 1 to 7) (World Economic Forum, 2000).

Drawing on data over the period 1991–2003 provided by the US National Data Center of the Army Corps

of Engineers, Blonigen and Wilson (2008) use reliable data on import charges on bilateral trade at the

commodity HS-6 level along with distance measures and port-to-port distances. For each time period and

product, they regress import charges on weight, value, distance, percentage of shipments in containers, a

measure of trade imbalance and fixed-effects that control for all time-invariant factors (observed and

unobserved) connected with each country-pair. These high-quality data coupled with controls produce

precise estimates, even though they do not control for changes in product composition at the port level over

time.

In their study, Blonigen and Wilson show that: (i) a 10 percent increase in distance raises freight costs

by 1.3 to 2.1 percent and (ii) weight and product value lead to an increase in import charges. These results

are in accordance with those of previous studies. Containerization reduces import charges, more so for high-

value products. The study also finds that imbalanced trade raises costs, but not by much.

Fixed effects for the US and foreign ports give estimates for the average efficiency of a port relative to

the excluded port (Oakland for the United States and Rotterdam for foreign ports), after controlling for all

the other factors affecting import charges mentioned above. For US ports, only 13 out of 50 are within 5

percent of the efficiency of Oakland. For foreign ports, they estimate an average improvement of 1.4 percent

per year relative to Rotterdam. The only African port in the sample, Durban, is estimated to have port

charges 15 percent above those at Rotterdam.

Overall, Blonigen and Wilson’s estimates suggest that a 10 percent rise in port efficiency increases trade

between a country-pair by 3.2 percent. Over the distribution of estimates, they find that a change in port

efficiency from the 25th percentile to the 75th percentile leads to a 5 percent increase in trade. However,

these estimates do not take account of the fact that increased port efficiency is likely to lead to increased

trade in new products as well as in existing products. Taking that into account, new products would raise

the value of the estimates.


2. Overall, the change to a more privatizedenvironment still has a long way to go inAfrica compared to the rest of the world, butmany African nations have begun to commitin earnest to this process.

Chapter 3 also suggests severalprecautionary steps that need to be taken inport reforms. First, the privatization processshould not take place without a clear visionof the objectives that the public sector istrying to achieve. Second, close coordina-tion between the different institutionsinvolved (port institutions, customs, trans-port ministries, labor unions, etc.) is neededto define how their respective roles andresponsibilities will evolve to result in anoverall gain for all parties. Third, otherefficiency-enhancing factors such as pro-competitive policies and arrangements,better coordination of the various agenciesoperating at ports, and a simplification ofdocumentation requirements and single-window processing should be encouraged.

Chapter 4 deals with the hinterlandinfrastructure (roads, railroads, and inlandwaterways) that connects ports to marketsand which impacts the overall costs of trade.The chapter also deals with the transitcorridors that are essential to link thelandlocked developing countries (LLDCs) tothe other African countries, to ports, and toglobal export markets. For all Africancountries, but especially those in SSA, theefficiency of ports is hampered by poorconnectivity with the hinterland because ofthe substandard physical condition of roads,railroads, and waterways, which deliverpoor quality service. As a result, andespecially because there is little competitionacross modes of transport, ports can be

“held hostage” to deficient infrastructure. Anestimated financing gap of 5 percent of GDPin SSA needs to be closed in order tooverhaul the infrastructure sector. Thechapter also points out that the improve-ment in corridors can only be made effectiveby “deep” regional integration.

The chapter establishes that tradefacilitation measures are the single mostimportant policy action to reduce transportcosts. However, without internationalcoordination and recognition of the need foran appropriate regulatory environment,their effectiveness will not achieve fullpotential. This is particularly the case for thetrade facilitation negotiations currentlyunderway through the auspices of the WorldTrade Organization (WTO). If successful,these negotiations, which aim at implement-ing the Freedom of Transit obligation ofArticle V of GATT 2004, will go some waytoward improving the situation of the 15landlocked countries in SSA.

Chapter 5 looks at the AfricanDevelopment Bank Group’s support toprojects and programs aimed at enhancingthe capacity and efficiency of ports in Africa(including hinterland connectivity). Theinitial finding is that the Bank considers thelack of adequate infrastructure, and inparticular the lack of transport infrastructure,to be a key constraint to the growthmomentum in Africa. In the area of portsspecifically, the Bank Group has madesignificant public investments over the lastdecades. More recently, the Private SectorDepartment has been instrumental insupporting the port concession process inseveral African countries. This is in line withsome of the key findings in this report, in



particular the need to increase privateparticipation in the port sector to improveefficiency. Going forward, given theenormous challenges presented in this reportin terms of hard infrastructure requirementsin African ports and other modes of transportinto the hinterland (such as rail, road, andwaterways), a large injection of public andprivate investment is required. The scaling up of support to this vital sector is in line with the Bank’s Medium-Term Strategy2008–2012, with its strong emphasis oninfrastructure. The Bank continues to play amajor role in this area, not only by allocatingit a large proportion of funding from its ownresources, but also by catalyzing investmentsfrom other major investment partners anddevelopment agencies.

Furthermore, investments in softinfrastructure, such as robust regulatoryframeworks and institutions (i.e. customs),are crucial to facilitate the movement ofgoods between ports and the hinterland. Tosupport these operations, a revised policyframework in maritime transport and relatedareas is needed to guide the prioritizationprocess and to improve the quality at entryof investments.

Finally, Chapter 6 examines the issuessurrounding the development of regionalport hubs in Africa. Many African countriesare aiming to modernize their ports anddevelop them into regional hubs. However,the continent can support only a fewregional hubs and the key issues of howAfrican ports can transform themselves intoregional hubs, and where such hub portsshould be located, is of critical importanceand are considered in the chapter. Thechapter examines both the physical and

policy considerations that governments musttake into account in developing regional hubports. It also examines the contributions IFIs can make towards the development ofthe port hubs. Governments have put inplace large-scale investment programs,which provide avenues for private sectorparticipation in the development of theports. At the same time, for the ports tobecome regional hubs, the governmentsneed to pay attention to the location, waterdepth, and the facilities and performance ofthe port to ensure low handling costs. Ascomplementary measures, policies must beput in place to foster and finance integratedport and transport facilities and associatedland use. Moreover, in order to developstate-of-the-art ports and to equip them withappropriate technologies and managementskills, the involvement of the internationalprivate sector is essential and this could beenhanced through the landlord port model.Also, the dredging of African ports, many ofwhich are characterized as too shallow forthe latest generation of container ships,could be a frontline area of intervention forthe private sector and development partnersalike.

References

Arvis, J.F., G. Raballand, and J.F.Marteau. 2007. “The Costs of BeingLandlocked: Logistics Costs and the SupplyChain.” Working Paper Series No. 4258,Washington, DC: World Bank.

Berthelon, M. and C. Freund. 2008. “Onthe Conservation of Distance in Inter-national Trade.” Journal of InternationalEconomics, 75: 310–20.



Blonigen, B.B. and W.W. Wilson. 2008.“Port Efficiency and Trade Flows.” Review ofInternational Economics, 16 (1): 21–36.

Bora, S., A. Bouët, and D. Roy. 2007. “TheMarginalisation of Africa in World Trade.”IFPRI Research Brief No. 7, Washington, DC:International Food Policy Research Institute.

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With approximately 80 percent of worldmerchandise trade carried by ships, maritimetransport remains by far the most commonmode of international freight transport. It isthe backbone to facilitating internationaltrade, offering the most economical andreliable way to move goods over longdistances. Ships can carry large volumes ofmerchandise and use free highways in theseas, which only require infrastructureinvestments at the seaports. For all countries,

how ports perform is an essential element ofoverall trade costs, as identified in Chapter 1.This is especially the case for Africa, as 15 ofits countries are landlocked and face severeinfrastructural and trade facilitationproblems. For the landlocked nations, ports— together with the inland waterway andland infrastructures (railroads and highways)— constitute a crucial link to the outsideworld and to the global marketplace.Consequently, high transport-related costs

C H A P T E R 2

Port Development in Africa

(C) AfricanBank 2010 Ch2 8/10/10 10:31 Page 31

represent a fundamental constraint to theseLLDCs’ global competitiveness and theirsustained economic growth.

It is generally recognized that the Africancontinent lacks natural ports, while itsartificial seaports have been poorlydeveloped (UNCTAD, 1999; Wood, 2004;Hoyle, 1999). African ports became morecongested following the rise in GDP growthand levels of global trade witnessed in mostAfrican countries in the years leading up tothe global financial crisis of 2008. Indeed,over the last decade, the amount of cargotransiting through Africa’s ports has tripled,but containerization is still low and the inlandtransportation linkages remain weak (WorldBank, 2009). Nonetheless, as discussed in thisand the following chapters, governments arenow demonstrating the political will neces-sary to confront this challenge, in a drive toimprove port and other infrastructure. Forexample, several ports have introduced, orrenovated, container and cargo transship-ment and bulk terminal (for coal, oil, foodand mineral) facilities. This has greatlyimproved port performance and efficiency,for example in Egypt following the regulatoryreforms of 2000.1

This chapter assesses port developmentand performance throughout Africa (Annex2.1 gives a detailed description of seaportsacross the continent). It establishes the areaswhere improvements in port logistics and,more generally, infrastructure, are urgentlyneeded. However, port development in itsbroadest sense covers not only the develop-ment of infrastructure and superstructure,but also environmental concerns. Africa hassome 40,000 km of coastline, extending over32 countries. Port development and activit-ies should not have a harmful environmentalimpact on land, nor lead to a deteriorationin the marine environment through pollu-tion. The African Development Bank Grouphas an Environment Policy in place tomitigate the potential negative impacts of itsprojects and programs, including those inthe infrastructure sector, and to mainstreamenvironmental and sustainability safeguardsthroughout the project cycle (see Box 5.2).In this way, the Bank seeks to ensure that allits port development projects conform tointernational best practice, including theInternational Maritime Organization (IMO)Convention on Marine Pollution (MARPOL73/78).

Following this introduction, the nextsection of this chapter describes theinfrastructure characteristics of a seaport,which can be divided into two categories orassets: (i) its physical or “hard” infrastructureand (ii) its organization or “soft” infra-structure. The analysis helps to situateAfrican ports within a global context. Thesubsequent section deals with the capacityand overall efficiency of African seaports,which are generally shown to be among theleast efficient in the world, although on a


1 Before the reforms in early 2000, the World Bank(1998) reported that customs and other clearanceprocedures at Egyptian ports delayed cargoes by5–20 days, compared to 1–2 days in more efficientports. This resulted in high storage costs and damageto cargo, which overall were costing the Egyptianeconomy about US$1 billion per annum. After thereforms of 2000, Egypt developed one of the mostefficient ports in Africa: the time to export decreasedfrom 27 to 10 days between 2006 and 2009, and thetime to import from 29 to 25 days over the sameperiod (Doing Business website of the World Bank).


par with ports in other low-income countriesin other global regions. African ports’ poorperformance can be attributed to a range offactors, principally: geography (poor con-nectivity); inadequate physical infrastructureresulting in congestion; and weak institu-tional development (reforms and institu-tional development are covered in Chapter3). We then turn to the recent investmentsfor regeneration and expansion in portphysical infrastructure. Conclusions andrecommendations close the chapter.

What Is a Seaport?

A port lies at the heart of the logistics supplychain, linking a country with its tradingpartners (Figure 2.1). This is especially thecase for Africa, which relies on maritimeshipping as its principal mode of

transportation for both primary andmanufactured goods destined for export.Ports are an infrastructure facility allowinggoods to be loaded/unloaded, stored, andtransferred for inland delivery via othertransport modes, such as trucks, trains, orinland waterway vessels. Ports usually havedeepwater channels or berths, as well asstorage facilities, which determine howmuch cargo the port can handle and thetype and capacity of vessels it can receive.

With the exception of some exportprocessing zones (EPZs) that are located inthe vicinity of ports, cargo and merchandiseleaving ports come from the hinterland viathe infrastructures identified in Figure 2.1.To function properly, the links betweenports and the hinterland must operatesmoothly to avoid bottlenecks in the ports’

Port Development in Africa 33

Figure 2.1: Ports at the heart of the logistics supply chain

(Hard) PhysicalInfrastructure

(Soft) InfrastructurePort Services

Other InfrastructurePipelines

Conveyor Belts

Road – Railroad – RiverInfrastructures

LandlockedCountries

Institutional Infrastructure and Regulatory FrameworkRegulation – Governance – Customs

HinterlandPortGlobal &RegionalMarket

Fleet


entrepôts and to minimize dwell times.2 Thequality of a port’s physical infrastructure andrelated services is an important determinantof its overall efficiency. However, as alsoindicated in Figure 2.1, equally important inthis regard is the institutional and regulatoryinfrastructure.

Hard and Soft Infrastructure inSeaports

To function efficiently and to maximize itspotential, a port needs two types of assets:(i) the “hard” physical infrastructure (seaportinfrastructure and superstructure facilitiesfor loading and unloading) and (ii) the “soft”infrastructure, which includes all theadministrative and customs services neces-sary to facilitate the transit of goods, plus thesupportive information and communicationstechnologies (ICT). The overall efficiency ofa port therefore depends directly on thequality of both its hard and soft infra-structure as well as the institutional frame-work (the number of documents to becompleted by shippers and importers; thefunctioning of customs administration). Thischapter concentrates on the efficiencyeffects related to the hard infrastructure andport services, while Chapter 3 deals with theinstitutional and soft infrastructure.3

• Seaport infrastructure providesoceangoing vessels with the necessaryfacilities to come within reach of theland. It comprises deepwaterchannels and berths where the shipsand other floating craft can tie upalongside, in order to load/unloadgoods. Harbors require a sufficientdepth of water to receive large ships;the size and design of berths varyaccording to their purpose. Forinstance, container berths aredesigned to service containerizedcargoes. The hard infrastructurementioned in Figure 2.1 is essential tothe overall efficiency of a port, as itensures access to intermodal trans-portation through connections toroads, railroads, and inland water-ways. A seaport also needs insiderailroad terminals or lines, and roadaccess to the major transportcorridors.

• Seaport superstructure includes allthe facilities aimed at loading andunloading ships, and moving goods toand from other modes of transport. Asthey approach and leave the docks,large ships are usually moved in tightquarters by harbor pilots andtugboats. The superstructure providesancillary services like fuel, water,cleaning, and repair services.


2 “Dwell time” is the time cargo remains in aterminal’s in-transit storage areas, while awaitingshipment (for exports) or onward transportation byroad/rail (for imports). Dwell time is one indicator ofa port’s efficiency: the higher the dwell time, thelower the efficiency.

3 Although all aspects of port efficiency areinterdependent in the determination of a port’soverall performance, it is convenient to examine the

factors identified in Figure 2.1 separately. ThereforeChapter 3 focuses on the role of the regulatory andinstitutional framework, while Chapter 4 covers thebehind-the-border aspects of trade costs (connectingports to markets).



PORT INFRASTRUCTURE

Source: Alexandria Port Authority. Source: Alexandria Port Authority.

Berth at the cargo terminal of the Port

of Alexandria

Storage area at the International

Container Terminal in El Dekheila,

Port of Alexandria

Source: Port Management Association of Eastern and

Southern Africa, PMAESA.

Source: Port Management Association of

Eastern and Southern Africa, PMAESA.

Post-Panamax cranes to unload/load

container ships

Reachstacker handling containers


• Port administration organizes andoversees the movement of ships andgoods. When ports handle inter-national traffic, customs facilities arealso part of the port assets. Theadministration services include

regulation of consignees, import/export documents and permits,phytosanitary certificates, and admin-istration of taxes. As part of the portadministration, information andcommunication technologies contri-


Map 2.1: African ports and their characteristics


bute to the speed with which goodstransit through ports. This includesinformation systems, electronicdatabases, and platform managementsoftware.

Categorization and Location ofAfrican Seaports

Ports are categorized based on theirfunctions and the type of goods they handle,e.g. general cargo ports, hub ports, feederports, bulk ports, transshipment terminals,dedicated oil terminals, and river ports (seeMap 2.1). These are discussed individuallybelow in Box 2.1.

Capacity and Efficiency of African Ports

African ports often work beyond theircapacity limits. Indeed, capacity shortfallsare reported for all Sub-Saharan maritimetrading areas (Cameron, 2008). This is partlydue to the fact that demand for resourcessuch as oil — which have also led togrowing economic activity — have scaledup the demands being placed on ports.However, port capacity and port logisticshave not kept up with increasing trafficacross most of Africa, causing severechallenges such congestion. As detailed inBox 2.2, this congestion is attributable toseveral factors, including deficient physicalinfrastructure, malfunctioning regulatorysystems, and poor management. Thesefactors translate into poor port efficiency,raising trade costs in Africa.

African ships are usually old and smallrelative to evolving global shippingstandards, which are shifting toward

containerization and increased size. AsTable 2.1 shows, by the end of 2005, theaverage age of the merchant fleet of Africancountries was 11.8 years, including thosewith open registry; and 20.5 years without amaritime open registry.4 By comparison,ships registered in developed economies arethe youngest (average age: 9.7 years inJanuary 2008), followed by developingcountries (12.3 years) and transitioneconomies (15.5 years) (see Annex 2.2).Furthermore, in 2005 none of the 35countries that controlled over 95 percent ofthe world merchant fleet was African(UNCTAD, 2006). In 2007, Africa accountedfor only 0.58 percent of the world merchantfleet.

The small number of shipping operatorsin Africa hinders the development ofsynergies and stifles competition.5 Thenational lines, which offer containerizedtransportation services, run fleets thatusually comprise small and old vessels.Companies generally use multipurposevessels, as exports (agricultural, naturalresources) are usually shipped unprocessed.This situation further contributes to themarginalization of Africa from internationalmarkets.


4 “Open registry” is a national ship registry —under a national flag — open to ships of all nations,regardless of nationality.

5 Hummels et al. (2009) estimate that, aftercontrolling for other factors such as costs related tocargo size, eliminating market power for ships enroute to the US from Latin American ports wouldincrease trade volume by 15 percent for LatinAmerican countries. One can surmise that gains intrade volumes would be even higher for Africa, asfewer ships call on African ports.



Suez Canal as long as they meet the draft restriction(18.91 m/62 ft as of 2008).

7 The Shire–Zambezi Waterway Project isdescribed in Box 4.1.

Box 2.1: Types of ports according to function

General Cargo Ports are medium-sized ports (including container terminals) with a large enough volume to

attract frequent direct vessel calls. Volumes are typically between 2–10 million tonnes p.a. and

100,000–500,000 TEUs p.a. Examples of general cargo ports include Port Elizabeth in South Africa and

Walvis Bay in Namibia. Most general cargo ports have ambitions to expand into regional hubs.

Hub Ports are large regional ports, with high volumes of direct large-vessel calls. They service a large

catchment area, which also serves the smaller regional ports by transshipping containers and general cargo in

smaller vessels. Typical examples are Durban in South Africa and Port Said in Egypt. These two ports are ranked

among the 60 largest ports in the world in terms of container volume throughput (over 2 million TEUs p.a.).

Feeder Ports are normally smaller ports with limited vessel calls and depth restrictions. They are unable

to attract many direct vessel calls because of the small volumes of trade they handle (generally less than

100,000 TEUs p.a.). These ports are mostly fed by smaller coastal services from the regional hub ports. The

Mozambican and Angolan ports and many of the West African ports are typical examples. The feeder

service and the double handling of containers add to the overall logistics costs.

Bulk Ports are mainly dedicated to handling large volumes of bulk materials, accommodating capesize

vessels,6 with depths of 18–25 m, generally without dedicated container terminals. Typical examples are

Richards Bay (coal) and Saldanha Bay (iron ore) in South Africa and Port Saco in Angola and Buchanan in

Liberia, both handling iron ore.

Transshipment terminals or ports are large container terminals where cargo is transferred from one

carrier to another, or from one type of vessel to another. Examples of transshipment terminals include the

ports of Algiers, Durban, Mombasa, and Djibouti. Transshipment terminals handle very large container

vessels (above 6,000 TEUs), which very few African ports can handle. Vessels of more than 15,000 TEUs

are now in service and these vessels require a quayside depth of 16–18 m (such as Singapore port, and

Salalah in Oman). The new port of Ngqura in South Africa, with a depth of 16 m, has been developed as a

transshipment port and will receive large vessels from the east and transship to smaller vessels for the East

and West African coasts.

Dedicated oil terminals handle crude oil which is most often transported in large capesize vessels of

120,000 to 150,000 dwt, which require greater water depths than can be provided at any of the African ports

currently. Oil tankers are mostly handled at offshore moorings which are linked to landside storage tanks via

submarine pipelines. This is the case for the ports of Durban in South Africa, Dar es Salaam in Tanzania,

and Cabinda in Angola. Some ports, such as Cape Town in South Africa, have dedicated tanker basins.

River Ports are generally small and isolated, and do not serve oceangoing vessels. One notable

exception is Matadi port in the Democratic Republic of Congo (DRC), which is 150 km from the coast and

serves as the country’s main port, but with restricted depth. There is currently a project proposal for the

development of a port on the Zambezi/Shire River waterway to serve Malawi, which will require dredging of

sections of the river system. However, this development is subject to an economic feasibility study and a

positive outcome of an environmental impact assessment.7

6 “Capesize vessels” are very large bulk carriersbetween 80–150,000 dwt, which used to be unableto transit the Suez Canal and were therefore forcedto sail around the Cape of Good Hope to and fromEurope. Now those vessels can transit through the



Table 2.1: Age distribution of African merchant fleet compared to those of other regions

Type World Developed Transition Developing African African

Total Economies Economies Economies Countries Countries

including without

Open Open

Registry1 Registry1

Bulk carriers 12.7 11.9 17.8 12.7 14.0 18.0

Container ships 9.0 8.6 10.6 8.9 6.9 12.3

General cargo 17.1 13.4 20.0 17.6 17.3 22.1

Oil tankers 10.1 7.5 11.2 11.0 11.2 21.4

Other types 14.7 13.1 11.8 15.5 17.2 21.2

All 11.8 9.7 15.5 12.3 11.8 20.5

Note: (1) Data for African countries for year-end 2005; data for other countries at January 1, 2008.

Source: UNCTAD (2006; 2008).

Box 2.2: Port congestion in Eastern and Southern Africa

According to the Port Management Association of Eastern and Southern Africa (PMAESA), the factors

leading to port congestion in Eastern and Southern Africa are:

• Increased container traffic volumes not consistent with infrastructure development, thus growth

outstrips available capacity;

• Long container dwell times, caused by inter alia, poor off-take by rail and the use of ports as

storage areas;

• Lack of adequate capacity and poor hinterland transport infrastructures, especially rail and road;

• Inadequate technology and aging, unsuitable equipment and vessels;

• Poorly integrated supply chains;

• Low productivity levels;

• Capacity constraints, for example insufficient container storage space;

• Poor planning such as overbooking of cargo by shipping lines, leading to cancelations and

rollovers;

• Bunching of vessels and unscheduled arrivals;

• Changes in routing patterns, causing vessels to make shorter rotations;

• A change in container size from 20 ft to 40 ft;

• Resistance to change in management styles;

• Lack of communication between stakeholders;

• Cumbersome regulatory systems, decentralized documentation processes coupled with

bureaucratic clearance procedures;

• General poor planning by the various cargo interveners.

Source: PMAESA (2008).


African Regional Port Situation

The African port situation is characterized bylarge number of small ports, each with acapacity of less than 1 million TEUs. Asshown in the detailed review of ports bysubregion presented in Annex 2.1, capacityshortages are widespread, particularly inWest and Central Africa.

It is important to note that countries withhigher port capacity have higher tradecapacity. However, the types of commoditythat the country trades in terms of importsand exports also matters (Table 2.2). For

example, Egypt is ranked number 1 in Africain terms of port capacity and South Africa isranked number 2. However, the value oftrade in South Africa is higher than Egyptdue to the type of exports, which are mainlyexpensive minerals such as platinum andgold. Moreover, the value can also be drivenby the number of ports that the countryservices. In the case of South Africa,landlocked economies such as Botswana,Lesotho, Swaziland, Malawi, Zimbabwe, andZambia depend on its ports, and thisexplains South Africa’s higher trade volumes.


Table 2.2: Port capacity and value of trade in Africa

Country Total TEU Capacity Ranking (1 to 16) Trade: Ranking (1 to 16)

Imports + Exports

(US$ mn)

Algeria 189,848 13 87,794 3

Angola 407,609 5 58,057 4

Cameroon 200,254 12 6,727 12

Djibouti 294,902 10 531 16

Egypt 4,755,879 1 56,324 5

Ghana 513,204 4 12,268 10

Kenya 585,367 3 13,070 9

Libya 44,202 16 54,720 6

Mozambique 62,516 15 6,000 15

Namibia 144,993 14 6,442 13

Nigeria 235,846 11 95,550 2

Senegal 375,876 6 6,123 14

South Africa 3,781,403 2 158,234 1

Sudan 359,537 7 17,654 8

Tanzania 301,579 9 7,508 11

Tunisia 349,507 8 34,009 7

China 101,963,351 1,760,430

Brazil 6,798,200 287,217

Sources: WTO database; Containerisation International Yearbook, 2009.

Note: Brazil and China given for comparative purposes.


Egypt and South Africa have the highestport capacity in the continent, with Port Saidin Egypt as the leading port (see Annex 2.1for more details). Given that most of thecountries in Africa start from a lower base interms of port capacity, the industry hassubstantial economic and investment pros-pects going forward. The Drewry Reportforecasts an annual growth rate of 2.5 percentin the African port subsector over the next sixyears, which is close to the global rate. InNorth Africa, in addition to Egypt’s massiveinvestment in the port subsector, othercountries such as Morocco and Algeria havealso scaled up their investments with the aimof transforming their ports into major trans-shipment hubs. Similarly, in the SouthernAfrica subregion, South Africa continues toexpand in terms of port capacity to meet itsgrowing demand both nationally andregionally. For example, the new deepwaterPort of Ngqura became operational in 2009 toaccommodate the latest generation ofcontainer ships. Other countries in the sub-region, including Namibia and Mozambique,have also embarked on investment andrehabilitation activities in their port subsectors.

In Eastern Africa, the terminal in Djiboutioffers the most modern facilities (i.e. forPanamax ships8) but needs further

investment to increase capacity, particularlyto accommodate the high transit volumesfrom Ethiopia. One of the major concerns inEast Africa is the safety risk due to growingattacks by Somali pirates in the IndianOcean. Port performance in major EastAfrican ports such Mombasa in Kenya andDar es Salaam in Tanzania has a lot ofpotential but congestion is still rife due tolow investment in infrastructure and poorconnection to the hinterland.

In West and Central Africa, an infra-structure deficit also continues to hamperport performance and efficiency. This ismainly due to a lack of concrete programsfor the transportation sector, leading to alower prioritization and investment tosupport the sector. However, in 2009,investments by the French company,Bolloré, in Pointe Noire in the Republic ofthe Congo, will increase substantially theport capacity there, allowing it to serviceother parts of the region. Ports in Nigeriahave also gone through reforms (see Box3.3), although congestion there remains aconcern.

Capacity: Global Comparisons

World container port throughput grew by anestimated 11.7 percent to reach 485 millionTEUs in 2007 (UNCTAD, 2008), with Chineseports accounting for approximately 28.4percent of this volume. In 2007, Singaporewas the busiest port, followed by China andHong Kong (Table 2.3). Port Said in Egyptand Durban in South Africa were the onlyAfrican ports to rank in the top 50 containerport traffic league in 2007.

Only 13 African countries are rankedamong the top 62 developing countries in


8 “Panamax” ships are the largest ships that canpass through the locks of the Panama Canal(specifically used for dry bulk and container vessels).Panamax ships can measure up to 956 ft long (forcontainer ships), 105 ft wide, 190 ft from thewaterline, and up to 39 ft below the waterline.Weight can vary, but based on these measuresshould average between 65,000–69,000 tons. Shipstoo large to transit the canal are called “post-Panamax.”


terms of container port traffic (Table 2.4).Total containerized cargo volume for thewhole of Africa was estimated at just over 15million TEUs, which is almost half thevolume handled by the largest ports inSingapore and China. In Latin America, PortSantos in Brazil has the largest port capacity,although still lower capacity than Port Saidin Egypt. However, the total volume for the whole of Brazil is higher than that ofEgypt.

Containerization has been growingrapidly in Africa at a pace of more than 10 percent annually. However, containertraffic to and from Africa remains marginalcompared to overall global traffic. Forexample, commodities to the Far East or Europe are still carried in break-

bulk9 from African ports. As a reference,Africa’s share of container traffic has rangedfrom 0.6 percent to 0.85 percent of totalglobal volumes over the last 10 years.

In addition, African ports record thehighest rate of empty containers shippedout. Algeria, Angola, Libya, and Nigeria havethe highest proportion, ranging from 85–100percent. For Cameroon, Egypt, Ghana,South Africa, and Sudan the shipped cargo isbetween 63 percent and 100 percent full,


9 “Break-bulk” is loose, non-containerized cargostowed directly in a ship’s hold, in small, separableunits. Loose cement, grain, ores, etc. are termed“bulk cargo,” whereas cargo shipped in units (bags,bales, boxes, cartons, pallets, drums, sacks, etc.) is“break-bulk.”

Table 2.3: Selected leading ports in the world by volume of containerized cargo, 2007

Global rank Port Country Region Capacity (TEUs mn)

1 Singapore Singapore Asia 27.93

2 Shanghai China Asia 26.15

3 Hong Kong China Asia 24.00

4 Shenzhen China Asia 21.09

5 Busan South Korea Asia 13.27

6 Rotterdam Netherlands Europe 9.65

13 Los Angeles United States USA 8.35

25 Jawaharal Nehru India Asia 4.06

36 Manila Philippines Asia 2.87

37 Port Said Egypt Africa 2.78

42 Santos Brazil South America 2.53

41 Durban S Africa Africa 2.51

47 Kingston Jamaica Caribbean Basin 2.16

50 Melbourne Australia Asia/Pacific 2.14



while Kenya and Tanzania ship 42–53percent full. This is a reflection of three mainfactors that characterize the African shippingindustry: (i) its high volumes of unprocessedexports, which do not require containeriza-tion; (ii) its low volume of manufactured

exports, and (iii) its heavy dependence onmanufactured imports. This reflects afundamental trade imbalance for thecontinent. Nonetheless, strenuous efforts arebeing made in countries like South Africa(i.e. Durban port — Pier 1), which is


Table 2.4: Container port traffic for selected developing and African countries, 2006–2007

(million TEUs)

Developing Country Rank 2006 2007 % Change 2006/07

Selected Developing Countries:

1 China 84.02 101.96 21.36

2 Singapore 25.61 28.76 12.32

5 Malaysia 13.42 15.12 12.68

7 UAR 10.97 12.83 16.96

8 Brazil 6.28 6.80 8.20

12 Indonesia 4.04 6.11 51.23

18 Mexico 2.68 3.07 14.58

20 Argentina 2.43 2.58 5.90

22 Jamaica 2.15 2.19 2.02

25 Dominican Republic 1.86 2.05 10.40

47 Trinidad and Tobago 0.47 0.52 10.51

Selected African Countries:

13 (1) Egypt 4.53 4.76 4.94

16 (2) South Africa 3.55 3.78 6.45

43 (3) Côte d’Ivoire 0.51 0.54 7.00

44 (4) Kenya 0.48 0.59 22.12

45 (5) Ghana 0.48 0.51 7.71

49 (6) Angola 0.38 0.40 7.00

50 (7) Tanzania 0.30 0.33 10.78

51 (8) Mauritius 0.36 0.41 15.19

52 (9) Sudan 0.33 0.36 10.05

54 (10) Djibouti 0.22 0.29 33.24

56 (11) Cameroon 0.20 0.19 –3.76

60 (12) Madagascar 0.09 0.11 21.55

62 (13) Namibia 0.08 0.14 74.14



investing in terminals that handle containersonly. The use of containers not onlyfacilitates the movement of goods andlowers trade costs, but also addressessecurity issues such as theft.

In terms of operational performance,one of the major challenges facing thecontinent is raising the finance to invest inequipment that can handle the world’slargest container ships. This meansaccommodating not only vessels that arecurrently in service but also the futuregeneration of vessels that might be deployedin the coming years. Table 2.5 gives thenumber of Panamax and “super post-Panamax”10 quayside gantry-cranes andtheir outreach in Africa compared to the restof the world. Africa has lagged behind interms of large investments in this type ofequipment. For example, Africa has 57

Panamax cranes, which represents only 3percent of the global total and 24 percent ofthe number in North America.

Efficiency Indicators for African Ports

Several indices are used to measure thevarious factors contributing to portperformance, some based on subjectiveindicators (ordinal rankings on a scale),some based on cardinal indicators (e.g.dwell times). Several factors are taken intoaccount when producing these efficiencyindices: physical infrastructure; managementand services; governance; regulations;customs and institutional framework.According to the indicators in Table 2.6,African ports have a medium efficiency(between 3.72 and 4.63 on a scale of 7, with7 being the best and 1 the worst) but theyhave the worst customs clearance, especiallyin Sub-Saharan Africa (more than 11 days).In the discussion below, the focus is onthree specific indicators: turnaround time;dwell time; and Liner Shipping ConnectivityIndex (LSCI).


10 The latest generation of “super post Panamax”vessels has a width of about 22 container rows,compared to “post Panamax” vessels, which accom-modate 18 container rows.

Table 2.5: Deployment of ship-to-shore gantry cranes by region and outreach, 2008

Africa World Eastern North South South

Europe America America Asia

Panamax 57 1744 71 236 63 48

16–18 rows 31 949 10 131 24 27

18–20 rows 25 698 12 105 22 49

20–22 rows 12 415 0 87 0 4

22+ rows 26 803 0 59 0 0

Source: Drewry Shipping Consultants (2009).


(i) Efficiency Indicator: Turnaround Time

Primary measures of port performance arethe average turnaround time per ship, andthe tonnage handled per ship-day in port.The ship turnaround is the rate at whichcargo is handled and the duration that cargostays in port prior to shipment or postdischarge. It is calculated from the time ofthe ship’s arrival to the time of its departure.Traditionally expressed in days, it is nowcommon to express turnaround time inhours. The port authority (PA) wouldnormally compile statistics giving monthlyand annual average turnaround times. Theaverage turnaround time per ship isdetermined by dividing the total hours bythe total number of ships calling at the port.

In its basic form, ship turnaround timedoes not mean much, as the length of stay isinfluenced by a number of factors: thevolume of cargo, the facilities madeavailable, and the composition of the cargoitself. Thus, it becomes necessary for theport to further break down the basic shipturnaround time according to type of ship:tankers, bulk carriers, container vessels, andgeneral cargo vessels. These may besubdivided further into domestic trade,regional trade, and oceangoing vessels.

In compiling data to determine shipturnaround time or the tonnage handled pership-day (or ship-hour), a port wouldnormally split total time in port into “time atberth” and “time off the berth.” Within eachof these and for each service activity, theamount of delay (idle time) would berecorded as well as the reasons for thedelay. In particular, the ratio betweenwaiting time for berth and the time spent atberth, known as the waiting rate, is a


Table 2.6: Efficiency indicators of

selected leading ports by volume of

containerized cargo, 2006

Region Port Customs Container

Efficiency Clearance handling

(7=best, (days) charges

1=worst) (US$/TEU)

North 6.35 3.50 261.7

America

Europe 5.29 4.00 166.7

(except East)

Middle 4.93 NA NA

East

East Asia 4.66 5.57 150.5

and the

Pacific

East and 4.63 12.00 NA

South Africa

North Africa 3.72 5.50 NA

Former 3.37 5.42 NA

Soviet Union

Eastern 3.28 2.38 NA

Europe

Latin 2.90 7.08 251.4

America

South Asia 2.79 – NA

West Africa NA 11.7 NA

Source: World Economic Forum (1999), World Bank

surveys, Camara Maritima and Portuaria de Chile

(1999), and LSU-National Ports and Waterways

Institute (1998).

Note: Efficiency variables per region are not directly

comparable because the availability of countries is not

the same.


significant indicator of possible congestionstatus.

(ii) Efficiency Indicator: Dwell Time

The assessment of a port’s performancefrom the point of view of the exporter/importer focuses primarily on the dwell timeof cargo in port, measured in terms of thenumber of days that a tonne of cargoremains on port. A high dwell time isgenerally an indication that all is not wellwith the port. The importance of dwell timealso varies with the nature of goods.

Capacity and productivity constraints inAfrican ports add to transport costs, byincreasing both the port charges and thetime in ports (which can be considered as a deadweight loss).11 When a port cannothandle the largest ships, shippingcompanies may prefer to use other majorhandling ports. If cargo or containers needto be transferred to smaller vessels to servesmaller ports, this raises unit costs. As manySSA countries have relatively small ports interms of cargo-handling capacity, this willincrease their freight costs.

As shown in Table 2.7, in Africa dwelltime is relatively high (measured in days,whereas in high-performing ports it istypically hours), berth productivity is fairlylow, and costs are high. Mombasa appearsto be one of the most efficient ports, with

only 5 days’ dwell time, high berthproductivity (60 moves per hour) and thelowest costs (US$ 90 per TEU). With 29berths and 73 percent capacity utilization, italso has scope to expand operations. This isalso supported by Al-Eraqi et al. (2008) in astudy that evaluates the location efficiencyof ports in East Africa and the Middle East.In Kenya, however, the general finding isthat most of the ports should improve theirefficiency levels at least 1.5 times throughbigger berths, improved handling equip-ment (e.g. post-Panamax ship-to-shoregantry cranes) to speed up the loading/offloading of cargoes, and other infra-structure in order to reduce congestion andwaiting time.

South African ports, especially Durban(although it is at full capacity) are relativelyefficient but other African ports faceproblems. Dar es Salaam and Toamasinahave relatively low berth times and moderateberth efficiency, but very high costs. Thismay explain the low capacity utilization,especially as they have relatively few berths.

A number of ports have moderately highcosts (not the highest, but above the SouthAfrican benchmark) and, even if berthproductivity is relatively good, high dwelltimes. Dwell times are particularly high inPort Sudan in the Sudan, Matidi in DRC(which also has low productivity), Tema inGhana, and Lagos in Nigeria, although berthproductivity is often reasonably high. Themajor problem in these ports is poorturnaround times; in such cases, increasingefficiency could increase capacity utilizationand reduce costs. Dakar in Senegal seems tobe the most efficient of the West Africanports. According to Scheck (2007), the


11 For discussion see Standard Bank (2008), whoreport that container handling costs in Africa areoften three times higher than in European ports.Moreover, shipping companies have noted thatAfrican costs, in particular slow and cumbersomecustoms procedures, are increasing faster thanrevenue (Scheck, 2007).


average wait time in Africa is 4 days andberth productivity is 25 moves per hour,whereas in Europe it is 2 days’ waiting timeand berth productivity of 40 moves perhour.

For shipping lines, port efficiency andcost are major factors in deciding whether or

not to call at a port. Kenya and South Africaappear to be most efficient and among thelowest-cost ports; Namibia is relatively low-cost but not as efficient. Thus, it is likely thatlarge container ships would only call inKenya and South Africa, and perhapsSenegal in West Africa. In this regard, there


Table 2.7: Efficiency indicators for selected African ports, 2006

Dwell No. of Moves Capacity Cost

Time (days) Berths per Hour Utilization (%) (US$/TEU)

East Africa

Kenya: Mombasa 5 29 60 73 90

Madagascar: Toamasina 9 6 22 35 184

Mozambique: Maputo 22 2 22 40 155

Tanzania: Dar es Salaam 7 11 20 45 275

Sudan: Port Sudan 28 17 20 78 150

Southern Africa

Angola: Luanda 12 11 14 77 320

Namibia: Walvis Bay 8 8 8 60 110

South Africa: Cape Town 6 34 36 70 121

South Africa: Durban 4 57 45 100 121

West Africa

Benin: Cotonou 12 11 NA 70 180

Cameroon: Douala 12 18 40 70 220

Congo, DR: Matidi 26 10 7 75 120

Ghana: Tema 25 14 40 60 168

Nigeria: Lagos 22 42 28 60 155

Senegal: Dakar 7 52 10 80 160

North Africa

Morocco: Tangier NA 1 NA NA NA

Algeria: Bejaia NA 21 NA NA NA

Tunisia: Rades NA 7 NA NA NA

Egypt: Port Said NA 20 NA NA NA

Sources: Ocean Shipping Consultants (2007) for SSA; International Containerisation Yearbook, 2009 and the World Port

Source website: http://www.worldportsource.com/index.php.

Notes: Dwell time is in average container days; Berths gives number of docks; and productivity is the average container

moves per hour (mph); Capacity Utilization (CU) is percentage capacity utilization for containers and cost is for imports

per TEUs (usually the same for exports, except in South Africa where it is US$243).


would be an incentive to transfer cargoes tosmaller vessels to serve smaller ports,contributing to higher costs and lowercapacity utilization elsewhere. Althoughthere are evident problems with costs inMadagascar and Tanzania, in generalEastern and Southern Africa are betterserved by port infrastructure than is WestAfrica.

Dwell time, unlike ship time in ports,identifies areas where improvements maybe sought. However, it does not provide abreakdown according to the variousprocedures that need to be completedbefore cargo can be shipped or delivered.Failure to address dwell time contributes tohigh congestion levels, which acts as aconstraint to the competitiveness of Africanports. Notteboom (2006) calculated that inEast Asia, the time spent in port averages 20percent of the total transport time, whereasin Africa this ratio increases to over 80percent. The shipping company Delmascalculated that in 2004, 146 days were loston the weekly service between Europe andAfrica because of congestion, whichtranslates into an estimated loss to theshipping companies of US$ 5 million. InLagos (Nigeria) in 2003, the average costwas higher than in Felixstowe (UK) (Palssonet al., 2007).

(iii) Efficiency Indicator: Liner Shipping

Connectivity Index (LSCI)

UNCTAD’s Liner Shipping ConnectivityIndex (LSCI) is a measure of a country’slevel of integration into the existing linershipping network. It captures liner shippingservices to a country’s port(s) using fivecomponents: (i) the number of ships; (ii) the

container carrying capacity (in TEUs) ofthose ships; (iii) maximum ship size; (iv)number of services; and (v) the number ofcompanies that deploy container ships onservices to and from a country’s ports. TheLSCI can be considered a proxy of theaccessibility to global trade. The higher theindex, the easier it is to access a highcapacity and frequency global maritimefreight transport system and thus effectivelyto participate in international trade.Therefore, the LSCI can be considered bothas a measure of a country’s connectivity tomaritime shipping and as a measure of tradefacilitation.

The countries with the highest overallLSCI rankings are those most activelyinvolved in trade. The export-orientedeconomies of China and Hong Kong (China)rank first, followed by the transshipmenthub of Singapore. Large traders such as theUK, Germany, and the US are also in the top15. As shown in Table 2.8 below, the best-connected countries in Africa in the 2009LSCI were Egypt (ranked 1st in Africa; 17thinternationally), Morocco (2nd in Africa,23rd internationally) and South Africa (3rdin Africa; 29th internationally). At the otherend of the scale, Guinea Bissau, Eritrea, andSomalia were the worst connected. Over theperiod 2007–2009, Morocco dramaticallyimproved its LSCI ranking, from 9.0 in 2007 to 38.4 in 2009. This was the result of major investments in the sector. Othercountries also improved their ranking in the 2009 index (e.g. Egypt, South Africa,Nigeria, Côte d’Ivoire, Ghana, and Djibouti) while others (e.g. Sudan, Senegal,Tanzania, and Guinea Bissau) witnessed adecline.




Table 2.8: UNCTAD Liner Shipping Connectivity Index, 2007–2009

2007 2008 2009

LSCI Int. LSCI Int. LSCI Int.

Rank Rank Rank

Top Six Countries (in 2009)

China 127.9 1 137.4 1 132.0 1

Hong Kong, China 106.2 2 108.8 2 104.5 2

Singapore 87.5 4 94.5 3 99.5 3

Netherlands 84.8 5 87.6 5 88.7 4

Republic of Korea 77.2 8 76.4 10 86.7 5

United Kingdom 76.8 9 78.0 7 84.8 6

Selected Developing Countries

Malaysia 81.6 7 77.6 9 81.2 10

Sri Lanka 42.4 19 46.1 19 34.7 26

Mexico 31.0 25 31.2 26 31.9 31

Brazil 31.6 24 30.9 27 31.0 33

2007 2008 2009

LSCI LSCI LSCI Int. African

Rank Rank

African Countries

Egypt 45.4 52.5 52.0 17 1

Morocco 9.0 29.8 38.4 23 2

South Africa 27.5 28.5 32.1 29 3

Nigeria 13.7 18.3 19.9 50 4

Côte d’Ivoire 15.0 16.9 19.4 53 5

Ghana 15.0 18.1 19.3 54 6

Djibouti 10.5 10.4 18.0 58 7

Senegal 17.1 17.6 15.0 63 8

Mauritius 17.2 17.4 14.8 64 9

Togo 10.6 12.6 14.4 68 10

Namibia 8.4 11.1 13.6 69 11

Benin 11.2 12.0 13.5 70 12

Kenya 10.8 11.0 12.8 72 13

Cameroon 11.6 11.1 11.6 73 14

Congo 9.6 11.8 11.4 74 15

Angola 9.9 10.2 11.3 75 16

cont.


Countries such as South Africa, Morocco,and Egypt are geographically wellpositioned as major hubs in Africa, whichhas contributed to their higher LSCI ranking.

Countries at the bottom of the indexinclude small island states, which rely onsmall feeder service connections to a regionalhub, and landlocked countries, which haveonly inland waterways connections servicedby small ships. The composition of the worstconnected countries (which are mostly inAfrica) changes more frequently than the bestconnected countries, as the overall numbers

of companies and services are very low. Awithdrawal of one service provider or oneservice can therefore strongly impact theoverall ranking. This is particularly relevantfor small island countries such as Comoros,Seychelles, Cape Verde and São Tomé andPrincipe.

While African least developed countries(LDCs) have seen improvements in the TEUcapacity in general, there is still a large gapbetween their capacity and that ofdeveloped countries. The two LDCs with thebiggest TEU capacity are Senegal (128,496


Table 2.8: cont.

2007 2008 2009

LSCI LSCI LSCI Int. African

Rank Rank

Tanzania 10.6 10.5 9.5 83 17

Libya 6.6 5.4 9.4 84 18

Mozambique 7.1 8.8 9.4 85 19

Sudan 5.7 5.4 9.3 86 20

Gabon 8.6 8.9 9.2 88 21

Madagascar 7.8 7.8 8.6 91 22

Algeria 7.9 7.8 8.4 96 23

Guinea 8.5 6.4 8.3 97 24

Gambia 4.7 5.0 7.5 103 25

Mauritania 7.9 7.9 7.5 104 26

Tunisia 7.2 7.0 6.5 107 27

Sierra Leone 5.1 4.7 5.6 111 28

Liberia 4.5 4.2 5.5 112 29

Cape Verde 2.5 3.6 5.1 115 30

Comoros 5.5 5.2 5.0 117 31

Seychelles 5.3 4.5 4.9 118 32

Dem. Rep. of Congo 2.7 3.4 3.8 137 33

G. Bissau 5.1 5.3 3.5 143 34

Eritrea – 3.3 3.3 145 35

Somalia 3.1 3.2 2.8 149 36


TEUs) and Angola (100,000 TEUs), while thecomparable figure for China, Germany, theUnited Kingdom, and Singapore is morethan 1 million TEUs.

Investments for Rehabilitationand Expansion

Many African countries are investing in portinfrastructure to meet growing demand andimprove port performance, while majorinternational container operators are alsoeager to invest. Several examples suggestthat port development is taking place, evenif it is too early to see the results. In Egypt,in 2000, significant reforms and investmentsin port infrastructure elevated that countryto premier position in terms of port capacityin Africa. South Africa has followed with theopening of Pier 1 container terminal inDurban in 2007, which is highly automatedto address capacity and productivityconstraints. Ngqura, another containerterminal in South Africa, became operationalin 2009. Namibia also invested heavily in theWalvis Bay port and is seeking to attractprivate sector participation. Morocco isamong the few African countries withequipment to handle Panamax vessels andthe government plans a US$ 2.5 billionpublic investment in the ports subsector.

Investments are also underway in otherparts of Africa. Equatorial Guinea aims todouble its port capacity and transform thecountry into a major shipping hub. The portproject and associated infrastructure willcost around US$ 4.5 billion and is due to becompleted in 2011. Côte d’Ivoire is planningto spend over US$ 60 million to upgrade theport of Abidjan into a regional trans-shipment hub for West Africa — an

improvement that would help redress thecurrent imbalance across the continent.Mozambique’s Nacala DevelopmentCorridor is planning to invest US$ 150million to upgrade its port, rail, and roadinfrastructure over the next five years toraise capacity to 4 million tonnes. TheDjiboutian port of Doraleh, under aconcession contract to DP World, hasalready raised US$ 400 million to develop acontainer terminal. The Kenya PortsAuthority has ambitious plans for moreinvestments in Mombasa. The DemocraticRepublic of Congo, through a concessioncontract, has also made significantinvestments in the port of Pointe Noire,which will increase capacity in the region.For the most part, these investments comefrom large foreign investors.

The investments cited above, underwayor planned, show strong dynamism thatshould yield large economy-wide benefits.For example, the new container terminal atPointe Noire (Congo Brazzaville) isexpected to boost permanent employmentin the port to reach 1,000 employees by2018 (compared to just 230 permanent jobsat present). In parallel, the site will generatenearly 200 jobs during the execution of theinfrastructure works.

Assessing the full benefits of theseinvestments will require more data on portperformance that is currently lacking,especially for African ports. Using East Asiaas a case in point, the cost of expanding portcapacity in that region to a total of 36 millionTEUs would cost about US$ 1.4 to 2.9 billionp.a. at the financial rate of return of 10percent (Abe and Wilson, 2009). The totalconsumer surplus due to the expansion



would amount to US$ 8 billion a year. Suchgains warrant further large capital injectionsinto the port subsector in the region.

Summary: The Way Forward forAfrican Ports

The growth in global trade over the pastdecade, together with increasing container-ization and an improved policy frameworkin Africa (see Chapter 1), have boosteddemand for African port capacity. With 80percent of the volume of world trade carriedby maritime vessels, the importance of portsin the logistics supply chain is paramount.However, trade imbalances, congestion, lowproductivity/efficiency, and low connect-ivity to other regions impede Africa’s fullintegration into the world trading system. Toillustrate the logistical problems facing theports in the region, it has been estimatedthat the share of total transport time spent inport (dwell time) may be up to four timeshigher in Africa than in East Asia. To remedythe inefficiencies, the infrastructure andservices of African ports need to beimproved along the dimensions identified inthis report. In particular, the followingcritical areas of action need to be addressed:

(i) Regional imbalances. Tworegions that are most lacking adequateport facilities are the west coast (fromEquatorial Guinea to Namibia) and theeast coast (from Tanzania to SouthAfrica). As a result, ports such as Durbanand Dar es Salaam have come to serve asthe main points of entry for numerouslandlocked countries in the region,creating congestion risks and bottle-necks. Lack of seaport choice alsoincreases the level of dependence for

landlocked countries on the usually poor hinterland transport facilities.Imbalances also result in weak links inthe chain of ports called upon by liners,since it is the weakest link thatdetermines the type of vessel used formulti-port deliveries.(ii) Capacity. Congestion, delays inexpansion plans, the need forrehabilitation, upgrading or newconstruction are systemic problems thatplague many African ports. With theeconomic downturn and reduceddemand for many primary commodities,the problems of congestion and delayshave eased for the moment. Althoughcapital financing is likely to be moredifficult to obtain given the liquidityconstraints, the current environmentprovides an opportunity to implementthe planned improvement projects with less disruption to normal portactivities.(iii) Size and Container Accom-modation. Spurred by the growth incontainerized cargoes, the need for portsto offer increased berth size and state-of-the-art container-handling activity hasexpanded. However, most African portsdo not have the capacity to handlegearless ships and port equipment isoften inadequate or poorly maintained.As a result, most African ports cannotreceive ships exceeding 2,500 TEUs,even though ships of up to 15,000 TEUsare now sailing the major internationalroutes. Many smaller African ports areunable to justify the acquisition ofexpensive equipment such as quaysidegantry cranes, and must rely on mobile



cranes and ships’ cranes (gearedvessels). This prevents ports achievingthe desired international benchmarks forcontainer movements per hour (40 perhour in the region), which in turn affectsthe cost competitiveness of the port.(iv) Other Infrastructure. Longerberth lengths, wider ship turning circles,and deeper access channels alongsideberths for modern ships are needed. (v) Land Access. Land access, for bothroad and rail, is restricted in manyAfrican ports since the latter aregenerally surrounded by denselydeveloped areas. Resulting delays andcongestion in both the delivery andremoval of cargoes to and from the portaffect port capacity and increase costs. Insome cases, greenfield sites may becalled for, rather than trying to heapmore facilities onto an alreadyovercrowded port infrastructure.

The analysis in this chapter suggests that,in many instances, large productivity gainscan be achieved by improving existingports. At the same time, improvements inthe regulatory environment are alsonecessary. Improvements in port manage-ment, often implying reform leading to theintroduction of public–private partnerships(PPPs), may be needed to provide thenecessary funding to carry out majorrehabilitation and expansion. Theseregulatory and institutional aspects arecovered in Chapter 3. Furthermore, sinceports are part of the larger trade logisticschain, reforms need to go beyondimproving the efficiency of ports alone andwork toward integrating the ports more

efficiently into the broader economy. Asargued in Chapter 4, this means guaran-teeing well-functioning, multimodal (road,rail, inland water, and air) transport linksbetween ports and the hinterland.

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This annex discusses the main ports inAfrica in terms of their infrastructure,facilities, and capacity. For the purposes ofthis review, the ports are divided into sixsubregions:

i. North Africa: Algeria, Egypt, Libya,Mauritania, Morocco, and Tunisia;

ii. East Africa: Djibouti, Eritrea,Kenya, Somalia, Sudan, and Tanzania;

iii. Southern Africa: Angola, Democratic Republic of Congo,Mozambique, Namibia, and SouthAfrica;

iv. Central Africa: Cameroon, Congo,Equatorial Guinea, and Gabon;

v. West Africa: Benin, Côte d’Ivoire,Gambia, Ghana, Guinea, GuineaBissau, Liberia, Nigeria, Senegal,Sierra Leone, and Togo;

vi. Island Countries: Mauritius,Madagascar, Comoros, São Toméand Principe, Seychelles, and CapeVerde.

The two premier ports serving the continentare Port Said in Egypt and the port ofDurban in South Africa (see Table 2.9 for alisting of Africa’s top container ports in2007). Excluding these two, port capacitiesacross the continent are generally patchy,and in need of improvement anddevelopment.

(i) Ports in North Africa

The North Africa subregion includes Algeria,Egypt, Libya, Mauritania, Morocco andTunisia, which are all middle-incomecountries, except for Mauritania. Egypt hasthe largest capacity and is home to some ofAfrica’s biggest and most sophisticatedports. The ports in the other North Africancountries are relatively small and haveadequate facilities to handle the low volumeof traffic. In all the ports, cranes areconnected to national rail networks,supporting an efficient movement of goods.

In Egypt, the Port of Alexandria haswitnessed significant reforms since 2002,which have improved its performance. Theport has two main container terminals: the Alexandria Container Terminal and the Alexandria International ContainerTerminal. The Alexandria ContainerTerminal has a storage capacity of 11,000TEUs and is scheduled to benefit fromsophisticated handling equipment, includingpost-Panamax gantry cranes. The newinfrastructure is expected to reduce theaverage waiting time for ships. The terminalhas a rail connection to support themovement of goods. The AlexandriaInternational Container Terminal has asmaller storage capacity of 7,000 TEUs.

Annex 2.1: Overview of African Port Facilities, Capacity,and Infrastructure by Subregion and Country


The container terminal at Damietta is thebiggest in Egypt, with a storage capacity of30,000 TEUs. The terminal benefits from railconnections to Cairo and other parts of theNile delta and Upper Egypt. Two additionalsuper post-Panamax cranes and othersophisticated machinery have been ordered.There are plans to dredge and extend theexisting container channels and a newterminal is expected to be opened by theend of 2009.

The Port of El Dekheila has twocontainer terminals: Dekheila ContainerTerminal and Dekheila InternationalContainer Terminal. Both ports have state-of-the-art, post-Panamax equipment capableof handling high volumes of cargo. TheDekheila Container Terminal is served byrail tracks, making it more efficient to move goods. There are also plans to acquiresuper post-Panamax gantry cranes forDekheila.

Port Said is the busiest port in Africa andserves as a major hub. It has two maincontainer terminals: Port Said ContainerTerminal and the Suez Canal ContainerTerminal. Port Said Container Terminal has state-of-the-art handling equipmentincluding post-Panamax cranes, which areset to increase in number. The terminal hasone rail terminal to facilitate the movementof goods. The Suez Canal ContainerTerminal is the busiest in Africa, with thelargest number of super post-Panamax,ship-to-shore equipment in Africa. Theterminal is also linked to a rail line. SokhnaPort also has post-Panamax equipment.Recent reforms in Egypt in the portsubsector have led to significant investmentswhich have boosted performance, so that


Table 2.9: Africa’s top container ports,

2007

Port Country TEUs Post

handled and

2007 Super

(000s) Panamax

facilities

Port Said Egypt 2,768.9 Yes

Durban South Africa 2,511.7 Yes

Damietta Egypt 1,195.6 Yes

Cape Town South Africa 874.6 Yes

Mombasa Kenya 585.4 No

Abidjan Côte d’Ivoire 507.1* No

Tema Ghana 458.1 No

Dakar Senegal 424.5 No

Port Elizabeth South Africa 415.9 Yes

Port Louis Mauritius 413.8 Yes

El Dekheila Egypt 453.2 Yes

Luanda Angola 407.6* No

Alexandria Egypt 385.0 Yes

Rades Tunisia 383.2 No

Port Sudan Sudan 342.2 No

Dar es Tanzania 334.1 No

Salaam

Lagos Nigeria 235.8 No

Djibouti Djibouti 221.3* No

Douala Cameroon 217.7 No

Walvis Bay Namibia 145.0 No

Toamasina Madagascar 112.4 No

Skikda Algeria 100.0 No

Maputo Mozambique 80.4 No

Bejaia Algeria 70.8* No

San Pedro Côte d’Ivoire 58.5 No

Takoradi Ghana 55.1 No

Tanger-Med Morocco NA** Yes


* 2006 data.** no data available at time of survey in

2008


Egypt now surpasses South Africa in termsof global rankings in container traffic.

Morocco is geographically located onone of the main liner shipping routes. From2004–2007, its Liner Shipping ConnectivityIndex was in the range 8.50–9.40, but thishas risen dramatically in recent years, toreach 30 in 2008 and 38 in 2009 (see Table2.7). Now Morocco is ranked 23rd at theglobal level, according to the LSCI. Data forrecent years show that the port ofCasablanca, which accommodates over 70percent of Moroccan maritime tradevolumes, has absorbed most of the country’strade increase. The largest ongoing projectin the port subsector is in Tangier, where theTanger-Med port has the biggest capacity inthe country (3.5 million TEUs). Thismultipurpose port entered into operation inJuly 2008 and is primarily intended fortransshipment, and part of the traffic willalso service the hinterland. The projectTanger Med II is currently under develop-ment and consists in an expansion of thecontainer terminal capacity of the TangerMed I to 8 million TEUs.

Algeria has two main ports: Algiers andBejaia, which provide services to theneighboring landlocked countries of Maliand Niger. The ports are located within easyaccess of the major markets of Europe andthe United States. The two ports arerelatively small but are well equipped tohandle the small volume of cargo in and outof the port. Algiers, as a transshipment port,had benefited from the recent concessionprocess to Dubai Ports. Bejaia is the largerand busier of the two ports. Rail facilities areavailable under gantry cranes connected tonational rail network. Bejaia has two main

limitations: first, the length and the depth ofits berths restrict the size of vessels that canaccess the port. Second, the port does notoperate 24 hours per day.

Tunisia has seven ports, handling morethan 95 percent of its international trade,and over 1,300 km of coastline. The mainport is the Port of Rades, which handles350,000 TEUs per annum. To attract largecontainer ships, in early 2007 the govern-ment launched a deepwater port project atEnfidha, 17 meters deep and able toaccommodate 80,000-tonnes vessels. Thiswill enable Tunisia to attract large shipspassing through the central Mediterranean,which are estimated at 10.3 million TEUs. Inaddition, this port will boost Tunisia’s tradewith the European Union, which accountsfor 80 percent of all of its foreign trade, 97percent of which is conducted by sea. TheTunisian coastline has the potential tobecome a strategic location for trans-shipment between the EU and the entireMaghreb region. With this new deepwaterport, the goal is to capture a flow of 3million additional containers per annum by2020.

Libya has two main ports, Benghazi andTripoli. The Port of Benghazi operates onlyfor 12 hours, which limits operations. ThePort of Tripoli is also limited in terms ofoperating hours.




Table 2.10: North Africa — port infrastructure, capacity, and facilities

Terminal Facilities Railroad Dwell

Port Country Berths typesTotal Storage

Facilities Time

and dimensionsArea TEUs

(days)

(m)(000m2) (000s)

Algiers Algeria 10 ro-ro 175 5.6 Quays connected

[D(7.10)] to national rail NA

3 container network

[D(11)]

Bejaia 4 container/ro-ro 90 9.0 Gantry cranes

[D(12); L(500)] connected to

national rail network NA

Oran General cargo for 410 3.0 Quays have rail links NA

geared vessels

Alexandria Egypt 3 container 163 11.0 Rail link to terminal NA

(Container [D(14); L(520)]

Terminal) 1 ro-ro

[D(14); L(160)]

Alexandria 1 container 110 7.0 Rail link to terminal NA

(International [D(12); L(180)]

Container Terminal)

Damietta 4 container 1,000 30.0 Rail connections to NA

[D(14.5); L(1,050)] Cairo and other

parts of the Nile Delta

and Upper Egypt

El Dekheila 4 container 380 20.0 Rail link to terminal NA

(Container Terminal) [D(12-14); L(1,040)]

50m ro-ro ramp

El Dekheila 2 container 190 NA

(International [D(12); L(512)]

Container Terminal)

Port Said 1 container/ro-ro 375 NA NA NA

(Abba Quay) [D(13.7); L(250)]

Port Said 1 container 467 24.0 One rail terminal NA

(Container Terminal) [D(14); L(970)]

Port Said (Suez 4 container 600 24.0 300m rail line NA

Canal Container [D(16.5,); L(1,200)]

Terminal)

(cont.)



Table 2.10: cont.



Facilities Time


(days)

(m)(000m2) (000s)

Sokhna Egypt 1 container 180 24.2 3,000m rail line NA

[D(17); L(750)]

Benghazi Libya 1 general cargo 4,400 24.4 NA NA

[D(8.5); L(1,228)]

Tripoli 3 Container 210.1 NA NA NA

[L(11)]

ro-ro facilities available

Nouadhibou Mauritania 1 general NA NA Rail linked NA

[D(8); L(128)]

1 general

[D(7); L(110)]

Nouakchott 3 general/container NA NA NA NA

[D(9-10.3); L(107)]

Casablanca Morocco 3 container 45 5.0 Available NA

(Container [D(12); L(380)]

Terminal) 1 ro-ro

[D(8);L(160)]

Casablanca 5 container 19 3.0 Available NA

(Mole Tarik/ [D(7.5-8.2);L(500)]

Ro-Ro 3 Ro-ro

Terminal) [D(8.2);L(300)]

Tanger-Med 1 container 390 35.0 NA NA

[D(18);L(400)]

Tangier 1 container 460 NA 2 rail tracks NA

[D(16);L(800)]

1 ro-ro

[D(6.5);L(173)]

3 general

[D(9);L(308)]

Rades Tunisia 1 container 325 NA NA NA

Key : D= Depth; L = Length; Ro-ro = Roll on/roll off vessel.

Sources: Containerisation International Yearbook 2009 — based on survey conducted in 2008; Africa Infrastructure

Country Diagnostic Report (World Bank, 2009).


(ii) Ports in East Africa

The East African subregion is composed ofDjibouti, Eritrea, Kenya, Somalia, Sudan,and Tanzania. Port Sudan is the largest portin terms of total area, while Djibouti is thelargest in terms of storage capacity. Kenyahas the busiest port (Mombasa) whichprovides the major export gateway tolandlocked countries in the subregion. TheDjibouti terminal offers the most modernfacilities but needs more investment to meetthe high transit demand from Ethiopia.

One of the major concerns in East Africais the safety risk due to growing attacks bySomali pirates in the Indian Ocean.Insecurity in the Somali waters has led to arise in the cost of shipping insurance, whichhas resulted in high freight costs. In 2008,shipping companies reported that they hadhanded over about US$ 80 million in ransompayments to Somali pirates.

In Kenya, the Port of Mombasa is thebusiest port in East Africa. It servicesUganda, Rwanda, Burundi, Southern Sudan,and the eastern gateway for the DemocraticRepublic of Congo. The port handlescontainers, general cargo, dry bulk, andliquid bulks. The container terminal has astorage capacity of 7,272 TEUs and benefitsfrom a rail link to the city of Mombasa,although there is a greater dependence onroad transport. The strongest growth hasbeen noted in the container sector.However, the port struggles to cope withheavy throughput traffic which has oftenresulted in chronic congestion. According tothe Kenya Ports Authority, Mombasa isapproaching saturation point. The port wasdesigned to handle 20 million tonnes perannum and reached 16.4 million tonnes in

2008. This is projected to rise eventually to30 million tonnes per annum by 2030.12 Thecontainer terminal was designed to handle250,000 TEUs per annum, whereas in 2008its throughput was 615,733 TEUs.

Furthermore, the terminal’s performanceis constrained by its small storage capacityand depth, which limit the size of vesselsusing the port. The available equipmentcannot load/unload cargoes fast enough toavoid congestion. Lack of modern advancedhandling equipment, such as super andpost-Panamax ship-to-shore gantry cranes,has also led to congestion and delays. Twomajor challenges experienced by the port inMombasa are: (i) poor hinterland con-nectivity due to substandard and unreliablerail services as well as poor road infra-structure and missing links and (ii) theinability of road transporters to cope withdemand. In view of the compelling need forgreater capacity, in 2009 the Kenya PortsAuthority submitted to the NationalEnvironment Management Authority (Nema)an environmental impact assessment studyreport on dredging works aimed at accom-modating post-Panamax containers to boostMombasa’s competitiveness. Once thenavigation channel is completed, this wouldallow large oil tankers to dock, therebyreducing the cost of crude oil imports, ascurrently Kenya has to use a large number ofsmaller vessels, which increases freightcosts.13


12 Kenya Ports Authority website, Nov. 30, 2009.http://www.kpa.co.ke/InfoCenter/News/Pages/MombasaPortsRemainsARegionalHub.aspx

13 Daily Nation online (Nairobi), November 4,2009.


Sudan’s main port is Port Sudan, whichalso services landlocked Chad. The porthandles containers, general cargo, dry bulk,and liquid bulks. Port capacity has reachedits maximum and to address this situation,two container berths are under construction.The Port of Suakin, 45 km from the Port ofSudan, has been identified as the site forfuture expansion to reduce the pressure onPort Sudan.

Tanzania’s biggest port is Dar esSalaam; the others being Mtwara andTanga. The port of Dar es Salaam has threedeepwater berths and handles containers,general cargo, dry bulk, and liquid bulks.Over 95 percent of Tanzania’s cargo transitsthrough the port, as well as transshipmentcargo to and from Zambia, Malawi, DRC,Burundi, and Rwanda. The port iswitnessing large increases in the general


Table 2.11: East Africa — port infrastructure, capacity, and facilities



Facilities Time


(days)

(m)(000m2) (000s)

Djibouti Djibouti 2 stern-ramp ro-ro 220 12.0 3 on-dock 600m NA

[D(11.5); L(250)] rail tracks for

2 Container intermodal container

[D(9.5-12); L(400)] traffic. Rail-link

dockside to Ethiopia.

Assab Eritrea 7 general cargo/ 360 2.6 NA NA

container/side/

quarter-ramp ro-ro

2 stern-ramp ro-ro

L: 145m

Mombasa Kenya 5 container 220 7.3 Rail link to 5

[D(11);L(586)] Mombasa

Port Sudan Sudan 2 container 1,200 10.0 Available 28

[D(12.6); L(427)]

Dar es Salaam Tanzania 1 container 180 7.0 Terminal for inland 7

[D(11.5); L(549)] rail movements

Mtwara 2 multipurpose 15 NA NA NA

Key: D= Depth; L = Length; Ro-ro = Roll on/roll off vessel.

Sources: Containerisation International Yearbook 2009; data based on survey conducted in 2008; Africa Infrastructure

Country Diagnostic Report (World Bank, 2009).


cargo sector as well as consistent growth indry and liquid bulk traffic. The strongestgrowth has been in the container sector,where transit, transshipment, and nationalgateway traffic is handled. According toWood (2004), problems of competitivenessare at least partially due to under-investment, management failures, skillsshortfalls, and difficulties in interfacing withthe railroad network.

The Djibouti Container Terminal has thecapacity and facilities to accommodatelarger volumes of cargo than it is currentlyhandling. The 20-year concession granted in2000 to Dubai Ports International, asubsidiary of Dubai Ports Authority, hasenabled the port to acquire the mostadvanced equipment on the east coast ofAfrica (e.g. two post-Panamax, ship-to-shoregantry cranes). The port has three rail tracksfor intermodal container traffic, and a raillink from the dockside to the Ethiopiancapital. Djibouti’s port subsector is ofstrategic importance beyond its borders, inparticular as a gateway for Ethiopian cargo,which accounts for around 70 percent ofDjibouti’s throughput. However, the port’sfull potential has not been achieved due toinadequate capacity of the port’s containerterminal facilities. The main challenges to beaddressed by Djibouti port authority are:(i) low availability of rail wagons and locomotives, (ii) delays in cargo deliveries,(iii) congestion in the port terminal, and (iv) high costs to importers/exporters.

(iii) Ports in Southern Africa

The Southern Africa subregion includesAngola, Mozambique, Namibia, and SouthAfrica. South Africa has the largest and most

developed ports, with Durban as the secondbusiest port in the continent. The ports inMozambique handle goods for the neigh-boring landlocked countries of Malawi,Zambia, and Zimbabwe, thanks to devel-oped railroad networks; however they are inurgent need of capacity development.

Angola’s two main ports are Lobito andLuanda. Lobito is the smaller of the two,with two general cargo berths and very basiccargo-handling facilities. The port is linkedto the national railroad network. The port ofLuanda is Angola’s main port. There iscongestion in most cargo-handling sectorsand the scope for volume development isconstrained by lack of capacity. The port hasthe potential to service Zambia and DRC,however, this is not possible due to the poorroad and rail networks. In response, theAngolan government has devised an actionplan to address the following constraints:inadequate infrastructure, lack of handlingequipment, low productivity, poor manage-ment, high labor-intensive processes, heavyadministrative clearance processes, and lack of use of information technology inports.

Mozambique’s ports are of strategicimportance to the neighboring countries ofMalawi, Zimbabwe, Zambia, Swaziland, andSouth Africa. The majority of the country’sports have strong rail connections beyondits borders. Maputo offers rail connections toSouth Africa, Zimbabwe, and Swaziland.Similarly, the Port of Beira has rail con-nections to Zimbabwe and marginally toMalawi and Zambia, while the Port ofNacala connects to Malawi.

The Port of Maputo is Mozambique’slargest port and handles cargo to and from




Table 2.12: Southern Africa — port infrastructure, capacity, and facilities



Facilities Time


(days)

(m)(000m2) (000s)

Lobito Angola 2 general cargo 40 3.0 Linked to national NA

railroad

Luanda TC1: 2 container 227 NA NA 12

TC2: 2 container

[D(10.5); L(450)]

TCG2: 2 general

cargo/container

[D(10.5); L(450)]

Beira Mozambique 4 container 200 3.6 3 rail tracks 20

[D(11); L(645)]

Maputo 1 container 80 1.5 2 rail tracks 22

[D(11.5); L(300)]

Nacala 2 container 84 1.8 2 rail tracks NA

[D(14); L(335)] +

[D(12); L(37)]

Walvis Bay Namibia 3 container 45 1.9 NA 8

[D(12.8); L(503)]

2 general

[D(10.6); L(574)]

2 general/ro-ro (for

geared vessels)

[D(12.6); L(349)]

Cape Town South Africa 5 berths 970 12.0 Rail transfer facility 6

[D(15.5); L(1300)] with rail-mounted

yard gantry

Cape Town 6 container 970 12.0 Rail transfer facility NA

(Container [D(10.7-14); with rail-mounted

Terminal) L(1,554)] yard gantry

Durban 7 container 1,122 14.5 3 rail tracks each 4

(Container [D(11.2); L(1,900)] 760m equipped with

Terminal) 45t rail-mounted

gantry cranes

(cont.)


South Africa, Swaziland, and Zimbabwe. It issouthern Africa’s nearest port to the rapidlydeveloping mega-markets of Asia and is theclosest deepwater port to the capitalJohannesburg. The port has small storagecapacity of 1,504 TEUs, which is inadequatefor its needs.

The Port of Beira is Mozambique’ssecond port after Maputo. It links directly to

Zimbabwe and Zambia by road and railnetworks, and to Malawi by road only.However, the Sena rail line linking Beirawith Malawi and the Tete Province iscurrently being rehabilitated. The port has astorage capacity of 3,654 TEUs. It has morefacilities for loading and offloading than theport of Maputo, with three rail stacks. TheNacala harbor serves its own hinterland and


Table 2.12: cont.



Facilities Time


(days)

(m)(000m2) (000s)

Durban South Africa 1 container 120 3.5 3 railway lines, NA

(Container [D(11.9); L(180)] 50 rail wagons per

Terminal 1 container line. 2 reach stackers

Pier 1) [D(11.9); L(180)] and 2 rail-mounted

1 container gantry cranes

[D(11.8); L(180)]

East London 7 berths 38 1.5 Direct rail-link to all 7

[D(10.7); L(1,204)] major cities and

6 berths neighboring

[D(10.7); L(1,206)] countries

Port Elizabeth 2 container 22 3.1 2 lines which 6

[D(12.2); L(635)] accommodate 25

rail wagons per line

Richards Bay 3 multipurpose

[D(14.4); L(540)] 21,570 NA NA NA

3 multipurpose

[D(14.2); L(644)]

1 multipurpose

[D(18.7); L(200)]


Sources: Containerisation International Yearbook, 2009 — survey conducted in 2008; Africa Infrastructure Country

Diagnostic Report (World Bank, 2009).


landlocked Malawi to the west, to which it isconnected by rail. It has the potential toservice Zambia through Malawi. Because ofit natural deep water and sheltered position,Nacala has no restrictions on shipmovement or size.

With the ending of the civil war andsignificant reforms in the country, there arenow positive opportunities for coastalshipping in Mozambique, although thecapacity for developing inland shippingappears to be very limited (Wood andDibben, 2005). Future growth depends onlocal participation, training and skillsdevelopment, and the broader social,economic, and transport infrastructure.

South Africa now has eight major ports:Durban, Richards Bay, Cape Town, MosselBay, East London, Port Elizabeth, Saldanha,and Ngqura. South African ports play animportant role for the landlocked economiesof the subregion, including Botswana,Lesotho, Swaziland, Malawi, Zimbabwe, and Zambia. South African ports areequipped with modern facilities includingsuper post-Panamax, post-Panamax, andPanamax ship-to-shore container equip-ment, and the ports are linked to the railnetwork.

The Port of Durban is South Africa’smain general cargo and container port. It isthe second busiest port in Africa and isstrategically placed on the world shippingroutes. The Durban Container Terminalstorage capacity of 14,5000 TEUs has state-of-the art handling equipment with superpost-Panamax and post-Panamax andPanamax ship-to-shore container equip-ment. The upgrading and re-equipping ofport infrastructure are well advanced,

including the widening and deepening ofthe port entrance and channels to enablemuch larger, later-generation ships to usethe port facilities. Meanwhile congestion onthe roads outside port terminals has becomea major problem. To address this challenge,the Port of Durban opened another portterminal, Pier 1, which handles containersonly. This terminal is highly automated,which has improved productivity andreduced congestion at the port of Durban.The increased use of containers has alsoreduced theft of goods at the harbor.

The Port of Cape Town is another busycontainer port, second in South Africa toDurban. The emerging oil industry in WestAfrica has also become a significant factorfor the port’s repair and maintenancefacilities. The harbor and Table Bay aresubject to strong winds during the months ofApril to September, and this can sometimesdisrupt cargo-handling and ship refits in theport.

Richards Bay is South Africa’s biggestdry bulk port, built in 1976 as one of theworld’s leading coal export platforms buthas since expanded into other bulk andbreak-bulk cargoes. Currently, Richards Bayhandles 60 percent of South Africa’sseaborne cargo, making it South Africa’sleading port in terms of volume handled.The port is the largest in area in South Africa,with total land and water surfaces of 2,174ha. and 1,443 ha. respectively.

The Port of East London has a carterminal on the West Bank, which includes a four-storey parking facility connected by dedicated road to the adjacentDaimlerChrysler factory. The terminal has atheoretical design throughput of 50,000



units a year with 2,800 parking bays. Theparkade can be expanded to 8 storeys toincrease the throughput to 180,000 vehiclesa year and the provision of a third berth isalso possible. The multipurpose terminal onthe East Bank handles an increasing volumeof containers and is geared for 90,000 TEUsa year — many for the motor industry.However, the port lacks gantry cranes.

Port Elizabeth container terminal hasthree berths and is equipped with one post-Panamax and one Panamax ship-to-shorecontainer gantry. The port has adequate railand road links with other parts of thecountry. The container terminal can loadrailroad trains directly under the gantrycranes, without containers having to bedouble handled, thus speeding up deliveryto inland destinations. The terminal hasthree quayside gantry cranes and is sup-ported by a number of straddle carriers.Motor vehicle components constitute a largeproportion of the container traffic at PortElizabeth. Plans are underway to replace thePanamax with post-Panamax cranes.

It is important to note that the invest-ment in the new deepwater port of Ngqurahas been influenced by the need to supportthe activities of the Coega IndustrialDevelopment Zone, which generate bothdry and liquid cargo. In this regard, ports notonly play their central role in the logisticschain but also help to support industrialpolicies that facilitate trade. The Port ofNgqura is expected to be fully functional byyear-end 2009, and will be serving the latestgeneration of container ships.

Although South Africa is ranked highlyin terms of performance, there are still someareas in need of improvement. These targets

are stated in Transnet’s14 strategic goals, andare expected to be met between 2009 and2012. Expected outcomes include: sustainedinfrastructure capacity provision ahead ofgrowth demand; integrated planning of portinfrastructure; safe and secure world-classport system; competitive and efficient portsystem that drives volume growth; andhuman capital development. Box 2.3presents recent highlights in the develop-ment of port terminals in South Africa.

In Namibia, Walvis Bay is the main port.It is a general cargo port and is beingaggressively marketed as an alternate port ofchoice to South African ports. There aregood roads and rail connections with therest of Namibia while the Trans KalahariCorridor links the port with Botswana andJohannesburg in South Africa. The port hasa total of nine berths, handles in excess of 2million tonnes of cargo annually, and isattracting a greater number of shipping linesas regular callers. In October 2009 theNamibian Ports Authority invested in aN$100 million deal to purchase newequipment to improve port performance.The new rubber-tired gantries (cargo-moving cranes) will improve storagecapacity by 42 percent. Furthermore, thesystem will reduce costs by about 10 percentcompared to a conventional stacker system.

In Southern Africa it is important to notethat many ports in postconflict areas stillsuffer from the legacy of a lack of infra-structure development and investment, eventhough the conflicts may have ended more


14 Transnet is a state-owned organizationoperating and controlling major transport infra-structures within South Africa.


than 10 years earlier. In Angola, portdevelopment effectively ceased at theoutbreak of civil war in 1975, at a time whencontainerization was being introduced inother African ports. Major upgrading hastherefore been necessary, and severecongestion has plagued the port operationsat Luanda for many years. In addition, civilunrest has had an effect on the transport and transit corridors servicing the ports.Corridors that used to be relatively efficientwere closed for many years in the 1970s and

1980s (such as Lobito, Nacala, Maputo, andBeira) because of civil war. This resulted inthe decline of the ports concerned as well asthe economic decline of landlockedcountries that relied on these ports. Forexample, the World Bank estimates that forMalawi, by the late 1980s, additionaltransport charges since the closure of thecorridors passing through Mozambique(Beira and Nacala in particular) causedcumulative losses of more than US$ 75million. Postconflict countries such as


Box 2.3: South Africa: recent highlights in the development of port terminals

Eight Specialized Port Terminals

• Durban, Richards Bay, Cape Town, Mossel Bay, East London, Port Elizabeth, Saldanha and Ngqura

(the latter became operational in 2009)

Highlights in 2009

• All ports have been dredged to promulgate depth

• The process of widening and deepening the entrance channel at Durban port underway; to be

completed by June 2010

• Expansion of the Cape Town Container Terminal on track

• Operationalization of Port Ngqura

• Capital investment of Rand 4.2 billion

Strategy

• Creating infrastructure capacity ahead of demand

• Improving port efficiency

• Managing the port position as a gateway for trade

Focus Areas in 2009/2010

• Growing real estate revenue and cost containment

• Delivering infrastructure and capacity improvements ahead of demand

• Building human capital through talent management and training

Key Risks

• Not providing adequate infrastructure, which could impact revenue

• Non-compliance with legislative requirements

• Risks of non-compliance with safety policies

• Inadequate skills

• Global economic environment resulting in low volumes.

Source: Transnet Limited Annual Report 2009


Mozambique should be commended fortheir efforts to scale up investments in ports.

(iv) Ports in Central Africa

The Central Africa subregion includesCameroon, the Democratic Republic ofCongo, the Republic of Congo, EquatorialGuinea, and Gabon. The subregion has someof the least developed ports in Africa. The portof Douala in Cameroon is the most developed.

Douala is the largest port in Cameroon,handling over 95 percent of the commercialtraffic, and having a storage capacity of13,000 TEUs. The port services thesurrounding landlocked countries of CentralAfrican Republic and Chad. The port hasfairly low depth, which restricts the size of

vessels that call on the port. The terminal isconnected to the Cameroon Railway. Eventhough Doula has emerged as one of themost efficient ports on the west coast ofAfrica, it has limited capacity.

The Democratic Republic of Congo’smain port is Matadi. This is a small port,situated on the left bank of the River Congohalfway between the Atlantic Ocean andKinshasa. The port is connected by two railfacilities. The main concern is congestiondue to poor infrastructure and space.

The Republic of Congo’s main port isPointe Noire, which has ambitions to becomea premier deepwater port in Central Africa.The port only operates at certain times duringthe day (0700–1200 hrs and 1430–1700 hrs),


Table 2.13: Central Africa — port infrastructure, capacity, and facilities



Facilities Time


(days)

(m)(000m2) (000s)

Douala Cameroon 1 container (for geared 170 13.0 Terminal connected NA

vessels) to CAMRAIL

[D(11.5); L(220)] (capacity

1 container ro-ro (for 2x44 TEUs)

geared vessels)

[D(11.5); L(220)]

Matadi DRC 2 container (for 40 2.8 2 rail tracks 25

geared vessels)

[D(7.6–8.9); L (350)]

Pointe Noire Republic of 2 general cargo (for 20 NA NA 18

Congo geared vessels); L 520.

Ro-ro facilities available





which limits its efficiency. Nonetheless,Pointe Noire is undergoing significantinfrastructure works such as refurbishing andextending existing quays, purchasing thelatest equipment such as gantry cranes, anddeveloping a logistics area next to the port. Anew container terminal in the port of PointeNoire became operational on July 1, 2009 asa major transshipment hub and also forhinterland import and export in the Congobasin. This provides access to the principaltransport corridors of the subregion, inparticular serving the DRC, the CAR, and thenorth of Angola.

(v) Ports in West Africa

The West Africa subregion includes Benin,Côte d’Ivoire, Gambia, Ghana, Guinea,Guinea Bissau, Liberia, Nigeria, Senegal,Sierra Leone, and Togo. The major ports areAbidjan, Tema, Dakar, and Lagos. Abidjan isrecovering from loss of business due tointernal conflict. Sierra Leone and Liberiahave also come out of conflict and the portsare in need of rehabilitation. West Africacounts numerous ports but to date there is nocomprehensive regional strategy to organizethe flow of ships and connect the sea to thehinterland. According to the Port Manage-ment Association of West and Central Africa,an infrastructure deficit continues to hamperport performance and port efficiency. This ismainly due to a lack of concrete programs forthe transport sector, leading to lower priori-tization of resources to the ports subsector.

Cotonou port in Benin is situated alongthe Gulf of Guinea. The port is rail-linkedbut has limited capacity to handle highvolumes of cargo. The depth onlyaccommodates small vessels. The port

handles containers, general cargo, dry bulk, and liquid bulks. It also providestransshipment to the neighboring countriesof Burkina Faso and Niger. The Port ofCotonou is operating beyond its capacityand is in need of rehabilitation.

Abidjan and San Petro are the mainports for Côte d’Ivoire. Abidjan port is thebigger of the two but with very basichandling equipment that cannot be used forlarge vessels or for high-volume loading andoffloading. However, in 2008 the govern-ment initiated the Ile Boulay expansionproject for Abidjan, which aims to doublethe handling capacity to 3 million TEUs peryear. Ile Boulay will eventually have a 1,500m wharf length, a draft of 15 m, and willcover an area of 60 ha.15

The Port of Banjul is the Gambia’s mainseaport, handling 90 percent of its foreigntrade. Senegal, Guinea Bissau, and Guineaare the three main destinations for re-exported cargoes through the Port of Banjul,which is strategically located close to majorshipping routes. The port can accommodatelarge vessels but lacks rail facilities.Container traffic has seen an average 11percent annual growth rate in recent yearsand now handles over 30,000 TEUs eachyear. Containers (although 90 percent areempties) form the largest export.

The Port of Tema is Ghana’s busiestseaport. It handles transshipped and transitcargo goods destined for the hinterlands/landlocked countries of Burkina Faso,


15 Port Autonome d’Abidjan, http: www.paa-ci.org. See also:http://www.winne.com/specialevents/2009/ene/port.php


Table 2.14: West Africa — port infrastructure, capacity, and facilities



Facilities Time


(days)

(m)(000m2) (000s)

Cotonou Benin 1 ro-ro 65 NA Available 12

6 general

1 container

[D(11); L(220)]

Abidjan Côte d’Ivoire 2 container 250 6.0 Available NA

[D(11.5); L(200)]

2 container

[D(12.5); L(440)]

1 ro-ro

[D(12.5); L(200)]

San Pedro 1 general 100 NA NA NA

[D(11-12); L(581)]

1 general

[D(9); L(155)]

Banjul Gambia 5 general/

container/ro-ro

[D(10); L(750)]

(max vessels L: 182.9m) 38.9 NA None NA

Takoradi Ghana 5 multipurpose 390 1.8 Rail line 100m from NA

[D(9-10); L(714)] the port

1 ro-ro

Tema 2 container 254 5.0 None 25

[D(11.5); L(566)]

1 container

[D(10); L(200)]

2 container

[D(10); L(366)]

7 multipurpose

[D(8); L(1,281)]

Conakry Guinea 2 general 480 5.0 NA NA

[D(8); L(340)]

3 multipurpose

[D(8.5-10); L(550)]

1 container

[D(10.5); L(269)]

Monrovia Liberia 4 general 45 NA NA NA

[D(9.14); L(609)]

(cont.)


Table 2.14: cont.



Facilities Time


(days)

(m)(000m2) (000s)

Lagos — Nigeria 4 container

Container [D(10.5); L(1,001)] 50 14.6 Available NA

Terminal

Lagos — Old 20 berths 1,200 2.0 Linked to national NA

Apapa Quays [D(9); L(2,459)] rail system

Lagos — Tin 7 general/ro-ro NA NA None NA

Can Island [D(10)]

2 ro-ro

[D(9.5)]

Calabar 3 general NA NA None NA

[D(11)]

4 General

[D(8)]

Onne 1dcontainer 200 NA NA 30

[L(250)]

1 ro-ro

[D(5.7); L(250)]

Port Harcourt 13 berths 470 NA NA NA

[D(7.6); L(1,390)]

Warri 5 general NA NA None NA

[D(11.5); L(1,250)]

8 general

[D(6.5); L(1,500)]

1 ro-ro

[D(11.5); L(250)]

Dakar Senegal 20 ro-ro 11 NA NA 7

[D(8-12); L(3,463)]

15 container/ro-ro

[D(8-11.6); L(2,562)]

Freetown Sierra Leone 1 container 85 1.1 NA NA

[D(8.84); L(174)]

2 container

[D(9.6); L(331)]

Lomé Togo 2 container 80 NA Linked to the NA

[D(11-12); L(250)] national rail system





Mali, and Niger. Tema has encounteredsubstantial congestion problems that lookset to continue over the short-term at least.It has a storage capacity of 5,000 TEUs. Theport lacks modern handling equipmentsuitable for large vessels, to facilitate fasterturnarounds. In addition, the port does nothave rail facilities. The future plan is todevelop a second container terminal anddredge to increase the depth of the port.Port of Takoradi is Ghana’s second port andis situated on the Gulf of Guinea (AtlanticOcean) in the south of the country. The porthas a storage capacity of 1,784 TEUs. GhanaRailways Corporation is 100 m from the port.Takoradi port is gearing up for furtherupgrades and increased private sectorparticipation. The future plans includeconstruction of two new container berthsand rehabilitation of port access roads.

Guinea’s main port is Port of Conakry.This is a small port with a storage capacityof 5,000 TEUs.

The Port of Lagos is Nigeria’s primaryseaport. The other ports are Calabar, Onne,Port Harcourt, and Warri. Port of Lagos issplit into three main divisions: Lagos Port,Old Apapa Port, and Tin Can Island. Lagoshandles significant volumes of trade fromneighboring Benin, Niger, and Cameroon.The terminal handles imports of consumergoods, foodstuffs, motor vehicles, machinery,and industrial raw materials. Lagos, Apapa,has traditionally played the role of the majorpublic port in Nigeria. Lagos Port Complex(port of Lagos) is located at the Apapa area ofLagos, South West Nigeria. Apapa Port’soperational area consists of standard berthingarea, cargo handling, stacking areas, andstorage facilities.

Ports in Nigeria have undergonesignificant reforms. However, congestion isstill a concern. As the economy hascontinued to grow since the booming oiltimes, there is a need to develop portcapacity to keep up with demand.According to the Nigerian Ports Authority,the main challenge for Nigeria is to scale upinvestment in ports in order to meet changesin vessel sizes and architecture.

Dakar is the principal port servingSenegal and the surrounding landlockedcountries. The Port of Dakar handlescontainer, general cargo, dry and liquid bulktraffic. Growth in the container sector isconstrained by lack of available capacity andfacilities to speed up the loading/offloadingprocesses to ensure faster turnarounds.

(vi) Island Countries

These include the Cape Verde Islands andSão Tomé and Principe in the AtlanticOcean and Madagascar, Mauritius, and theSeychelles in the Indian Ocean. The otherisland countries have smaller ports and donot handle large vessels, which also reflectsthe size of their economies. The generalobservation is that the larger the economy,the busier the port. Unlike the islandcountries in the Caribbean (which haverelatively larger economies), the Africanisland countries (with the exception ofMauritius) are visited by few shipping lines.This increases the cost of shipping.

Port Louis in Mauritius is located on animportant trading route between Africa andAsia and is the busiest port among the islandcountries. In 2007 it handled 413,828 TEUsand ranked as one of Africa’s 10 busiestports. The Mauritius Container Terminal is



the largest, covering an area of 274,500 sqm. The port is able to handle post-Panamaxvessels; it has 5 post-Panamax ship-to-shoregantry cranes. According to the EnablingTrade Index 2009, Mauritius has the highestscore (33) in Africa. However, the poorestscore is in the quality of transport services,which leads to delays in shipping.

Madagascar’s main port is Toamasina,which has a storage capacity of 2,300 TEUs.

In 2007 the port of Toamasina handled112,427 TEUs. The port facilities are justadequate to handle the volume of cargoconsidering the size of the economy. Theother smaller islands (Seychelles, CapeVerde Islands and São Tomé and Principe)handle even less cargo, also reflecting thesizes of their economies.




Flag Oil tankers Bulk General Container Other types Total

carriers cargo cargo

Algeria 26 234 75 0 442 777

Angola 8 0 12 0 26 47

Benin 0 0 0 0 0 0

Cameroon 69 0 3 0 6 79

Cape Verde 4 0 13 0 6 23

Comoros 243 224 480 5 57 1,010

Congo 0 0 0 0 1 1

Congo (DR) 2 0 1 0 14 17

Côte d’Ivoire 1 0 0 0 4 5

Djibouti 0 0 3 0 1 4

Egypt 345 778 332 58 134 1,646

Equatorial Guinea 1 0 6 0 13 19

Eritrea 3 0 19 0 3 25

Ethiopia 0 0 125 0 0 125

Gabon 1 0 4 0 3 8

Gambia 5 0 5 0 2 12

Ghana 5 0 15 0 67 87

Guinea 0 0 0 0 9 9

Guinea-Bissau 0 0 0 0 2 2

Kenya 8 0 2 0 6 16

Libya 13 0 62 0 24 99

Madagascar 17 0 18 0 6 32

Mauritania 0 0 1 0 24 25

Mauritius 0 8 15 0 43 66

Morocco 113 0 41 90 122 365

Mozambique 0 0 11 0 17 27

Namibia 0 0 4 0 52 56

Nigeria 384 13 28 0 99 524

São Tomé & Principe 1 7 32 0 2 42

Senegal 0 0 2 0 17 18

Seychelles 111 0 4 0 30 145

Sierra Leone 105 7 232 5 23 372

Somalia 2 0 5 0 4 10

South Africa 10 0 0 30 70 110

Saint Helena 0 0 0 0 1 1

Annex 2.2: African Merchant Fleet, by Flag of Registrationand Type of Ship, as of January 2007 (dwt 000s)



Flag Oil tankers Bulk General Container Other types Total

carriers cargo cargo

Sudan 1 0 26 0 1 29

Togo 0 0 4 0 8 12

Tunisia 67 26 3 0 25 122

Tanzania 14 0 23 0 2 39

Total 1,548 1,299 1,606 187 1,367 6,007

World fleet 382,975 367,542 100,934 128,321 62,554 1,042,328

Percentage of world fleet:

Africa 0.40 0.35 1.59 0.15 2.19 0.58

Developing countries of

Asia 21.97 25.00 29.06 16.45 16.09 22.69

Developing countries of

S. America 2.28 1.39 4.27 0.52 4.39 2.07

Developed countries 20.37 12.40 17.14 28.43 31.71 18.92

Source: UNCTAD (2008).


With the growth in world trade spurred bythe reduction in government-imposedtransaction costs (e.g. customs levies andtariffs), transport costs have become a muchmore significant factor in overall trade costs,as outlined in Chapter 1. This change hasput pressure on the port subsector, which isa key component in the logistics chain.

Consequently, over the last 50 years, theport subsector has gone through significantchanges at the global level. One of the mostnotable reforms is deregulation, which hasled to more competition. Prior to thereforms, competition between ports wasalmost nonexistent, and featured a fewmajor transport operators who controlled

C H A P T E R 3

Reforms and the Regulatory Framework ofAfrican Ports

(D) AfricanBank 2010 Ch3 8/10/10 10:32 Page 76

the bulk of operations from port-to-port. Asa result of the deregulation, competitionacross ports has increased across severaldimensions.

First, a number of new ports haveemerged in Africa as part of the decentral-ization process and this has increasedcompetition between ports at subregionaland national levels. Second, competition forthe port market has intensified as privateoperators seek to win concessions. Third, onthe shipping side, the explosion of maritimeservices has led to the dismantlement of theliner conferences1 that divided up themarket with little or no competition acrossliners. Fourth, greater competition acrossdifferent modes of transport has putpressure on the port subsector. If thesereforms have contributed to improvementsin efficiency and a reduction in the cost ofmaritime services, the results have beenuneven, varying across subregions andcountries, depending on the institutionalenvironment.

This chapter focuses on institutions andon the role of the regulatory framework inincreasing the efficiency of maritimeservices. Weak institutions have a negativeimpact on trade through several channels.

First, poor management contributes todelays at the port level, as it slows theloading and unloading of cargo. Weakinstitutions also increase delays at theborder, when cumbersome customs pro-cedures slow the movement of goods atentry and exit. High taxes and customs fees,sometimes accompanied by extortion alongthe import–export chain, characterize thosecountries with a weak regulatory frame-work.2 Third, they can lead to inefficientregulation and control of the fleet, leadingto substandard safety levels and labor rightswhich ultimately cause delays and affecttrade adversely. All these inefficienciescontribute to high trade costs along thelogistics chain. A key issue is whetherregulatory reform can be successful in anenvironment with weak governance at thesectoral level.

Although institutional reforms havetaken place in the African port subsector,many countries have not yet adopted global“best-practice” methods, resulting in a greatdisparity across several measures of portefficiency. To give an example, in NorthAfrica, average port costs on 20-ft containersamount to Euro 370 in Casablanca, Euro 210in Rades-Tunis, and Euro 70 in Alexandria.On the other hand, average port transitdelays total 15 days in Alexandria, but only9 days in Casablanca and Tunis (Kostianis,2005).

Reforms and the Regulatory Framework of African Ports 77

1 A liner conference is an agreement between twoor more shipping companies to provide a scheduledcargo and/or passenger service on a particular traderoute under uniform rates and common terms. SinceOctober 2008, the EU has banned liner conferencesfor shipping companies serving EU ports byabolishing the Far East Freight Conference (FEFC),following the example of their Americancounterparts. This decision implied the banning ofcertain activities, in particular price fixing andcapacity regulation.

2 Empirical evidence in Kandiero and Wadhawan(2003) shows that trade performance as measured bytrade openness (trade to GDP) will yield optimalbenefits if the quality of institutions (i.e. lesscorruption in customs) in developing countries isimproved substantially.


Before designing and carrying out anyport reforms, a detailed and completeassessment of the objectives that the publicsector is seeking to achieve should be drawnup. The participation of the private sector,even if deemed beneficial or resulting inimprovements in port efficiency, should notbe considered as an end in itself. Indeed,reforms to increase port privatization shouldbe a means to achieve precise and clearpublic interest objectives, taking intoaccount economic and social needs. In thiscontext, the objectives of port sector reformcould range from expanding/ modernizingcontainer-handling capacity, to stimulatingeconomic growth, to reducing governmentexpenditures on the sector, so that limitedpublic funds can be channeled to othermore pressing social needs. Private partici-pation in port services, and more generally,in the infrastructure sector, is but one of themany instruments available to solve specificproblems and to achieve explicit publicinterest objectives.

This chapter reviews the reforms in theport subsector in Africa, focusing on theregulatory framework and several efficiencyindicators of port services. It also comparestrade costs in Africa with those of otherregions. The analysis encompasses portmanagement models that range from fullystate owned to fully privately owned (thelatter being when the private sector owns thehard infrastructure as well as delivering portservices). In view of fact that the quality ofgovernance varies across countries and thatports deliver both public goods and privateservices, there is a need to adopt appropriateownership and regulatory structures, whichare likely to be country-specific.

This chapter then moves on to discussbroad trends in port reforms across Africansubregions, contextualizing these within thecategories of port management modelspresented previously. We then turn ourattention to trends in the reform of theregulatory framework: the institutions, theregulation of the fleet, and port manage-ment. The final section of the chaptersituates these African reforms within theglobal framework, using several indicatorsranging from perceptions by business tomore comparable and standardizedmeasures drawn from aggregate indicators.The comparisons show that progress isbeing made, although more efforts arerequired to compete on a global scale.

Institutional Set-up of PortManagement in Africa

Globally, 80 percent of container traffic ishandled by commercial global operators,such as Dubai Ports, Hutchison, Port ofSingapore Authority (PSA), and InternationalContainer Terminal Services Inc. (ICTSI),who won concessions to invest and operatethe world’s major common-user containerports under the “landlord” scheme. In Africa,however, as discussed below, about 50–70percent of traffic is still handled by public/government operators in tool ports or publicservice ports. It was observed that in aconsiderable number of African ports, publicsector ownership of the port infrastructureand superstructure, together with directinvolvement of the ministry in the provisionof port services, has generally beenresponsible for inefficiency and non-profitable performance. Two major genericreasons were highlighted in the Bank Review



of the Maritime Sector in Africa (AfDB, 2001):

(i) Regulation of tariff structures forships and other services at levelsbelow the cost of providing suchservices and some cases, even belowthe break-even point; and

(ii) Overstaffing of the Port Authorities(PA), resulting in governmentsubsidy in regard to both recurrentand capital expenditures. This issuewill be discussed in the next chapter.

Several factors have contributed to thissituation:

• A large number of African ports aretoo small to be commercially attract-ive to private investors;

• Commercial and political uncertaintiesin several African countries, which arelinked to the institutional and politicalenvironment, further deter privateinvestment;

• Many African ports operate in amonopolistic environment, whilecomplex cross-border procedureseffectively limit inter-port competi-tion.3 This makes it difficult for thepublic sector to privatize the portservices, since strong public regula-tory institutions are needed to controlthese natural monopolies;

• Ports may face opposition to reformsfrom trade unions and vestedinterests, who oppose private sectorinvestments that might reduce directemployment in their ports.

Alternative Forms of PortAdministration

Port reform is complicated by several uniquecharacteristics. First, ports provide acombination of public goods (e.g. the coastalprotection works necessary to create portbasins) and private goods (e.g. cranes,quays, and other “hard” infrastructure). Thepublic goods are indivisible and nonrival,which excludes private sector involvement,thereby justifying public intervention fortheir provision. This is important since thesepublic goods create positive externalities(increases in trade and trade-relatedservices) and social benefits over and abovethe market price that would be paid byprivate commercial operators. Also, ports areincreasingly integrated into global logisticschains and the public benefits they provideare taking on regional and global attributes.This complicates the administration of ports,which is in the hands of the port authority(PA4) — a governing body, generally public,which plays a coordination role, ensures theproper use of common facilities, and takescare of safety issues as well as the generaldesign of port facilities (see Box 3.1).

Three types of organizational modelsaccommodate this diversity: the landlord


3 For instance, traders from Tanzania will mostlyuse Dar es Salaam while those from Kenya useMombasa only. This differs from the situation inEurope, where a lot of German cargo uses Rotterdam(the Netherlands), the largest port for Norwegiancargo is Gothenburg (Sweden), and Polish cargotransits mostly through Hamburg.

4 PA is interchangeably referred to as “PortAuthority,” “Port Management,” or “Port Administra-tion,” each definition describing the functions carriedout by the PA.


port; the tool port; and the services port(public or private) models. As shown inTable 3.1, regardless of the model selected,the physical infrastructure (berths, etc.) isboth owned and managed by the PA.

However, depending on the model chosen,the superstructure and equipment (cranes,etc.) may be owned/managed by either thePA or by the private operator, as detailedbelow.


Box 3.1: The role of the Port Authority

The term Port Authority (PA) was defined in 1977 by a commission of the European Union (EU) as a “State,

municipal, public, or private body, which is largely responsible for the tasks of construction, administration

and sometimes the operation of port facilities and, in certain circumstances, for security.” The PA can be

created at different government levels: national, regional, provincial, or local. The most common form is the

local port authority. In this case, the PA is an authority administering only one port. However, in some African

countries national port authorities still exist, as in Tanzania and Nigeria.

In principle, the role of the PA should be confined to the provision of infrastructure (and superstructure,

depending on the PA model) and the coordination of port services. Often though, the PA has broad

regulatory powers relating to both shipping and port operations. It is also responsible for applying

conventions, laws, rules, and regulations (e.g. relating to public safety and security, the environment,

navigation, and healthcare) and it can be assigned police powers (World Bank, 2007). The PA can also

publish port bylaws, with rules and regulations concerning the behavior of vessels in port, use of port areas,

and other issues. The PA also provides the investment planning and financing, or technical and economic

regulation of the private operators.

Statutory powers of a national port authority

As stated in the UNCTAD Handbook for Port Planners in Developing Countries (based on the assumption

that operational decisions will be taken locally), a national port authority should have the following statutory

powers:

• Investment: Power to approve proposals for port investments for amounts above a certain level. The

criterion for approval would be that the proposal was broadly in accordance with a national plan,

which the authority would maintain.

• Financial policy: Power to set common financial objectives for ports (for example, required return on

investment defined on a common basis), with a common policy on what infrastructure will be funded

centrally versus locally, and advising the government on loan applications.

• Tariff policy: Power to regulate rates and charges as required and to protect the public interest.

• Labor policy: Power to set common recruitment standards, a common wage structure, and common

qualifications for promotion; and the power to approve common labor union procedures.

• Licensing: When appropriate, power to establish principles for the licensing of port employees or

agents.

• Information and research: Power to collect, collate, analyze, and disseminate statistical information on

port activity for general use, and to sponsor research into port matters as required.

• Legal: Power to act as legal advisor to local port authorities.

Source: World Bank (2007)


In the services port model, theinfrastructure, superstructure and servicesare all managed by a PA which could bepublic (public services port) or private(private services port). In the tool portmodel, a public PA owns the superstructureand equipment, while the private sectoroperates the facilities through licenses ormanagement contracts. This tool port modelis usually adopted for medium and smallports where, because of the small volume,the private sector lacks incentives to investin infrastructure.

In the landlord port model, the PA ownsthe facilities to avoid the risk of monopoliza-tion of essential assets by private firms. ThePA then either rents or awards in concessionthese facilities to private operators, leaving asmany activities as possible in the hands of theprivate sector (Matto et al., 1999; Trujillo andNombela, 2000).

Until the 1980s, private sector involve-ment in ports was negligible owing to thecombination of restrictive labor practices,centralized control by the government, andan unwillingness to invest in infrastructure.On occasion, investments in infrastructurewere not aligned to the needs of foreigntrade and shipping.

A first shift occurred with the recognitionthat the role of the public sector should berestricted to the provision of public goods. Asecond occurred with the outsourcing ofpublic services to the private sector. Portgovernance successively evolved through anationalization period, when nationalplanification was prevalent and publicownership of economic activities waswidespread, to a period where both publicand private port operations were involved.The most recent wave of privatizations hasseen a shift toward the landlord port model,


Table 3.1: Main types of organizational structures for Port Authorities (PAs)

Organizational type Infrastructure Superstructure & Equipment Services

Landlord port PA owned Privately owned Privately managed

PA managed (1) Privately managed

Tool port PA owned PA owned Privately managed

PA managed Privately managed

Public Services port PA owned PA owned PA managed

PA managed PA managed

Private Services port (2) PA owned PA owned PA managed

PA managed PA managed

Source: Estache and Trujillo (2008a).

Notes: (1) In some cases privately managed; (2) In this case the Port Authority is a private organization.


which is dominant in terms of TEU move-ment. This has come to be the preferredmodel at the international level for itsefficiency and productivity (especially forlarge and medium ports).

In Africa the public services port is thedominant port management model. When agovernment contemplates a shift away froma public services port to a private servicesport, it needs to determine what risks thepublic sector can afford to bear and whatrisks it can shift to the private sector. This isbecause port operations require severalcategories of long-lived assets, some ofwhich are more amenable to privateinvestments than others. Charges forinfrastructure equipment (on-dock storageand transshipment facilities) can be awardedthrough competition, whereas charges forbreakwaters, channels and turning basinsare essentially a public good with a highmarginal benefit and a low marginal cost, sothat a private operator would make amonopoly profit by charging a price basedon user benefits. Should this last category ofhigh-cost infrastructure be placed in thehands of private operators (as it wouldunder the private sector model, as indicatedin Figure 3.1), the private sector investorswould face a high-risk tradeoff betweentheir ability to set prices independentlywithout regulatory constraint whenconsidering their very long-term investmentdecision. This explains why countries withweak governance may fail to procure thehoped-for investment from the privatesector in a reform that concessions servicesof long-lived assets to the private sector.

The tradeoff shown in Figure 3.1 mayhelp explain the patterns of public–private

involvement in the port subsector acrossAfrica, which are displayed in Table 3.2.Investing in high-cost and long-terminfrastructure carries high risks for theprivate sector, in the absence of anindependent and autonomous regulatoryframework (such an institutional frameworkis considered as “best-practice” for the portsubsector). Consequently, in Africa oneobserves few instances of landlord andprivate services ports where thesuperstructure and equipment are privatelyowned.5

Port Reform in Africa

Much progress has been made in the lastdecade toward institutional reform in theinfrastructure sector, with ports achieving thegreatest success after telecommunications and


5 The World Bank Port Reform Tool Kit ( June2003) discusses choices and options for reforms inthe port subsector.

Figure 3.1: The public–private balance

of risk and regulation

Source: World Bank (2007), module 2, box 9.

PublicService

Port

ToolPort

LandlordPort

PrivateService

Port

Low High

Low

High

Importance of Regulation

Private

Secto

r R

isk


ahead of roads and railroads, where privatesector financing has been low. Institutionalreform in the infrastructure sector in general,including ports, has placed emphasis on thequality of governance in state-ownedenterprises (SOEs) of which many remain,particularly in the port subsector.

Disparities in economic and institutionaldevelopment across African countries makeit difficult to pick out a standard “African”model of reform. Table 3.2 shows that thepublic–private partnership (PPP) takes manyforms which vary from region to region andeven within the same country. According to

a 2001 UNCTAD survey,6 some 24 of the 34ports in the sample featured private sector


6 In 2001, UNCTAD carried out a survey of 50African ports across all regions, entitled “Expériencesde la participation du secteur privé dans les portsafricains” [The experience of African ports withprivate sector participation]. The objective was toobtain an idea of the involvement of the privatesector in port management and development and inprivatizing services. The replies (34 relating to 46ports) came from either the port authorities or theresponsible ministry, even for ports that wereprivately managed. The results of the survey alludedto here were not published.

Table 3.2: Port management models and regulatory agencies in selected African countries

Country Management Model Agency responsible for regulation

Djibouti Management concession Ministry of Transport

Sudan Service port Sudan Sea Ports Corp.

Kenya Service port Ministry of Information, Transport, and

Communications

Tanzania Part landlord, part service port Tanzania Ports Authority

Madagascar Part landlord, part service port NA

Namibia Service port Namibian Ports Authority

South Africa Service port Transnet National Ports Authority

Angola Part landlord, part service port Ministry of Transport, Merchant Marine and

Ports Division

Democratic Republic

of the Congo Service port NA

Congo (Brazzaville) Service port Port Autonome de Pointe Noire

Cameroon Part landlord, part service port National Ports Authority

Nigeria Landlord model Nigerian Ports Authority

Benin Service port Port Autonome de Cotonou

Ghana Landlord model Ghana Ports and Harbor Authority

Côte d’Ivoire Part landlord, part service port The Autonomous Port of Abidjan

Senegal Part landlord, part service port Direction of Ports and the Interior Maritime

Transport

Cape Verde Service port NA

Source: Cameron (2008); Ocean Shipping Consultants (2008).


participation while seven ports had plans tobring in private operators by 2005(UNCTAD, 2003). Yet in Africa, where asingle port is a natural monopoly, it istempting for the government to maintaindirect ownership control and operation,which allows the port to cross-subsidizeother government activities.

Further, transit operations account forquite a large share of total activity. The port ofDjibouti, which absorbs 75 percent ofshipments currently destined for Ethiopia, is anotable example (UNCTAD, 2003). Regionalcompetition for the lucrative transshipmentbusiness provides the impetus for reformsleading to a public–private partnership.According to the 2001 UNCTAD survey, whenentering into partnership with the privatesector, the main objectives of African portauthorities were to: enhance the productivity,efficiency, and quality of their services (45percent); modernize their infrastructure (17percent); reduce port costs (20 percent each);and attract private investors (17 percent).

Overall, private participation in ports hasbeen quite successful in 24 countries in SSA,with 26 container terminal concessionsinvesting a total of US$ 1.3 billion since themid-1990s. More importantly, beforeexamining the varied regional experience, itis useful to keep in mind one of the findingsof the recent Africa Infrastructure CountryDiagnostic (AICD) study (World Bank,2009). This concludes that even though theprivate concessions approach has notsubstantially bridged the financial gap ininfrastructure needs, it has made a signifi-cant contribution to improving operationalperformance, leading to the recovery offunds lost to various sources of inefficiency.

Subregional Trends

The participation of the private sector hasgenerally been initiated through the awardof concessions to operate the port servicesand terminals, rather than through the saleof public port assets (Trujillo and Tovar,2007). Concession contracts can take diverseforms, depending on the port size, initialconditions, and the type of serviceconsidered. The types of contract include:BOO (Build, Operate, and Own); BOT orROT (Build/Rehabilitate, Operate, andTransfer); joint-ventures; leasing; licensingand management contract (Trujillo andNombela, 2000; Guasch, 2007).

The use of concession contracts hasemerged as the preferred method for privatesector participation, rather than sellingseaports’ hard infrastructure assets to theprivate sector. The recent Word Bank (2009)AICD report concludes that there is greatpotential to continue granting concessions.For example, the port of Maputo inMozambique has been fully privatized on a15-year renewable concession basis (DPWorld/Grindrod).

It is now common practice for containerterminals to be concessioned out to inter-national operators, such as DP World(Djibouti, Dakar, Algiers, and Maputo), APMoller (Walvis Bay, Luanda, Lagos, andTema) and Hitchinson (Dar es Salaam andMombasa). South African ports are the majorexception to this trend, as the governmentthere has decided to keep containerterminals under state control (Transnet PortTerminals).

General cargo and special terminals arealso often privately operated, particularlythe stevedoring and warehousing opera-



tions. Large dedicated bulk terminals arealso most often privately operated,particularly when linked to a singlecustomer or consortium. The large iron oreterminal at Saldanha Bay in South Africa,handling more than 40 mtpa, is, however,operated by Transnet Port Terminals, withTransnet also being responsible for theprovision and operation of the 800-kmdedicated rail line.

The highest rates of private sectorparticipation are recorded in North and EastAfrica (41.7 percent) and in South Africa(37.5 percent). In East and Southern Africa,this reflects the political commitment by thegovernments of the Southern AfricanDevelopment Community (SADC), whohave dedicated financial and technologicalresources and expertise to modernize andincrease the efficiency of their national andregional transportation systems. SADC alsorecognized the need to create a liberalenvironment conducive to the developmentof a partnership with the private sector foroperations and investments in the portsubsector (UNCTAD, 2003; Cameron, 2008).

In West Africa, the privatization processis following two divergent paths (Harding etal., 2007). The first has led to the establish-ment of the statutory port companies, whooffer shares. Shares are at present ownedonly by Treasuries, but equity participationby others is being opened up. The secondpath follows the continental trend towardthe concessioning of specialized terminals.For example, in Senegal stevedoringservices have been transferred to the privatesector in Dakar port, which has progres-sively evolved toward a landlord portsystem (Trujillo and Nombela, 1999).

Implications of Privatization

Notwithstanding growing participation bythe private sector, especially in portoperations and services, in Africa the publicsector still plays a major role in the seaportsystem (Baird, 2000). In the vast majority ofAfrican countries (and elsewhere), thepublic sector retains a central role in seaportplanning, regulation, development andinvestment through the PA, marine depart-ment, or other agencies. In many respects,governments seem unwilling to fullyprivatize the industry, preferring to retaincontrol over what is deemed to be a strategicnational asset. This is despite the fact thatprivate sector participation in portoperations in Africa has generally been seenas successful, because it is almost alwaysfinancially viable, with pricing influenced bya largely captive market.

As a result, the landlord port model hasnot been widely adopted in Africa and theinvolvement of international privateoperators remains very low. So far, onlyNigeria and Ghana have moved towardpartial or complete adoption of the landlordport model, while several francophonecountries have adopted a hybrid model.According to the review conducted byOcean Shipping Consultants in 2008, thistrend is striking. Of the 17 African countriesincluded in their study, nearly half retainedthe public services port model, while ninecountries had begun to privatize certainareas by concessioning out to the privatesector key container facilities (OceanShipping Consultants, 2008).

One important consequence ofprivatization is that the governmentexpenditures are lowered as the role of



public sector involvement is reduced.Consequently, some of the costs aretransferred to the private sector, which will,ultimately, boost government revenuesthrough concession agreements and taxes(World Bank, 2007). In general, the privatesector also offers greater opportunities interms of responsiveness and adaptation tothe services required from the shippingcompanies. In addition, privatization favorsthe transfer of technical know-how for moreefficient terminal management (Gillen andCooper, 1995). On the other hand, theseaport industry has large capital needs,especially in the context of reduced publicsubsidies. Consequently, private financinghas become a very important opportunityfor many countries. Indeed, total invest-ments from the private sector for containerterminal concessions in SSA has reachedUS$ 1.3 billion since the mid-1990s, whichhas gone some way toward bridging theinfrastructure financing gap.

Studies on the impact of privatization onAfrican port efficiency indicate improve-ments across several measures ofproductivity (Al-Eraqi et al., 2007; Clark etal., 2004; Valentine, 2000). Enhancedproductivity has been achieved mainly atcontainer terminals where privateinvestment has occurred. In containerterminals, an increase in traffic and greaterefficiency in services as well as enhancedintraregional competition were observedfrom the very first year of private-sectorinvolvement (UNCTAD, 2003; Foster, 2008).Certain ports, however, are still sufferingfrom the effects of substandard practicesand poor performance (delays, missinggoods, etc.) of other services such as

customs and security, and from thedeficiencies of overland transportation suchas railroads and roads. The case of theApapa Container Terminal in Lagos, Nigeria,described in Box 3.2, illustrates how suchproblems can impact efficiency.

As we have seen, not only can privatesector participation improve productivity,but it can also open the way to the adoptionof modern technologies and managementpractices that have revolutionized the worldmarkets for shipping and cargo handling.The mobilization of private capital andmanagement skills could also improveefficiency and help to develop a logisticssystem in terminal operations and otherareas in the port structure (World Bank,2009).

In spite of this overall positiveassessment of private sector participation,the relationship between ownership struc-ture and performance is complex, as it goesbeyond “hard” infrastructure to encompass“soft” institutional reform (Gonzalez andTrujillo, 2009; Brooks and Cullinane, 2006;Estache and Trujillo, 2008). For example,prior to moving toward a more privatizedtype of management, the culture of perform-ance measurement might be lacking; thismay need to be introduced by privateoperators. Second, the privatization processis predicated on there being a robustregulatory and governance framework inplace. Research suggests that deregulationmay have a negative impact on efficiency inthe short term, as there are costs incurred inmoving from a regulated to a deregulatedenvironment. Third, privatization of the portsubsector usually generates numerousderegulations and reforms in peripheral



sectors — in customs, shipping, stevedoring,and handling companies. All these issuesneed to be factored into the decision tomove toward a more privatized form of portmanagement.

The complementarities across reformsmake it difficult to isolate and measure theimpact of port privatization and perform-ance. However, as shown in the case of theApapa Container Terminal in Lagos (Box3.2), privatization alone is not enough toachieve maximum efficiencies — it must beaccompanied by regulatory reform.

Regulatory Framework

An appropriate regulatory framework,covering labor management and theregulation of the fleet, is a prerequisite forthe maritime sector to function efficientlyand competitively as it creates the condi-tions for a contestable market structure forport and maritime services. This frameworkshould cover various functions: thefunctioning of markets and the setting oftariffs, revenues, or profits; controllingmarket entry or exit; and maintaining fairand competitive behavior and practiceswithin the port subsector (World Bank,


Box 3.2: Obstacles to port efficiency: the case of the Apapa Container Terminal, Lagos

Lagos port has long been notorious for inadequate facilities and congestion. As part of a broader program

of port reform in early 2006, the Nigerian PA awarded a concession to APM Terminals to manage, operate,

and develop the Apapa Container Terminal, with the remit to increase capacity from 220,000 TEUs per year

to 1.6 million TEUs. Within months of awarding this concession, delays for berthing space at the Apapa

terminal had reduced significantly. Moreover shipping lines dropped their congestion surcharge from Euro

525 to Euro 75 per TEU, saving the Nigerian economy US$ 200 million a year. By early 2009, new gantry

cranes had been acquired to triple the original capacity of the port.

Nevertheless, while the port’s equipment is now able to handle more than 500 containers per day for

customs examinations, by the end of each day the majority are returned to stacking. By January 2009 the

port was clogged with uncollected containers, and at the end of February 2009 the head of the Nigerian PA

announced a temporary suspension of ship entry with immediate effect — to last until some time in mid-April

to enable terminals to clear “alarming” backlogs. The controller of the Nigeria Customs Service for Apapa

blamed the backlog on the need to physically examine 100 percent of containers because of the high

incidence of concealment and false declarations by importers.

However, this was not the only problem, as even cleared containers were not being collected. At the end

of January it was reported that 9,741 containers were waiting in the port for delivery to the importers. Yet

851 of these had already been cleared by customs, all charges paid, and with documentation completed,

but not picked up by agents. The Nigerian PA consequently proposed introducing demurrage charges of

US$ 4 per TEU in a bid to force owners to move them out of the ports. However, the agents blamed a lack

of trucks, arguing that many had been booked to empty containers.

While the moratorium on the entry of new vessels was lifted in early March 2008, some backlogs and

delays persisted and significant organizational and regulatory problems remain.

Source: From press reports assembled by Cornelis Kruk. Also see World Bank (2009; Chapter 12).


2007). As ports evolve into landlord portauthorities, for example, liberalization andderegulation reduce monopoly power forcertain port services, allowing free entry byprivate service providers. On the otherhand, in activities where there is a risk thatprivate operators might adopt monopolisticpractices, oversight of pricing practices by aregulator will help to scale up efficiency.

Regulatory institutions are also neededto exert some degree of control over theinfrastructure assets used by private firms.The task of the regulator is a difficult one asit takes place under asymmetric informationconditions, in that firms know their costsand market conditions better than theregulator does.

For contestable activities, servicespreviously provided by the public portauthority such as pilotage, tug assistance,vessel stevedoring, cargo handling, storage,and yard services may fall under theresponsibility of private operators. Privateparticipation in this regard reduces subsidiesand costs, and helps achieve full costrecovery from users directly (Notteboomand Wilkelmans, 2001). However, the profitmaximization objectives of private operatorsneed to be checked by regulatory oversightto control the exercise of market power, toensure that the public goods characteristicsof many port sector activities are notundersupplied and, more broadly, to ensurethat the public interest is upheld.

Regulatory Institutions

Typically, the Ministry of Transport overseesthe development of transport and portpolicies and the preparation and imple-mentation of transport and port laws,

national regulations, and decrees. Before theratification of national laws and regulation,the Ministry makes sure that they (i)incorporate relevant elements of inter-national conventions,7 and (ii) represent thecountry in bilateral and multilateral port andshipping forums and during the negotiationof agreements concerning waterborne orintermodal transit privileges. The Ministryalso prepares financial and economicanalyses to evaluate the socioeconomic andfinancial feasibility of projects, taking thecontext of national policies and prioritiesinto account.

As to implementation, in manycountries, independent bodies such as thetransport directorates are hosted within aministry to carry out executive functions. Atypical list of duties performed by a maritimeand ports directorate is long (indicating thepower of the regulatory body) and includes:the inspection and registration of ships andshipping companies; the protection of themarine environment; the implementation oftraffic safety measures; compliance with theInternational Ship and Port Facility SecurityCode; the maritime education and trainingof merchant officers and seafarers throughmaritime academies, exams and licenses; theexecution of the national port policy; theconstruction of protective works, sea locks,port entrances, the control of port state(based on the terms of the Paris and TokyoMoUs); in the case of a maritime incident,


7 For example, the International Convention ofSafety for Life at Sea (SOLAS), the United NationsConvention on the Law of the Sea, the InternationalConvention for the Prevention of Pollution fromShips (MARPOL). (See World Bank, 2007.)


the investigation and adjudication; theregulatory and licensing functions; and theconstruction and maintenance of the vesseltraffic systems and aids to navigation andthe search and rescue functions.

In an environment where competitionacross ports and across modes of trans-portation is increasing, it is important forport regulators to be given autonomy tocarry out their regulatory functions. In Africathere is no evidence of the independentregulation of ports outside of South Africa8

(Cameron, 2008). Nigeria has plans to set upan independent regulator as part of its portreform package, but has not moved beyondthe planning stage. The regulatory functionis therefore undertaken by other bodies insuch cases, typically the Ministry ofTransport or other government agency, suchas a national or local port-managementbody, or public port authorities. Of the 13countries featured in Table 3.2, four areregulated at the Ministry of Transport leveland the rest by port authorities or portmanagement bodies that are directly orindirectly under government control.

A sound and transparent legal frame-work is therefore necessary to ensure

credibility, openness, and transparency inthe reform process and to define PPPs.Moreover, to ensure the success of thereform process, it is essential to establishprocedures for reducing the workforce in asocially acceptable way. This is important inthe context of a shift toward container-ization, which involves more capital-intensive techniques and a substitution ofcapital for labor. In a number of ports indeveloping and developed countries,overstaffing has been a contentious issuethat has to be addressed in port reorgan-izations (see Nigerian and Tunisianexperiences detailed in Box 3.3). Innumerous cases, the workforce in ports isbloated and the success of reforms rests ona downsizing of the labor force.

Regulation of the African ShippingIndustry

As the world shipping industry has becomemore capital-intensive and more technicallydemanding, it has witnessed strong con-centration. For example, in 2009 the top 10service operators controlled 51 percent ofthe worldwide containership TEU capacity(UNCTAD, 2009; Table 32). The number ofactive African shipping lines has decreasedand they are being marginalized. At theglobal level in 2009, 35 countries controlledover 95 percent of the world merchant fleet(UNCTAD, 2009; Table 12). This list did notinclude any African countries.

For container shipping, regulationspertaining to issues such as capacity andquality of shipments have a large impact onmaritime transport. Reforms aimed atharmonization would reduce costs and sincemaritime transportation is international,


8 When the National Ports Act came into effect in2006 in South Africa, a Ports Regulator wasestablished, becoming operational in 2008. The PortsRegulator fulfills the following functions: (i) itregulates the port systems in line with thegovernment’s strategic objectives, including theannual approval of National Ports Authority tariffs;(ii) it promotes an equitable access to ports andfacilitates and services provided by ports; and (iii) itmonitors the activities of the National Ports Authorityto ensure that it perform its functions in accordancewith the Act.


these reforms need to be carried out at aregional or global level. However, obtainingcooperation across different jurisdictions,regions, and countries is no easy task. Thisis particularly the case in Africa where, inspite of many regional trade agreements,little devolution of national powers tosupranational entities has taken place.However, some progress is being made atthe international level. Following manyyears of negotiations, a new set ofinternational rules to increase the securityand ease the growing volume of contain-erized trade has been drawn up and ratifiedby over 20 countries (see Box 3.4).

Despite the progress made in Africanshipping from the viewpoint of deregula-tion, the industry still labors under a numberof constraints. One is largely historic anddates back to 1983, to the entry into force ofthe UN Convention on the Code of Conductfor Liner Conferences, popularly known asthe “40-40-20 Rule.” This states that 40percent of freight should be allocated toshipowners established in the country oforigin, 40 percent to owners established inthe country of destination, and 20 percent toshipowners of any country (cross-traders)(Teravaninthorn and Raballand, 2009). TheRule was established to encourage the


Box 3.3: Integrating labor force reforms into port reforms: the cases of Tunisia and Nigeria

Tunisia

Tunisia has awarded 21 port concessions since 2000. The country has moved very cautiously along the path

of labor force reform since the concessioning process was legalized in March 1999, which led to the

establishment of the Code for Trade Maritime Ports. The principal objectives of the Code were to introduce

new work schedules, allowing the port to operate 24/7, in a drive to increase the efficiency of handling

activities, and create an incentive for manufacturing companies to ensure adequate training of the

workforce.

Discussions between the Office de la Marine Marchande et des Ports and labor unions and delegates of

the dockers’ corporation lasted several years until the parties finally reached an agreement in 2004. The

agreement made provision for the non-replacement of retiring dockers, indemnity by the government,

extension of social benefits until 60 years old, and gradual diminution of the powers of the dockers’

corporations.

(Source: Discussions with the Office de la Marine Marchande et des Ports, Tunisia)

Nigeria

The Nigerian port subsector has witnessed one of the most vigorous concessioning processes in Africa.

From 2003 to 2006, 21 concessions were granted to 15 different local and international terminal operators.

The government had to reach an agreement with labor unions on severance packages and to secure

funding for the retrenchments and pensions, and also had to prevent labor unions from calling widespread

strikes. Negotiations with labor unions lasted several months until agreement was finally reached on a

severance package in February 2006.


development of the shipping industry indeveloping countries, and to counteract theapplication of cartel-type arrangements byliner conferences. In fact, some have arguedthat this Rule led to market distortions andincreases in maritime costs, which had anegative effect on the development ofdomestic fleet industries for severalcountries in Africa (Harding et al., 2007;Teravaninthorn and Raballand, 2009).

In 1992, the European Court ruled that“liner conferences” were illegal monopolies.Despite this, they are still regularly used to

service many ports in Africa. For example,West and Central Africa countries are servedby four conferences: COWAC (Continent —West Africa Conference) covering tradebetween North Europe and West Africa;UKWAL (UK — West Africa Lines) for tradebetween UK and West Africa; CEWAL(Central — West Africa Lines) for tradebetween North Europe and Central Africa;and MEWAC (Mediterranean — West AfricaConference) for trade between theMediterranean region and West Africa(Harding et al., 2007).


Box 3.4: Convention on Contracts for the International Carriage of Goods Wholly or Partly

by Sea

After exhaustive negotiations between 2001 and 2008, a new Convention on Contracts for the International

Carriage of Goods Wholly or Partly by Sea (“the Rotterdam Rules”) was approved by the United Nations

Commission on International Trade Law (UNCITRAL) in July 2008 and was adopted by the UN General

Assembly on December 12, 2008. On September 23, 2009, 16 countries officially expressed their support

for the Convention by becoming signatories during an official signing ceremony in Rotterdam. As at January

6, 2010 the number of signatories had risen to 21, namely: Armenia, Cameroon, Congo, Denmark, France,

Gabon, Ghana, Greece, Guinea, Madagascar, Mali, the Netherlands, Niger, Nigeria, Norway, Poland,

Senegal, Spain, Switzerland, Togo and the United States of America.

This new international Convention provides a legal framework for a truly global industry across all the

applicable jurisdictions in order to provide legal certainty and uniformity for all stakeholders, shippers, and

carriers. The new Rotterdam Rules address the challenges of modern shipping trade: namely, the growth in

e-commerce; faster and bigger ships; the massive growth in containerization; quicker port turn-arounds; and

modimodal transportation whereby the operator undertakes the entire transport of goods from receipt from

shipper’s premises to final delivery. The Convention replaces the unimodal maritime liability regimes in the

Hague, Hague Visby, and Hamburg Rules.

Although the Convention will lead to increased liability for shipowners, it enshrines many valuable

provisions that seek to facilitate and regulate modern shipping practices. In particular it addresses the

lacuna that previously existed for maritime transport, where there is also multimodal carriage (both land and

sea legs). It clearly demarcates responsibility and liability during the whole transport process. The Rules will

apply not only to outgoing maritime transport but also to incoming. Furthermore, the Convention puts in place

the infrastructure for the development of e-commerce in maritime transport, to reduce documentation costs

and boost efficiency.

Sources: UNCITRAL website; also see Rotterdam Rules website at: http://www.rotterdamrules2009.com/cms/index.php


A further feature of the shippingindustry, which acts as a deterrent to anysmall, nascent shipping line, is theenormous cost of building ships (mega-carriers cost over US$ 100 million). This is amassive barrier to market entry and isexacerbated by the growth of container-ization. This impact was strongly felt after2004, as the number of line services andcompanies has decreased in several Africancountries. In Egypt, the number ofinternational companies providing servicesto the country’s ports fell from 61 in 2004 to47 in 2009, while in South Africa there arenow 30 companies, compared to 38 in 2004(Viohl and Hoffmann, 2009).

This trend raises concerns about theimpact of the continuing process ofconcentration in liner shipping, especiallyfor countries with a low connectivity.Typically, East Asian ports use vessels in the8,000–11,000 TEUs range, while mostAfrican ports cannot handle efficientlyvessels above 2,000 TEUs. Furthermore, thepoor connectivity of many African ports,resulting from their small container capacity(see Chapter 2, Map 2.1), means that largeinternational shipping lines are forced to useregional operators for transshipments,which increases shipping costs.9 Eritrea,Seychelles, and Somalia, for example, onlyrecord services from one single internationalshipping line. Liberia is served by twoproviders, while Cape Verde and SierraLeone are served by three liner companies.

The experience of the Caribbean reported inChapter 1 (Figure 1.5c) shows that freightcosts for a standard-size container are muchhigher when a port is served by only one ora limited number of ships. Figure 3.6 showsthat delays are another factor contributing tohigh freight costs in Africa.

Privatization of maritime transport inAfrica is one way to improve efficiency andshould lower costs. In the case of NorthAfrica, maritime transport betweenMediterranean countries is carried out bynational shipping lines which are subject tomultiple, sometimes conflicting regulatorysystems (such as the Code of Conduct ruledescribed above). In this environment, theexistence of a major national publicshipowning concern was considered to be aprecondition for any liberalization of themaritime transport subsector. However,these countries’ fleets are very old (seeTable 3.3), very expensive to run, and theirperformance is mediocre. Moreover, newprovisions regarding security and safety(deriving from the International MaritimeOrganization [IMO], the EU, the Inter-national Ship and Port Facilities SecurityCode [ISPS Code], etc.) have significantlyraised the cost of renovating the fleets. As aresult, North African countries are nowconsidering a regulatory framework whichshould enable private North Africanshipping lines to compete on the northernshore of the Mediterranean.

In the current environment of increasingcompetition in international maritime trans-port, regulatory efficiency of the Africanfleet has nonetheless improved. Forexample, port state control has becomeincreasingly efficient in Africa. This


9 For example, Maersk uses Salah (Oman) to serveEast Africa and Algeciras (Spain) and Tangier(Morocco) to serve West African trade in smallvessels.


concerns the control of foreign ships inports and was originally conceived to backup flag state implementation in order todetect substandard ships. The authoritiesverify whether the condition of the ship andits equipment comply with internationalrequirements. Port state control has provedto be very effective, as ships usually visitseveral countries during a single voyage. Inthis way, ships are regularly controlledwithout being delayed by unnecessary red-tape (IMO, 2003).

In SSA, three Memoranda of Understand-ing have been signed in recent years: theAbuja MoU for West and Central Africa; theMediterranean MoU for Northern Africa andother Mediterranean countries; and theIndian Ocean MoU covering Southern andEast Africa (IMO, 2003). The Abuja MOUwas signed in 1999 by 16 countries fromWest, Central, and Southern Africa.However, in their last annual meeting theparticipants reported weakness in its

implementation, due to the lack of neces-sary infrastructure and to insufficientpolitical commitment to carry out properflag state administration and port statecontrol (African Union, 2008).

One may turn to Liberia for an exampleof a successful fleet regulatory system. Thegovernment has set up an open maritimeregistry, which allows the country ofregistration to differ from the country ofownership.10 This is the second largestregistry in the world, and includes 3,100ships of more than 96 million gross tonnes,representing 10 percent of the world’s


10 Traditional reasons for choosing an openregister and running a “flag of convenience” vesselinclude: protection from burdensome income taxes,wage scales, and regulations. Liberia is the secondopen registry at the global level after Panama, andthe national fleet in this registry is virtuallynonexistent. In 2009, over 90 per cent of the shipsregistered in Liberia were foreign-owned, principallyby German and Greek companies.

Table 3.3: Age distribution of merchant fleets as at January 1, 2008

Type World Developed Transition Developing African African

Total Economies Economies Economies Countries Countries

including Open excluding Open

Registry* Registry*

Bulk carriers 12.7 11.9 17.8 12.7 14.0 18.0

Containerships 9.0 8.6 10.6 8.9 6.9 12.3

General cargo 17.1 13.4 20.0 17.6 17.3 22.1

Oil tankers 10.1 7.5 11.2 11.0 11.2 21.4

Other types 14.7 13.1 11.8 15.5 17.2 21.2

All 11.8 9.7 15.5 12.3 11.8 20.5

Source: UNCTAD (2006; 2008).

* Open registry: National ship registry under a national flag, which is open to ships of all nations regardless of nationality.


oceangoing fleet.11 The registry has beenadministered since 2000 by LISCR (theLiberian International Shipping andCorporate Registry), a US-owned andoperated company. The LISCR uses aworldwide network of nautical inspectors toconduct annual safety checks in order tosafeguard the quality of the shippingregistry. Consequently, the Liberian registryis “white-listed” by international safetyorganizations, indicating above-averagesafety performance. The open registrygenerates approximately US$ 18 million peryear in government revenues.

Assessing Reforms

The standard reform package for theinfrastructure sector calls for marketrestructuring through divestiture and forprivate sector involvement, to include theestablishment of independent regulators.This package applies to the port subsectoras well as to the other subsectors (utilities,water, roads, railroads, and airports). Theexpected results from implementing thispackage of reforms are enhanced competi-tion and increased efficiency. However,although some progress has been made inAfrica, it has been uneven. Consequently,Africa still lags behind other regions in termsof efficiency indicators for the trade logisticschain.

Institutional Reforms

A comparison of the quality of infrastructureacross global regions reported fromaggregate indicators is provided in GlobalCompetitiveness Report (World Economic

Forum, 2009). These indicators are collectedfrom opinion surveys administered toexecutives in multinational enterprises andwere collected for 101 countries over theperiod 2004–2007. Figure 3.2 reports theaverage value over the period for each ofthe four infrastructure subsectors (ports,roads, railroads, and airports) as well asproviding an overall infrastructure indicator.

The regional averages are ranked indescending order. In general, there is astrong correlation across regions for eachindicator (exceptions being Latin Americaand the Caribbean, which have a high valuefor airport infrastructure partly because oftourism). North Africa ranks fourth, closebehind the East Asia and Pacific region.Africa as a region ranks last, particularly forthe landlocked countries in SSA. Thelandlocked countries are further handi-capped by the low values for the quality ofthe ports they use, and also for the quality ofthe road and airport infrastructures, possiblyreflecting their small size. The difficultpredicament of landlocked countries isfurther examined in Chapter 4.

Figure 3.3 is a scatter plot showing therelation between the quality of portinfrastructure and income per capita. Thestrong correlation suggests two-waycausality, since high income per capita is asmuch caused by good port infrastructure(and other factors) as the overall quality ofport infrastructure is determined by percapita income (and other factors). Thestrong correlation is evidenced by thepositioning of the low-income SSA countriesin the bottom left-hand corner of the figure.This positive association between acomposite index of infrastructure quality


11 See the LISCR website: www.liscr.com.


and income per capita will also be analyzedin Chapter 4. The figure also shows thatthere is quite a lot of variation ininfrastructure quality after controlling fordifferences in income per capita. Thisspread is particularly evident for the highincome per capita countries, but it is also present among the North Africancountries.

A more complete assessment of factorsdetermining performance can be obtainedby comparing objective indicators of

institutional quality across infrastructurecategories, and by examining specificinstitutional reforms.

A first objective indicator of the efficiencyof port services that takes into account both“hard” and “soft” infrastructure is the time ittakes to handle cargo at port. Table 3.4decomposes this indicator into fourcomponents (pre-arrival documents; port andterminal handling; customs and inspections;inland transport to warehouse). For allcomponents except “inland transport to


Figure 3.2: Quality of infrastructure across regions

Source: Portugal-Perez and Wilson (2009, table 2). Data are taken from the indicators in the World Economic Forum’s

Global Competitiveness Report 2008–2009. The aggregate infrastructure index is constructed by factor analysis.

Notes: Regions ranked by decreasing quality of overall infrastructure . The infrastructure indicator is a simple average

of the 4 sub-indicators in the figure. The maximum value taken by the index is unity.

Infrastructure

Indicator

Quality of ports

infrastructure

Quality of roads

infrastructure

Quality of railroad

infrastructure

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infrastructure

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Caribbean

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Africa


warehouse,” the SSA region evidences thelongest delays. If, as a rough indicator, onetakes the cost-equivalent of one day lost intransport cited in Chapter 1 (one day saved inshipping being equivalent to a 0.8 percentreduction in tariffs), then if SSA were toimprove from its present level of 59 days’clearance time to East Asia’s average clear-ance time of 28 days, the cost saving wouldbe equivalent to around 2 percent. (To this,one should add the gains in time if the per-centage of cargo inspection were reduced.)

More comprehensive evidence can begleaned from a recent review of the

infrastructure sectors in 24 countries in SSA,accounting for 85 percent of GDP. Thissuggests that the relative weakness ofAfrican practices and institutions resulting inpoor governance could contribute to thelow perceived score on overall infrastructurequality shown in Figures 3.2 and 3.3.

To establish any links betweeninstitutional factors related to infrastructureperformance outcomes across countries, ascorecard was developed to cover the threekey institutional dimensions: (i) sectoralpolicy reforms (legislation, restructuring,policy oversight, and private sector involve-


Figure 3.3: Port infrastructure quality and income per capita

Source: Portugal-Perez and Wilson (2009, table 2). Data are taken from the indicators in the World Economic Forum’s

Global Competitiveness Report, 2009–2010 and the aggregate infrastructure index is constructed by factor analysis.

Note: The index is for the sample of countries used in the regional averages reported in Figure 3.3a. Income per capita

is expressed in logarithms and maximum value for the index is unity when a score of unity is obtained for each

component.

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Sub Saharan Africa

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Remaining countries


ment); (ii) amount and quality of regulation(autonomy, transparency, accountability,tools); and (iii) enterprise governance(ownership and shareholder quality,managerial and board autonomy, account-ing disclosure, labor and capital marketdiscipline, outsourcing). Indicators that wereeasy to measure and deemed pertinent byinfrastructure experts were then selected tocover each element of the correspondinginstitutional dimension. These are reportedin Figure 3.4, where each indicator takes amaximum value of 1 when “best-practice”status is achieved.12

The individual and average scores foreach component show most progress in thesectoral reforms, with much less progress onthe regulatory and governance fronts.

Overall, the telecommunications subsector —which is of great importance in the overalltrade logistics chain — has witnessed themost progress. It is notable that little progresshas occurred on the quality of governance,particularly for ports where, as noted earlier,the regulatory bodies are still not autono-mous from governance interference.

The lack of progress on governancedoes not necessarily imply a lack of progresson performance, where private sectorparticipation has ushered in greaterefficiencies. Figure 3.5 looks at twotransport subsectors — ports and railroads— and breaks down average values ofperformance according to whether or notservices have been concessioned out to theprivate sector. However, the sample is small(20 observations in ports and 13 inrailroads). This explains why the differencesin mean performance are not alwaysstatistically significant. Nonetheless, overall


12 See World Bank (2009, Box 4.1). The discussionthat follows is largely drawn from chapter 4 of thatreport.

Table 3.4: Port cargo-handling times across regions (days)

Region Pre-arrival Port and Customs Inland Total % of

Documents Terminal and Transport to Time Cargo

Handling Inspections Warehouse Inspected

(import)

OECD high income 8 2 2 2 14 5

East Asia & Pacific 18 3 4 3 28 31

Latin America & Caribbean 24 4 5 3 36 51

Middle East & North Africa 25 5 9 4 43 63

Europe & Central Asia 25 4 7 7 43 18

South Asia 24 6 7 10 47 69

Sub-Saharan Africa 33 8 10 9 59 67

World 23 5 6 5 40 43

Source: Hoffmann (2009) adopted from World Bank Doing Business 2006


one can conclude that private sectorparticipation has been associated withimproved performance in both subsectors.

Efficiency of the Transport LogisticsChain

Several examples help to show whatprogress has been made and what remainsto be done to overcome the remainingshortcomings in the “soft” component ofinfrastructure. Customs procedures in Africain general, but especially in SSA, are lengthyand cumbersome and act as a bottleneck toport efficiency, thereby raising trade costs.The introduction of modern customsprocedures would help to relieve thisbottleneck and would contribute to thedelivery of efficient port and freighttransportation systems (Ocean ShippingConsultants, 2008).

Reforming customs is necessary and themajor steps that need to be carried out areindicated in Box 3.5. At the same time, threecharacteristics of the low-income countriesof SSA make this task difficult. First, a largeshare of government revenue is raised atcustoms. Because the tax base is small, taxrates are high, which encourages taxevasion. Second, customs is where the rentsare to be obtained, so this is where extortionis likely to occur when governance is weak.Third, customs officials must fulfill twoobjectives that are at times conflicting: toraise revenue and to facilitate trade.

Delays at the customs level contribute tohigh transaction costs. This is clear fromregional averages for the number ofdocuments and the number of days neededto import or export a 20-ft container,reported in Figure 3.6. The difference


Figure 3.4: Institutional progress on

reforms, regulation and governance

Source: Vagliasindi and Nellis (2009).

Legislation Restructuring PolicyOversight

PrivateSector

Autonomy Transparency Accountability Tools Average

Sectoral Reforms

Regulatory Quality

100

90

80

70

60

50

40

30

20

10

0

Average

Telecommunications

Ports

Railways

Telecommunications

Ports

Railways

100

90

80

70

60

50

40

30

20

10

0

Board

Aut

onom

y

Owne

rship

Accou

ntab

ility

Out

sour

cing

Labo

r Mar

ket

Cap

ital M

arke

t

Avera

ge

Governance Quality

Telecommunications

Ports

Railways

100

90

80

70

60

50

40

30

20

10

0


between developed countries and Africa isstriking. In North America it takes on average7 days to export and 8 days to import goods,compared to 34 days and 40 days in Africa.These delays heavily constrain the trade offragile and perishable products, in particularagricultural commodities. The situation isworst in Central Africa and Africanlandlocked countries, where it takes 55 daysand 56 days respectively to clear importprocedures.

A similar pattern emerges from Figure3.6, which shows that in 2008, North Africa

was the best performing subregion in thecontinent for cross-border trade fluidityindicators. For example, in Morocco in 2008it took about 14 days for exports to clearcustoms procedures and 19 days forimports, compared to Central AfricanRepublic’s record of 57 days for exports and66 days for imports. However, more recentdata indicate that in 2008–2009, 14 Sub-Saharan African countries were rated as“most active” in the World Bank’s globalDoing Business league for cross-border tradepolicy reforms. This was in part due to


Figure 3.5: Performance indicators for port concessions and railroad concessions

Source: Vagliasindi and Nellis (2009).

Note: *Performance differential is statistically significant at the 10 percent level; **significant at the 1 percent level.

Annual (weighted average)growth rate of container

trade 1995–2000

Average moves per hour(unit: 100 moves)*

Container gantries ashandling system

Staff (million units oftraffic per staff)

Locomotive availability(% of time)**

Cars (million ton-kilometer per car)

Coaches (millionpassenger-kilometer

per coach)*

Others

Concessioned

State-owned enterprises

Concession

(a) Ports (b) Railroads

0.0 1.5 3.0010

30

50

20

40

60

70

80

90


enhanced donor support for aid-for-tradeinitiatives (World Bank, 2010).

The extensive time required to clearcustoms is partly due to the cumbersomepaperwork involved. Figure 3.6 shows that,on average, 8 documents are needed forexports and 9 documents for imports inAfrica, against 4 and 5 documentsrespectively in North America. The Africancountries requiring the greatest number ofdocuments to be completed are: Angola andMalawi (12 documents for exports) and theCentral African Republic (18 documents forimports).

Nathan Associates (2002) report on themultiplicity of documents needed to exportproducts in Mozambique. Exporters thereneed to obtain a certificate of origin, acertificate of quality, a sanitary andphytosanitary certificate, and an exportlicense for each transaction. Moreover thereis uncertainty in this list of clearingprocedures, which vary across transactions(Clarke, 2005).

As further evidence, Clarke (2005)reports the outcomes of a survey whichevaluates the impact of trade and customsregulation on private sector operations. Thesurvey reported that 40 percent of theenterprises involved in exporting claimedthat customs and trade regulation repre-sented a serious obstacle in the eight Africancountries surveyed. By comparison, only 28percent of exporters in Asia claimed thatcustoms and trade regulations were aserious obstacle. As a result, most importers/exporters have to use clearing agents toclear customs procedures in Africa. Clarkenotes that 85 percent of the surveyedimporters in Africa use the services of a


Box 3.5: Customs regulatory framework

— key issues and questions

The following questions indicate what needs to

be done to improve the efficiency of customs:

• Have customs laws, regulations,

administrative guidelines, and procedures

been reviewed, harmonized, and

simplified to reduce unnecessary

duplication and red tape?

• Has a process of continuous review and

improvement of systems and procedures

been introduced?

• Have tariff rates been moderated and the

number of different rates of duty

rationalized?

• Has a formal process for the review and

rationalization of exemptions and

concessions been introduced?

• Has a program of consultation and

cooperation with other government

agencies been established to examine a

means of rationalizing regulatory

requirements?

• Have international conventions,

instruments, and accepted standards

including the Revised Kyoto Convention,

the WCO HS Convention, the WTO

Valuation Agreement, the ATA Carnet

Convention, and the WTO TRIPS

Agreement, been implemented?

• Do regional customs unions and

economic groups adopt internationally

agreed standards and work toward

regional harmonization of systems and

procedures?

• Does the administration actively

participate in international benchmarking

and information-sharing initiatives?

Source: De Wulf and Sokol (2005).


clearing agent. He estimates that in Zambia,the median cost is about 1 percent of theshipment value and that 70 percent of the enterprises reported needing licenses foreach imported consignment.

African countries have taken steps toimprove other aspects of trade and customsadministration and regulation. For example,Ghana, Mozambique, and Uganda reducedaverage processing times from weeks toonly a few days but other links in thelogistics chain have not followed this trend.

Similarly, North African countries aremaking serious efforts to reform theircustoms systems in conformity with the Kyoto Convention and the agreementson international road transport, precisely in order to diminish these obstacles.Operators in North Africa unanimouslyagree that the major trade barrier can befound at the borders of the Maghrebcountries. These steps will make a positivecontribution to the World TradeOrganization (WTO) negotiations on Trade


Figure 3.6: Cross-border trade fluidity indicators, per TEU container

Source: Time, number of documents, and costs computed from World Bank Doing Business data (2008).

Note: To ensure comparability across countries, these figures represent the official fees levied on a dry-cargo, 20-ft,

full container load expressed in US dollars and associated with completing the procedures to export or import the

goods. Costs include the costs of documents, administrative fees for customs clearance and technical control,

terminal handling charges, and inland transport, and exclude tariffs as well as other trade-related taxes.

Time for import (days)

Time for export (days)

Documents for import (number)

Documents for export (number)

Cost to import (US$ per container)

Cost to export (US$ per container)

East & South East Asia

South Asia

Latin America

European Union

North America

East Africa

South Africa

West Africa

North Africa

Central Africa

African with Access to Sea

African Landlocked

60 50 40 30 20 10 0 0 1000 2000 3000 4000


Facilitation13 and Free Trade Area (FTA)agreements. Morocco runs physical spot-checks on goods, using a selectiveverification approach based on an objectiverisk analysis technique. In Algeria, physicalspot-checks are almost an integral part ofthe customs procedure. The problem comeswhen health, phytosanitary and, morerecently, security checks are involved. Theprocedures for these checks are weighty,uncoordinated, and costly. Notwithstandingthese inherent difficulties, several successstories have been identified in the customssector in North Africa. These include theMoroccan customs system reform, whichhas made remarkable progress (reducingclearance time on average from 1 hour and45 minutes in December 2001 to 37 minutesby March 2003), and where advancesubmission of customs declarations ispossible for all products.14 In Tunisia, thisprocedure is currently being established.

The development of information systems,information technology, and moderncustoms practices should help to improve thegovernance of the African ports. Applicationof this type of “soft” infrastructure reducesclearance and dwell times,15 while also

improving the quality of checkingprocedures and also removes discretion inthe administration process. Steps to reducedelays and corruption at the customs levelalso include the minimization of physicalinspections and contacts between importersor exporters and the customs administration.

Another example of soft infrastructure isthe “Transports Internationaux Routiers”(TIR), which allows goods to travel acrossone or more international borders with theminimum of customs involvement anddelays (see Chapter 4, Box 4.4). Here theuse of information technology is key for thesystem to function. For countries that applyTIR, prompt payment of customs dues bylogistics companies on behalf of their clientsand paperless transit have increased taxrevenues and reduced government corrup-tion. It is harder for a customs official tohold out for a bribe when the system iscomputerized and tracked by a logisticscompany’s bar code. However, it is reportedthat information technology still offersextortion opportunities for corrupt customsofficials — with the customs official refusingto press the “enter” key if importers andexporters do not pay up. Nonetheless, TIRdoes offer substantive improvements; forexample, the average processing time inGhana was reduced from weeks to a fewdays after its introduction (Clarke, 2005; TheEconomist, 2008).

Another example is the Camerooniancustoms administration, which underwent amajor reform in 2006 following the WorldCustoms Organization (WCO) Columbusprogram. The purpose of the reform was toincrease transparency and defeat corruption.The heart of the reform was internal control,


13 The gains from trade facilitation measures forAfrican countries, particularly landlocked ones, arecovered in Chapter 4.

14 See De Wulf and Sokol (2005) and De Wulf andFinateu (2002) for more detailed information on thecustoms reform in Morocco.

15 “Dwell time” is the time cargo remains in aterminal’s in-transit storage areas, while awaitingshipment (for exports) or onward transportation byroad/rail (for imports). Dwell time is one indicator ofa port’s efficiency: the higher the dwell time, thelower the efficiency.


through the creation of indicators auto-matically and regularly implemented anddisseminated by electronic mail to opera-tions managers and the director general. Theobjective was to strengthen the chain ofcommand by holding each of its linksaccountable. Since then, three major resultshave been achieved: the development of aculture of performance-based personalmanagement; “better practices” notifica-tions; and an increase in the productivity ofcontrols (Libom et al., 2009).

Conclusions

A review of the evolution of portmanagement structures around the worldshows a shift toward the landlord portmodel, where all but the hard infrastructureis placed in private sector hands. With a lag,Africa is joining the trend with an increase inconcessioning across ports. At the sametime, the extent of private investment inphysical port infrastructures has been low,reflecting a variety of factors, rangingprimarily from the small size of the marketto weak institutional support. As a result,many ports are visited by small regionalships which undertake transshipments forthe final ocean leg. Both these factorscontribute to higher freight costs in theAfrica region.

Evidence suggests that reform packagesthat include regulatory reform and inde-pendence of the regulator from governmentinterference will allow the other ongoingpolicy reforms a greater chance of success.Such measures will encourage privateshipping companies to call on African ports.Furthermore, private operators in the portswill be more inclined to make the

investments in physical infrastructureneeded to relieve the bottlenecks identifiedin Chapter 2.

Overall, the shift to a more privatizedenvironment has not made the sameprogress in Africa as in the rest of the world.In pursuing reforms, several precautionarysteps should be taken by governments. First,before the privatization process is initiated,the government needs to have a clear visionof the objectives that the public sector istrying to achieve. Second, close coordina-tion between the different institutionsinvolved (port institutions, customs, trans-port ministers, labor unions, etc.) is neededto define how their respective roles andinteractions should evolve, for the benefit ofall parties involved. Third, other efficiency-enhancing factors need to be promoted,such as pro-competitive policies andarrangements, better coordination of thevarious agencies that intervene at ports, anda reduction in documentation requirementsand single-window processing. Finally,beyond ensuring autonomy for the portsregulator, countries should aim at achievingsimplification and harmonization in theirprocedures, which will lead to bettercoordination and increased efficiency atregional and international levels.

References

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Clarke, G.R.G. 2005. “Beyond Tariffs andQuotas: Why Don’t African ManufacturersExport More?” Policy Research WorkingPaper No. 3617. Washington, DC: WorldBank.

De Wulf, L. and E. Finateu. 2002. “BestPractices in Customs Administration Reform

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De Wulf, L. and J.B. Sokol (eds). 2005.Customs Modernization Handbook.Washington, DC: World Bank.

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Trujillo, L. and G. Nombela. 2000.“Seaports”, in A. Estache. and G. De Rus(eds), Privatization and Regulation ofInfrastructures: Guidelines for policymakersand regulators. Washington, DC: WorldBank Institute.

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Vagliasindi, M. and J. Nellis. 2009.“Evaluating Africa’s Experiences withInstitutional Reform for the InfrastructureSectors.” Working Paper No. 23, AfricaInfrastructure Country Diagnostic.Washington, DC: World Bank.

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It is well established that efficiency at portsis crucial to the overall efficiency of thetransport logistics chain. However, a port isonly as good, and its development only asviable, as the transport networks linking theports to centers of production andconsumption. As identified in Chapter 1, thelinks to other modes of transport are criticalfor the overall logistics chain to functionwell and fulfill its objective of facilitatingtrade. The importance of well-functioning

links to ensure the efficient transit of goodsacross borders is even more critical for the15 landlocked countries of Africa.

In Africa, the efficiency of the transportchain and of the maritime services ishampered by poor connectivity to markets,resulting from the poor quality and high costof land transport infrastructure. In additionto the inadequacy of “soft” infrastructureexamined in Chapter 3, poor connectivityresults from the underdevelopment and

C H A P T E R 4

Connecting Ports to the Markets

(E) AfricanBank 2010 Ch4 8/10/10 10:32 Page 107

poor condition of “hard” physical infra-structure along the overland transport chain.Typically, the development of road andrailroad transport corridors — and in somecases inland waterways — has been limited(often one main line with various feeders oflow quality). Lack of proper maintenance ofroads and railroads aggravates the problem.In the case of river transport, the absence ofnavigable rivers into the hinterland limits theuse of such a mode of transport.

This poor connectivity raises freightcosts at destination, particularly forlandlocked countries who have to rely oninterstate transit corridors to access ports.The low quality of inland transport contri-butes to the bottlenecks at the ports, asidentified in Chapter 2. As a result, portservices such as containerization andintermodalism1 are underdeveloped acrossthe continent. In addition, land transportcosts in Africa tend to be higher (per unitdistance) and more important (as a share oftotal transport) than in other regions.According to recent estimates, transportcosts for most African landlocked countriesrange from 15 to 20 percent of import costs— which is three to four times higher thanin most developed countries (Teravanin-thorn and Raballand, 2009: 2).

However, the transport problems forbusiness and traders in Africa do not relatesolely to the hard infrastructure. They arealso about the soft component ofinfrastructure, relating to the efficiency ofcustoms and other border agencies, and to

the affordability of arranging internationalshipments. And for the 15 landlockedcountries in Africa, they are also about thecosts related to transshipment. Theweakness of the logistics systems in Africaraises overall trade costs and impactslandlocked countries the most.

This chapter deals with connectivity inAfrica through transport networks and themovement of goods in and out of ports. Thesection that follows this introductiondescribes the quality of connectivity andintermodalism across the continent. Itsummarizes the state of the road, railroad,and inland waterway networks needed tobring the goods from the factories to themarket and from the ports to the consumers.The appraisal leads to the conclusion thatthe entire transport network needs to beoverhauled.2 The discussion then turns tothe landlocked countries that suffer mostfrom the poor functioning of the transportcorridors. Trade facilitation measures arethen examined, i.e. the steps that could betaken at the national, regional, andinternational levels to facilitate trade; stepsthat would benefit greatly the landlockedcountries. The analysis then moves on toevaluate the overall costs of the poorconnectivity of African countries bycomparing recent end-to-end freight quotesfrom different African countries to aEuropean port (Rotterdam). Suggestiveestimates of the ad-valorem tariff equivalentof the poor performance of the logisticschain are also provided. The chapterconcludes with policy recommendations.


1 Intermodalism implies the use of two or moremodes of transport in an integrated manner in adoor-to-door transport chain (OECD, 2001).

2 Much of the analysis in this chapter draws on therecent AICD report (World Bank, 2009).


The Quality of Connectivity andIntermodalism in Africa

Ports constitute the main nexus for the bulkof African international trade; however, thetransport of goods involves several modes oftransport to connect producers andconsumers in Africa to foreign markets. MostAfrican countries face a double-bind interms of geographic characteristics: they arevery large in terms of surface area yet smallin terms of population, with large distancesbetween areas of high population densityand areas of production.

To connect ports to the markets, thereare three principal modes of transport:roads, railroads, and inland waterways. Allthree demonstrate low network densities,mirroring the low population density acrossthe continent. In this respect, Africa faresworse than low-income countries in otherglobal regions. As emphasized by the litera-ture on economic geography (Krugman,1991), the low population density alsoexplains the lack of industrial agglomera-tion, as it is often cheaper to supply thesparse African population with goods fromabroad, in spite of high transport costs.

Links to the hinterland — both railroadsand roads — are weak, for the reasonsindicated in Figure 4.1. In these circum-stances, there develops a “vicious circle” ofunderinvestment, delapidation of thephysical condition of rails/roads, and lowtrade volumes. First, the low level ofhinterland and interregional trade does notjustify investments (including investmentsfor maintenance) in infrastructures likeroads and railroads, which carry high fixedcosts. This then leads to the dilapidatedcondition of much of the infrastructure,

resulting in high rehabilitation costs. Thesubstandard state of the road and railroadnetworks results in delays, the slowmovement of goods, and to high main-tenance costs for the rolling stock on therailroads, and the trucks on the road. All ofthese characteristics contribute to high tradecosts, which in turn lead to a low volume oftrade and low per capita income. Yet, in anumber of countries, the asset value of theroad network exceeds 30 percent of GDPand road density is high relative to thecontinent’s income and hence its ability topay for maintenance (World Bank, 2009).

Figure 4.2 shows an index of the overallquality of infrastructure drawn from opinionsurveys administered to multinationalenterprises. It gives a breakdown betweenNorth African, SSA and remaining countries.This composite index adds airports,railroads and roads to the port indexpresented in Chapter 3. As in the case of theport index, it shows a close link between the

Connecting Ports to the Markets 109

Figure 4.1: The vicious circle of African

road/railroad networks

Poor and oldcondition

of infrastructure

Highrehabilitation

costs

Low trade leveldoes not justify

more investmentsin infrastructure

Low level ofhinterland andregional trade

Disincentive torehabilitate the

railway/roadsystem network


quality of overall infrastructure and percapita income. Across countries, there is aclose correlation among the values of all theinfrastructure indices, illustrating the inter-connections illustrated in Figure 4.1. So ifalong the transport chain one link is weak,then the others are weak. Moreover, in theabsence of other modes of transport (as isthe case in most of SSA), it is the weakestlink that determines the overall connectivityalong the transport chain.

A similar picture emerges from therankings of the Logistics Performance Index(LPI) in Table 4.1, which shows that SSA

countries have a low ranking according tothis index as well. The LPI ranks the qualityof the logistics environment for 150countries, based on data obtained from aweb-based questionnaire administered toprofessionals in logistics service companies.The LPI has the advantage of providingmeasures of logistics and trade facilitationcosts gathered from the same source.

South Africa has the best score in Africawith a ranking of 28 and a value of 3.46,followed by Senegal (2.86) and Tunisia(2.84) (see Annex 4.1 for all the LPI rankingsby country). The quality of customs services


Figure 4.2: Quality of infrastructure and income per capita

Source: Portugal and Perez Wilson, 2009b (Table 2).

Note: The index is for the sample of countries used in the regional averages reported in Figure 3.3a. Income per capita

is expressed in logarithms and maximum value for the index is unity when a score of unity is obtained for each

component.

1.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

100.00 1000.0000 10000.00 100000.00

Infr

astr

uctu

re I

nd

ex

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■

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▲▲▲▲▲▲

▲▲▲

▲▲▲▲▲

GDP per capita in log

Sub Saharan Africa

North Africa

Remaining countries


and of infrastructure are an integral part ofthe logistics chain. This poor logisticsperformance affects adversely the con-nectivity and transit of goods between theports and the hinterland.

Roads

Roads are the predominant mode for freightand passenger transport in Africa andcomprise the main connections from a portto the rest of a country (Map 4.1). Thenational road densities in SSA are lower thanin low-income countries in other globalregions. According to recent estimates (seeFigure 4.3), 80 percent of the main road

network is in good or fair condition and thecurrent value of the national road network isat least 70 percent of its potential (WorldBank 2009: Chapter 10).

With the institutional reforms introducedacross a large number of African countries inrecent years, most African countries nowhave road funds supported by fuel levies.Many others have autonomous roadagencies that contract out to specialistmaintenance agencies. Yet, more remains tobe done in the 24 countries surveyed for theAfrican Infrastructure Country Diagnostic(AICD): fuel levies are often too low androad funds and agencies do not meet


Table 4.1: Logistics Performance Index by region, 2010

Region LPI Customs Infra- International Logistics Tracking Time-

structure shipments competence & tracing liness

Europe & Central 2.74 2.35 2.41 2.92 2.60 2.75 3.33

Asia (regional

average)

Latin America & 2.74 2.38 2.46 2.70 2.62 2.84 3.41

Caribbean

(regional average)

East Asia & 2.73 2.41 2.46 2.79 2.58 2.74 3.33

Pacific (regional

average)

Middle East & 2.60 2.33 2.36 2.65 2.53 2.46 3.22

North Africa

(regional average)

South Asia 2.49 2.22 2.13 2.61 2.33 2.53 3.04

(regional average)

Sub-Saharan 2.42 2.18 2.05 2.51 2.28 2.49 2.94

Africa (regional

average)

Source: World Bank (2010).


international best-design criteria. Forexample, fuel levies vary enormously acrosscountries from US$ 0.16 to US$ 0.3 per liter(the latter considered to be the minimum foradequate road maintenance). Evasion,extortion, and delays contribute to lowcollection rates. Toll roads only operate in

0.1 percent of the region’s classified roadnetwork, and almost all of these are in SouthAfrica. Even though two-thirds of the 24countries in the sample have a road agency,only one-third of the agency boards haveprivate representation (World Bank, 2009:Chapter 10).


Map 4.1: Road network in Africa


Most of the reforms have sought toimprove the urban road networks and havefailed to tackle rural areas, consequently thetransport infrastructure gap is daunting inrural hinterlands. One of the MillenniumDevelopment Goals (MDGs) transport-related targets, endorsed by the African headsof state through the African Union in 2005, isto halve the proportion of the ruralpopulation living beyond 2 km of an all-weather road. Currently only 34 percent ofthe rural African population (bearing in mind

that 70 percent of the African population isrural) meets this target. Furthermore, out of2.1 million km of roads in Africa, only 21percent are paved, compared to the worldaverage of 50 percent paved. This situationisolates people from basic services, transportcorridors, trade hubs and economicopportunities, and of course from ports.Given that African exports consist principallyof primary commodities, poor road networksthat fail to link production areas to portsconstitute a major barrier to trade.


Figure 4.3: Condition of the African road network

Source: AICD Database (World Bank, 2009).

Zambia

Uganda

Tanzania

South Africa

Senegal

Rwanda

Nigeria

Niger

Namibia

Mozambique

Malawi

Madagascar

Lesotho

Kenya

Ghana

Ethiopia

Cote d’Ivoire

Chad

Cameroon

Burkina Faso

Benin

0% 20% 40% 60% 80% 100%

fair

poor

good


Even in towns and cities, where there hasbeen greater progress, the development ofroad networks has not kept pace with therapid urbanization witnessed since the1970s. In 2007, 40 percent of the Africanpopulation was living in urban areas and thisratio is expected to increase to 61 percent by2050 (United Nations, 2008). To avoidcongestion problems and to capture theexpected economic benefits of urbanization,sound transport infrastructures are urgentlyneeded. In addition to the urban congestionproblem, major African agglomerations arestill poorly linked to one another.

The region’s main trunk network, whichis comprised of trading corridors that linkseaports to the hinterland, only includes10,000 km of road. According to estimatesfor a Trans-African Highway (TAH),between 60,000 and 100,000 km of newroads are required to provide intra-continental connectivity. This would costabout US$ 47 billion over 15 years withestimated benefits of about US$ 250 billion(see details in Annex 4.2).

Buys et al. (2006) investigate the potentialtrade benefits of investing in upgrading andmaintaining this TAH network. The proposednetwork would link 83 major cities with alength of about 100,000 km. Buys et al.estimate that intra-African trade, as a whole,can be expected to increase from US$ 10billion to about US$ 30 billion per year, whileinitial investments and annual maintenancecosts would be relatively moderate over thecourse of the investment cycle. For instance,an upgrade of the road from Bangui in theCentral African Republic to Kisangani inCongo DR is expected to increase the volumeof trade by 7.9 percent.

However, as emphasized in Chapter 3 ofthis report, adequate road connectivityinvolves more than just hard infrastructure.Africa continues to be handicapped by highroad freight tariffs driven by high profitmargins rather than high costs (defectiveroads). For example, in Central and WestAfrica particularly, trucking industry cartelspractice tour de rôle3 traffic allocation, anddispatching practices are responsible for lowvehicle mileage and poor fleet quality.

Railroads

There are approximately 89,000 km ofrailroads in Africa (Map 4.2). These areusually single lines going inland fromcoastal seaports, with few rail inter-connections. The railroad networks in Africaare historically linked to ports, as they wereoriginally built between seaports and miningsites. For this reason they were usually state-owned, or developed and owned by miningcompanies. Even though concessioning hasmet with some success and has increasedtraffic volumes (see Figure 4.4) as well aslabor productivity, railroads remain poorlydeveloped across the continent.

Several factors contribute to the weakrail infrastructure. First, relations withgovernments have traditionally beendifficult as the private operators have notreceived sufficient compensation for loss-making passenger service routes. Second,concessionaires have restricted expenditureof their own funds to cover day-to-daymaintenance, not infrastructure as washoped for by the governments. Third, rail


3 Prioritized assignment system: transportoperators are assigned by turn.


and traffic densities are low compared toother sparsely populated countries likeAustralia, Canada, and China, wheredensities are between 5 and 7. By contrast,in most African countries the density isbetween 1 and 6 (excluding the 13 countries

that have no operating railroad.)4 Fourth, as pointed out in Chapter 1, there is an


4 Spatial density is measured in route-km per1,000 sq km. The density for European countries isin the range of 20–100, whereas it is 16 for SouthAfrica, the country with the highest density in Africa.

Map 4.2: Railroad network in Africa


imbalance in the structure of African trade,so that it is not unusual to have a largedifferential between inbound and outboundfreight traffic.

Few African railroads (apart from thenetwork in East Africa and the networkextending North in South Africa) traverseinternational borders. Almost all carrypassenger traffic (there are no freight-onlyrailways) on end-to-end traffic. Majorinfrastructure problems associated withaging railroads (insufficient ballast, decrepitstructures, rail wear, poor rail signaling)raise the costs of rehabilitation comparedwith existing traffic and revenues. A further

factor contributing to poor performance isthat the network (which often originated asan add-on to the mine rail lines) isdisconnected and rarely lies at the center ofeconomic activity. At the end of 2008, therewere only 47 railroads operating in 32countries in Sub-Saharan Africa, pointing tolow demand.

The level and quality of the railroadinfrastructure are very weak. With lowdemand and with competition from the roadnetwork, the vicious circle identified inFigure 4.1 translates into a perceiveddwindling of the importance of thissubsector other than for the transport of


Figure 4.4: Railroad traffic volumes, 2001–2005

Source: AICD database (World Bank, 2009).

STATE-OWNED CONCESSIONED

Tra

ffic

units (

mill

ion)

Passenger-km Net tonne-km

2000

1800

1600

1400

1200

1000

800

600

400

200

0 Nam

ibia

Sudan

Tazara

Bots

wana

Sw

azila

nd

DR

C (S

NC

C)

CF

M

Congo

Ghana

Eth

iopia

Benin

DR

C (C

FM

K)

Nig

eria

FC

E

Gabon

Kenya

Tanzania

Cam

rail

Sita

rail

Zam

bia

Tra

nsra

il

Uganda

Beira

Nacala

Mala

wi

Madara

il


mineral goods. Without financing assetrenewal and rehabilitation, competitionfrom road networks will jeopardize thesurvival of railroad networks for passengertraffic and general cargo.

Inland Waterways and Inland Ports

(i) Inland waterways

This mode of transport offers an alternativefor landlocked countries in terms of thetransit of primary products. This is an


Map 4.3: Major Rivers of Africa


inexpensive, energy-efficient, and environ-mentally friendly form of transport,particularly for the 29 African countries withnavigable waterways. However, this modeof transport in Africa is in decline (WorldBank, 2009).

The main African inland waterwayscomprise four rivers (Nile, Congo, Niger,and Zambezi Rivers) and three lakes(Victoria, Tanganyika, and Malawi). In Eastand South Africa, lakes Victoria, Tanganyika,and Malawi used to be crucial for transit andintraregional trade. Lake Victoria was ofparticular importance, offering services thatformed part of the railroad system, linkingthe rail heads at the inland ports of Kisumu(Kenya), Bell (Uganda), and Mwanza(Tanzania). In Kenya and Uganda, lakeoperations were concessioned together withthe railroad system, while in Tanzania lakeservices were separated from the railroads.On Lake Victoria, only one service iscurrently operating and some of the railroadtrack linking to the ports is in poorcondition, especially in Kenya.

The renewed interest in this mode oftransport in Southern Africa led to theredevelopment of the Shire–ZambeziWaterway Project, which was adopted as apriority project by both the SADC andCOMESA. The overall objective of theproject is to develop a waterway at the heartof regional transport corridors, to fosterregional integration and open up newoutlets to the sea for SADC countries (Box4.1).

A comparable situation prevails in Westand Central Africa, where the Congo basinhas a navigable network of 12,000 km,covering nearly 4 million sq km across nine

countries. In principle, this could be a veryvaluable resource in a multimodal transportnetwork.

To tackle this missed potential, theExecutive Secretary of CEMAC took action in2005 and invited the Cameroon, Congo,DRC, and CAR governments to establish theCommission Internationale du BassinCongo-Oubangui-Sangha (CICOS) with theaim of improving the physical and regula-tory arrangements for inland navigation.With sufficient trust and supranationaldelegation of authority, and drawing on theexample of the Shire–Zambezi WaterwayProject, this cooperative effort could proveto be successful.

(ii) Inland ports

Along the transport chain, seaports are notthe only nodes. Dry ports, also called inlandports, offer an important support to transportlinks like roads, railroads, and waterways.Many African countries have developedinland ports, which serve two broadfunctions: (i) as transshipment facilities fromone transport mode to another and (ii) aslocal and regional distribution andconsolidation centers. Inland terminals andlogistics hubs are usually located at major railheads or ports, and often incorporatecustoms facilities and bonded warehouses.Virtually all African ports require near-portterminals in order to improve port accessand efficiency, but very few are beingdeveloped. Typically, the near-port hubshould be close enough to the port to belinked with a trailer shuttle service, and alsoto expand the export stacking areas.

In principle, dry ports would be a veryuseful asset in a multimodal transport



network and their development wouldaccelerate the spread of containerizationthroughout Africa. They also facilitate in alarge measure the movement of goods frompoint of origin to final destination withoutthe need for customs control, or anyhandling en route, other than at the point oftransfer between the modes.

In Africa, this waterway mode oftransport is affected by outdated andinsufficient infrastructure, compounded by

inadequate channel markings, substandardmaintenance, poor regulation, and numer-ous nonphysical barriers to the movement ofgoods. Owing to the relatively poor anddeclining performance of rail intermodalfreight in Africa, the development of majorinland terminals and hubs has not reallytaken off, except in South Africa andisolated locations on inland waterways andlakes, such as Port Bell in Uganda. Traffic atthe City Deep terminal in South Africa,


Box 4.1: The Shire–Zambezi Waterway Project

Infrastructure development is high on landlocked Malawi’s list of priorities to stimulate growth. The

Shire–Zambezi waterway will provide the country with a crucial multimodal inland transport linkage with its

neighbors and the entire region. The project is an example of successful regional cooperation, putting a

waterway at the heart of regional integration and regional transport corridors. In this way, it aims to open up

new outlets to the sea for SADC countries. The project will also help to reduce costs for investment in key

export products.

The project comprises the following components:

• Construction of a 238-km waterway that will link landlocked Malawi’s inland port of Nsanje to

Mozambique’s Indian Ocean port of Chinde (a reduction of transport distance to one-sixth of current

levels);

• Building of berths and port buildings and the replacement of certain dysfunctional port structures,

especially to allow barges and medium seagoing vessels between Chinde and Nsanje. This would

open up direct waterway access to the Indian Ocean;

• Dredging and conversion of the Shire–Zambezi waterway into a more modern canal and the setting

up of container stacking;

• Construction and rehabilitation of a range of interlinked roads within the corridor area (from Malawi’s

lakeshore town of Salima through Lilongwe to Zambia; Malawi’s lake port of Nkhata bay into Zambia,

Rwanda and Burundi; and Nsanje to Malawi’s tea growing district of Thyolo);

• Rehabilitation and construction of the railroad from Nsanje through the Malawian cities of Blantyre and

Lilongwe to Chipata, in Zambia.

The expected outcomes are:

• US$ 250 million of savings per annum on direct transport costs for Malawi, Zambia, and Mozambique

and a general reduction in transport costs;

• Increase in competitiveness of exports and enhanced opportunities for diversification.

Source: Standard Bank (2008).


which is the prime intermodal hub in theSouthern Africa subregion, has graduallydeclined over the past 20 years, carryingonly 20 percent of the container traffic onthe main Durban corridor. However, theimplementation of new terminal operatingprocedures and new investment during2008/09 have resulted in a dramaticimprovement from 5 to 19 trains per day.

African Infrastructure: The PressingNeed for Rehabilitation andMaintenance

Typically, per capita expenditures oninfrastructure increase in parallel withincome per capita. In absolute terms, percapita expenditure on infrastructure is low,at around US$ 20–40 per year (Briceno-Garmendia et al., 2008). Yet once externalfinance — which accounts for about 35percent of all expenditures — is taken into

account, expenditures amount to 6–8percent of average GDP in SSA. This breaksdown into US$ 20.5 billion on operation andmaintenance of infrastructure and anotherUS$ 24.9 billion on capital expenditure(Table 4.2).

Nonetheless, maintenance expendituresare insufficient, contributing to thedeterioration of African hard infrastructure.Like port infrastructure, the construction andmaintenance of national road and railroadnetworks are usually funded from the publicsector. Where concessioning has occurred,investments have been for maintenancerather than capital expenditures. The onlyexceptions are for the ICT and powersectors, which have been more successful inattracting private infrastructure expenditures(see Table 4.2). Overall, less than 9 percentof capital expenditures in the transportsector has come from the private sector.


Table 4.2: Current infrastructure spending in Sub-Saharan Africa (US$ billion)

Sector Operation & Capital Expenditure Total

Maintenance Spending

of Public Public ODA Non- PPI* Total

Sector Sector OECD Finance Cap.

Exp.

ICT 2.0 1.3 0.0 0.0 5.7 7.0 9.0

Power 7.0 2.4 0.7 1.1 0.5 4.6 11.6

Transport 7.8 4.5 1.8 1.1 1.1 8.4 16.2

WSS 3.1 1.1 1.2 0.2 2.1 4.6 7.6

Irrigation 0.6 0.3 — — — 0.3 0.9

Total 20.5 9.4 3.6 2.5 9.4 24.9 45.3

Source: World Bank (2009, table 4).

* PPI = Private Participation in Infrastructure.


According to the recent estimates of theAICD report (World Bank, 2009), a financinggap of around 5 percent of GDP (splitequally between maintenance and capitalexpenditures) needs to be bridged for all theinfrastructure sectors. About 40 percent ofrural roads and railroads plus 25 percent ofmain highways are in need of rehabilitation.This situation reflects a legacy of under-funding for maintenance, which isattributable to two main factors. First, thereis the competition for government fundsfrom other social sectors (health, education,etc.). Second, there is the under-collectionof revenues, especially in the power andutilities subsectors.

To give an example, Nyangaga (2002)estimated that by the end of the 1980s, almost2 million km of road in SSA (with areplacement cost of at least US$ 170 billion)were in need of repair, requiring an annualexpenditure of between US$ 2–3 billion forroutine and periodic maintenance. Inresponse to this challenge, UNECA and theWorld Bank launched the Sub-Saharan AfricaTransport Program (SSATP). This is a uniquepartnership of 35 African countries, 8Regional Economic Communities (RECs), 3African institutions (UNECA and AU/NEPAD), national and regional organizations,as well as international development partners,all seeking to ensure that transport plays itsfull part in achieving the development goalsof SSA. One of the components of SSATP isthe Road Maintenance Initiative (RMI), whichaims to “commercialize” the road sector bycharging user fees.5

In response to the RMI, many countriesearmarked selected road-related taxes andcharges and deposited them into a specialoff-budget account, or road fund, to supportspending on roads. The performance of suchfunds was generally quite poor. Commonproblems were: inadequate financialmanagement; absence of independentaudits; extensive use of funds forunauthorized expenditures; diversion offunds; and weak oversight. As a result, mostof the “first-generation” road funds havebeen closed down and replaced by “second-generation” road funds.6 Second-generationroad funds are now a significant feature ofsector reform programs and strategies forimproving road maintenance. Today 27 SSAcountries have established road funds andthis number is likely to increase in the


5 The success of the “first-generation” road fundswas thought to be dependent on four

prerequisites: (i) creating ownership by involvingroad users in funding and management of roads togenerate support for adequate road funding and alsoto control national agencies’ monopoly power; (ii)securing an adequate and stable flow of fundingbased on dedicated user charges; (iii) securing aclear delimitation of all responsibilities and theirappropriate assignment with matching authority; and(iv) strengthening management of roads byintroducing sound business practices to obtain valuefor money.

6 The characteristics of “second-generation” roadfunds are: (i) a sound legal basis, i.e. a separate roadfund administration, clear rules and regulations; (ii)strong oversight, i.e. a broad-based private/publicboard; (iii) an agency that is a purchaser and not aprovider of road maintenance services; (iv) revenuesincremental to the budget and coming from chargesrelated to road use, like fuel levies, and channeleddirectly to the Road Fund bank account; (v) soundfinancial management systems, lean efficientadministrative structures; and (vi) regular technicaland financial audits.


coming years as a result of ongoing reformsin West and Central Africa. Despite thecreation of autonomous entities responsiblefor the management of road networks, mostSSA countries still face difficulties in fullycommercializing the road sector.

For railroads, for reasons discussedabove, classic concessions have been unableto attract long-term infrastructure investmentsfrom the private sector. Substantial publicfunding will continue to be necessary andsome form of guaranteed compensationscheme is required to compensate operatorson unprofitable carrier services. The mainissue is to determine the level of expenditurethat African railroads can afford, given thelow density of traffic and the competitionfrom roads. According to the recent estimatesin the AICD report (World Bank, 2009), long-term maintenance requires an investment ofUS$ 3 billion to rehabilitate tracks; this couldbe spread over a 10-year period. ExcludingSouth Africa, once the rehabilitation hastaken place, a steady-state ongoing budget ofUS$ 100 million per annum is needed fortrack reconstruction. As to the rolling stock, afreight charge of US$ 0.04 per tonne-km orpassenger-km (close to the average rates incurrent practice) would be sufficient toreplace the depreciated stock (World Bank,2009: Chapter 11).

The Plight of LandlockedCountries

Africa is the continent with the highestconcentration (15) of landlocked developingcountries (LLDCs). According to the gravitymodel estimates of Limão and Venables(2001), the median landlocked country’stransport costs for a standard 20-ft container

are 46 percent higher than the equivalentcosts for a median coastal economy. Theyalso find that distance explains only 10percent of the change in the transport costs.Poor road infrastructure represents 40percent of the transport costs predicted forcoastal countries and 60 percent forlandlocked countries.

These estimates are corroborated by thefreight charges from different countries to aEuropean port (Rotterdam), as posted on theInternet in 2008 by Maersk, a global shipper(Figure 4.5). Being landlocked imposes alarge premium on overall freight costs, for astandard 20-ft container. For example, Maliand other LLDCs pay large premia aboveocean freight costs.

Both sets of estimates confirm that globalmarket access for landlocked countriesdepends heavily on regional infrastructureand links to ports. This justifies the focal areasdelineated in the Almaty Program of Action,7

among them: (i) transport infrastructure at thenational level; (ii) international laws andtreaties; and (iii) cross-border cooperation. In addition, as shown in the examplesdeveloped here, transit logistics costs need tobe improved. In particular, improvements callfor the development of transit corridors.

Transit and Trade Corridors in Africa

A corridor is the geographical concentrationof transport infrastructures and transitactivities between two or more economiccenters, linking them to one another and to


7 The Almaty Program of Action was establishedin 2003 and a roadmap was drawn up by the UN-OHRLLS specifically to address the needs oflandlocked countries.


international markets (Figure 4.6). Ports areone of the gateway nodes on corridors, asthey constitute a direct link to externalmarkets. The corridor approach to improv-ing connectivity is gaining momentum andmost of the transport sector strategy in Africais based on the development of transportcorridors.

The major transport corridors in Africaare:

• Africa-wide: the Trans-AfricaHighway (TAH) project;

• West Africa: the Abidjan–Lagos andthe Bamako–Ouagadougou–LoméCorridors;

• Central Africa: the CEMAC Corridor;


Figure 4.5: Transport costs from selected cities to a European port (Rotterdam), 2008

Costs, USD

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Kampa

la, U

GA

Bamak

o, M

LI

Nairo

bi, K

EN

Gab

oron

e, B

WA

Map

uto,

MOZ

Djib

outi, D

JI

Mas

eru,

LSO

Mom

basa

, KEN

Dar

es Sal

aam

, TZA

New

Delhi, I

ND

Abidjan

, CIV

Port L

ouis, M

US

Dak

ar, S

EN

Lom

é, T

GO

Asunc

ión,

PRY

Cap

e Tow

n, Z

FA

Dur

ban,

ZFA

Santo

s, B

RA

Bueno

s Aire

s, A

RG

Mon

tevide

o, U

RY

Izm

ir, T

UR

Algiers

, DZA

Beiru

t, LB

N

Tunis, T

UN

Alexa

ndria

, EGY

Cas

ablanc

a, M

OR

Additional charges

Inland Haulage Import

Basic Ocean Freight

Source: Maersk. Transport costs corresponding to July 2008.

Note: The data is estimated for carpets, floor coverings and textiles for one standard container of 40ft shipped on July

2, 2008.


• East Africa: the Northern Corridor;• Southern Africa: the North–South

Corridor, the Maputo Corridor, andthe Wallis Bay Corridors.

Annex 4.2 provides detailed information onthese corridors, while Table 4.3 lists the maincorridors linking African LLDCs to a seaport.

Regional corridors are vital for Africa’slandlocked countries, as they provide themwith access to the sea and to export markets;but benefits from transit traffic throughcorridors can be as substantial for coastalcountries. For example, in Kenya in 1990,transit traffic yielded a net value added ofUS$ 53 million, while Tanzania could


Map 4.4: Major African Corridors


increase its annual foreign exchange earningsby 12–18 percent if it were to improve themanagement of its transit traffic system.

All corridors face the same kind ofbarriers to transit: long transport delays, highcosts, poor infrastructure level, and a lack ofinstitutional harmonization between thecountries involved. The users along thecorridor may also be subject to extortionalong the multiple roadblocks andcheckpoints. Table 4.4 indicates the large

number of checkpoints on selected roadcorridors in West Africa. The Lagos–Abidjanhighway, in particular, has a very highnumber of checkpoints (7 per 100 km).

The North–South Corridor

The busiest traffic occurs on the North–South Corridor (NSC), which is the mostefficient in Africa. The NSC serves as anexample for other subregions (in particularWest Africa) of the gains that can be


Table 4.3: Corridors linking landlocked countries (LLCs) and ports

Regional Corridors

West Africa Central Africa East Africa Southern Africa

Main ports of entry Abidjan, Tema, Lomé, Douala Mombasa, Durban, Maputo,

Cotonou, Dakar Dar-es-Salaam Bera, Dar-es-Salaam

LLC served Mali, Burkina Faso, Chad, CAR Uganda, Rwanda, Botswana, Malawi,

Niger Burundi, East of DRC Zambia, Zimbabwe,

South of DRC

Source: Teravaninthorn and Raballand (2009).

Figure 4.6: Transit of Goods along a Corridor

Port of

Entry

Rail

Transit

Multimodal

Transfer

Road

Transit

Border

Crossing

Road

Transit

Final

Clearance

Check Points

International Transit National Transit


anticipated from “deep” regional integration(i.e. regional integration that goes beyondestablishing free trade by taking measures toreduce behind-the-border costs). In spite ofthe need for further improvements, theNorth–South Corridor (NSC), linkingKolwezi in DR Congo to the southern ports(mainly the port of Durban in South Africa)more than 3,500 km away and to the port ofDar es Salaam, serves as an adequateconnector for all the southern and eastAfrica regional transport corridors and ports.Success in achieving further improvementsrests on more extensive harmonization atthe regional level (see Annex 4.2).

The efficient and improved performanceof the NSC is considered to be a keyeconomic driver for the region and has beendeveloped as a pilot Aid for Trade (AfT)program by the COMESA–EAC–SADCTripartite (see Box 5.7). As such, it hasattracted considerable donor and institu-tional financial commitments for infra-structure improvements and upgrades.

Yet, as can be seen from Figure 4.7,delays along the NSC are still important.

Figure 4.7 gives travel times and border-crossing times between main towns on thecorridor. However, it should be borne inmind that these are only averages. Traveltimes vary considerably according to anumber of factors: type of cargo (whetherbreak bulk, containerized, tankers,perishable goods, etc.); the direction oftravel; whether the cargo is in transit or not;and by the quality of the “soft” infrastructure(i.e. whether the computerized systems arefunctioning and papers are cleared rapidly).

It can be seen that the journey fromKolwezi to City Deep (in Johannesburgwhich is an Inland Container Depot) takeson average 15–20 days, with 10–15 days ofdowntime at the border crossings. To givean example of the trade-offs involved, andof the uncertainties faced by transporters, ifa transporter chooses to use the routethrough Botswana, his payload will berestricted because the ferry at Kasungulaacross the Zambezi has a maximum grossvehicle mass (GVM) of 45 tonnes, comparedto the maximum GVM of 56 tonnes for theroad network as a whole. In addition, the


Table 4.4: Checkpoints on selected road corridors in West Africa

Highways Distance (km) No. of Checkpoints Checkpoints per 100 km

Lagos–Abidjan 992 69 7

Cotonou–Niamey 1,036 34 3

Lomé–Ouagadougou 989 34 4

Accra–Ouagadougou 972 15 2

Abidjan–Ouagadougou 1,122 37 3

Niamey–Ouagadougou 529 20 4

Source: ECOWAS Official Site (2003).


journey time is longer and the time saved atborder crossings is minimal, if any. Thesame is true if a transporter chooses to crossinto Botswana at Kasungula and into SouthAfrica at Labatse (Gaborone) instead ofMartins Drift.

The easiest and quickest way to reducetransport costs along the North–SouthCorridor is to reduce the time taken atborder posts by converting them into one-stop border posts (OSBPs). If all thenecessary steps were to be carried out(infrastructure upgrades, systems upgrades,streamlining of procedures [see Box 4.3]),waiting times at borders could be cut by atleast half. Upgrading the road and bridgeinfrastructure along sections in disrepair

would save additional time. Likewise, newbridges are needed at river crossings (atKasungula and at Tete in particular). Theseupgrades would produce multiple benefits:savings brought about by reducing queues(since there are long queues at both theferry crossing at Kasungula and the bridge atTete) and savings in running times fortrucks, lower costs for truck maintenance,and less accidents. In contrast, reducinginformal payments would have a marginalimpact on transport costs and prices.

Trade Facilitation Measures

Trade facilitation measures reduce tradecosts. Some trade facilitation measures, suchas the introduction of information and


Figure 4.7: Distances, journey times (and waiting times at borders) between the main

towns on the North–South Corridor

Source: Pearson and Giersen (2009, diagram 1).

Note: Distances are for southbound traffic — times are averages.

1014km 2 daysDar es Salaam

Nakonde/Tunduma

Kasungula

777km 2 days

LusakaKasumbalesa

460km 1 day 113km 0.5 day

3–5 days

CityDeep

3–5 days

551km 1 day

Beit Bridge

499km 1 day

Martins Drift

872km 2 days

Chirundu

3–4 days24km

4–5 days

1034km 2 days

4–5 days400km 1 day

Kolwezi

1 day


communications technology (ICT) systemsto replace paperwork at customs, can betaken at the national level. For most costsrelating to international trade, tradefacilitation requires some kind of coopera-tion either at the regional or multilaterallevel. Effective cooperation to improve tradefacilitation at the international level is thehardest to achieve because agreement mustbe reached among many parties, who oftenhave conflicting interests. This section givesexamples of trade facilitation measures thatcan help to reduce trade costs, starting withnational and regional measures, and thendiscussing measures that could be takenmultilaterally.

National and Regional Measures

(i) Customs — time at borders

Delays at the border are costly. In Asia, eachday costs around US$ 370 for a 40-ftcontainer according to estimates forlandlocked countries (Arvis et al., 2007;Appendix 4). However, several trade facilita-tion measures can be taken to reduce thesecosts. Three are described here: (i) the useof ICT to reduce and speed up paperwork atthe national level; (ii) establishment of one-stop-border-posts (OSBPs) and (ii) theTransports Internationaux Routiers (TIR).The latter two require regional cooperation.

The introduction of ICT and electronicplatforms reduces trade costs along severaldimensions. One successful example of thisis Tradenet (TTN), an IT-based virtualplatform that processes the various exportand import formalities through ports. TTN(see Box 4.2) uses a single electronicwindow that allows all documents related totransit to be accessible to all the operators:

companies, banks, forwarding and commis-sioners’ customs agents, carriers, andshipping agents. The introduction of thissingle electronic window has reduced thecost of doing business by allowing all theprocedures to take place with no paper, nodisplacement, and no personal contact, allof which significantly diminishes the risk ofcorruption. The electronic form also ensuresthe consistency of all documents, since theycan be updated online and are visible to alloperators instantaneously. This increases thetransparency of the processes and thetraceability of all operations.

Other trade facilitation measures, such asone-stop-border posts (OSBPs), requireregional cooperation. This is a border postshared by two adjacent countries to conductjointly cross-border and security clearanceprocedures. Practically, an OSBP relates to asituation where the goods moving in thesame direction are on the same gateway,and officials from the two countries arelocated in a single location. It is a practicalway to minimize duplication of controls andso reduce the clearance processing timesand costs involved in crossing borders byunifying border control processes within asingle operating sequence. This also reducesthe opportunity for a fraudulent exchange ofinvoices (Box 4.3).

Along the North–South Corridor, theRECs (with COMESA as the lead agency) arepiloting an OSBP at Chirundu, the borderpost between Zambia and Zimbabwe, whichopened in December 2009. The respectivegovernments provided the political supportneeded to implement an OSBP under abilateral agreement. With assistance fromJICA and DfID, the two governments have



constructed new buildings and a new bridgeover the Zambezi River. They have alsopassed national legislation to allow an OSBPto operate8 and a single operating pro-cedure that permits all exit and entrydocumentation to be submitted in aconsolidated manner at one time.

The time saved at a fully functioningOSBP creates economic and social benefits.The economic benefits include a reduction

in red tape and transport costs. The socialbenefits include a reduction in the infectionrates of HIV/AIDS and other sexuallytransmitted diseases, as truck drivers spendless time at border posts.

However, OSBP implies the harmon-ization of customs procedures andlegislation, and hence cooperation. Even ifthe principle is simple, the planning andprocedures are complex. To speed up theprocessing of documentation, it is necessaryfor governments to jointly take a number ofmeasures:

• to harmonize customs practices,facilities, ICT systems, procedures andlegislation, such as signing up to theGATT valuation system;


8 Including national legislation to allow extra-territorial exercise of powers by officials from bothcountries to perform their functions in a foreigncountry and allowing the declaration of commonareas of control and harmonization of roles, powersand responsibilities of officials with an interest inborder control.

Box 4.2: Trade facilitation at the port: the case of Tradenet, Tunisia

Tradenet (TTN) was launched in 2000 with an original investment of US$ 80.26 million. It is a public–private

entity under the supervision of the Minister of Finance, with 30 percent private ownership. TTN has proved

to be very successful: it received the Technology in Government in Africa (TIGA) Award 2009 and is being

replicated in other African countries.

TTN has developed two sub-entities: a “service bundle” and a “transport bundle.” The transport bundle

handles all the documents related to the movements of ships at the port. So far, all the formalities related to

the ship entry at the port have been implemented. Tunisian exports increased by close to 30 percent per

annum over the period 2000–2008, with the highest growth rates in 2007 and 2008, soon after the

implementation of the TTN transport bundle. Implementation of TTN in Tunisia has reduced the time required

to complete export and import procedures by 2 days. The time required is now 15 days, which is similar to

Egypt but still 3 times higher than the US and 4 times higher than Singapore.

With regard to future prospects for trade facilitation, “Motorways of the Sea” is a project instigated by the

European Union aiming at creating maritime trade and transport corridors between Europe and its

neighboring countries. TTN has been involved and is now in discussion with the ports of Marseilles in France

and Genes in Italy, to harmonize their systems of data processing.

In November 2003, the TTN technology was introduced in the port of Douala in Cameroon and

discussions are ongoing with Togo, Algeria, and Libya to export the same system. A successful

implementation requires a sufficient level of IT infrastructure and capacities, and the existence of a basic

set of transit procedures and documents, which have to be compliant with international trade agreements.

Source: Discussions with TTN.


• to ensure that countries are on thesame version of the HarmonizedSystem of Customs Classification;

• to simplify and harmonize temporaryadmission, re-exportation and transitprocedures;

• to harmonize exemption and otherduty relief measures;

• to dispense with all pre-shipmentinspections; and

• to adopt regional antidumping andcountervailing duty regulations.

To fully carry out such procedures, it isnecessary for countries to delegate someauthority to a supranational entity, whichmay occasionally entail relinquishing somenational priorities. Up to 15 differentgovernment agencies on both sides may beinvolved. In addition, the private sectorneeds to be kept apprised of the prevailingprocedures and measures, and agree toconform to the OSBP system.

A second example of a trade facilitationmeasure that involves even greater regionalcooperation is the seamless TransportsInternationaux Routiers (TIR) (see Box 4.4).Implementation of TIR recognizes thatfreedom of transit rests on guaranteesprovided by operators against potential fiscalloss. Transit is a public–private partnershipinvolving a chain of (preferably) harmonizednational procedures. To be operational, ahigh degree of professionalism is required ofthe logistics operator organizing thesequence of operations for the consignee/shipper (this is often helped by affiliation toan international network). It is clear that thesuccess of this implementation of GATTArticle V on freedom of transit requires arobust institutional setting, which is usuallylacking in Africa.

(ii) Harmonization of safety regulations

Safety regulations relating to internationaltransport require regulations at the regional


Box 4.3: Basic One-Stop-Border Post

(OSBP) operating principles

• The country of entry hosts officers

carrying out exit procedures so that the

entire exit and entry process occurs in

one common control zone.

• Entry procedures cannot begin until all

exit procedures are completed and

jurisdiction has formally passed from the

exit state to the entry state. This is to avoid

any conflict over jurisdiction within the

OSBP.

• Officers carry out their own border control

laws, even when acting in the adjoining

country, but only within the common

control zone established by a bilateral

agreement between the border countries.

• A law establishing extra-territoriality

authorizes officers to carry out exit

procedures in the adjoining country.

• Wherever possible, inspections and other

procedures are carried out jointly to

increase effectiveness and save time.

• Working in close proximity encourages

cross-border risk assessment of persons

and goods.

• Simplification of documents and

procedures as well as harmonization of

regulations occur more readily in an

OSBP and increase its benefits.

• Sequencing of procedures and

minimizing distance between them will

reduce the time spent by officers and

border users.


level. One important example is road safety,which is still a big issue in Africa. The Sub-Saharan Africa Transport Program (SSATP)estimates that Africa has the highest per capitatraffic-related mortality rate in the world, at28.3 deaths per 100,000 of population. Theannual road crash cost in Africa is estimatedat US$ 3.7 billion. Studies indicate that therate of return on investment to reduce crashesis very high. Improvement of road safety anda reduction of accidents on the road networkwill help to lower insurance costs, improvepredictability of transport time, and enhanceoverall connectivity.

Harmonization of axle loads presents aninteresting example of the benefits of

cooperation, but also of the difficulty ofachieving the necessary collective action.Axle loads are specified by the gross vehiclemass (GVM) by type of vehicle (vehicle andtrailer and the combined number of axles).In Southern and East Africa, for example, themaximum GVM allowed is 56 tonnes.Although African RECs have agreed toharmonize axle loads and vehicle dimen-sions, on some routes axle loads are de factorestricted because of the poor quality of theinfrastructure. Moreover, the incentive fortransporters to operate trucks with greateraxle loads than officially permitted is highbecause of the fierce competition amongcarriers. However, excessive axle loads will


Box 4.4: Transports Internationaux Routiers (TIR)

Transit procedures seek to implement the “Freedom of Transit,” Article V of the GATT, while at the same time

safeguarding the interests of the transit country from potential fiscal loss. Any transit operation rests on three

core principles; (i) the consignee provides a guarantee to the transit country’s customs; (ii) customs affix

seals on the vessel; (iii) customs implement documentary and information systems at borders to reconcile

inflows and outflows.

The Transports Internationaux Routiers (TIR) is an example of a trade facilitation mechanism used

throughout Western Europe. Goods that are moved under TIR can pass through these countries with

customs duties and other taxes suspended and without the need for unloading/reloading at frontiers. The

simplification achieved by the TIR regime rests on the following pillars:

• the use of secure vehicles or containers;

• the international guarantee chain;

• the TIR carnet (a single harmonized manifest);

• the mutual recognition of customs controls; and

• controlled access to use the system and integrity guaranteed by the United Nations Economic

Commission for Europe (UNECE) and the International Road Transport Union (IRTU).

As of 2005, there were 66 Contracting Parties to the TIR Convention, including the European Community.

It is, however, only possible to establish a TIR operation with 55 of these countries, as the rest do not have

an approved guarantee association. The TIR system has been underused in African countries for various

reasons. In Morocco, TIR carnets are rarely used, and in Tunisia TIR traffic represents a very small

percentage of Tunisian transport companies’ operations. In Algeria the system has been suspended (El

Khayat, 2005).


accelerate the deterioration of roads that arealready under stress, which will increasetravel times, as well as road maintenanceand freight costs (hence overall transportcosts).9

Other ways to reduce the cost of surfacetransport in Africa include harmonizing roadtransit charges, using a regional carrier’slicense that would allow vehicles to operatewith a single license, and using regionalthird-party vehicle insurance schemes.

Multilateral Measures

The issue of port safety, together with anti-pollution and other environmental aspects,is effectively carried out through obligatorymembership of the International MaritimeOrganization (IMO), a specialized UnitedNations agency. When the IMO wasestablished in 1948, its main concern was todevelop the international machinery toimprove safety at sea. This internationalbody is a public good necessary to control

the threat of marine pollution from ships,particularly by oil carried in tankers.

The IMO’s intervention in Africa consistsmostly in supporting NEPAD’s activitiesthrough an Integrated TechnicalCooperation Program. Technical advisoryand assessment missions, workshops, train-ing sessions, and seminars are organized inthe countries concerned on a variety ofthemes: governance, peace and security,environment, urbanization, human resour-ces development, employment, andHIV/AIDS. Recent achievements include:agreement by the CEMAC countries on apackage of merchant marine regulations thatembody IMO’s principal maritime safety/security and marine environment instru-ments; the signing of an MoU on theestablishment of a subregional integratedcoastguard network in West and CentralAfrica; the adoption of a Code of Conductconcerning the Repression of Piracy andArmed Robbery against Ships in the WesternIndian Ocean and the Gulf of Aden.

There are other examples whereharmonization at the international levelwould yield large gains, but are difficult toachieve because of the lack of internationalcooperation. For instance, there arehundreds of different sizes of pallets. Thecosts resulting from a lack of harmonizationin this area are especially heavy fordeveloping countries, which have to complywith destination markets’ standard require-ments while they lack rental and exchangemarkets for pallets (see Raballand andAldaz-Carroll, 2005).

The ongoing negotiations on tradefacilitation at the WTO, especially thosearound Article V on Freedom of Transit, are


9 A similar debate is taking place about supersingle tires (which are wider than normal tires). Ifused instead of dual tires, these will result in areduction in the vehicle tare weight (the unladenvehicle weight). However, at present, axle load limitsare set according to the number of axles on a vehicleand the number of tires on an axle. Therefore, therewould need to be a change in legislation to allow theuse of super single tires on an interlink (or doublesemi-trailers), which is the main vehicle combinationfor heavy vehicle transport in Southern and EastAfrica. It is generally agreed that super singles shouldbe given a higher load limit than for normal tires butagreement needs to be reached on what exactly thatload should be. The main objective is to ensure thatthe vehicle does not damage the road, while at thesame time allowing it to carry a higher payload.


of great interest to LLDCS. Implementationof these principles is one way to overcome“landlockedness.”10 Article V requires eachWTO member to allow free movement ofgoods, vessels, and other means of transportthrough its territory, destined to or comingfrom any other WTO member. Such transitmust be allowed via the routes mostconvenient for international transit. GATTArticle V also requires equal treatment oftraffic in transit, independent of the flag ofthe vessel, the point of origin or departure,entry, exit, destination, or ownership of thegoods and vessels. Traffic in transit must notbe subject to unnecessary delays orrestrictions, and must be exempted fromcustoms and transit duties (countries cancharge fees for administrative expensesincurred by the transit).

The Freedom of Transit is, however,limited by the right of the State to set theconditions or requirements for grantingtransit rights. LLDCs are especiallyconcerned about Article V, which recognizesthat Freedom of Transit is compromised byburdensome and lengthy procedures. ArticleV rules have never been interpreted by aWTO panel, so the current trade facilitationnegotiations at the WTO represent anopportunity to clarify and improve theprovisions “to further expedite themovement, release and clearance of goods,including goods in transit.” The negotiations

aim to make Article V operational and toaddress the special needs of the LLDCsadopted in the 2003 Almaty Program ofAction. A successful outcome to thesenegotiations would offer an opportunity forLLDCs and transit countries to benefit fromtechnical assistance, capacity building, andin some cases support for infrastructuredevelopment, which will assist members tocomply with new WTO commitments.11

The Costs of Deficient TradeLogistics in Africa

Time is a barrier to trade, specifically in thecontext of shipping costs. More time intransit imposes inventory-holding costs,including holding buffer stocks, anddepreciation in the value of time-sensitiveproducts (e.g. spoilage or overripening offoods; fashion goods where design has to bechanged regularly, etc.).12 Time delays alsoreduce the probability that a country canexport to major markets and are costly, asthe following estimates suggest. On average,each extra day a product is delayed prior to being shipped reduces trade volumes by 1 percent. For agricultural goods, anadditional delay of one day reduces exportson average by 6 percent.

In this regard, transport chains are nostronger than their weakest links. And in


10 The legal aspects of trade facilitation arecovered in GATT 1994 under Article V (Freedom ofTransit), Article VII (Fees and Formalities Related tothe Import and Export) and Article X (Publicationand Application of Rules Related to InternationalTrade).

11 See AITIC “Trade Facilitation Briefs —Facilitating Transit Procedures: Evolution of Proposalson GATT article V in the WTO Trade FacilitationNegotiations”. http://www.acici.org/aitic/documents/TFBriefs/download/TFBrief1_eng.pdf

12 Hummels (2001) estimates that each extra dayin transit for the average length of shipment to theUS is equivalent to a 16 percent ad-valorem tariff.Also see Djankov et al. (2008).



Figure 4.8: Worldwide distribution of trade costs and Ease of Trading Index

Source: World Bank (2009).

Notes: Sample of 180 countries with 45 countries per quartile; quartiles ranked by increasing importing and exporting

costs per TEU. Left scale indicates the range in costs within each quartile (the range in costs per import container in

Q1 is US$500 to US$1000 and in Q4 from US$1900 to US$6000). Horizontal broken line indicates the number of

landlocked African countries in that quartile (i.e. 15 in Q4 and none in the other quartiles). The number of African

countries per quartile is indicated on the right-hand scale.

7000

6000

5000

4000

3000

2000

1000

0

50

45

40

35

30

25

20

15

10

5

0

QuartileQ1 Q2 Q3 Q4

Ease of Trading index(number of African countries)

Ease of Trading index(number of landlocked African countries)

Export Cost per container(in USD)

Import Cost per container(in USD)

US$


Africa, port–rail is the weakest link, as inlandtransport and facilities are poorly alignedwith port development. Multimodaltransport is also weakly developed becausethe railroad links are often poor, in spite ofsome progress since concessioning hastaken hold. The end result of poor logisticsis high trade costs for African countries.

Figure 4.8 displays the distribution byquartile of export and import costs for astandard container for 180 countries, alongwith the values of an Ease of Trading index.The range of costs for the countries with thebest logistics in quartile 1 (Q1) is betweenUS$ 500 and US$ 1,000, while the corres-ponding range in the bottom quartile (Q4) isUS$ 1,900 to US$ 6,000. There are only threeAfrican countries in Q1, while 29 are in Q4,which includes all the landlocked Africancountries. With 45 countries per quartile,almost two-thirds of the countries in thelowest quartile are African.

Comparing the costs of logistics withthose of tariffs in terms of their impact onthe volume of trade is another way to assessthe costs of poor infrastructure and poorlogistics. Chapter 1 decomposed trade costsinto (i) those that are the result of tradepolicies and (ii) those that can be reducedthrough other channels, notably tradefacilitation. Gravity model estimates providean indication of the importance ofunfriendly logistics relative to the trade costsimposed by trade policy. To this effect, theTariff Trade Restrictiveness Index (TTRI)estimates presented in Table 1.3 of thisreport can be coupled with the costs oftrading a standardized container of goods(as measured by Doing Business (DB) data)into a gravity model of trade that includes

the usual control variables (distance,common border, common language, andlandlocked). The estimated coefficients thenserve to compute a counterfactual ad-valorem TTRI that would otherwise begenerated by a variation in DB trade costfigures for a given country. Portugal-Perezand Wilson (2009a) computed this “ad-valorem equivalent” of improving thebusiness environment in their sample of 104countries by calculating the ad-valoremtariff-cut in importing countries if eachcountry were to move halfway to the levelof Mauritius (the African country with thelowest costs along these DB measures).

Figure 4.9 provides estimates from this“tariff-cut equivalent” or “ad-valoremequivalent” for each African country in thesample. For most countries, the tariff-equivalent is higher for exports than forimports, which suggests that the poorlogistics impact exports more than imports.The highest costs, about equivalent to a 70percent tariff, are for three landlockedcountries: Central African Republic, Uganda,and Rwanda. These countries also have highad-valorem costs for imports due to poorlogistics indicators. Among the lowest ad-valorem equivalent costs are the coastalcountries of Gambia, Ghana, Tanzania, andTogo.

These estimates are only approximate.They depend on the validity of the gravitymodel augmented by trade policy barriersand other trade costs, as captured by the DBand LPI indicators as an adequate descriptionof bilateral trade between countries. In anycase, the magnitudes of the estimates arelarge compared to the barriers to trade due torestrictive trade policies. The pattern of



results confirms the preliminary conclusionsreached in Chapter 1, namely that Africancountries’ high trade costs are more the resultof logistics costs rather than trade barriers indestination countries or direct transport costs.

Conclusions and PolicyImplications

For ports to operate efficiently and reducetransport costs, good connectivity to

producers and consumers in the hinterland isessential. This in turn requires adequate roadand railroad physical infrastructure. With thespread of containerization, the state oftransport-related costs is becoming the mostimportant element of overall costs along thelogistics chain. This is particularly importantfor the 15 LLDCs in Africa that have to dealwith transit through third-countries beforethe goods can reach their destinations.


Figure 4.9: Estimated ad-valorem equivalents of an improvement in LPI and Doing

Business (DB) indicators

Source: Adapted from Portugal-Perez and Wilson (2009a, figure 8).

80%

70%

60%

50%

40%

30%

20%

10%

0%

Angola

Benin

Bots

wana

Burk

ina F

aso

Buru

ndi

Cam

ero

on

Cape V

erd

eC

AR

Chad

Com

oro

sD

RC

Congo R

ep.

Côte

d’Iv

oire

Equato

rial G

uin

ea

Eritrea

Eth

iopia

Gabon

Gam

bia

Ghana

Guin

ea-B

issa

uK

enya

Leso

tho

Lib

eria

Madagasc

ar

Mala

wi

Mali

Maurita

nia

Moza

mbiq

ue

Nam

ibia

Nig

er

Nig

eria

Rw

anda

Senegal

Seyc

helle

s

Sie

rra L

eone

South

Afric

aS

udan

Sw

azi

land

Tanza

nia

Togo

Uganda

Zam

bia

Zim

babw

e

DB import cost equivalent variation in TTRI DB export cost equivalent variation in TTRI


For all African countries, but especiallythose in SSA, the efficiency of ports ishampered by poor connectivity with thehinterland due to the substandard conditionof roads, railroads, and waterways,delivering a poor-quality service. As a result,and especially because there is littlecompetition across modes of transport, portscan be “held hostage” to deficient infra-structure. A major financing gap, estimatedby the World Bank (2009) to be in the regionof US$ 31 billion per annum, is required tooverhaul the infrastructure sector (includingpower). In addition, as shown in thischapter and in Chapter 3, the softcomponent of the infrastructure also needsto be improved to lower trade costs.

An improvement in the transport sectorin Africa necessitates a combination of hardand soft infrastructure developmentmeasures. Most projects in the infrastructuresector funded by the International FinancialInstitutions take this into account and havea mix of components to address both hardand soft infrastructure deficiencies.

For landlocked countries, transitcorridors need to be improved. Thisimprovement can only be made effective bydeep regional integration. The North–Southcorridor is functional and provides anexample of the gains in connectivity that canbe made from some harmonization at theEAC–COMESA–SADC level. Yet, there aremany more areas where cooperation at theregional level would yield further reductionsin trade costs. OSBPs and single electroniccustoms windows are examples of cost-reducing trade facilitation measures.Regional integration efforts are still to bedeveloped in West Africa in particular. The

examples discussed in this chapter showthat progress in regional integration is takingplace but, at the same time, they alsoillustrate the difficulty in obtaining thenecessary full cooperation to carry out theprojects.

One challenge in trade facilitation is theinterrelated nature of the transport logisticschain; if weak links in the chain are notaddressed, reforms elsewhere may havelimited impact. Seaport services are an areaof local logistics competence which involvea myriad of complementary services. Themovement of freight traffic through a portincludes berthing activities, piloting, towing,and cargo handling. In port, vessel servicesare required for bunkering, repairs, andmaintenance. Meanwhile, to facilitate trade,the services include customs clearance,storage, and warehousing. Many of thesemarkets are dominated by the State andgreater benefits could be derived from someliberalization with regulatory reform.

Improvements in services such ashaulage, customs brokerage, insurance,declarations, advance notifications, andgeneral supply chain performance wouldreduce trade costs. Often problems indeveloping countries in local logisticsservices stem from lax regulations and lackof competitiveness. The latter is difficult toaddress through measures in individualcountries. There tend to be a small numberof large agents; often part of or associatedwith multinational companies, with marketpower in international logistics services.However, the domestic market is character-ized by a large number of small agents. Thelarge agents will tend to have a dominantposition in international transport. Measures



taken by national governments can supportlocal agents but will have little effect onglobal players (especially shippingcompanies). Domestic regulatory reformsand facilitation measures may supportimprovements, while international logisticsservice providers can be encouraged toinfluence best practice by entering themarket on a competitive basis.

While domestic reforms lie at the heartof trade facilitation, some issues cannot beaddressed by domestic investment or tradefacilitation measures. International shippingcosts, especially maritime transportation, arelargely determined by three factors beyondthe control of African policymakers: fuelprices, capacity utilization, and shippingcartels. However, governments can improvecosts at the margin by removing policies thatdistort competition, such as cargo reserva-tion schemes or “national flag require-ments,” and by accepting the need forregulatory institutions to monitor anti-competitive practices (although this requiresregional cooperation and coordination).

Trade facilitation measures are the singlemost important policy action to reducetransport costs. However, without inter-national coordination and consensus on theneed for an appropriate regulatory environ-ment, they cannot achieve their fullpotential. This is particularly the case for thetrade facilitation negotiations currentlyunderway under the auspices of the WTO. Ifsuccessful, these negotiations, which aim atimplementing the Freedom of Transitobligation of Article V, would go some waytoward removing the constraints faced bythe 15 landlocked countries in SSA.

References

AfDB/UNECA. 2003. Review of theImplementation Status of the Trans-AfricanHighways and the Missing Links. Vol. 2:“Description of Corridors.”

African Union. 2008. “State of TransportSector Development in Africa.” First Sessionof the Conference of African Ministers ofTransport, Addis Ababa.

Arvis, J.F., G. Raballand, and J.F.Marteau. 2007. “The Costs of BeingLandlocked: Logistics Costs and the SupplyChain.” Working Paper Series 4258.Washington, DC: World Bank.

Behar, A., P. Manners, and B. Nelson.2009. “Exports and Logistics.” OxfordUniversity Working paper. Oxford, UK:Oxford University Press.

Briceno-Garmendia, C., K. Smits, and V. Foster. 2008. “Financing PublicInfrastructure in Sub-Saharan Africa:Patterns, Issues and Options.” AICDBackground Paper. Washington, DC: WorldBank.

Buys, P., U. Deichmann, and D. Wheeler.2006. “Road Network Upgrading andOverland Trade Expansion in Sub-SaharanAfrica.” World Bank Policy ResearchWorking Paper 4097. Washington, DC:World Bank.

COMESA–EAC–SADC. 2008. “North–SouthCorridor Pilot Aid for Trade Program:Surface Transport.” North–South CorridorHigh Level Conference, Lusaka, April 2008.



Djankov, S., C. Freund, and C.S. Pham.2008. “Trading on Time.” Review ofEconomics and Statistics, November.

El Khayat, M. 2005. “Les enjeux majeursdes transports au Maghreb 2003–2004.”Économie et territoire/Territoire et transports.Available online at: http://www.iemed.org/anuari/2005/frarticles/felkhayat.pdf.

Global Transport KnowledgePartnership website, “One Stop BorderPosts — Design & Implementation.” SeeGTKP website: http://www.gtkp.com.

Hummels, D. 2001. “Time as a TradeBarrier”, Global Trade Analysis ProjectWorking Paper No. 18.

Krugman, P. 1991. “Increasing Returns andEconomic Geography.” The Journal ofPolitical Economy, 99 (3): 483–99.

Limão, N. and A.J. Venables. (2001).“Infrastructure, Geographical Disadvantage,Transport Costs, and Trade.” World BankEconomic Review, 15: 451–79.

Nyangaga, F. N. 2002. “OvercomingObstacles to Implementation: Reformingroad management in Sub-Saharan Africa.”Africa Technical Note No. 32, SSATP, WorldBank.

OECD. 2001. Intermodal Freight Transport:Institutional Aspects. Paris: OECD, RoadTransport and International LinkagesResearch Program.

Pálsson, G., A. Harding, and G. Raballand. 2007. “Port and Maritime

Transport Challenges in West and CentralAfrica.” SSATP Working Paper No. 84.Washington, DC: World Bank.

Portugal-Perez, A. and J. Wilson. 2009a.“Why Trade Facilitation Matters for Africa.”World Trade Review, 1: 1–38.

Portugal-Perez, A. and J. Wilson. 2009b.“Revisiting Trade Facilitation Indicators andExport Performance.” Mimeo, World Bank.

Raballand, G., and E. Aldaz-Carroll.2005. “How Do Differing StandardsIncrease Trade Costs? The Case of Pallets”,Policy Research Working Paper No. 3519.Washington, DC: World Bank.

Raballand, G., C. Kunaka, and B.Giersing. 2008. “The Impact of RegionalLiberalization and Harmonization in RoadTransport Services: A Focus on Zambia andLessons for Landlocked Countries.” PolicyResearch Working Paper No. 4482.Washington, DC: World Bank.

Raballand, G., C. Kunaka, J.F. Marteau, J-K. Kabanguka, and O. Hartmann. 2008.“Lessons of Corridor Performance Measure-ment.” SSATP Discussion Paper No. 7,Regional Integration and Transport — RITSeries. Washington, CD: World Bank.

Regional Trade Facilitation Programwebsite: http://www.rtfp.org/overview_border.php

Standard Bank. 2008. “AfricanInfrastructure Survey — Harnessing LocalOpinion and Insight.” Research Economics,Africa Hardcover.



Sub-Saharan Africa Transport PolicyProgram (SSATP). 2006. RoadMaintenance Funds Matrix: Country Policyand Reform Status, SSATP website.

Teravaninthorn, S. and G. Raballand.2009. Transport Prices and Costs in Africa:A Review of the International Corridors.Washington, DC: World Bank.

United Nations, 2008. World UrbanizationProspects: The 2007 Revision. ExecutiveSummary. Department of Economic andSocial Affairs, New York.

World Bank. 2007. “CEMAC: Transport —Transit Facilitation Project.” Report No.38463-AFR, Project Appraisal Document.Washington, DC: World Bank.

——. 2009. Africa’s Infrastructure: A Timefor Transformation, Part 2 — SectoralSnapshots. Flagship Report: AICD Study.Washington, DC: World Bank Group.

——. 2010. “Connecting to Compete, TradeLogistics in the Global Economy, TheLogistics Performance Index and ItsIndicators”, World Bank Group, Washington,DC.




An

nex 4

.1: L

og

istics P

erf

orm

an

ce In

dex (L

PI) a

cro

ss A

fric

an

co

un

trie

s, 2010

Co

un

try

LP

I L

PI

Cu

sto

ms

Infr

a-

Inte

rnati

on

al

Lo

gis

tics

Tra

ckin

g

Tim

elin

ess

Ran

kstr

uctu

resh

ipm

en

tsco

mp

ete

nce

& t

racin

g

South

Afric

a28

3.4

63.2

23.4

23.2

63.5

93.7

33.5

7

Senegal

58

2.8

62.4

52.6

42.7

52.7

33.0

83.5

2

Tunis

ia61

2.8

42.4

32.5

63.3

62.3

62.5

63.5

7

Uganda

66

2.8

22.8

42.3

53.0

22.5

92.4

53.5

2

Benin

69

2.7

92.3

82.4

82.6

52.6

43.0

73.4

9

Mauritiu

s82

2.7

22.7

12.2

93.2

42.4

32.5

72.9

1

Congo, D

em

. R

ep.

85

2.6

82.6

02.2

72.5

62.9

32.4

33.2

0

Madagasc

ar

88

2.6

62.3

52.6

33.0

62.4

02.5

12.9

0

Egyp

t92

2.6

12.1

12.2

22.5

62.8

72.5

63.3

1

Tanza

nia

95

2.6

02.4

22.0

02.7

82.3

82.5

63.3

3

Togo

96

2.6

02.4

01.8

22.4

22.4

53.4

23.0

2

Guin

ea

97

2.6

02.3

42.1

02.4

32.6

82.8

93.1

0

Kenya

99

2.5

92.2

32.1

42.8

42.2

82.8

93.0

6

Nig

eria

100

2.5

92.1

72.4

32.8

42.4

52.4

53.1

0

Cam

ero

on

105

2.5

52.1

12.1

02.6

92.5

32.6

03.1

6

Nig

er

106

2.5

42.0

62.2

82.6

62.4

22.4

53.2

8

Cote

d’Iv

oire

109

2.5

32.1

62.3

72.4

42.5

72.9

52.7

3

Gam

bia

, The

113

2.4

92.3

82.1

72.5

42.3

72.2

73.1

5

Chad

115

2.4

92.2

72.0

02.7

52.0

42.6

23.1

4

Congo, R

ep.

116

2.4

82.0

21.6

22.3

32.4

22.3

34.0

0

Ghana

117

2.4

72.3

52.5

22.3

82.4

22.5

12.6

7

Com

oro

s120

2.4

51.9

61.7

62.5

62.2

62.7

93.2

3

Gabon

122

2.4

12.2

32.0

92.2

92.3

12.6

72.8

7

Eth

iopia

123

2.4

12.1

31.7

72.7

62.1

42.8

92.6

5

Djib

outi

126

2.3

92.2

52.3

32.5

02.1

72.4

22.6

7

Lib

eria

127

2.3

82.2

82.0

02.3

32.1

62.3

83.0

8

Alg

eria

130

2.3

61.9

72.0

62.7

02.2

42.2

62.8

1

Lib

ya132

2.3

32.1

52.1

82.2

82.2

82.0

82.9

8 cont.



Co

un

try

LP

I L

PI

Cu

sto

ms

Infr

a-

Inte

rnati

on

al

Lo

gis

tics

Tra

ckin

g

Tim

elin

ess

Ran

kstr

uctu

resh

ipm

en

tsco

mp

ete

nce

& t

racin

g

Bots

wana

134

2.3

22.0

92.0

91.9

12.2

92.5

92.9

9

Moza

mbiq

ue

136

2.2

91.9

52.0

42.7

72.2

02.2

82.4

0

Zam

bia

138

2.2

82.1

71.8

32.4

12.0

12.3

52.8

5

Mali

139

2.2

72.0

82.0

02.1

72.1

32.3

12.9

0

Angola

142

2.2

51.7

51.6

92.3

82.0

22.5

43.0

1

Burk

ina F

aso

145

2.2

32.2

21.8

91.7

32.0

22.7

72.7

7

Sudan

146

2.2

12.0

21.7

82.1

12.1

52.0

23.0

9

Guin

ea-B

issa

u149

2.1

01.8

91.5

62.7

51.5

61.7

12.9

1

Rw

anda

151

2.0

41.6

31.6

32.8

81.8

51.9

92.0

5

Nam

ibia

152

2.0

21.6

81.7

12.2

02.0

42.0

42.3

8

Sie

rra L

eone

153

1.9

72.1

71.6

12.3

31.5

31.7

32.3

3

Eritrea

154

1.7

01.5

01.3

51.6

31.8

81.5

52.2

1

Som

alia

155

1.3

41.3

31.5

01.3

31.3

31.1

71.3

8

Sourc

e: W

orld B

ank

(2010).

An

nex 4

.1 (

co

nt.

)



( i) Trans-Africa Highway (TAH)

The Trans-Africa Highway is the mostambitious road program in Africa. It wasformulated in the early 1970s by the AfricanUnion (AU), the African Development Bank(AfDB), United Nations Economic Commis-sion for Africa (ECA), and Africa’s RegionalEconomic Communities. Its aim was toestablish a network of all-weather roads ofgood quality which would: (a) as much aspossible provide direct road links betweencapitals of the continent; (b) contribute to thepolitical, economic, and social integrationand cohesion of Africa; and (c) ensure roadtransport facilities between important areasof production and consumption.

The Trans-Africa Highway network isconceived of as nine interlinked highwayswith a total length of 56,683 km (see Box 4.5).

The sponsors estimate that completingthe Trans-Africa Highway will cost aboutUS$ 47 billion over 15 years (expendituresof approximately US$ 35 billion forupgrading and maintenance and anadditional US$ 12 billion for administration,monitoring of road conditions, andprograms that compensate abuttingsettlements for loss of revenue frombarricades). The economic benefits areestimated at about US$ 250 billion and theproject is expected to generate around 14million person-years of employment.

A study was jointly conducted by ECAand the AfDB in 2002 to review the existing

physical condition of the TAH network, tohighlight problems and prospects of thenon-physical barriers to road transportoperations, as well as the institutional

Annex 4.2: Overview of the Major African Trade andTransport Corridors

Box 4.5: The Trans-Africa Highway

network: nine interlinked sections

TAH 1: Cairo–Dakar Highway: 8,636 km. TAH 1

joins with TAH 7 to form an additional

north–south route around the western extremity

of the continent.

TAH 2: Algiers–Lagos Highway: 4,504 km.

TAH 3: Tripoli–Windhoek–(Cape Town) Highway,

10,808 km. This route has the greatest number

of missing links and requires the greatest

amount of new construction.

TAH 4: Cairo–Gaborone–(Pretoria/Cape Town)

Highway, 10,228 km.

TAH 5: Dakar–Ndjamena Highway: 4,496 km.

Also known as the Trans-Sahelian Highway, this

links West African countries of the Sahel.

TAH 6: Ndjamena–Djibouti Highway: 4,219 km:

contiguous with TAH 5, continuing through the

eastern Sahelian region to the Indian Ocean port

of Djibouti.

TAH 7: Dakar–Lagos Highway: 4,010 km. This

highway joins with TAH 1 to form an additional

north–south route around the western extremity

of the continent.

TAH 8: Lagos–Mombasa Highway: 6,259 km.

TAH 9: Beira–Lobito Highway: 3,523 km.

Source: AfDB/UNECA (2003)


framework for the development andharmonization of the TAH network(AfDB/UNECA, 2003). The total fundingrequirement for completion of missing linkswas estimated at about US$ 4.3 billion. Thestudy proposed the next steps to be takenfor TAH implementation should includefinancial and technical feasibility studies ofthe sections deemed to be in need ofimprovements. However, it would appearthat little progress in this area has beenmade in the intervening seven years.

(ii) The Northern Corridor

Countries linked

The Northern Corridor is the transportcorridor linking the Great Lakes countries ofBurundi, DRC, Rwanda and Uganda to theKenyan seaport of Mombasa. The corridoralso serves Northern Tanzania, SouthernSudan, and Ethiopia.

Corridor administration

The Northern Corridor is administered bythe Northern Corridor Transit TransportCoordination Authority (NCTTCA), createdin the mid-1980s, following the signing ofthe Northern Corridor Transit Agreement byBurundi, Kenya, Rwanda, and Uganda. TheDemocratic Republic of Congo became acontracting state of the NCTTCA in 1987after ratifying the Treaty.

Corridor characteristics

The corridor includes the Mombasa port,which is the largest and busiest port ineastern Africa.

The main roads network totals nearly7,000 km, of which only 60 percent is paved.The main axis is the Mombasa–Nairobi–

Kampala–Kigali–Bujumbura road. EasternDRC links extend from Kigali through eitherGoma or Bukavu to Kisangani. FromUganda, Eastern DRC is linked viaBunagana, Mpondwe, Ishasha, Goli and Aruborder posts, with the main axis goingthrough Kasindi, Beni, Komanda, andNiania to Kisangani.

The railroad network comprises theKenya/Uganda sections from Mombasathrough Nairobi, Nakuru, Eldoret, Malaba,Jinja, and Kampala to Kasese in westernUganda (a distance of approximately 1,660km). A branch line runs from Nakuru toKisumu on Lake Victoria (217 km), wherethere is a wagon ferry link with Jinja andPort Bell in Kampala.

There are inland waterways on LakeVictoria, Lake Albert, Lake Kivu, the RiverNile, and the River Congo.

The landlocked countries of Uganda,Rwanda, Burundi and Eastern DR Congoaccess their fuel supplies from the oilpipeline, initially between Nairobi andMombasa but then extended to Kisumu andEldoret.

Investment opportunities

There are a number of investmentopportunities along the Northern Corridor,as outlined by NCTTCA. In addition, theWorld Bank has initiated a support projecton the Northern Corridor that seeks toincrease efficiency of road transport; tofacilitate trade and regional integration;enhance aviation safety and security to meetinternational standards; and to promoteprivate sector participation in themanagement, financing, and maintenance ofroad assets.




Table 4.5: Estimated interregional trade volume effect of road network upgrading1

(US$ million) in SSA, 2006

Regional Pair2 Current Network Trade Upgraded Network Trade Change

West West 2,838 9,062 6,224

West Central 647 1,252 605

West East 23 93 70

West Southern 4 24 20

West South 870 1,540 670

Central Central 200 1,551 1,351

Central East 308 348 40

Central Southern 127 194 67

Central South 1,390 2,374 984

East East 724 1,182 458

East Southern 101 124 23

East South 871 1,378 507

Southern Southern 72 99 27

Southern South 1,868 6,753 4,885

Totals:

Within Regions 3,834 11,894 8,060

Across Regions 6,209 14,080 7,871

West, Central East Africa with

South Africa 3,131 5,292 2,161

West, Central, East Africa

with Southern Africa 1,210 2,035 825

Southern Africa with

South Africa 1,868 6,753 4,885

Source: Buys et al. (2006).

Notes: 1 The road network upgrade is simulated by increasing all link quality indices to a minimum level of 45. The quality

indices have been elaborated by Buys et al. (2006) based on a mildly increasing-returns function and which captures

“percent paved” roads, but also government revenues supporting road maintenance. Values by country have been

normalized to 100 for the highest-quality road transport (in South Africa).2 Because of data issues, the following countries are not included: Botswana, Lesotho, Namibia, Swaziland, Liberia and

Somalia. The other countries are grouped into regions as follows:

West: Benin, Burkina Faso, Chad, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau,

Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo

Central: Angola, Burundi, Cameroon, Central African Republic, D.R. Congo, Gabon, Rep. Congo,

Rwanda, Zambia

East: Djibouti, Eritrea, Ethiopia, Kenya, Malawi, Sudan, Tanzania, Uganda

Southern: Mozambique, Zimbabwe

South: South Africa


Table 4.6 details areas where railroadnetwork rehabilitation and upgrading areneed for the Northern Corridor.

(iii) The North–South Corridor (NSC)

Countries linked

The North–South Corridor (NSC) links theports in South Africa to the port of Dar esSalaam in Tanzania, through Botswana, thecopperbelts of Zambia, Mozambique,Malawi, DRC, Zimbabwe and Tanzania. Italso links with the port of Wallis Bay inNamibia and Lobito in Angola.


The NS Corridor is administered by threeRECs: the COMESA, EAC and SADC, throughthe North–South Corridor Pilot Aid for TradeProgram. The Program is aimed at enablingthe RECs, their member states, and theinternational community to implement aneconomic corridor-based approach toreduce costs of cross-border trade in theregion. It takes a holistic approach to enableproducers and traders to be morecompetitive, thereby creating higher levelsof economic growth, employment creation,and reducing poverty.


Table 4.6: Rehabilitation and upgrading of the Northern Corridor’s existing railroad network

Section Rehabilitation/Upgrade Requirements Estimated

Cost

(US$ million)

Mombasa–Nairobi This section, laid with 95 lb rails, requires spot improvement and 5

(530 km) replacement of rails and sleepers

Nairobi–Malaba Upgrading to 110 lb rails, replacement of sleepers and 62

(550 km) reconstruction of culverts

Nakuru–Kisumu Upgrading from the Nakuru to Mau Summit, a distance of 60 km, 47

(217 km) from 60 to 80 lb rail occurred between 2002 and 2004. Remaining

section requires the upgrade

Malaba–Kampala Emergency repairs of bad spots, culverts and bridges are being 38

(250 km) undertaken with financing from the EU. Permanent railway

rehabilitation and improvement of the signaling and

telecommunications systems is required

Kampala–Kasese Major rehabilitation, including the strengthening of the basement, 42–100

(330 km) realignment, reconstruction of culverts and bridges, and replacing

rails and sleepers

Tororo–Mbale–Soroti Insecurity in Northern Uganda led to frequent closures of this line. –

–Gulu–Pakwach Line When it opens, only freight services operate up to a certain point

(502 km) on the line

Source: Northern Corridor Transit Transport Coordination Authority (NCTTCA).


Corridor characteristics

The regional transport sector is characterizedby the busiest traffic in the region in terms ofvalues and volumes of freight but also bypoor road and rail infrastructure and longwaiting times at borders and ports. Thosedelays create significant costs and hamperregional producers’ ability to access regionaland international markets. The road transportsystem is highly competitive, deregulated,and competes openly with rail services.

The railroad network in the corridor ischaracterized by inflexibility, in relation toschedules and poor intermodality, resultingin delays and unreliability. The level of hardinfrastructure railroad is low, as sectionsrequire refurbishment and upgrading andimprovement in operations, and conse-quently suffer from poor efficiency andcapacity constraints, including speedrestrictions, shortage of operational railroadwagons, availability of locomotives, andlack of operating capital for the purchase ofspares and fuel.


Some of the most effective cost-reducingmeasures on the corridor would be roadrehabilitation; reduction in fuel costs; and, toa lesser extent, reduction in journey timesand harmonization of national rules andregulations.

(iv) The Maputo Corridor

Countries linked

The Maputo Corridor links Zimbabwe,Swaziland, Botswana, and Mozambique,although it only runs through South Africaand Mozambique.

From as far east as the deep seaport ofWalvis Bay in Namibia, the Trans-KalahariCorridor connects Namibia’s capital,Windhoek, with landlocked Botswana’scapital, Gaborone, via the vast expanse ofthe Kalahari Desert. From there, direct railand road links connect Gaborone with theMaputo Corridor along a transport route thatcan rightly be called the Capital Corridor,passing through

• Mafikeng, provincial capital of SouthAfrica’s Northwest Province;

• Pretoria, South Africa’s executivecapital located in the greater TshwaneMetropolitan Municipality;

• Johannesburg, capital of GautengProvince;

• Nelspruit, capital of MpumalangaProvince; and

• Mozambique’s capital, Maputo.


The Maputo Corridor is administered by theMaputo Corridor Logistics Initiative (MCLI).It was established as a nonprofit organiza-tion consisting of infrastructure investors,service providers, and stakeholders fromMozambique, South Africa, and Swazilandto focus on the promotion and furtherdevelopment of the Maputo DevelopmentCorridor (MDC) as the region’s primarylogistics transportation route.

Corridor’s characteristics

The Maputo Corridor is part of a greatertransport axis linking the Atlantic and IndianOcean via the subcontinent of SouthernAfrica, and runs through the most highlyindustrialized and productive regions ofSouthern Africa.



Unlocking the landlocked regions of theMpumalanga, Gauteng, and LimpopoProvinces, the Maputo Corridor is a truetransportation corridor, comprising road,rail, border posts, port and terminalfacilities. The corridor is also characterizedby poor road conditions betweenJohannesburg and Maputo, insufficient railcapacity and long journey times, longborder crossing times, limited directshipping opportunities, and limited portaccess.


The initial strategic focus of MCLI is toengage with the governments of SouthAfrica, Mozambique, and Swaziland toreinforce the public–private partnerships inthe arena of logistics, to ensure that theMaputo Corridor is the first choice forregional importers and exporters alike.

The governments of South Africa andMozambique have promoted the revival ofthe Maputo Corridor as part of a greaterSpatial Development Initiative, with bilateralpolicies and substantial public and privatesector investments, designed to stimulatesustainable growth and development in theregion. Now private businesses are neededto ensure full optimization of the MaputoDevelopment Corridor.

The following have been identified aspriority areas:

• Continuous improvement of borderprocedures and operational hours;

• Increased scope and competitivenessof transport services: additionalcapacity, higher service levels, andmore competitive rates for road, rail,port, terminals and shipping lines;

• Creation and continuous enhance-ment of information services; and

• Coordination and acceleration ofpromotion of investment zones.

These challenges have been addressed bythe Maputo Corridor Logistics Initiative andthere is now a new, high-quality toll road,concessioned to a private operator, MaputoRailway Services. As a result, the rail hasbeen rehabilitated and new rolling stockpurchased. Waiting times at the border havebeen reduced and border opening timeshave been extended, with plans to make theborder a one-stop border post. Directcontainer shipments have been introduced;and significant investments have been madeto improve access to the port.

(v) Walvis Bay Corridors

Countries linked

The Walvis Bay Corridors comprise anetwork of transport corridors including thePort of Walvis Bay, the Trans-KalahariCorridor, the Trans-Caprivi Corridor, theTrans-Cunene Corridor, and the Trans-Oranje Corridor.


These corridors are managed by the WalvisBay Corridor Group, a public–privatepartnership that allows it to pool resourcesand authorities of both transport regulatorsand transport operators, thus effectivelyserving as a facilitation center and one-stopshop coordinating trade along the WalvisBay Corridors and linking Walvis Bay port tothe rest of the Southern African subregion.



Corridors’ characteristics

According to a report in the Namibianpress13 in January 2009, trade volumes alongthe Trans-Kalahari, Trans-Caprivi and Trans-Cunene corridors have increased from174,299 tonnes to 282,031 tonnes, represent-ing a growth rate of more than 61.8 percenton tonnage shipped between 2007 and2008. The estimated revenue generated bythe transport sector along the corridorsincreased by N$ 45.9 million from the N$73.5 million in the 2006/2007 financial yearto N$ 119.5 million in 2007/2008 andvolumes on the Trans-Kalahari Corridor(TKC) increased by 19.1 percent from 4,917to 5,857 tonnes. Volumes on the Trans-Caprivi Corridor (TCC) increased by morethan 76.7 percent from 27,521 to 48,627tonnes. Volumes on the Trans-Cunene(TCuC) increased by 60.4 percent from141,861 to 227,548 tonnes.

The Walvis Bay Corridors, in particularthe Trans-Caprivi, are seen as providing analternative route to the Zambian and DRCongo’s Copperbelt. The Trans-KalahariCorridor route has seen a significant shiftwhereby road transporters and traders havemoved from the traditional trade route viasouthern Namibia into South Africa. Morethan 40 percent of road transporters are nowutilizing the route from Johannesburg, SouthAfrica via Botswana into Namibia.

Walvis Bay could also be regarded as themost convenient and nearest port for a largepart of Angola and the Trans-CuneneCorridor reached record levels in cargomovement in 2008 with the redevelopment

of the Angolan economy, as more and moreconsumables, vehicles and constructionmaterials were ordered and supplied via thePort of Walvis Bay.

The Group’s main competitive strengthis its setup of transport and logisticsstakeholders from both the public andprivate sectors. This allows for the poolingof resources, expertise and authorities fromboth the regulators and the operators.

(vi) West African Transport Corridors

Countries linked

The West African Transport Corridors linksix coastal countries (Ghana, Benin, Côted’Ivoire, Senegal, Guinea, and Togo) andthree LLCs (Burkina Faso, Mali, and Niger).

Corridors’ characteristics

The landlocked countries of West Africahave traditionally been dependent on theports to their south. According to the WebAtlas on Regional Integration in WestAfrica,14 between 1999 and 2003, transportoperations to and from Mali, Burkina Faso,and Niger rose by nearly 70 percent, from2.0 to 3.4 million tonnes of goods, whichrepresents approximately 7.5 percent oftotal traffic at the ports of Dakar, Abidjan,Takoradi, Tema, Lomé, and Cotonou. Thesetransactions consisted principally of importsof consumer products and exports of agri-cultural products (mainly cotton).

In 1999, more than 50 percent of thetransit traffic with these countries wasthrough the port of Abidjan. The rest was


13 http://www.economist.com.na/content/view/10571/70/

14 http://www.atlas-ouestafrique.org/spip.php?article45


shared between Cotonou (19 percent), Lomé(17 percent), Dakar (11 percent), and Tema(1 percent). However, between 2002 and2003, the traffic of goods in transit betweenAbidjan and the landlocked countriesdeclined fivefold. The operations withBurkina Faso have declined from 390,000 to15,000 tonnes. While in 1998, Burkina Fasoexported 80 percent of its cotton throughAbidjan, by 2003 no exports from BurkinaFaso were going through the Ivorian port.

Nouakchott, in Mauritania, built withChinese assistance in the 1980s, is growing inimportance and size and is now providingcompetition to Abidjan, Dakar, and Tema.Nouakchott is increasingly used by Malianexporters and importers because traffic fromlandlocked Mali to Nouakchott has becomeeasier and cheaper owing to less bureaucracyand fewer checkpoints on the road.Although the ports to the south of Mali arecloser, the 1,500-km Bamako–Nouakchottroute is considered to be a practicalalternative by many. The road from Bamakoto Néma (in the southwest of Mauritania) is inpoor condition but the Néma–Nouakchott“Trans-Mauritanian highway” of about 1,000km in length, is in good condition.

There have been significant improve-ments in connectivity in West Africa resultingfrom improved road links betweenBamako–Conakry and Bamako–Nouakchott,and the privatization of the railroad betweenDakar and Bamako and the Abidjan–Ouagadougou lines. The more traditionalnorth–south transport and transit corridorsare now facing growing competition fromeast–west corridors, notably from Dakar,Nouakchott, Banjul, and Conakry.

The Ivorian crisis has demonstrated the

ability of regional actors to swiftly adapttransit activity to circumstances andopportunities. The closing of internationalroad and rail routes from Abidjan resulted ina rerouting of freight to other ports in Togo,Benin, and Ghana (Teravaninthorn andRaballand, 2009). In the future, the bigtransport flows could again experience suchpendulum swings; not only in order tobypass areas of political instability, but alsoto make use of the most competitive ports aswell as the fastest and least expensive roads.

(vii) The CEMAC Trade and TransportCorridor

Countries linked

The CEMAC Trade and Transport Corridorlinks all the CEMAC country members:Cameroon, Central African Republic (CAR),Chad, the Republic of Congo, EquatorialGuinea, and Gabon.

Corridor’s administration

A Trade and Transport Facilitation Programwas adopted in March 2006 by the CEMACmember states. It is aimed at implementinga regional institutional framework; harmon-izing national regulations; fostering customsinterconnectivity and information tech-nology systems within the region; andimplementing a pilot trade and transportfacilitation project on the N’Djamha–Douala(about 1,850 km) and Bangui–Douala(about 1,450 km) surface transport corridors.

Corridor’s characteristics

Intraregional trade among the six countriesrepresents less than 5 percent of the totaltrade in the subregion. This is primarily dueto the dominance of oil, and forestry,



mineral and agricultural commodities in allcountries’ trade mix, as well as the similarityin production structure of goods andservices in the subregion. Furthermore, thecurrent inefficient transit system whichhinders regional integration, and the poorcondition of road, and to a lesser extent railinfrastructure, keep the share of intra-regional trade at a very low level.

The major international trade routes in theCEMAC area consist mostly of the N’Djamha–Douala and the Bangui–Douala corridors,

which link the port of Douala by road or by acombination of rail and road to landlockedCAR and Chad. Alternative corridors carryonly limited traffic. Some of the road sectionsare currently being rehabilitated by otherdevelopment partners (EC, Arab donors,France, Japan, etc.). However, the committedfunding remains insufficient to secure an all-weather road network between the mainCEMAC trade centers, which was one of thestated objectives of the “Réseau IntégrateurCEMAC 2000.”


Table 4.7: Main characteristics of the African transport corridors

Corridor Administrative Body Bottlenecks Investment Needs

Trans-African African Union • Non-physical barriers • Technical and financial

Highway • Institutional framework feasibility studies of the

harmonization remaining sections.

Northern Northern Corridor Transit NA • Increase efficiency of

Corridor Transport Coordination road sector

Authority • Facilitate trade and

regional integration

• Enhance aviation safety

and security to meet

international standards

• Promote private sector

participation in the man-

agement, financing and

maintenance of roads assets

North–South North–South Corridor Pilot • Poor road and rail • Need for an effective

Corridor Aid for Trade Program infrastructure regional economic

• Long waiting time at transport regulator to

borders and ports regulate competition

• High rail tariffs and • Road rehabilitation

unpredictability because of • Reduction in fuel costs

poor management, • Reduction of border-

inadequate use of assets crossing delays

and poor costing practices

(cont.)



Table 4.7: cont.


• High road maintenance • Aligning and harmonizing

costs due to permissible sequentially countries’

gross vehicle mass (GMV) trade and transport

policies, procedures, and

regulations

• Ensure that adequate

power supply is available

to industrial, commercial

and domestic consumers

Maputo Maputo Corridor Logistics • Poor road conditions • Reinforcement of PPPs

Corridor Initiative • Insufficient rail capacity in the arena of logistics

• Long journey times, long • Improvement of border

border crossing times procedures and

• Limited direct shipping operational hours

opportunities • Increased scope and

• Limited port access competitiveness of

transport services:

additional capacity, higher

service levels and more

competitive rates for road,

rail, port, terminals and

shipping lines

• Implementation and

enhancement of

information services

• Promotion of investment

zones

Walvis Bay Walvis Bay Corridor Group NA NA

Corridors

West African NA NA NA

Transport

Corridors

(cont.)



Table 4.7: cont.


CEMAC CEMAC Trade and Transport • Current inefficient NA

Corridors Facilitation Program transit system which

hinders regional integration

• Poor condition of road,

and to a lesser extent rail

infrastructure

• Committed funding remains

insufficient to secure an

all-weather road network


Drawing on the key findings from theprevious chapters, this chapter shifts focusto assess activities that the AfricanDevelopment Bank Group (AfDB) hasundertaken specifically in the areas of portsand related logistics. It points to critical areasof intervention where the Bank canconsolidate its leadership role and best

direct its support. The positive news is thatthe Bank places a very high level ofimportance on infrastructure developmentin its lending strategy, as emphasized by itsMedium-Term Strategy 2008–2012. Indeed,the AfDB considers the lack of adequateinfrastructure and, in particular, the lack oftransport infrastructure, as one of the main

C H A P T E R 5

Contribution of the AfDB to Infrastructure Development

(F) AfricanBank 2010 Ch5 8/10/10 10:33 Page 154

constraints threatening the growth momen-tum in Africa. This vision is supported by aninternal policy framework which has been adriver of the Bank’s activities in developingtransport logistics including roads, railroads,and ports at both national and regionallevels. The main activities that have beenundertaken in this area fall under thefollowing broad functions: policyformulation, operations (both public andprivate sectors), regional integration, andpartnership activities with developmentfinance institutions (DFIs) and donors. Eachof these areas of Bank intervention isanalyzed below.

From the viewpoint of its investmentprogram in ports, between 1973 and 2000the Bank invested US$ 804.39 millionthrough 27 lending operations. Furthermore,the Bank’s Private Sector Department(OPSM) has been instrumental in the courseof the last decade in supporting the portsconcession process in several Africancountries (see Annexes 5.1 and 5.2). Thisapproach enforces some of the key findingsin this report, in particular the need toincrease private participation in the portsubsector.

Linking to other modes of transport, theBank has also taken a major role inaddressing transport infrastructure, inparticular roads, which are vital for theinterconnectivity of ports to the hinterland.This has been achieved through investmentsin both national and regional projects andprograms. Nonetheless, there is still room toexplore opportunities in railroad projectsand other modes of transport, for example,navigable rivers and lakes (e.g. theZambezi–Shire Waterway project between

Malawi and Mozambique; see Box 4.1 inChapter 4), to ease pressure on roads for themovement of goods across the continent. Interms of Bank strategy and policy, one areathat demands increased focus is maritimetransportation; here a strong policyframework is needed to guide investmentdecisions in ports and related logistics.

Policy Formulation

The Bank policy framework for portdevelopment in Africa is guided by itsTransport Sector Policy. The transport sectorwas selected by the Bank Group’s2008–2012 Medium Term Strategy (MTS) asone of its four key sectors of focus, tobenefit from a significant proportion of theBank’s new commitments to infrastructureinvestments. The Bank’s Transport SectorPolicy was approved in February 1992 andsuperseded its previous policy in this sector,dated October 1991. The OperationalResource and Policy Department (ORPC) inits 2010 Work Program is scheduled toupdate the Bank’s Transport Sector Policy.

The existing Transport Sector Policydistinguishes five subsectors based onphysical and economic characteristics.These subsectors generally correspond tothe primary modes of moving passengersand freight, and include roads, railroads,water transport (or maritime transport), airtransport, and urban transport. The Bank’spolicy has three specific objectives: (i) toprovide guidance to sector lending; (ii) to stimulate policy dialogue; and (iii) tostrengthen coordination. The PolicyGuidance to sector lending provides a frameof reference for internal decision-making bythe Bank Group regarding transport projects

Contribution of the AfDB to Infrastructure Development 155


and programs formulated by its regionalmember countries (RMCs).

The scope of the AfDB’s interventions onbehalf of its RMCs includes lending forprojects and programs, sector and structuraladjustment loans, and technical assistance.In order to increase the amount of financingavailable, the Bank Group promotescofinancing arrangements with otherorganizations that have complementarydevelopment objectives. These financialresources are channeled to transportprojects and programs which have beencarefully prepared and assessed by duediligence work carried out by the Bank. TheAfDB takes into consideration the followingfive general priorities in its lending program:(i) investment, rehabilitation and main-tenance; (ii) regional trade and transport;(iii) role of government and private sector;(iv) cost recovery and financial considera-tions; and (v) institutional and humanresources development (see Box 5.1).

Among these objectives identified in theTransport Sector Policy and to meet the keychallenges of the water transport in thecontinent, the Bank has identified strategicoptions for the promotion of maritimetransport. These options are described inTable 5.1. Although this blueprint articulatesthe focal areas that guide the Bank in itslending policies, the strategy has not yetresulted in key interventions in the area ofmaritime transport. The new TransportStrategy, which is expected to be unveiled in2010, will provide more information andfoster a better understanding of thissubsector. This should result in a bettertargeting of activities, given the urgent needsof the port subsector. Areas for future

investment and support, such as buildingregulatory institutions, managementreforms, human resources development,shipping coordination, strengtheningmaintenance procedures, inland waterwaydevelopment, and multimodal regulation,which are highlighted in Table 5.1, resonatewith the findings presented in previouschapters of this report.


Box 5.1: Transport sector – the AfDB’s

five lending priorities

• Investment, Rehabilitation and

Maintenance: Fostering an appropriate

balance of expenditures for new

infrastructure and equipment, rehabilita-

tion and maintenance, based on national

investment planning and coordination.

• Regional Trade and Transport:

Eliminating nonphysical and physical

barriers to regional and international trade

and transport, particularly along major

transport corridors.

• Role of Government and Private Sector:

Creating regulatory environments

conducive to the provision of efficient and

safe transport services, minimizing the

intervention of government in transport

operations and services, and encourag-

ing the involvement of the private sector.

• Cost Recovery and Financial

Considerations: Reducing or eliminating

public subsidies to transport infra-

structure and operations, increasing

operator revenues and decreasing costs,

and strengthening financial and

management systems.

• Institutional and Human Resources

Development: Fostering institutional

reform, training, education and pro-

fessional development.



Table 5.1: Strategic options for the promotion of maritime transport in Africa

Focal Area Issues Strategy

Institutional • Inappropriate institutional frameworks for • Establish and strengthen national

maritime administration organization for maritime administration

• Inadequate institutional support for • Form a national trade and transport

multimodal transport promotion group to address multimodal

issues in maritime administration

Management • Inefficient management of ports • Reform management practices to

• Lack of port security encourage decision-making freedom and

• Lack of organization and application of accountability

modern management practices by • Strengthening the organization and

African shippers staffing of port security

• Improve organizational structures and

management procedures

Human • Inadequate training and human • Establish and strengthen regional

Resources resource management training programs

Development • Hazardous working conditions on shore • Review and improve work rules and

and at sea regulations

Shipper • Lack of shipper representation in port • Strengthen the role of shippers’

Coordination administration and management decision- councils and other coordination bodies

making

Maintenance • Inadequate shoreside and seaboard • Establish and strengthen maintenance

maintenance practices management procedures

• Shortage of skilled maintenance personnel • Provide technical training programs

for maintenance personnel

Regional • Lack of shipping policy coordination • Improve the organization and

Cooperation and cooperation management of port associations

Inland • Lack of inland waterway facilities • Prepare integrated investment

Waterway plans for inland waterways development

Investment

Multimodal • Inappropriate regulation of multimodal • Rationalize regulations pertaining to

Regulation transport multimodal transport


AfDB’s Operational Approach toInfrastructure Development

This section looks at the Bank Group’sinvestments in infrastructure and relatedactivities, followed by specific inventions inthe public and private sector related to portsand other modes of transport. The Bank

recognizes that the InfrastructureDepartment of the Bank (OINF) and thePrivate Sector Department (OPSM) mustcontinue to develop a clear understandingof the strengths and constraints of the localinfrastructure networks and marketpotentials. In that regard, Country and


Box 5.2: The AfDB’s environment policy for infrastructure projects

Infrastructure and port projects, although crucial for Africa’s economic development, can sometimes have

unintended negative environmental impacts. A Bank Group Environment Policy was first adopted in 1990,

to promote environmental mainstreaming in all Bank operations. Environmental and Social Assessment

Procedures and a new Environment Policy were released in 2001 and 2004 respectively.

A set of new approaches is currently adopted by the Bank in its operations in order to: (i) mainstream

environmental sustainability considerations into all the Bank’s operations; (ii) strengthen existing environmental

assessment procedures and develop new environmental management tools; (iii) clearly demarcate internal

responsibility in implementation; (iv) assist RMCs to build adequate human and institutional capacity to deal

with environmental management; (v) improve public consultation and information disclosure mechanisms; (vi)

build partnerships to address environmental issues, harmonize policies, and disseminate environmental

information; and (vii) improve monitoring and evaluation of operations.

In this way, environmental impacts of a project are reviewed throughout the project cycle, from the

conception and programming stage, through to appraisal, supervision, and monitoring. In each operational

department of the Bank, environmental and social specialists provide guidance and support and follow the

project’s progress.

Project categorization based on four levels of risk (4 being the lowest risk, 1 the highest) is one of the

tools to address environmental issues. Port and infrastructure projects are rated as category 1, covering all

projects that are likely to induce important adverse environmental and/or social impacts. As such, before an

infrastructure project is presented to the Board for approval, the following steps need to be taken:

• conduct a full Environmental and Social Impact Assessment (ESIA), which examines the project’s

potential beneficial and adverse impacts, compares them with those of feasible alternatives, and

recommends any measures needed to prevent, minimize, mitigate or compensate for adverse impacts

and to enhance environmental and social project benefits;

• conduct an Environmental and Social Management Plan (ESMP), which summarizes the impacts;

develops mitigation and enhancement measures with quantitative and qualitative details; and

provides provisions for monitoring;

• conduct a Resettlement Action Plan (RAP) if relevant; and

• allow a period of 120 days’ disclosure before Board presentation.

The Bank’s promotion of, and adherence to, the highest international environmental and sustainability

standards in its projects serves an important demonstration effect by encouraging the participation of other

investors and partners.


Regional Strategy Papers, which areprepared in collaboration with the respect-ive governments of countries concerned,should continue to be used as tools to definethe needs and ensure coherence andsynergies between assistance to the publicand private sectors.

Based on consultations with RMCs as wellon economic sector work, the public sectordepartments develop programs to address theweaknesses and constraints in the enablingenvironment. This may include the provisionof public goods in “hard” infrastructure,comprising the sectors of energy, water andsanitation, transport, and telecommunicationsas well as in “soft” infrastructure, such asregulatory and legal frameworks, which areessential for economic growth and privatesector development.

The Bank’s Private Sector Departmenttakes the lead in supporting private sectoroperations through a variety of instrumentswithout a sovereign guarantee, includingloans, lines of credit, guarantees, equity andquasi-equity investments, and technicalassistance. These interventions are under-taken with private corporations, financialinstitutions, or state-owned enterprises andin partnership with other developmentinstitutions. In this way, the Bank seeks tobuild confidence around projects, and toattract other investors by creating a strongdemonstration effect. In addition to thestrategic alignment above, private sectorprojects are often assessed on the basis oftheir commercial viability, developmentoutcomes, additionality, and complement-arity.

Overview of AfDB Investments tothe Sector

Infrastructure development in Africa, whichincludes transport but also energy, telecom-munications, and water and sanitation, isone of the AfDB’s top priorities. This iscurrently reflected in the Bank’s 2010operational work program, where infra-structure will account for 49 percent of totalfinancing.

Since 2000, the renewed emphasis oninfrastructure development has led to asharp increase in AfDB investments to thesector, both in value and relative terms (seeFigure 5.1). Lending approvals in theinfrastructure sector reached a record highof US$ 3.05 billion in 2007 (75 percent oftotal approvals), an increase of around 125percent over the 2006 level of US$ 1.29billion. Of this US$ 3.05 billion, 40 percentwas allocated to transport infrastructure. Interms of subregional allocations to hardinfrastructure, North Africa received in 2007the largest share (Figure 5.2).

However, as shown in Figure 5.1, in 2008Bank Group investment approvals forinfrastructure decreased to US$ 2.17 billion,although this still represented 45 percent ofthe AfDB’s total commitment for the year.Regional infrastructure projects accounted for12 percent of the Bank’s total commitment.With respect to the transport subsector, in2008 the Bank Group contributed US$ 393.94million of its own funds to cofinance projectsin the transport subsector, and mobilized anadditional US$ 114.41 million from externalpartners and private sector institutions, with afurther US$ 243.62 million coming fromgovernments and local firms.



In terms of the split between financingwindows for approvals in the infrastructuresector in 2008, US$ 1.05 billion (48 percent)came from the ADB window, compared toUS$ 1.12 billion (52 percent) from the ADFwindow. The development of regionalinfrastructure also increased from US$193.80 million in 2006 to US$ 213.70 millionin 2007, reflecting the Bank’s emphasis onregional integration (AfDB, 2008; ICA,2008a, 2008b, 2009). As a result of its strongcommitment toward infrastructure develop-ment in Africa, the Bank emerges as one ofthe key players in this sector. Nevertheless,much remains to be done to bridge the

infrastructure investment gap in Africa,which is estimated by the Africa Infra-structure Country Diagnostic (AICD) studyto stand at US$ 31 billion per annum (WorldBank, 2009).

To improve resource mobilization for thedevelopment of African ports, the Bank hasmainly focused on developing public–private partnerships through its PrivateSector Department. The public sector arm ofthe AfDB has targeted the development ofthe hinterland interface, mainly through theconstruction of road networks and thecreation of regional trade corridors.


Figure 5.1: AfDB Investment in hard infrastructure, 1985–2008 (US$ mn)

Source: AfDB, Statistics Department.

3500

3000

2500

2000

1500

1000

500

0

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

US$ million

Power Supply

Water Supplyand Sanitation

Communications

Transport


AfDB Investments in Ports: LessonsLearned

Between 1973 and 2000, the AfDB assumeda leadership role by carrying out substantialinvestment in ports, as documented in the2001 Review of Bank Group Operations inthe Maritime Subsector (AfDB-COD, 2001).In that 17-year period, the Bank Groupcommitted to US$ 804.39 million, represent-ing 27 financing operations in regionalmember countries (see Annex 5.1). ADFfinancing accounted for 48 percent of theBank Group’s total maritime investments(see Figure 5.3).

The main areas of Bank Group supportto the maritime sector during 1973–2000included: (i) construction of new ports; (ii)

reconstruction and rehabilitation of ports;(iii) procurement and installation of safetyequipment; (iv) institutional support (e.g.capacity building, trade facilitation; enhanc-ing the regulatory framework); and (v)maritime studies (i.e. to prepare projects orto evaluate the performance of thesubsector). Within the Maritime Review’stimeframe (1973–2000), approximately 74percent of the operations were implementedbefore 1990, while the remaining 26 percentwere completed in 1997. The decline in theAfDB’s pipeline of projects in the maritimesubsector during this period is due to thefact that under the ADF-VII lending policy,there were no resources allocated to theports subsector. This gave the Bank the


Figure 5.2: AfDB investment in hard infrastructure in Africa by subregion, 2008

Source: ICA (2009).

1000

900

800

700

600

500

400

300

200

100

0

Energy Non-ODA

Energy ODA

Water Non-ODA

Water ODA

Transport Non-ODA

Transport ODA

North Africa Western Africa Eastern Africa Central Africa Southern

Africa except

SA

South Africa


opportunity to explore the use of its privatesector window to finance port projects.

Another key finding of the 2001Maritime Review was the need to supportregional integration, which is articulated asone of strategic areas of Bank intervention.In this respect, the Report highlighted thefollowing critical focal areas:

• the need to finance inland waterwaystudies on selected lakes and rivers(such as Victoria, Chad, Niger, andNile) that have significant regionalintegration impacts;

• the need to finance studies andmobilize resources to support thesetting-up of inland multimodalcontainer ports, which are required tofacilitate the transit of cargo tolandlocked countries; and

• to encourage RMCs and RECs,through policy dialogue, to cooperatein rationalizing their ports in terms ofneed and use, to adopt minimumtariffs for transit cargo, and topromote access to landlockedcountries.

On the knowledge side, the Report stressedthe need to conduct more economic andsector work, in order to fully evaluate thecontribution of the maritime subsectorprojects to the overall economicdevelopment agenda.

Bank’s Private Sector InfrastructureInvestments

A principal objective of the Bank’s PrivateSector Department (OPSM) vis-à-vis theinfrastructure sector is to promote PPPs bycombining resources from both the publicand private windows, as well as byproviding technical assistance (TA) andcapacity building to the Bank’s RMCs. Thecombination of nonconcessional andconcessional resources from the AfDBboosts the bankability of a project andmakes it more attractive to private sectorcofinanciers. Furthermore, a Public–PrivatePartnership Strategy is under preparationthat should, among other things, defineinternal incentives and procedures forpromoting private participation morerobustly. As a result of this strategicorientation, all infrastructure projectssubmitted by OPSM for approval by theBoard in 2007 and 2008 took the form ofPPPs.

As African ports are increasinglyprivatizing part of their activities through


Figure 5.3: AfDB maritime investments

by financing instrument, 1973–2000

(% of total)

Source: AfDB–COD (2001).

NTF11%

ADB41%

ADF48%


concessions, OPSM is also focusing on portinfrastructure projects to be managed underconcessional agreements. Over the lastdecade, about 25 percent of the cumulativeapproved operations emanating from thePrivate Sector Department have been in thetransport sector, and of these, 50 percent aredirectly related to the development of portsin Africa.

Over the past decade, the Bank hasapproved four major port projects: (i) asenior loan of US$ 10.0 million for theDjibouti Bulk Terminal (2003); US$ 150.0million for the Damietta Container Terminalin Egypt (2007); US$ 80.0 million for theDoraleh Container Terminal in Djibouti(2008); and US$ 71. 36 million (Euro 47.50million) for the Dakar Container Terminal inSenegal (2009) (see Box 5.4 and Annex 5.2).All these projects were PPPs, financed byboth the private and public sectors.

Private sector operations in the portsubsector thrive where an enablingenvironment has been created by way ofport reforms and the formulation of legaland regulatory frameworks. However, thereare still ports in Africa that need to bederegulated, and this poses a challenge toprivate investment in these countries. Inaddition, other constraints impeding privatesector involvement include: governanceissues; insufficient capacity to design;contraction and regulation of the privatesector participation; lack of local capitalmarket to support private projects; the longgestation period needed for infrastructureprojects; and reconciliation of recovery ofcost with constraints in customers’affordability and availability of subsidies.

Given that many ports continent-widehave weak onshore and offshore infra-structure, poor management, shallow draftand low terminal capacity — and given toothe advent of post-Panamax vessels(supersize ships), there is an urgent need toidentify and develop hub ports alongregional lines in order to attract internationalshipping lines. This will bring about greatereconomies of scale for ports, and so reduce


Box 5.3: AfDB’s Technical Assistance

support toward a feasibility study of

road/railroad linkages between Kinshasa

and Brazzaville

One example of technical assistance provided

by the Bank to the transport sector in 2008 was

to cofinance a study into a project designed to

link the capital cities of the two Congos,

Kinshasa (Democratic Republic of Congo) and

Brazzaville (Republic of Congo) and to construct

a 1,015-km railroad to connect the cities of

Kinshasa and Ilebo in the DRC.

The study comprises two components:

(i) feasibility and final design of the road/railroad

bridge between the two capitals, including

terminal facilities as well as access roads to

existing road and railroad networks in both

countries and (ii) the feasibility of the

Kinshasa–Ilebo railroad.

These infrastructure linkages aim to increase

interregional trade, reduce transportation costs

and travel times between countries located

along the corridor, and to fill one major missing

link in the Tripoli–Windhoek corridor.

The Bank contributed an ADF grant of UA 5.0

million toward the total cost of the study (UA

5.44 million), with the remainder provided by the

governments of the DRC and the Republic of

Congo.

Source: AfDB (2008).


maritime transport costs. Notwithstandingthis overarching objective, there are goodprospects for further development andexpansion of container terminals in someports. Indeed, OPSM is in the process ofcarrying out its due diligence on a number ofport projects with PPP investment potential.

Public Sector InfrastructureInvestments

Public infrastructure investments by theAfDB have traditionally focused on the

development of the hinterland infrastructurenetworks through roads and, to a lesserextent, railroad projects and programs. Eventhough these networks may not link to aport interface, such infrastructures facilitatethe movement of people and goods tomarkets, and ultimately boost trade.

In 2008, for example, the public sectordivision of the AfDB supported thedevelopment of road networks in Tunisia(Road Project V [AfDB — OINF, 2008b]) andBurkina Faso (AfDB — OINF, 2009c). In


Box 5.4: The Doraleh Container Terminal project in Djibouti

The Middle East has seen soaring container port volumes, and virtually all ports with privatized container

operations are increasing their capacity and/or their capability to handle larger vessels. This includes the

transshipment range comprising the Arabian Sea/Gulf of Aden ports. By contrast, cargo-handling facilities

at most East African ports remain fairly basic.

Forecast demand in the subregion is strong for both the transit and transshipment businesses. Container

port demand arising from Ethiopia’s foreign trade has been increasing at around 1.5 times the rate of

Ethiopian GDP growth over the last 5 years. For example, Ethiopian traffic at the Djibouti port has increased

at an average growth rate of 20 percent per annum over the last 5 years and at 18 percent per annum over

the last 10 years. Container port throughput in the broader region (which comprises Djibouti’s potential

transshipment market), increased by 218 percent over 1995–2005, reaching 32.6 million TEUs in 2005.

Container transshipment demand for the Arabian Sea/Gulf of Aden port range, consisting of Salalah (Oman),

Aden (Yemen), and Djibouti ports, is forecast to increase by 164–280 percent over the 2005–2015 period,

to around 7.06–10.15 million TEUs.

To tap into the existing growth potential, in 2008 the Bank agreed to cofinance the construction of a new

terminal at the natural deepwater port of Doraleh under a 30-year concession agreement awarded to Doraleh

Container Terminal (DCT). The port is located a few kilometers from the existing Djibouti port, and will handle

exclusively all container business in Djibouti. The Djibouti port will continue to operate for bulk cargo traffic

only. The project will have a 1.5 km quayline length and the capacity to handle 1.55 million TEUs by 2015.

The terminal will have the deepest draft in the region at 18 m and will be able to receive vessels with a

capacity of up to 12,000 TEUs. The new site at Doraleh will be the first port after Suez capable of

accommodating the latest generation of supersize container ships and is set to become an important transit

port and transshipment hub.

The Bank agreed to invest US$ 80 million (20 percent of the total project cost). The project is co-

sponsored by the Port Autonome International de Djibouti (PAID) and Dubai Port World (DPW).

Source: AfDB — OPSM (2008).


Tunisia the objectives were to support theupgrading of the classified roads networkthroughout the country, and to improveaccessibility to the principal developmentpoles to boost trade and economic growth.In Burkina Faso, the project aimed to reducegeneral transportation costs and to improvethe state of roads along the main nationalcorridor of the country. Burkina Faso is alandlocked country without a seaboard, sothe diversification of its access corridors iscritical to its development. The road targetedby the project was identified as the mainhighway corridor (among the five existingones) to access neighboring ports located inTogo and Ghana in particular.

Nevertheless, the Bank also considers thedevelopment of public infrastructure in thebroader framework of regional integration.The Bank’s approach in this regard is thedevelopment of trade corridors, through thedevelopment of transnational multimodaltransport networks, to link nationaleconomies and allow landlocked countriesto access ports. The Bank considers thisapproach as a necessary condition ofintraregional and global trade developmentas well as integration of national markets.

The identification of regional transportcorridors is a key development strategy in aresource-constrained environment. In itsrecently approved Regional IntegrationStrategy, the Bank proposes to validate theidentified development corridors byinvestigating their linkages and economicpotential. This process would involveassessing individual development corridorsin terms of growth, development impactopportunities, indicative infrastructurerequirements, investment potential, and

ability to support regional integration. In thisrespect, the Bank will combine thedevelopment of the corridors with parallelinvestments in trade facilitation. In thisregard, the Bank will promote and supportprivate sector activities along the corridors,especially small and medium enterprises(SMEs), by promoting the implementation offavorable policy and regulatory frameworksand facilitation of trade. Support to SMEswill also help to promote economicdiversification and exports.

The Bank has established itself as aleading financier of regional (multinational)operations in Africa, and this funding hastraditionally come from the AfricanDevelopment Fund (ADF), which is theAfDB’s concessionary window. However,more recently, increasing emphasis is beingplaced on mobilizing nonconcessionaryfinance for regional operations. Forexample, recent major AfDB regionalinfrastructural projects and initiativesdeveloped with various developmentpartners include: the North–South Corridorproject (Box 5.7); the Central AfricanEconomic and Monetary Community(CEMAC) Transport and Trade Corridorproject (Annex 5.3); the second phase of theMombasa–Nairobi–Addis Ababa RoadCorridor project (Box 5.5), and the NacalaRoad Corridor project (see Annex 5.3).These projects aim at removing criticalbottlenecks to trade and transport flows, bydeveloping the hinterland interface andimproving access to ports, which willultimately reduce transport delays and costs.

The Bank also intends to produce aseries of country reports on measures thatcan be taken by member governments,



individually and collectively, to accelerateintegration of their economies. The firstreport was produced by the Bank in 2009,and focused on priority infrastructureoptions in Burundi (Box 5.6).

In addition to “hard” infrastructureinvestment, “soft” infrastructure is also crucialto an RMC’s economic development. Softinfrastructure can be defined as the socialoverhead capital of a region or country, whichenhances the commercial environment forbusinesses and trade — for both domestic andforeign companies who may be thinking ofscaling up investment. Soft infrastructurecovers a broad spectrum of areas, including:governance, regional leadership, education

and knowledge, research and development,technical and business advisory services,access to capital and finance, support tobusiness and trade associations, crimeprevention, health, and social inclusion issues.

Soft infrastructure is increasinglyrecognized as the foundation of successfuland sustainable economies (Stimson et al.,2006) and for that reason has even beentermed “smart” infrastructure (Smilor andWalekin, 1990). Some economists haveargued that trade costs are negatively relatedto the existence of improvements in softinfrastructure (Khan, 2006). For example, inthe first phase of the Mombasa–Nairobi–Addis Ababa Road Corridor Project, approved


Box 5.5: Mombasa–Nairobi–Addis Ababa Road Corridor Project, Phase II

The Mombasa–Nairobi–Addis Ababa Road Corridor Project, approved by the AfDB in 2009, aims at

promoting trade and regional integration between Ethiopia and Kenya by improving transport

communications between the two countries. The project involves the construction to bitumen standard of

438 km road sections including a 245-km Merille River–Marsabit–Turbi road section in Kenya and a 193-km

Ageremariam–Yabelo–Mega road section in Ethiopia. The total cost of the project is US$ 510.31 million.

The project is to be cofinanced by the Bank Group (64 percent), the European Union (23 percent), and

the governments of Ethiopia and Kenya (13 percent). The expected outcomes of the project include reduced

transport and shipping costs between Kenya and Ethiopia; reduced transit time for import and export goods;

and increased volume of Ethiopian transit goods using the port of Mombasa. Ultimately, transit to/from

Ethiopia via the port of Mombasa should increase from zero in 2009 to 500,000 tonnes by 2014; and to over

1 million tonnes or 20 percent of total Ethiopian sea freight by 2018. The average transport cost of US$ 0.50

per veh-km on the corridor in 2009 should reduce by 20 percent by 2011 and by 50 percent by 2014. Transit

and travel time of 5 days between Addis and Nairobi in 2009 should be reduced by 20 percent (1 day) by

2011; and by 60 percent (3 days) by 2014.

The development of the corridor will expand market sizes beyond national boundaries and foster an

enabling environment for the private sector and for attracting foreign direct investment. In addition to

enhancing trade and strengthening regional integration, the project will contribute to poverty reduction in

both countries by increasing access to markets and social services for the surrounding areas, and by

empowering women and other disadvantaged groups through adequate roadside socioeconomic

infrastructure and services.

Source: AfDB — OINF (2009a)


in 2004 by the AfDB, one of the sevencomponents was a study of the containerterminal on the Ethiopian side of the corridor.The aim of this study was to present anintegrated development plan of the wholecorridor into a viable trade route, taking intoaccount all the necessary construction orimprovement to the physical infrastructure,including transit infrastructure facilities.Among the facilities, a one-stop border post(OSBP), which is considered as softinfrastructure, was identified as a possibleimprovement to the efficiency of the corridor.The Chirundu, between Zambia andZimbabwe (mentioned in Chapter 4), is thefirst OSBP along the North–South Corridor

Project. Another active OSBP financed by theBank is between Rwanda and Burundi.

The Bank Group’s RegionalIntegration Activities

The Bank’s Regional Integration Strategy,approved in March 2009, articulates threeprincipal objectives. First, it supports theestablishment of an effective and efficientpan-African and subregional institutionalframework to promote trade and managethe integration process. Second, the strategyaims to facilitate an enabling investmentpolicy framework for the continent. Third, itsets out the different resources that the Bankhas at its disposal, in terms of financial


Box 5.6: An infrastructure Action Plan for Burundi: accelerating regional integration

Burundi has badly suffered as a result of conflicts over the last two decades, which has left a legacy of

substandard and poorly maintained infrastructure. The challenges that this presents are compounded by

the fact that Burundi is a landlocked and densely populated country. Against this background, significant

changes are underway to overhaul the regional trade and infrastructure landscape. On the one hand,

Burundi has recently become a member of the East African Community (EAC), which could induce shifts in

the trade structure with its partners. On the other hand, several major regional projects are in the pipeline

which could deeply affect the relative competitiveness of existing transport corridors, as well as the supply

of electricity and the structure of energy trade.

To address the problem of pervasive poverty in Burundi, the government is committed to accelerating

the economic GDP growth of the country to 6–7 percent per annum in real terms. To support the government

in meeting this objective, in 2009 the Bank conducted a study in Burundi to suggest priority infrastructure

options, with a focus on transport, communications, and energy, to maximize the economic benefits of

regional integration. The study produced a medium-term Action Plan to develop the proposed

infrastructures. The report provides the government, the donor community, and the private sector with a

detailed assessment of infrastructure investment opportunities in Burundi and the wider region. It will

therefore underpin the government’s ongoing dialogue with donors and the business community about these

opportunities. Finally, this report contributes to a better coordinated action within the donor community.

The African Development Bank and the World Bank are collaborating on the preparation of a Country

Economic Memorandum (CEM) for Burundi. The relevant findings of this report on infrastructure will be

integrated into the forthcoming CEM.

Source: AfDB — OREA (2009).


investment, technical assistance, andknowledge to facilitate delivery of priorityregional infrastructure.

This new strategy is expected to result ina number of benefits for its RMCs and thecontinent: greater economies of scale andincreased competitiveness; higher levels ofFDI and a more enabling environment forprivate sector participation; enhancedAfrican presence in the global marketplace;a scaling-up of intraregional trade; theestablishment of a more effective African“voice” on issues of development andregional integration; and a more efficientprovision of regional public goods. Toachieve these concrete results, the strategy isunderpinned by two mutually reinforcingpillars: regional infrastructure and institu-tional capacity building, the latter includingtrade facilitation and capacity buildingmeasures.

The Bank has traditionally supportedregional infrastructure, but without buildinginto it trade facilitation programs. The newstrategy, therefore, marks a shift toward amore balanced approach, and will includecapacity building to the Regional EconomicCommunities (RECs) in the soft areas oftrade facilitation, in addition to thedevelopment of trade-related infrastructure.Specifically, this support will aim to:

• Assist and build capacity to developtrade facilitation strategies andimplement trade facilitation audits;

• Promote the harmonization andcoordination of regional tradepolicies, with a view to eliminatingtariff and nontariff barriers (NTBs) tothe cross-border flow of productionfactors, goods and services;

• Harmonize environmental standardsand regulations;

• Streamline cross-border infrastructureregulations and remove publicprocurement bottlenecks; and

• Support the implementation ofcustoms unions.

The NEPAD Infrastructure ProjectPreparation Facility (NEPAD-IPPF) in 2009funded a feasibility study on the extensionof the Port San Pedro and related infra-structure in Côte d’Ivoire. The objectives ofthe proposed project are to stimulateeconomic growth and socioeconomicdevelopment, and to build an efficientregional transport system to facilitate accessto reliable services for the landlockedcountry of Mali and some parts of Guineaand Liberia. The broad focus of the projectis to support import and export-orientedSMEs by facilitating trade and contributingtoward regional integration. More specific-ally, the project aims at extending thecapacity of the port so that it can serve as aregional hub, as well as promotingmultimodal transport (road/rail) for a freeflow of people and goods.

The NEPAD-IPPF Special Fund con-tributes to these objectives by (i) reducingcosts while improving the quality oftransport services to improve competitive-ness and (ii) supporting regional integrationand the integration of markets by improvingtransport services. The development of roadlinks converging to the Port, namely,Odienné (Ivory Coast)–Bougouni (Mali) andDanane–N’Nzérékoré (Guinea) forms part ofthe West Africa Monetary and EconomicUnion (UEMOA) Community Priority Road



Network articulated in the CommunityInfrastructure and Transport Road ActionProgram (PACITR). This road network,together with the bridge over the CavallyRiver linking Côte d’Ivoire to Liberia, seeksto (i) capture the road traffic from thesoutheast of Mali, Guinea, and Liberia, and(ii) to transit goods at least-cost through theport of San Pedro by land and sea routes tothe markets in the regional hinterland.

The Bank has also taken into account themain issues stated in West and Central AfricaMemorandum of Understanding (MoU) onPort State Control, which was signed in Abujain 1999. The Abuja MoU regulates theimplementation of port state controlprovisions, i.e. the inspection of foreign shipsin national ports to verify that their conditionand equipment comply with the require-ments of international conventions, and thatthe ship is operated in compliance withapplicable maritime laws. The aim of theMoU is to foster the eradication ofsubstandard shipping practices, to ensuresafety and security of persons on board ships,and protect the marine environment frompollution. A presentation of the MoU tookplace in 2008 at the African Union conferenceof Ministers of Transport in Algiers, whichidentified areas of improvement for a betterimplementation of the MoU, especiallyrelated to institutional commitments.

On softer issues, the Bank’s RegionalIntegration Department (ONRI) hasdeveloped a strong trade facilitation programwhich is aimed at addressing cross-bordertransport regulations/procedures relating tothe development of the corridors. Theseinclude the development and management ofOSBPs, transit traffic regimes, cross-border

movement of persons and standardspertaining to vehicle size, weight and safetyrequirements. In this regard, ONRI hasorganized two consultation missions to assistmembers of RECs to formulate positions inthe World Trade Organization negotiations ontrade facilitation. The Bank aims to strengthenthe capacity of ECCAS and CEMAC, within theframework of the ongoing development of acapacity-building program for the implemen-tation of the Consensus Transport Master Planof Central African States. The secondconsultations will be held with COMESA,EAC, and SADC as a follow-up to theTripartite Summit of these three RECs, gearedtoward their eventual merging into one body.

In addition, the Bank continues to helpshape Africa’s regional infrastructuredevelopment through its knowledgeproducts. First, it undertakes periodic reviewsof the NEPAD Short Term Action Program(STAP) to identify implementation challengesand make appropriate recommendations.Technical support is provided to addressshortcomings identified in the STAP process,including weak definition of projects andprograms, the need for improved leadershipand ownership, as well as the lack ofenabling policy and regulatory frameworks.Second, by expediting the development ofthe medium- to long-term strategic Programfor Infrastructure Development in Africa(PIDA), in collaboration with the AUC andthe NEPAD Secretariat, ONRI providessupport toward its eventual implementation.Third, it provides advice and technicalsupport and collaborates with the NEPADSecretariat, RECs, and RMCs to facilitatealignment of national, REC, STAP, and PIDAinfrastructure priorities, and to prioritize



infrastructure projects for funding andimplementation. In this regard, prioritizationis based on criteria already agreed with theRECs and RMCs. Lastly, the Bank alsosupports the harmonization process forregulations, procedures, and standards thataffect cross-border connectivity.

The AfDB is working with the WTO andUNECA to implement the WTO’s Aid for

Trade (AfT) Agenda, which supports thetrade liberalization agenda by addressingsupply-side constraints. The North–SouthCorridor is one of the pilot programs inwhich the Bank is participating as part of theAfT agenda (Box 5.7).

Partnerships and theInfrastructure Consortium forAfrica

The Bank leverages resources withdevelopment-oriented financing institutionsto support projects in its RMCs. InSeptember 2008, the Bank established afinancing mechanism, namely the AfricanFinancing Partnership (AFP), which


1 This was originally organized through theRegional Trade Facilitation Program website(www.rtfp.org). However, the RTFP officially cameto an end in October 2009, after achieving significantsuccess. A follow-on program, to be calledTradeMark Southern Africa, is due to commence inthe near future.

Box 5.7: The North–South Corridor: an Aid for Trade pilot program

The North–South Corridor (NSC) has been identified (in full collaboration with DfID) as a pilot program under

the Aid for Trade (AfT) initiative to help reduce transport and transit costs, and boost trading opportunities

in southern and eastern Africa. The Bank has committed to contribute US$ 600 million over 2009–2012 to

support activities along the Corridor.

The Corridor traverses the vast area from the copperbelt of southern DRC and northern Zambia to the

port of Dar es Salaam in the northeast, and to the South African ports in the south. Its development involves

the Secretariats of COMESA, EAC, and SADC, which have already set up a joint Task Force to enhance

implementation of the program and its benefits. The main objectives are to:

• Remove main bottlenecks to trade flows and target areas of intervention along the Corridor;

• Address the Corridor’s development in a holistic manner, looking at regulatory, administrative and

infrastructural constraints to transport and transit systems as a whole;

• Ensure that interventions to reduce costs and time are effected in a coherent and sequential manner

to generate a “knock-on” effect in terms of savings along the entire Corridor;

• Allow all information to be collated and made available on a GIS database to help informed decision-

making;1

• Support regional trade policy regulation and trade facilitation initiatives.

Significant progress has already been made, including preparation of financing proposals, identification of

transport networks and bottlenecks, mapping of existing and planned investments, and strengthening trade

facilitation measures. Some development partners, including DfID, are providing support. The challenge is

now to take the pilot to the next phase and secure more support.


facilitates collaboration with some of thelarger DFIs, with a provision for the eventualparticipation of smaller DFIs and privatefinanciers. The principal objective of theAFP is to optimize the consolidated marketknowledge and project financing skills ofthe DFIs, including the AfDB, and therebymitigate financial risks for cofinanciers. TheAFP focuses on very large projects thatrequire massive capital injections — theseoften fall within the infrastructure sector.The AFP enables all partner institutions toavoid unnecessary duplication of efforts,lower legal and administrative costs,increase financing capacity, and achievegreater diversification and synergies,thereby maximizing project effectiveness.

The Bank has also taken steps to build astrong partnership with the African FinanceCorporation, which will yield huge efficiencybenefits for both institutions. Furthermore,the Bank leverages the networkingopportunities afforded by its Annual Meetingsto create a forum for representatives fromnational authorities, investors, financiers,promoters, and contractors to meet and shareproject ideas. All these mechanisms providean opportunity to build synergies andcatalyze additional financing for infrastructuredevelopment in Africa.

Similarly, the Infrastructure Consortium forAfrica, which is hosted by the AfDB in Tunis,facilitates a more coordinated approach toinfrastructure development. It has in particularpromoted collaboration between the AfDBand other donors and helps to define acommon approach to support policy reforms,negotiations, and the involvement of theprivate sector. The Consortium has also beeninstrumental in promoting partnerships to

leverage financial support to bridge theinfrastructure gap in Africa.

In 2007, the Bank successfully mobilizedclose to US$ 2.7 billion in cofinancing in thetransport, energy, and ICT subsectors (ICA,2008b). In 2008, the Bank Group con-tributed US$ 393.94 million of its own fundsto cofinance projects in the transportsubsector, while it mobilized a further US$ 114.41 million from external partnersand private sector institutions, with anadditional US$ 243.62 million of fundingcoming from governments and local firms.

Conclusion

Between 1973 and 1997, the Bank assumeda leadership role vis-à-vis investments in theport subsector in Africa, mainly using publicsector instruments. However, more recently,public investments have declined in favor ofprivate sector investments. To date, almostall Bank port development projects havebeen prepared by its Private SectorDepartment, including those in Egypt,Djibouti, and Senegal. Nonetheless,opportunities for a scaling-up of participa-tion by both public and private sectorsshould be explored, given the substantivefinancial needs of the ports subsector.

The AfDB should be commended forincreasing its support to transport projectsand programs, which account for the bulk ofits total infrastructure investments. However,there is a need to ease pressure on the roadtransport systems and to focus on othermodes, such as rail and navigable rivers andlakes (e.g. the Zambezi–Shire WaterwayProject; see Box 4.1).

Beyond hard infrastructure, the AfDBalso supports soft infrastructure investments,



such as OSBPs, which are essential nodes inthe movement of goods in and out of portsand through transport networks andcorridors. The Bank is well placed throughits key partnerships with RECs, governmentbodies, and civil society organizations, toexplore other areas where it might interveneeffectively to assist its RMCs, such as inhelping to streamline and harmonizecustoms procedures and enhance theinstitutional regulatory framework.

Discussions with national authorities andother partners reveal that there is room forthe Bank to invest further in ports andrelated logistics. However, as these types ofinvestments are expensive, the Bank shouldcontinue to leverage all the instruments at itsdisposal and strengthen its partnerships, inorder to catalyze the participation andresources of other key players.

References

AfDB. 2008. Annual Report, 2007. Tunis:AfDB.

——. 2009. Annual Report, 2008. Tunis:AfDB.

AfDB — CEPR. 1992. Transport SectorPolicy. Presented to the Board of the AfricanDevelopment Bank on February 26, 1992.

AfDB — COD. 2001. Review of BankGroup’s Operations in the MaritimeSubsector, April 2001.

AfDB — OCIN. 2002. Project AppraisalReport: “Multinational — BCEAO: Proposalfor an ADF loan of UA 6.20 million to financethe project to reform systems and means of

payment in UEMOA countries.” Prepared byOCIN. Submitted to the Board of the AfricanDevelopment Bank on October 2, 2002.

——. 2003. Project Appraisal Report:“Ghana: Proposal for an ADF loan of UA 18million, an NTF loan of UA 3 million and aTAF grant of UA 0.80 million to finance theRoad Infrastructure Project.” Prepared byOCIN. Released on August 11, 2003.

AfDB — OINF. 2008a. Project AppraisalReport: “Ghana: Proposal for supplementaryloans of UA 43.10 million to finance three(3) on-going road transport projects. BoardMemorandum.” Prepared by OINF.Submitted to the Board of the AfricanDevelopment Bank on February 11, 2009.

——. 2008b. Project Appraisal Report:“Tunisia: Proposal for an ADB loan of Euro174.33 Million to finance the Road ProjectV.” Prepared by OINF. Submitted to theBoard of the AfDB on May 28, 2008.

——. 2009a. Project Appraisal Report:“Mombasa–Nairobi–Addis Ababa RoadCorridor Project Phase II.” Prepared byOINF. Submitted to the Board of the AfDBon July 1, 2009.

——. 2009b. Project Appraisal Report:“Multinational — Mozambique/Malawi/Zambia — proposal for ADF loans of UA102,720,000 to Mozambique and UA14,320,000 to Malawi to finance the NacalaRoad Corridor — phase I.” Prepared byOINF. Submitted to the Board of the AfDBon June 24, 2009.

—— 2009c. Project Appraisal Report:“Burkina Faso: Proposal for an ADF loan of



UA 10 million and ADF grant of UA 31million to finance the project to rehabilitatethe Koupela–Bittou–Cinkanse–Togo borderroad and the Mogande access road.”Prepared by OINF. Submitted to the Boardof the AfDB on February 11, 2009.

AfDB — ONIN. 2004. Project AppraisalReport: “Mombasa–Nairobi–Addis AbabaRoad Corridor Project.” Prepared by ONIN.Released on November 5, 2004.

AfDB — ONRI. 2009. Bank Group RegionalIntegration Strategy, 2009–2012. Presentedto the Board of the AfDB in March 2009.

AfDB — OPSM. 2003. Project AppraisalReport: “Djibouti: Proposal for an ADB loanof US$ 10 million to finance the DjiboutiBulk Terminal project.” Prepared by OPSD.Submitted to the Board of the AfricanDevelopment Bank on December 3, 2003.

——. 2007. Project Appraisal Report:“Egypt: Proposal for a US$ 150 millionsenior loan to finance the DamiettaContainer Terminal.” Prepared byOPSM/GECL/OIVP. Submitted to the Boardof the African Development Bank onDecember 4, 2007.

——. 2008. Project Appraisal Report:“Djibouti: Proposal for a senior loan of US$80 million to finance the Doraleh ContainerTerminal (DCT) project.” Prepared byOPSM. Submitted to the Board of the AfricanDevelopment Bank on September 24, 2008.

——. 2009a. Project Appraisal Report:“Senegal: Proposal for a loan of 47.5 millionEuro to finance the Dakar Container

Terminal.” Prepared by OPSM. Submitted tothe Board of the African Development Bankon July 20, 2009.

——. 2009b. “Information Note on theTrade Finance Initiative.”

AfDB — OREA. 2009. “An InfrastructureAction Plan for Burundi: AcceleratingRegional Integration.”

Infrastructure Consortium for Africa(ICA). 2008a. ICA Annual Report, 2007.

——. 2008b. “Questionnaire for thepreparation of the 2007. Annual Report.”

——. 2009. “Questionnaire for the prepara-tion of the 2008 Annual Report.”

Khan, H.A. 2006. “Soft Infrastructure,Trading Costs and Regional Co-operation”,CIRJE Discussion Paper, University ofDenver.

Smilor, R.W., and M. Wakelin. 1990.“Smart Infrastructure and EconomicDevelopment: The Role of Technology andGlobal Networks,” The TechnopolisPhenomenon. Austin, TX: IC Institute,University of Texas.

Stimson, R.J., R.R. Stough, and B.H.Roberts. 2006. “Regional EconomicDevelopment: Analysis and PlanningStrategy.” New York: Springer.

World Bank. 2008. “Abidjan–LagosTransport and Transit Facilitation Project,Report No.: AB2798, Project InformationDocument, Washington, DC: World Bank.




No. BANK GROUP REGION PROJECT NAME

WINDOW

ADB

1 Côte d’Ivoire WST DEEPENING OF VRIDI CANAL ENTRANCE

2 Cameroon CEN EXTENSION OF DOUALA SEA PORT I

3 Cameroon CEN EXTENSION OF DOUALA SEA PORT PHASE II

4 Comoros EST MUTSAMUDU PORT DEVELOPMENT

5 Gambia WST BANJUL PORT DEVELOPMENT PHASE 1

6 Congo, Dem. Rep. CEN MATADI KINSHASA PORTS DEVELOPMENT

7 Guinea WST CONAKRY PORT DEVELOPMENT

8 Madagascar EST PANGANALES CANAL DEVELOPMENT

9 Seychelles EST VICTORIA COMMERCIAL PORT

ADF

1 Madagascar EST PANGALANES CANAL DEVELOPMENT

2 Cape Verde WST MAIO PORT CONSTRUCTION

3 Burundi CEN BUJUMBURA SHIPYARD CONSTRUCTION

4 Cape Verde WST SAO VINCENT SHIPYARD IMPROVEMENT STUDY

5 Multinational ZZMULT NAVIGATION STUDY ON RIVER SENEGAL

6 Eritrea EST ASSAB PORT DEVELOPMENT PROJECT

7 Cape Verde WST MINDELO SHIPYARD IMPROVEMENT

8 Madagascar EST THE PANGALANES CANAL STUDY

9 Multinational (OMVS) ZZMULT STRENGTHENING OF THE RIGHT BANK DYKE OF THE DIAMA

DAM PROJECT

10 Egypt NOR TWO CANALS STUDIES

11 Gambia WST BANJUL PORT II

12 Madagascar EST THE REHABILITATION OF THE PROTECTIVE DYKE OF TOLIARY

TOWN AGAINST FLOODING BY THE FIHERENANA RIVER

13 Madagascar EST TOLIARY TOWNSHIP PROTECTION PROJECT

NTF

1 Benin WST COTONOU PORT

2 Cape Verde WST MAIO PORT CONSTRUCTION

3 Burundi CEN BUJUMBURA SHIPYARD CONSTRUCTION

Source: AfDB-Central Operations Department (2001).

Annex 5.1: Bank Group Approvals in the TransportMaritime Subsector, 1973–2000



DATE APPROVED YEAR APPROVED AMOUNT APPROVED TOTAL COST (UA mn)

(UA mn)

19/12/1973 1973 3.30 23.10

21/12/1976 1976 5.00 40.00

18/08/1977 1977 5.00 40.00

26/11/1981 1981 10.00 39.20

22/06/1982 1982 7.00 17.47

30/09/1982 1982 20.00 80.27

26/04/1983 1983 12.69 28.50

25/01/1984 1984 11.00 32.78

25/01/1984 1984 18.42 30.19

19/11/1984 1984 2.76 9.74

27/11/1986 1986 0.55 7.42

17/09/1987 1987 0.53 0.56

20/09/1988 1988 0.34 0.37

17/04/1989 1989 41.02 55.37

18/03/1991 1991 4.60 5.11

27/01/1992 1992 1.84 2.03

05/1992 1992 4.83 5.38

06/01/1993 1993 1.56 1.68

14/12/1993 1993 16.00 27.00

10/1993 1993 6.85 7.61

11/1997 1997 6.44 7.16

17/10/1978 1978 2.42 9.68

19/11/1984 1984 6.00 33.68

27/11/1986 1986 4.45 7.42



(i) Djibouti: Bulk Terminal Project(2003)

At project preparation phase, Djibouti hadan acceptable level of infrastructure,although further investment was required tomeet the country’s growing level ofeconomic activity. The Port of Djibouti wasidentified as the most significant infra-structure to kick-start its economy, and onethat could benefit other countries in thesubregion, since the road and rail networkslink Djibouti with Ethiopia. The develop-ment of Djibouti Port was identified ashaving broader beneficial impacts, since by facilitating the supply of grains andfertilizers to neighboring countries(Ethiopia, Eritrea, Somali, and Sudan) itwould raise living standards and mitigate theeffects of famine, which is a recurrentaffliction in this subregion of Africa.

The project had to be implemented on afast-track basis in a subregion that hadpreviously failed to generate significantinvestments from international commercialbanks, which proved reluctant to providethe long-term financing required by capital-intensive infrastructure projects. Further-more, the financial market perceptions(creditworthiness and sovereign risks of thecountry) and sector constraints (regulatoryarrangements of the port and nature of thedomestic financial market) also made itdifficult to obtain local debt financing of theproject.

Consequently, the Bank’s participationwas sought to build comfort and confidencearound the project and thereby attract othercommercial lenders. The following needswere identified: (i) to facilitate the localbanks’ understanding and assessment of therisks of the project; (ii) to ease discussionswith prospective international lenders whohad also revealed their reluctance to assumeDjibouti’s sovereign risks over long periodsand/or were unable to participate withoutthe Bank’s involvement; and (iii) to givecomfort to the private investor (sponsor)about Djibouti’s sovereign risk, as the localprivate banking sector was not yet in aposition to absorb or manage those risks.The Bank’s expertise in project appraisal,supervision, and risk mitigation was alsosought.

The project comprised the development,design, construction, ownership, operationand maintenance of bulk terminal facilities forcereals and fertilizers, destined for export toEthiopia and the wider subregion. Initially,the concession granted the right to build,own, operate and transfer (BOOT) a bulkterminal project on an area of 42,000 squaremeters in the Port Autonome International deDjibouti for a period of 30 years. The bulkterminal has been successfully built asconceived and is now fully operational.

In terms of impact, the project hasconsiderably improved the port turnaroundtime. It has also had a more far-reaching

Annex 5.2: Examples of AfDB Private Sector PortProjects, 2000–2009


impact, by contributing to food security andpoverty reduction in Ethiopia, the majoruser of the port. The project has improvedcargo handling and reliability, and hasadded value to the port as a whole byincreasing its competitiveness. Furthermore,new business opportunities in servicing theport operations and associated logistics havebeen created by the project. It hasencouraged the growth of local andindigenous companies, for example byemploying subcontractors who providetruck haulage services and equipment rentalservices, all of which are spearheaded bythe private sector.

Nevertheless, delays in implementationstart-up often negatively impact project costsand expected revenues. By virtue of the timedelay and the nature of this particularturnkey Engineering, Procurement andConstruction (EPC) contract, the contin-gency provision was insufficient to cover theoverrun. As a result, the lesson was learnedto increase the amount of contingency insimilar future investments. Furthermore theproposed Operations and MaintenanceService Agreement did not materialize asplanned, thereby creating an operationalrisk. The Concessionaire will be advised topay closer attention to this aspect in futuredeals. The development of an Environ-mental and Social Management Plan (ESMP)was expected to be a condition precedent tofirst disbursement, but two years into projectoperations, an ESMP had still to bedeveloped. Relaxed adherence to projectconditions and covenants often increasesthe project’s related risks; in this case, theenvironmental risks mitigation effort wascompromised by this omission.

The total cost of the project, cofinancedby the Société Djiboutienne de Gestion duTerminal Vraquier (SDTV) and the ADB, wasestimated at around US$ 30 million. InDecember 2003 the Board of the ADBapproved a US$ 10.0 million senior loan,which represented 33 percent of the totalproject cost.

Source: AfDB–OPSM (2003).

(ii) Egypt: Damietta ContainerTerminal project (2007)

For Egypt and its neighboring countries, thecontainer transshipment industry has grownrapidly in recent years and this trend isexpected to continue. For the period1990–2005, the average annual growth rateof container shipments in Egypt was 18.6percent, rising to 21.2 percent since 2000.This strong demand is directly linked to thelevel of economic activity. In addition todirect trade-related factors and trans-shipments, container port demand has beenboosted by the continuing containerizationof general cargoes in some commoditytrades and of backhaul bulk cargoes. From1995–2005 the annual increases incontainer-handling demand in Egyptexceeded Egyptian GDP growth by anaverage of 7 percent. The total volume ofcontainers generated by the Egyptianeconomy and handled via Egyptian ports isexpected to increase by around 118 percentin the period to 2015 and then demonstratea further growth of 26 percent from2015–2020. The total range of possibleimport/export container port demand in2020 is projected to be in the range 2.8–3.9million TEUs.



In order for Egypt to capture a significantportion of the Egyptian and regionaltransshipments container activity, the AfDBagreed in December 2007 to cofinance theupgrading and expansion of the Damiettatransshipment port under a 40-yearconcession agreement. The two othersponsors of the project are the Kuwaiti GulfLinks Ports International (KGLPI) and theAref Investments Group. Together they formthe Damietta International Ports Company(DIPCO), which is the SPV executing theBOOT concession.

Damietta port began operations in 1986.It is situated on the Mediterranean coast ofEgypt, about 37 km west of Port-Said. Theport currently handles exports of agriculturalproducts, fertilizers, and furniture as well asthe delivery of imported goods such aspetrochemicals, cement, grains, flour, andgeneral cargo with a total capacity of about5.6 million tonnes annually. Damietta is wellconnected by roads and railroads; this givesthe port a competitive advantage over otherEgyptian terminals. However, the port’sexisting facilities are unable to serve thepotential demand of 4.5 million TEUs, whichwould make it one of the largest trans-shipment facilities in the Mediterranean andthe only one capable of handling the newgeneration of supersize container ships.

To take advantage of Damietta’s naturalcomparative advantages, a new containerterminal would be built and equipped withmodern transshipment facilities. The projectconsisted of: (i) construction of quay walls;(ii) dredging of the access channel andturning basin; (iii) installing the moderntransshipment equipment; and (iv)developing the terminal area and container

yard. These new terminal berths of about2,360 m will be able to accommodate thelatest-generation container vessels, with amaximum draft of 16 m, a length of 400 m,and a width of 53 m. The project will occupyapproximately 130 hectares of land at theport. Ultimately by 2014, the port will reacha maximum capacity of 4.5 million TEUsannually.

The total project cost was estimated atUS$ 680 million. The ADB Board approveda US$ 150 million Senior Loan, whichrepresented 22 percent of the total cost. Twoother leading Middle Eastern commercialbanks invested US$ 330 million (48 percentof the total), with the Sponsors providingUS$ 200 million (30 percent) in equity.

Source: AfDB — OPSM (Nov. 2007).

(iii) Senegal: The Dakar ContainerTerminal (2009)

The Port of Dakar is the busiest in WestAfrica, handling 90 percent of the total valueof Senegal’s foreign trade. It has a naturaladvantage in terms of geographical position,as it is situated at the crossroads betweenEurope, North America, South America, andSub-Saharan Africa. It has a dredgednavigational channel and breakwater, andfacilities for handling liquid and dry bulk,general cargo, and containerized cargo.

The demand for container volume isgrowing and expected to reach 416,000TEUs by 2012 and 580,000 TEUs by 2016. Inorder to improve the port’s facilities and tosafeguard its competitiveness, a 25-yearrenewable Concession Agreement wassigned in October 2007 between theGovernment of Senegal (represented by the



Port Autonome de Dakar [PAD]) and DubaiPort World (DPW). Under the Agreement,DPW has been awarded the concession toequip, operate, and manage the existingcontainer terminal in the Northern Zone ofthe Port of Dakar (“Terminal à Conteneurs”or “TAC”) under Phase 1 of the Project. Thesecond phase is to design, finance,construct, operate, and manage the Port duFutur, when the throughput of the existingport reaches 416,000 TEUs. Port du Futurwill have a potential capacity of 1.75 millionTEUs.

The Bank was invited to cofinance theproject, as part of its continuing effort topromote projects in the port subsector. TheBank has previously collaborated in asimilar transaction, where DPW was also asponsor. The Bank’s financial backing wassought at a time of liquidity constraints formost commercial banks, in the wake of theglobal financial crisis. By fulfilling acountercyclical role, the Bank’s participationserved a demonstration effect, helping to

attract other investors and lower theperceived commercial risks.

The proposed investment will coverPhase 1 of the project, which consists ofupgrading the stacking areas, the improve-ment of other port infrastructure (railroadinstallations, electricity, roads and buildings)and the acquisition of equipment (mobileharbor cranes, auto-twist spreaders, reachstackers, empty handlers, tractor-trailers)and installation of additional containerhandling and stacking equipment (STScranes, etc.).

The project cost for this first phase isestimated at Euro 210 million, of which theequipment (24 percent), civil works anddevelopment (24 percent), and concessionfee (22 percent) comprise the mostimportant components. The AfDB wasinvited to provide 50 percent of the totaldebt, on a par with Standard CharteredBank. In July 2009 the Bank approved a loanof Euro 47.5 million to that effect.

Source: AfDB — OPSM (2009).




(i) The CEMAC Trade Corridor project(2007)

The member countries of the CEMAC regionagreed in 2006 to develop the CEMAC TradeCorridor project to improve transport andtrade efficiency in the subregion. Trade inthe subregion was especially constrainedand transport costs were among the higheston the continent. Before project imple-mentation, delays at the Douala Port inCameroon could take up to 28 days andtransport of goods from the port toNdjamena (Chad) or Bangui (Central AfricanRepublic) took 15 days and 10 days,respectively.

The AfDB in collaboration with theWorld Bank, the European Commission, andthe French Development Agency (AFD)agreed to jointly finance the CEMAC TradeCorridor project. At preparation stage theAfDB and the World Bank agreed to sharetechnical expertise, while Cameroon, Chad,and CAR formed a steering committee usingthe CEMAC platform. In February 2007, theAfDB signed a US$ 67 million agreementwith CEMAC and CAR. In June 2007, theWorld Bank approved a US$ 201 millionpackage for the three country members ofthe steering committee, and in October2009, approved additional financing forCameroon and CAR for an amount of US$ 217 million.

(ii) Ghana: rehabilitation of sections ofthe Abidjan–Lagos Road Corridor

In Ghana, the AfDB has been financingrehabilitation of road sections of theAbidjan–Lagos Road Corridor since 2002. In2008, the following amounts wereapproved: US$ 40.14 million for theTema–Aflao Rehabilitation Road Project andUS$ 21.18 million for the Akatsi–Dzodze–Noepe Road Upgrading Project. Thetargeted sections are part of the broaderAbidjan–Lagos coastal corridor whichconnects Côte d’Ivoire to Nigeria throughGhana, Togo, and Benin via 1,028 km ofcoastal roads.

This regional corridor has beenidentified by ECOWAS and UEMOA as apriority to promote economic and socialdevelopment in the region. The corridor’simportance is major in terms of the dailymovement of people and goods, which isone of the highest in the Africa continent onseveral segments. The Abidjan–Lagoscorridor has the potential to become acatalyst for economic integration andsubregional cooperation of UEMOA andECOWAS member countries.

The roads targeted by the different AfDBprojects are considered by the Governmentof Ghana to be critical international roadsthat need immediate attention in order toreduce poverty, especially in the EasternRegion. Consequently, the roads have beenincluded in the current Roads Subsector

Annex 5.3: Examples of AfDB-Supported TransportCorridor Projects


Development Program. The project isdesigned to facilitate regional integrationactivities as well as access to social servicesand markets. It is therefore in line with theBank Group Policy on Regional EconomicIntegration, as articulated in its RegionalIntegration Strategy, and it conforms to thebilateral agreement between the Bank andthe ECOWAS.

Several donors financed other sectionsof the Corridor, including the World Bank,the European Union, and the Japan Bank forInternational Cooperation.

On the same corridor, a project iscurrently under preparation by the AfDB tofinance other sections in Togo.

Source: AfDB — OINF (2009).

(iii) SADC Region: the Nacala Corridor

The Nacala Corridor is one of the priorityprojects of the SADC region and isconsistent with the NEPAD and Bankstrategy for multinational infrastructureprojects. The objective is to removeobstacles to the movement of persons andgoods, and to support regional cooperation,integration, and trade. The Nacala Corridorcomprises a total of 1,033 km of road worksand two one-stop border posts (OSBPs).

To support the development of theNacala Corridor, the Bank approved in 2009the financing of the Nacala Road Corridor —Phase I, consisting of two ADF loans: (i) US$159.45 million to Mozambique and (ii) US$22.23 million to Malawi. The projectcomprises the improvement of roadtransport over 361 km or 35 percent of roadworks in Mozambique and Malawi. The nexttwo phases will cover 360 km or 34.9

percent of road works in Zambia (Phase II)and 312 km or 30.1 percent of road works inMozambique and Malawi. It will also includetwo OSBPs between Mozambique/Malawiand Malawi/Zambia (Phase III).

The project should provide Malawi,Zambia, and the interior of Mozambiquewith an improved road transport linkage tothe port of Nacala and improve transportservices along the corridor. It will improveaccessibility of the communities in the zoneof influence to markets and social servicesand contribute to the reduction of poverty.

Ultimately after Phase I, the averagetravel time in Mozambique will be reducedby 41 percent, from 9 hrs in 2008 to 5.3 hrsby 2014; and in Malawi by 60 percent, from50 minutes in 2008 to 20 minutes by 2013.Furthermore, delays at the Mozambique/Malawi and Malawi/Zambia borders shouldbe reduced from 36 hours to 6 hours by2015, due to the establishment of twoOSBPs.

Links between ports and harbors andmajor centers of economic activity in thehinterland should be improved. Import/export cargo handled at Nacala port shouldincrease from 0.9 million tonnes per year in2009 to 1.6 million tonnes per year by 2015.Mozambique’s rating in the GlobalCompetitiveness Index should improve from3.1 in 2009 to 4.1 in 2015. Furthermore, itspercentage share of transport and transitcost in cif and fob prices of import andexport should be reduced by 25 percent by2015.

Source: AfDB — OINF (2009b).



(iv) Agona Junction–Elubo Road Study:Part of the Road Infrastructure Project(Eastern and Western Regions)

As outlined above, the AfDB has financedseveral road projects in Ghana that aresections of the Abidjan–Lagos Corridor.

The second component of one of thoseprojects — the Road Infrastructure Project(Western and Eastern Regions) — compriseda feasibility study on the Agona Junction–Elubo road section. The Bank agreed tofinance the study in 2003.

The study was divided into two stages:the first aimed at assessing the feasibility,environmental impacts, and the impact onpoverty reduction of the civil works. Thesecond stage offered detailed engineeringdesigns, provided cost estimates andpreparation of tender documents for theapproved alternative.

This study was instrumental in planningroad infrastructure investments to rehabili-tate and strengthen the trade corridor.

Source: AfDB — OCIN (2003).



Introduction

This chapter draws on the key lessons fromthe preceding chapters to point the wayforward toward the development of regionalhub ports in Africa. The emergence of suchhub ports is important both for the regionaleconomic integration of African countries andfor their wider integration in the world trading

system. As discussed earlier, the gradualopening up of African economies and theirgrowing international integration have givenrise to a corresponding increase in thedemand for international transport services.However, few African ports are capable ofhandling the latest generation of post-Panamax vessels, and they are generally

C H A P T E R 6

Going Forward: Developing Regional Hub Ports in

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ill-equipped for the dramatic changes in tradeand shipping patterns that are currently underway.

In response, many African countries areaiming to modernize their ports and developthem into regional hubs through large-scaleinvestment programs, to providetransshipment services for cargo from otherorigins destined for third countries. Themomentum of modernization is beingfurther fueled by the growing presence andconsolidation of global shipping lines,integrated multimodal operators (coveringrail–road–sea transport), and internationalterminal operators in African ports. Theseoperators have been engaged in thesecountries for some time now and see thatthe time is ripe for an expansion of servicesin the African port sector.

Indeed, many African ports have thepotential to become regional hubs. However,this outcome depends on the capitalinjections and other related activities,including policy reforms, that governmentsare able to put in place toward portdevelopment and regeneration. Theseplanned investment and related activities alsooffer avenues for private sector participationin African port development. In particular,the dredging of African ports, many of whichare characterized as too shallow for the latestgeneration of container ships, could be afrontline area of intervention for the privatesector and development partners alike. Thisissue is elaborated upon later in this chapter.The aspiration of many governments andPort Authorities (PAs) to develop their portsinto regional hubs augurs well for theincreased competitiveness of the Africanshipping industry in the future; this will boost

trade in the region and strengtheningnational economies generally. However,Africa can support only a few regional hubsand the key issues of how African ports cantransform themselves into regional hubs, andwhere such hub ports should be located, is ofcritical importance.

This chapter examines this topic andfocuses on the relevant issues facing Africangovernments and International FinancialInstitutions (IFIs). The rest of the chapter isorganized as follows. The next sectionsummarizes the principal characteristics ofAfrican ports and the infrastructuralconditions and policy reforms required totransform them into regional hubs. Againstthis background, there follows anexamination of the comparative advantagesof a number of key ports becoming regionalhubs. The discussion then turns to thevarious key roles that IFIs can play in thisprocess. The chapter ends with a summaryof the key points impacting Africancountries in their efforts to modernize andtransform their ports, to more fully integrateinto the world trading system.

Developing African Ports intoRegional Hubs: PhysicalCharacteristics and PolicyRequirements

A hub port can be described as aninternational or regional port that, inaddition to the normal cargo-handlingfunctions of import and export trade, alsocaters for so-called transshipment cargoes(in particular containerized cargoes) to andfrom major intercontinental or regionalshipping routes, with the additionalprovision of services to a number of (usually



smaller and / or shallower) African ports. Ananalysis of potential hub ports generallycenters on their physical characteristics(TEU capacity; depth of water; berthlengths; availability of quayside gantries andcontainer-handling equipment, etc.) andtheir road/rail/air linkages to the hinterland.

Practically all hub ports in the worldtoday handle a mixture of three main typesof cargo:

• captive cargoes (destined for and /or originating from the directhinterland of the hub port);

• transit cargoes (cargoes destined forand / or originating from the moreremote hinterland and / or landlockedcountries); and

• transshipment cargoes (sea–seacargoes).

The potential of African ports to becomeregional hubs is determined by severalfactors, including the shipping services itprovides, the port’s physical characteristicsand location, and the types of vessel it canhandle. Several characteristics facilitate thecreation and successful operation oftransshipment hubs (see Box 6.1). Theavailability of a considerable volume ofcaptive cargo is often cited as a CriticalSuccess Factor for a port seeking to become ahub. The reason for this is that transshipmentcargo tends to be “foot loose” and may easilybe shifted to another port if circumstances(e.g. facilities and tariffs) are better there.1

Investing in port capacity is not in itselfa sufficient condition to transform a port intoa hub unless it also enjoys a strategiclocation, adequate water depth, and thefacilities and performance to ensure lowhandling costs. A good corridor for transittraffic is another prerequisite, and this mayrequire measures to facilitate a fast andefficient flow of traffic on the main tradecorridors from the port to the landlockedhinterland. In this respect, a port’scompetitiveness depends not only on itsown physical capacity and the services it canoffer, but also on the quality and fluidity ofthe land transport networks that serve it(principally the regional interstate roads).Ports that benefit the most from thisemerging trade competition tend to belocated in countries that also possess goodroads (without roadblocks), operational raillines, and border posts with the leastadministrative formalities and swift customsclearance.

In effect, the most important policy con-siderations for governments looking toestablish hub ports are how best to foster andfinance integrated port and transport facilitiesand associated land uses. National port plansmust be developed to cover modalintegration and port-specific issues. A keyrequirement is the allocation of enough landfor integrated development in the earlystages of port planning, particularly for newports. Also, linkages between rail and port

Going Forward: Developing Regional Hub Ports in Africa 185

This relates to the function and location of this port.Salalah is located close to the convergence pointwhere the large sea trade lane between Asia andEurope, and the North–South connection betweenEurope, the Middle East and Africa meet.

1 A well-known exception to this Critical SuccessFactor is the Port of Salalah in the Sultanate of Oman.Practically all containers handled in this port (3.5million TEUs in 2009) are transshipment containers.


concessions should be made to provide thebest incentive for multimodal integration.This requires governments of both coastaland landlocked countries to decide whichtransit corridors to support and develop.Coordinated system development providesthe key to exploiting the major scope fortraffic growth. The Ghana Gateway and theMaputo Corridor between the port of Maputoand South Africa, Swaziland, and Zimbabweprovide useful examples of this. Landlockedcountries will likely want more than onealternative. Where the bottlenecks are at theseaports, the planning and development ofinland ports (dry ports) warrant considera-tion, particularly for landlocked transitcountries. The Ghana Boankra Inland Port isan example in the overall scheme of portdevelopment and trade facilitation.

Before the start of the global financialcrisis, almost all major shipping lines startedto order large numbers of 8,000+ and even12,000+ TEUs vessels to be employed in thevery lucrative and booming trade lane ofEurope–Asia in particular. This meant thatthe “smaller” container vessels, mainly in the4,000 to 6,000 TEU classes, began to bewithdrawn from this route and replaced bythe bigger sisters, in what is often referred toas the “cascading process,” following theeconomy of scale principle. The 4,000 to6,000 TEUs vessels were partly employed inthe African liner services. The problem,however, was that only a few ports in Africahad sufficient depth to receive such mid-sized vessels.

Although the global financial crisis hascaused some hiatus to this cascading


Box 6.1: Basic transshipment requirements of a hub port

Experience suggests that several port characteristics facilitate the creation of transshipment hubs:

• Location close to major world or regional shipping routes, leading to minimum deviation from that

shipping route;

• Preferably already handling a considerable volume of base import and export cargo;

• Land area available for cargo storage and / or value adding activities;

• Access to a large hinterland, preferably with more than one transport mode;

• Sufficient depths in approach channel and the port and the possibility to increase the depth if required

by the port users (shipping lines);

• Little or no queuing of ships (“the berth has to wait for the ship and not the other way around”);

• Safe and secure port access from land and sea and a secured (ISPS) port area;

• Efficient ship and cargo handling operations;

• Good relations between port employers and employees (unions);

• Reasonable level of port performance;

• Active port business community;

• Banking and communication facilities;

• Limited or rather no corruptive practices;

• Stable political systems; and

• Regional role.


process, there are signs (since mid-2010)that it may reemerge in areas wherebooming trade between the major economicand production blocs proves to besustainable. As such, an African port aimingto become a regional hub must ensure thedevelopment of a port with sufficient depthto receive the larger vessels that arebecoming more and more commonplace onAfrican shipping routes.

Traditionally, high sea freight costs havebeen a major impediment to the develop-ment of ports in Africa, which have typicallybeen served by “Liner Shipping” and“‘Conference Services.” Liner services haveboth advantages and disadvantages. Onemajor advantage is that the tariffs arenegotiated beforehand and usually main-tained during the contract period, which actsas a risk mitigation factor in terms ofunexpected costs. The liner contract is aguarantee that each port of the line will becalled at, irrespective of the volume of cargoto be loaded and/or unloaded. ConferenceService agreements have a similar effect.Sometimes a number of shipping companiesenter into a Conference Agreement,meaning that ships belonging to differentshipping lines will maintain very similarservices, tariffs and conditions, irrespectiveof the shipping company calling. Thedisadvantage of the systems is that the tariffsare usually high.

In this context of traditionally highfreight rates, a port hub in Africa shouldhelp to lower the cost of trade for shippinglines and cargo owners. This would entailthe move away from Africa’s currentmultiple gateway system of medium-sizedports, toward the model of transshipment

hubs with larger gateway feeder ports. Forcargo owners, hub ports would offer savingsin total yearly supply chain costs throughincreased shipping line competition andimproved service levels and delivery times,while greater maritime activity wouldimprove access to regional and globalmarkets. The shipping lines would seebetter utilization with fewer stops andincreased port efficiency and speed at thehub.

The necessity for a conducive environ-ment for the creation of port hubs enjoinsAfrican governments to determine how bestto develop state-of-the-art ports, and how toequip them with appropriate technologiesand management skills. This determinationshould certainly involve the internationalprivate sector, particularly in the containerterminal business. The prevalence of state-owned service ports in Africa has long beenassociated with low operational efficiency aswell as a low concentration of globaloperators. A policy of attracting majorinternational container lines and terminaloperators — who are well acquainted withthe advantages of scale in terminaloperations and with the benefits of anefficient hub-and-feeder structure in thedeep-sea trade — will serve to increaseefficiency and lower costs.

In the last 10–15 years, the African portsector has witnessed a considerable numberof reforms, including a scaling-up ofpublic–private partnerships involving some ofthe major international players in portdevelopment. The reforms in Africa, aselsewhere, have suggested that the landlordport model has generally enjoyed greatersuccess than the public services port model,



and is the best way to attract private sectorparticipation.2 On the other hand, the numberof African countries that have introduced thelandlord port model is very limited. TheWorld Bank’s Africa Infrastructure CountryDiagnostic (AICD) Report of 2006 cites onlytwo countries, Nigeria and Ghana, as having“comprehensively adopted the favoredlandlord port model.”3

For government policies and reforms toachieve optimal efficiency in Africa’s ports,they need to consider how best to introduce/incentivize competition. Over the last twodecades, lessons from global port reformshave indicated the need to avoid mono-

polistic practices in ports privatization. Thespecific cases of Colombia, Argentina, andthe United Kingdom show that buildingcompetitive environments tends to makeports more efficient and to lower costs,which benefits not just the Port Authorities,but also shipping lines, terminal operators,cargo owners, private investors, and endconsumers. On the other hand, port reformsin several African countries seem to havebeen designed to minimize competition.Indeed, some African governments are evenpreserving government monopolies(Durban) or creating private ones (Tema).

Certainly, where cargo volumes arerelatively low, as is the case in most Africanports, inducing competition can be difficult.In such cases, an appropriate regulatoryframework is essential. But again in anumber of African ports, monopoliesoperate without there being a regulatoryframework in place to monitor foranticompetitive activities (e.g., Maputo,Mozambique). Most countries in Africa lacka regulatory framework and tools to preventanticompetitive practices on the part of portand multimodal operators. Only South Africais currently taking steps to establish anEconomic Regulator to address port anticom-petitive behavior.4


4 Regulation that ensures fair competition is rare.Only Peru, Australia, Colombia, and perhaps Mexicohave well-established Economic Regulators toaddress pricing regulation. Authorities in manycountries, even those of the European Union, seemunwilling to manage port anticompetitive behavior,despite their authority to do so. Given the difficultyregarding regulation, it may be essential for Africangovernments to consider this in initial concessioncontracts with partners.

2 In Nigeria, for example, the Federal Governmenthas made colossal savings of US$ 2.5 billion fromport reforms. The Bureau of Public Enterprises (BPE)indicates that the Nigerian economy would save afurther US$ 2.5 billion following the concessioningof the nation’s ports over a 10-year period. Thisamount, which is equivalent to 5 percent of thecountry’s Gross Domestic Product, is required by theFederal Government to maintain the ports. Thesuccessful implementation of the port reforms wouldquadruple cargo-handling productivity at the ports,reduce port operating costs by US$ 65–80 millionyearly (about 20–25 percent) and reduce portcharges by 20–30 percent, thereby saving port usersbetween US$ 70 and US$100 million annually. Thereforms would reduce the cost of Nigeria’s importsby as much as 5–13 percent per annum, throughincreased efficiency, improved service delivery,modernized port development, and a general fall inthe cost of shipping and clearing goods at the ports.

3 Other countries engaged in the process ofchanging their port management system includeLiberia and Sierra Leone. Also, the Tanzaniangovernment has amended the National Port Law,while the Tanzania Ports Authority is in the processof changing from a public services port model tolandlord port model.


Comparing African Ports forRegional Port Hub Status

A considerable number of ports in Africahave the potential to develop intotransshipment hubs. These are analyzedbelow, according to their geographicallocations. On the Mediterranean coast ofAfrica, the main contenders are: Tangiers(Morocco), Damietta (Egypt) and Suez CanalContainer Terminal (or Port Said East). Insub-Saharan Africa, the following portshave the potential to become major regionalhubs: Dar-es-Salaam (Tanzania), Port Louis(Mauritius), Djibouti (Djibouti), Mombasa(Kenya), Abidjan (Côte d’Ivoire), Durbanand Cape Town (South Africa), Tema(Ghana), Douala (Cameroon), Lagos(Nigeria), and Dakar (Senegal).

(i) Mediterranean Coast

Tangiers (Morocco) has already beentransformed into a “Pure TransshipmentPort” (PTP), which is providing regionalfeeder services, especially to the WestAfrican coast. Tangiers’ development into aPTP exhibits most of the key criteriahighlighted earlier for successful regionalport hub development. The port is wellpositioned — sitting at the western end ofthe Strait of Gibraltar, which divides Africaand Europe. Container traffic lies at the heartof the strategy of the port, with containervolumes reaching 1.2 million TEUs in 2009.The two container terminals already openedare each managed by a consortium ofinternational terminal operators. The porthas the physical infrastructure in place tohandle more than 3 million TEUs a year,thus Tangiers will have spare capacity forsome time to come. Much of Tangiers’ initial

appeal lay in its lower labor costs. As well aspolitical stability, Morocco boasts abusiness-friendly legal system, attractiveincentives for FDI, advanced infrastructure,and a competent and highly trainedworkforce. This has attracted more than2,500 foreign companies to locate theirbusinesses in the country.

(ii) West African Coast

Along the West African coast, in terms of sizeand activity, the Port of Lagos (Nigeria) isthe most important. Its annual merchandisetraffic, in excess of 30 million tonnes,represents approximately 55 percent ofNigeria’s port activity (excluding hydro-carbon exporting terminals) and 25 percentof the combined ECOWAS membercountries’ port activity. However, the Port ofLagos essentially serves the national hinter-land and only the outlying areas of Niger,Cameroon and Benin, an area that accountsfor more than half of the population.However, the concentration of port activity islargely on the national hinterland, whichlimits the port’s importance as a regionalhub.

The Nigerian authorities are undertakinginvestment programs with the aim of trans-forming the port into a regional hub. Underthe Lagos Free Trade Zone (LFTZ) initiative,the Nigerian Ports Authority and the LagosState Government are to build the first privatedeepwater port in Lekki, 60 km distant fromthe Lagos metropolis. The total cost isestimated at US$ 6 billion and the port isexpected to be ready in 2011. The rationalebehind the port is to provide a deepwaterport for Nigeria, thereby allowing largervessels to berth. It is also intended to relieve



the congestion in the Lagos/Apapa ports.Also the port is located to take advantage ofthe future development of the new LagosFree Trade Zone.

By contrast, the ports of Abidjan, Tema,and Dakar play a more regional role in WestAfrica. These ports do not rely solely ontheir national hinterland in order to thrive.The development of the West African roadnetwork, together with an increasingnumber of alternative transport servicesrendered to the landlocked regions, haveincreased their regional roles but placedthem in direct competition with each other.

Considering the fact that regional hubs areusually established in ports with substantialcargo volumes, Abidjan (Côte d’Ivoire),with a capacity of 640,000+ TEUs, appears amore likely candidate to serve as the regionalhub. The Ivorian government aims to expandthe port further from an import–export pointto a gateway for landlocked countries in WestAfrica. The Port Authorities aim to developthe port’s capacity to handle volumes forBurkina Faso, Niger, and Mali, which isexpected to grow strongly over the next fiveyears, as will transshipments for ports in thesubregion. To this end, a bond issued byAbidjan Port has been oversubscribed by over30 percent, raising 30 billion CFA francs (US$56 million) to finance port development.

However, Tema (Ghana), which is anew and highly mechanized terminal, offerssubstantially more efficiency and berthproductivity, compared to other ports on thewest coast of Africa. Tema is the first to offera terminal with the efficiency required forregional hub services. Though Tema haslower volumes (about 350,000 TEUs), this isenough to attract main regional feeder

services, thus assigning Tema regional hub status. Significantly, the port is currentlyexpanding its berthing facilities and workingon achieving greater depth in order to attractmore cargo. The government is aiming toachieve 14 m depth (currently it stands at11.5 m) and has dredged berths 1-6. Theport is also focused on reducing the turn-around time for vessels which currentlystands at 1.7 days and to ensure that the costof doing business is one of the lowest in thesubregion (Otal Trade Watch, July 2010).

(iii) East African Coast

Along the East African coast, Dar-es-Salaam(Tanzania), Port Louis (Mauritius), Maputo(Mozambique), Durban (South Africa),Djibouti, and Mombasa (Kenya) are themajor ports with the potential to becomeregional hub ports. The successful comple-tion of planned investment programs inthese ports will determine the extent towhich they are transformed into regionalhubs.

At present Durban (South Africa)emerges as a frontrunner in terms of size andactivity. Durban is Africa’s busiest generalcargo port and home to one of the largest andbusiest container terminals in the southernhemisphere. The port handles the greatestvolume of seagoing traffic of any port insouthern Africa. However, Durban’s cargo-handling demand has exceeded the terminal’shandling capacity, causing berth congestionand forcing carriers to impose penaltysurcharges. Under the government’s currentprogram for the port, an additional capacityof 600,000 TEUs is being developed to bringthe total container capacity of the port to 3.6million TEUs by 2011. This project includes



Durban container terminal’s reengineeringproject, which will realize the true potentialcapacity of this premier port.

The port of Dar-es-Salaam (Tanzania)is also well placed as a transshipment hub,ideally located to meet the export andimport needs of Tanzania’s landlockedneighbors, namely Burundi, Malawi,Rwanda, and Zambia. Also, Dar-es-Salaamhas a number of inland depots forlandlocked countries that import and exportvia the port. However, Dar-es-Salaam hasnot been able to take full advantage of itsposition due to limited capacity, which hasled to the diversion of consignments to theneighboring port of Mombasa. Besides,most of the inland depots are currentlylocated close to the port, leading to seriousroad congestion and pollution.

To remedy the situation, the TanzaniaPort Authority is aiming to strengthen theport’s container-handling capacity. ANational Port Strategy Study undertaken in2008 recommended two options: (i)development of two additional containerberths in the port of Dar-es-Salaam (Berths13 and 14); and (ii) development of adeepwater port along the coast (severallocations have been identified). Theexpansion program to build the secondcontainer terminal is estimated to costaround US$ 400–650 million.

Furthermore, Tanzania is investigatingthe feasibility of the development of a dryport (also known as an inland port) facilityas a solution to the problem. The majorobjective is to decrease the usually longdwell times of containers destined forlandlocked countries by moving them by rail(under bond) to the dry port located some

40 km away from the Port of Dar-es-Salaamas soon as basic administrative procedureshave been completed. Movement by rail willreduce the need for road transport which, inturn, will result in less road congestion inand around the port and the city and reduceits pollution effect. The development of thedry port opens opportunities for privateinvestments in terms of development and/ormanagement, as well as participation by thelandlocked countries that will benefit fromthis initiative. Moreover, it will open the wayfor investment in upgrading and repairingthe Dar-es-Salaam railroad, which wouldhave large spillover effects, notably byrevitalizing traffic at the port of Bujumbura.

In respect to Mombasa (Kenya), theKenya Ports Authority (KPA) has finalized aVision 2030 that includes PPP participationin the development of port infrastructureand provision of services. The schemeprovides for the dredging of the Port ofMombasa to allow larger vessels to the portand the benchmarking of facilities andservices to international standards. Anotherelement of Vision 2030 is the developmentof a new deepwater port at Lamu Island. InMay 2010 the Kenyan government awardeda contract to Japan Port Consultants (JPC) tocarry out a feasibility study for Lamu Port,which experts hope will position thecountry as a major transshipment hub. Thefirst port at Lamu is being developed withassistance from the governments of Qatarand China and is scheduled for completionat the end of 2011.

The Port of Djibouti is creating anadditional 3 million TEUs, to achieve a totalcapacity of 3.4 million TEUs. In June 2000 thegovernment of Djibouti signed a management



contract with Dubai Port World (DPW), tostrengthen the import and export function ofthe port (some 90 percent of all cargohandled is Ethiopian cargo). DPW developedplans to build a large deepwater containerfacility at Doraleh (some 10 km from the Portof Djibouti). The maximum capacity of thisterminal will be 1.7 million TEUs (comparedto the 250,000 TEUs of the present terminal inDjibouti). The project will be built on thebasis of a BOO (Build-Own-Operate) contractand the estimated cost of the project is aboutUS$ 350 million. The first phase of Doraleh(Phase 1-A) was opened for business in May2009. Phase 1-A (capacity 800,000 TEUs) wasfinanced through equity. Phase 1-B (capacity1.1 million TEUs) will be financed throughcash reserves and bank loans. The anticipatedcontainer flows are import/export, transit andtransshipment.

(iv) The Role of Public–Private

Partnerships

Thus far, it is apparent that the potentialdoes exist for a number of African ports tobecome regional hubs, although asindicated earlier, this will depend on thesuccess of planned investments and relatedmodernization of these ports. Thedevelopment of Tangiers demonstrates thesuccessful role that public-privatepartnerships can play toward the desiredoutcomes and point the way forward forother African governments and portauthorities to replicate. In effect, theinvestment programs in those other portscall for similar partnerships in portdevelopment in Africa.

The Role of IFIs in theDevelopment and Improvementof Ports and RelatedInfrastructure

As African countries contemplate strategiesfor transforming their ports into regionalhubs, they should pay heed to the importantrole that IFIs, such as the AfricanDevelopment Bank, can play in the process.IFIs can facilitate private sector participationas well as provide finance for portdevelopment. These issues are discussed atgreater length below.

Provision and /or Facilitation ofExpertise, Training and Education

Expertise: As indicated earlier, port reformand the introduction of PPPs, especiallyleading to the establishment of landlord portmanagement systems, are highly complexexercises. They require expertise in manydisciplines such as legal, operations, finance,economy, etc. Selecting the best professionalexpertise is a difficult task in itself and canonly be done adequately when professionalinsight, oversight, and market knowledge areavailable. IFIs can support governments andnational Port Authorities to produce therequisite documents; they can also availexperts in the port reform processes. Also, theexperienced and professionally qualifiedconsultants that governments and portauthorities rely on are expensive and IFIs maybe prepared to contribute financially to thesecosts.

Training and Education: In order tocreate a good working relationship betweenthe government, national Port Authority, theconsultant, and the potential private sector



participants, the public party should havesufficient in-house expertise to meaningfullyengage in the process. If such expertise isnot available, education and training areextremely important. Workshops andseminars on dedicated topics are a verygood means to point out the essential stagesof the processes to be followed. This isanother area where IFIs may provide auseful function, either with the involvementof their own staff or in the role of a financierand/or facilitator.

Arranging /Facilitating Financing DealsDredging: As indicated earlier, manyAfrican ports are characterized as rathershallow. Developments in the internationalshipping market require ports to havesufficient water depth to allow larger vesselsto call. Experience shows that initial capitaland/or maintenance dredging projects aredifficult to realize and can be expensiveundertakings in relatively remote areas. IFIs,and the AfDB in particular, could assistAfrican ports that have similar dredgingproblems to jointly enter into a dredgingcontract with a dredging company. TheBank could facilitate the introduction ofPerformance Based Maintenance (PBM)dredging contracts between the Africancountries and a dredging company (see Box6.2). The cost of this to the African countrieswould be lower than if they were to draw upa contract on an individual country basis;moreover the ports would be assured, forthe duration of the contract, that theguaranteed water depth would always beavailable.

Regional Investment: In the context ofregional cooperation, IFIs could assist

countries, both coastal and landlocked, toinvest, possibly through an internationalconsortium, in major new port developmentinvestment projects. The plans of thegovernments of Kenya and Tanzania tobuild a new deepwater port on theircoastline represent such an initiative. Such a


Box 6.2: Performance Based Maintenance

(PBM) dredging contract

A PBM dredging contract is an agreement

between a client (for instance a Port Authority)

and a dredging company. The contract

stipulates that the dredging company, at all

times during the contract period, guarantees

that the agreed water depth is always available.

The dredging company regularly surveys the

depth in the contract area. If the contract depth

in a certain location, due to sedimentation, is

about to be reached, the dredging company

dredges that area. The client also makes

regular soundings (depth surveys). If these

show that at a certain location the dredging

company is in default (i.e., the depth is less than

the contract depth), the dredging company is

liable to pay a fine.

Unlike contracted capital or maintenance

dredging campaigns, the dredging company is

not paid for the number of cubic meters of silt it

has removed. The agreement between the

parties is made on the basis of a long-term

estimate of the dredging quantities during the

contract period. This may result in higher

dredging costs per cubic meter than in case of

a single dredging campaign. But the principal

advantage is that the Port Authority is

guaranteed that the required contract depth is

always available. The costs of the bidding

process of a dredging campaign may,

moreover, well outbalance the possibly higher

cubic meter dredging costs of the PBM

contract.


facility, including efficient and sufficienthinterland connections, will requiresignificant financial capital outlay, which theIFIs may be able to provide or facilitate.

Railroad Corridors: The importance of therailroad in Africa for freight movement hasalready been demonstrated (see Chapter 4).However, even though the concessioning ofrailroads has met with some success and hasincreased traffic volumes as well as increasedlabor productivity, this mode of transportremains poorly developed across thecontinent. Yet railroads are an economicallysound choice for long-distance transport oflarge volume bulk commodities, agriculturalproducts, and general and containerizedcargoes across the continent for onwardtransit to African ports and beyond. Inaddition to helping to mobilize funding forstrengthening and expanding this inlandtransport mode, IFIs can provide advice andexpertise to countries that enter into railroadconcessioning agreements.

Provision of Other Catalytic and DirectFinancing for Port DevelopmentAs there is a great need to attract more externalinvestment to the port sector in Africa, IFIs cangalvanize the private sector in other ways andparticipate directly in port finance. IFIs mayhave differing aims, and this will play animportant role in their choice of projects.However, these institutions have the commondual mission of “transitionality” (supportingthe move from state to market economy) and“additionality” (providing “something more”than a commercial lender would on a givendeal). In this context, IFIs may be wellpositioned to provide assistance to Africangovernments in the reform process through

the design of appropriate port frameworks;restructuring and divesting port institutions;and capacity building for port planning andregulation. In addition, IFIs can assist Africangovernments by attracting and negotiatingwith private partners to assure substantialbenefits for the African partner country.Another consideration is that IFIs are wellexperienced in the area of risk mitigationmechanisms, which acts as a further incentiveto attract private capital into port projects.

IFIs could also directly finance criticalelements of port infrastructure. As indicatedearlier (Chapter 5), the AfDB has since 1973successfully participated in infrastructurefinancing and port development in Africa.IFIs, including the AfDB, are well placed tofocus directly on the private sector segmentof port infrastructure in African countries,using instruments such as the traditionallines of credit to increase private investment.The long-term tenor of such lines of creditwill allow borrowers to extend the maturityof their lending operations, thereby makingthe port development programs morecommercially attractive to investors.

In addition, IFIs could use varied instru-ments, including equity and quasi-equityproducts and guarantees to increase theparticipation of the private sector. Throughthese, IFIs would bring in other investorswith the capital, skills, and know-howneeded for African port development. TheAfDB Local Currency Project is an exampleof a successful mechanism that could beemployed to increase private participationin ports. This project brings increasedinvestor attention to Africa and bringsvisibility to African currencies and bondmarkets. It addresses the need for local



currency loans that eliminate currency riskfor borrowers and promotes internationalbest practices. A wider application of thisactivity focused on African ports could beinstrumental in contributing to the financingneeds for port development.

Concluding Remarks

This chapter has highlighted the require-ments for the development of regional hubsin Africa, analyzed the potential of specificAfrican ports to become regional hubs,pointed to the opportunities available forprivate sector participation, and has outlinedsome of the contributions that IFIs can makein the process.

African ports are presently characterizedby high sea freight rates and high levels ofcongestion. Their transformation into moreefficient port hubs will not only reducethese rates but also contribute toward inter-African economic integration, as well as thecontinent’s fuller integration into the worldtrading system. Several African governmentsand Port Authorities are aiming to develop

their ports into hubs. Improvementsplanned in many other ports in the continentwill also offer opportunities for privateparticipation.

Key measures in the process to trans-form ports into regional hubs includefostering and financing integrated port andtransport facilities and associated land use.Also, policies that introduce and/or enhancecompetition are necessary to increaseefficiency. In both these areas, globalexperiences have shown that the trans-formation of a public services port into alandlord port model often leads to a highlysuccessful outcome.

In this context, IFIs can play a major rolethrough the provision and/or facilitation ofexpertise, training and education, wherebyexperienced professionals can assist Africangovernments in the preparation of their portreforms. In addition, IFIs are well placed toassist in arranging and/or facilitatingpublic–private financing deals that are badlyneeded to carry out major rehabilitation andexpansion programs for African ports.



Backhaul To haul a shipment back overpart of a route that it has already traveled;return movement of cargo, usuallyopposite from the direction of its primarycargo destination.

Beam The width of a ship.

Berth Civil engineering structures locatedon a quay to allow oceangoing vessels andother floating craft to be moored or securedalongside with the purpose ofloading/offloading cargoes. Berths areusually classified to the water depth in frontof them. Distinction is made betweendedicated container berths, dry bulk berths,liquid bulk berths and general cargo,multipurpose or neo bulk berths.

Berth dues (or quay dues or dockage)Charges for the use of a berth. Typicallyassessed based on the duration of a vessel’sstay and length overall (LOA).

Bonded warehouse A warehouse author-ized by customs authorities for storage ofgoods on which payment of duties isdeferred until the goods are removed.

Border control services Services of theContracting Parties competent to carry outborder controls, such as frontier police,customs, plant protection and veterinaryinspections services, and any other servicesas may be deemed necessary.

Break-bulk A loose, non-containerizedcargo stowed directly into a ship’s hold, to

ship in small, separable units. Loose cement,grain, ores, etc. are termed “bulk cargo,”whereas cargo shipped in units (bags, bales,boxes, cartons, pallets, drums, sacks, etc.) is“break-bulk”.

Broker A person who arranges fortransportation of loads for a percentage ofthe revenue from the load.

Build-operate-transfer (BOT) A form ofconcession where a private party orconsortium agrees to finance, construct,operate and maintain a facility for a specificperiod and transfer the facility to theconcerned government or port authorityafter the term of the concession. Theownership of the concession area (portland) remains with the government or portauthority during the entire concessionperiod. The concessionaire bears thecommercial risk of operating the facility.

Build-own-operate-transfer (BOOT) Aform of concession where a private party orconsortium agrees to finance, construct,own, operate, and maintain a facility for aspecific period and transfer the facility tothe concerned government or portauthority after the term of the concession.The ownership of the concession area (portland) vests in the private party orconsortium during the entire concessionperiod and is transferred to the governmentor port authority at the end of theconcession period. As with the BOT, theconcessionaire bears the commercial risk ofoperating the facility.

Glossary

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Bulk carrier/vessel All vessels designedto carry bulk cargo such as grain, fertilizers,ore, and oil.

Bulkhead A structure to resist water; apartition separating one part of a ship fromanother part.

Bunkering The act or process of supply-ing a ship with fuel.

Bunkers (a) A bin or tank, especially forfuel storage on board a ship; (b) Fuel usedaboard ships.

Capesize vessels A very large bulk carrierbetween 80–150,000 dwt, which used to beunable to transit the Suez Canal andtherefore forced to sail around the Cape ofGood Hope to and from Europe. Nowthose vessels can transit through the SuezCanal as long as they meet the draftrestriction (18.91 m/62 ft as at 2008).

Cargo tonnage Ocean freight isfrequently billed on the basis of weight ormeasurement tonnes. Weights tons can beexpressed in terms of short tons of 2,000pounds, long tons of 2,240 pounds, ormetric tons of 1,000 kilograms (2,204.62pounds). Measurement tons are usuallyexpressed as cargo measurements of 40cubic feet (1.12 cubic meters) or cubicmeters (35.3 cubic feet).

Carrier Any legal or naturalized personwho, in a contract of carriage and inaccordance with the national laws andregulations of the Contracting Parties,undertakes to perform or to procure theperformance of carriage by sea, inland

waterway, rail, road, air, or by a combina-tion of such modes.

Clearance The size beyond whichvessels, cars, or loads cannot pass through,under, or over bridges, tunnels, highways,and so forth.

Common carrier A transportationcompany that provides services to thegeneral public at published rates.

Concession An arrangement whereby aprivate party (concessionaire) leases assetsfrom an authorized public entity for anextended period and has responsibility forfinancing specified new fixed investmentsduring the period and for providing speci-fied services associated with the assets; inreturn, the concessionaire receivesspecified revenues from the operation ofthe assets; the assets revert to the publicsector at expiration of the contract.

Consolidation Cargo that consists ofshipments of two or more shippers orsuppliers. Container load shipments maybe consolidated for one or moreconsignees.

Container Steel or aluminum frameforming a box in which cargo can bestowed meeting International StandardOrganization (ISO)-specified measure-ments, fitted with special castings on thecorners for securing to lifting equipment,vessels, chassis, rail cars, or stacking onother containers. Containers come in manyforms and types, including: ventilated,insulated, refrigerated, flat rack, vehiclerack, open top, bulk liquid, dry bulk, or



other special configurations. Typical con-tainers may be 10 ft, 20 ft, 30 ft, 40 ft, 45 ft,48 ft, or 53 ft in length; 8 ft or 8.5 ft inwidth; and 8.5 ft or 9.5 ft in height.

Container berths Number of berthsdesignated for the loading and unloadingof containerized cargoes.

Container freight station A dedicatedport or container terminal area, usuallyconsisting of one or more sheds orwarehouses and uncovered storage areaswhere cargo is loaded (“stuffed”) into orunloaded (“stripped”) from containers andmay be temporarily stored in the sheds orwarehouses.

Container handling capacity Thenumber of containers, usually expressed inthe standard dimension of TEU, that a portor terminal is designed to handle in aperiod of one year. A Twenty FootEquivalent Unit (TEU) is the standard unitto express container capacity. A TEU is arepresentation of a container with thefollowing dimensions: 8 ft wide; 8 ft or 8 ft6 in or 9 ft 6 in in height; and 20 ft long. Thevery large portion of the world containerpopulation consists of 20 ft and 40 ftcontainers. A 40 ft container equals 2 TEUs.

Container pool (a) An agreementbetween parties that allows the efficientuse and supply of containers; (b) acommon supply of containers available tothe shipper as required.

Container terminal An area designatedfor the handling, storage, and possiblyloading or unloading of cargo into or out of

containers, and where containers can bepicked up, dropped off, maintained,stored, or loaded or unloaded from onemode of transport to another (that is,vessel, truck, barge, or rail).

Container vessel Ship equipped withcells into which containers can be stacked.Container ships may be full or partial,depending on whether all or only some ofits holds are fitted with container cells.

Container yard A container handling andstorage facility either within a port orinland.

Contraband Cargo that is prohibited.

Contract carrier Any person not acommon carrier who, under special andindividual contracts or agreements,transports passengers or cargo forcompensation.

Controlled atmosphere Sophisticated,computer-controlled systems that managethe mixture of gases within a containerthroughout an intermodal journey, therebyreducing decay.

Corridor A geographical concentration oftransport infrastructures and transitactivities between two or more economiccenters, linking them to one another, andoften to ports/international markets.

Customs broker A person or firm,licensed by the customs authority of theircountry when required, engaged inentering and clearing goods throughcustoms for a client (importer).

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Customs house A government officewhere duties are paid, import/exportdocuments filed, and so forth, onshipments.

Demurrage A penalty charge againstshippers or consignees for delaying thecarrier’s equipment beyond the allowedfree time. The free time and demurragecharges are set out in the charter party orfreight tariff.

Dock or quay A structure attached to landto which a vessel can be moored.

Draft (or draught) The depth of a shipwhile in the water. Measured as the verticaldistance between the waterline and thelowest edge of the keel.

Dredging Removal of sediment to deepenaccess channels, provide turning basins forships, and maintain adequate water depthalong waterside facilities.

Dry bulk Loose, mostly uniform cargo,such as agribulk products, coal, fertilizer,and ores, that are transported in bulkcarriers.

Dry bulk berths Number of berthsdesignated for the loading and unloadingof dry bulk cargoes. Dry bulk cargoes arehomogeneous cargoes that are usuallytransported in loose form, being loadedand unloaded in a more or less continuousway with the use of mechanical equipmentand devices such as grabs, conveyor belts,section machines, etc. Examples of drycargoes include: coal oil, liquid chemicalsand liquefied gases.

Dwell time The time cargo remains in aterminal’s in-transit storage areas, whileawaiting shipment (for exports) or onwardtransportation by road/rail (for imports).Dwell time is one indicator of a port’sefficiency: the higher the dwell time, thelower the efficiency.

Electronic data interchange (EDI)Transmission of transactional data betweencomputer systems.

Feeder service Transport service where-by loaded or empty containers in a regionalarea are transferred to a “mother ship” for along-haul ocean voyage.

Fixed costs Costs that do not vary withthe level of activity. Some fixed costscontinue even if no cargo is carried; forexample, terminal leases, rent, andproperty taxes.

Forklift Also called a lift truck, ahigh/low, a stacker-truck, trailer loader, ora sideloader, it is a powered industrial truckused to lift and transport materials.

Forty-foot (40 ft) equivalent unit (FEU)Unit of measurement equivalent to one 40-ft container. Two 20-ft containers (TEUs)equal one FEU.

Free trade zone (FTZ) A zone, oftenwithin a port (but not always), designatedby the government of a country for duty-free entry of any nonprohibited goods.Merchandise may be stored, displayed, orused for manufacturing within the zoneand reexported without duties beingapplied.



Gantry crane A crane fixed on a frame orstructure spanning an intervening spacetypically designed to traverse fixedstructures such as cargo (container) storageareas or quays and which is used to hoistCONTAINERS or other cargo in and out ofvessels and place or lift from a vessel,barge, trucks, chassis, or train.

Gateway A point at which freight movingfrom one territory to another is inter-changed between transportation lines.

Grounding Contact by a ship with theground while the ship is moored oranchored as a result of the water leveldropping, or when approaching the coastas a result of a navigational error.

Harbor dues (or port dues) Charges by aport authority to a vessel for each harborentry, usually on a per gross tonnage basis,to cover the costs of basic port infra-structure and marine facilities such asbuoys, beacons, and vessel traffic manage-ment system.

Inland carrier A transportation companythat hauls export or import traffic betweenports and inland points.

Intermodality The use of two or moremodes of transport in an integrated mannerin a door-to-door transport chain.

Jetty (or pier) A structure that isperpendicular or at an angle to theshoreline to which a vessel is secured forthe purpose of loading and unloadingcargo.

Landlocked state A state which has nosea coast or which does not have a directlink with the sea coast through its ownterritory.

Landlord port An institutional structurewhere the port authority or other relevantpublic agency retains ownership of the portland and responsibility for port planningand development, as well as the main-tenance of basic port infrastructure and aidsto navigation.

Lender’s direct agreement Agreementbetween parties to a concession or BOTagreement (government or port authorityand special purpose vehicle [SPV] orterminal operator) and the lenders (usuallybanks or a consortium of banks) setting outthe rights and obligations of the lenders inrelation to the government or port authorityregarding the facilitation of the financing ofa port project. The lender’s direct agree-ment is used in the event of a proposedtermination of the concession agreement toinduce the lenders to provide the debt tothe SPV or operator under the financingdocuments. These rights and obligationsusually comprise assignment rights withrespect to the concession and the site leaseagreement, priority rights with respect torepayment of the debt, and step-in rights incase of termination as a result of breach ofcontract by the SPV or operator.

Lighter An open or covered barge towedor pushed by a TUGBOAT or a pusher tugand used primarily in harbors and oninland waterways to carry cargo to or fromthe port.

Glossary 201


Liner A vessel sailing between specifiedports on a regular basis.

Liner conference Agreement betweentwo or more shipping companies toprovide scheduled cargo and/or passengerservice on a particular trade route underuniform rates and common terms. Alsocalled shipping conference.

Liquid bulk berths Number of berthsdesignated for the loading and unloadingof liquid bulk cargoes. Liquid bulk cargoesare liquids that are transported in tankcompartments on board a vessel and storedin tanks on shore. The cargo is loaded andunloaded by means of pumps. Examples ofliquid bulk cargoes are: crude oil, liquidchemicals and liquefied gases.

Loaded draught (or draft) Depth ofwater to which a ship is immersed whenfully loaded.

Lo-lo (lift-on lift-off) Cargo-handlingmethod by which vessels are loaded orunloaded by either ship or shore cranes.

Mixed cargo Two or more productscarried on board one ship.

Mobile crane General purpose cranecapable of moving on its own wheels fromone part of a port to another.

Mode of transport Method used for themovement of goods or people (e.g. by sea,road, rail).

Multi-purpose berths Number of berthsdesignated for the loading and unloading

of multipurpose cargoes. These are anyassortment of conventional general,unitized, containerized and/or NEO-BULK

cargo. Examples of neo-bulk cargoes are:motor cars, sawn timber and steel products.

Neobulk cargo Uniformly packagedgoods, such as wood pulp bales, whichstow as solidly as bulk, but are handled asgeneral cargoes.

Open Registry National ship registry —under a national flag — open to ships of allnations, regardless of nationality.

Panamax Panamax ships are the largestships that can pass through the locks of thePanama Canal (specifically used for drybulk and container vessels). Panamax shipscan measure up to 956 ft long (forcontainer ships), 105 ft wide, 190 ft fromthe waterline, and up to 39 ft below thewaterline. Weight can vary, but based onthese measures should average between65,000–69,000 tons. Ships too large totransit the canal are called “post-Panamax.”

Pilotage The act of assisting the master ofa ship in navigation when entering orleaving a port or in confined water.

Pooling Sharing of cargo or the profit orloss from freight by member lines of a LINER

CONFERENCE.

Port dues (or harbor dues) Chargeslevied against a shipowner or ship operatorby a port authority for the use of a port (seealso HARBOR DUES).



Port handling capacity The design cargohandling capacity of a port expressed intonnes/year.

Port of registry Place where a ship isregistered with the authorities, therebyestablishing its nationality.

Project financing Financing wherein thelender looks to a project’s cash flows torepay the principal and interest on debt,and to a project’s assets for security; alsoknown as “structured financing” because itrequires structuring the debt and equitysuch that a project’s cash flows areadequate to service the debt.

Rail-mounted gantry (RMG) or rail-mounted container gantry crane Usedfor container acceptance, delivery, andstacking operations in a container yard.

Reefer Refrigerated container or vesseldesigned to transport refrigerated or frozencargo.

Relay To transfer containers from one shipto another.

Ro/ro A shortening of the term “roll-on,roll-off.” Ro/ro is a cargo handling methodwhereby vessels are loaded via one ormore ramps that are lowered on the quay.

Rubber-tired gantry (RTG) or rubber-tired container gantry crane Gantrycrane on rubber tires typically used foracceptance, delivery, and container stack-ing at a container yard.

Shed Covered area for the reception,delivery, consolidation, distribution, and

storage of cargo. Note: A warehouse usuallypoints at longer-term storage, whereas ashed usually is used for shorter-termstorage. (Also see WAREHOUSE)

Side loader A lift truck fitted with liftingattachments operating to one side forhandling containers.

Stevedoring To load or unload a cargowhile in port.

Sto-ro A vessel with capacity for break-bulk cargo as well as vehicles or trailerborne cargo.

Storage capacity The area in a portdesignated for the storage of cargo.

Stowage factor The average cubic spaceoccupied by one ton weight of cargo asstowed aboard a ship.

Super Post-Panamax The latest genera-tion of “super post Panamax” vessels has awidth of about 22 container rows,compared to “post Panamax” vessels,which accommodate 18 container rows.

Supply chain A logistics managementsystem that integrates the sequence ofactivities from delivery of raw materials tothe manufacturer through to the delivery ofthe finished product to the customer inmeasurable components.

Tare weight The weight of wrapping orpacking; added to the net weight of cargoto determine its gross weight.

Traffic in transit Passage of traffic acrossthe territory of a Contracting Party with or

Glossary 203


without transhipment, warehousing,breaking bulk, leaning, repairing, repack-ing, assembly, disassembly, reassembly ofmachinery and goods, and change of modeand means of transport when any suchoperation is undertaken solely for theconvenience transportation, provided thatsuch passage is only a portion of acomplete journey beginning and terminat-ing beyond the frontier of the State acrosswhose territory the traffic passes.

Transit Passage across the territory of aContracting Party when such passage isonly a portion of a complete journey,beginning and terminating beyond thefrontier of the State across whose territorythe transit takes place.

Transshipment A distribution methodwhereby containers or cargo are transferredfrom one vessel to another to reach theirfinal destination, compared to a directservice from the load port of origin to thedischarge port of destination. This methodis often used to gain better vessel utilizationand thereby economies of scale byconsolidating cargo onto larger vesselswhile transiting in the direction of maintrade routes.

Transshipment port A port where cargois transferred from one carrier to another orfrom one vessel of a carrier to anothervessel of the same carrier without the cargoleaving the port.

Tugboat A boat that maneuvers vessels bypushing or towing them. Tugs move vesselsthat should not move themselves alone, suchas ships in a crowded harbor or a narrowcanal, or those that cannot move themselves,such as barges, disabled ships, or oilplatforms. Tugboats are powerful for theirsize and strongly built, some are ocean-going. Some tugboats serve as icebreakers orsalvage boats. Early tugboats had steamengines; today diesel engines are used.

Turnaround time The time it takesbetween the arrival of a vessel and itsdeparture from port; frequently used as ameasure of port efficiency.

Twenty-foot equivalent unit (TEU)Container size standard of 20 ft. Two 20-ft containers (TEUs) equal one FEU (40-ft container). Container vessel capacityand port throughput capacity arefrequently referred to in TEUs.

Variable cost Costs that vary directly withthe level of activity within a short time.Examples include costs of moving cargoinland on trains or trucks, STEVEDORING insome ports, and short-term equipmentleases.

Warehouse Covered area for thereception, delivery, consolidation,distribution, and storage of cargo. Note: Awarehouse usually points at longer-termstorage, whereas a shed usually is used forshorter-term storage. (Also see SHED)



This publication was prepared by the Bank’s Development Research Department (EDRE) in the ChiefEconomist Complex (ECON). Other publications of the Complex include:

ADB POCKET BOOK A pocketbook of data from two statistical publications: the Compendium of Statistics andSelected Statistics on African Countries.

AFRICA COMPETITIVENESS REPORT The report presents an in-depth assessment of many aspects of Africa’s business environmentand highlights the key issues that hinder progress in Africa’s competitiveness and job growth.The report is published by the African Development Bank, in collaboration with the WorldEconomic Forum and the World Bank.

AFRICAN DEVELOPMENT REVIEW The African Development Review is a professional development economics journal that providesa platform for expressing analytical and conceptual views on Africa’s development challenges. It is published three times a year.

AFRICAN ECONOMIC OUTLOOK An annual publication jointly produced by the African Development Bank, the OECDDevelopment Center, and the United Nations Economic Commission for Africa (UNECA). Itanalyzes the comparative economic prospects for African countries.

AFRICAN STATISTICAL JOURNAL A bi-annual publication aimed at promoting the understanding of statistical development in Africa.

COMPENDIUM OF STATISTICS An annual publication providing statistical information on the operational activities of the Bank.

ECONOMIC RESEARCH PAPERS A working paper series presenting preliminary research findings on issues of relevance toAfrican development.

GENDER, POVERTY AND ENVIRONMENTAL INDICATORS ON AFRICAN COUNTRIES An annual publication providing statistics on broad development trends relating to gender,poverty and environmental issues in all 53 African countries.

PRODUCT CATALOGUE FOR ICP PRICE SURVEYS IN AFRICAN COUNTRIES This catalogue provides International Comparison Program for Africa (ICP-Africa) surveyinformation on a series of products to be priced in Regional Member Countries of the AfricanDevelopment Bank.

SELECTED STATISTICS ON AFRICAN COUNTRIES An annual publication, providing statistics on selected social and economic indicators for the 53Regional Member Countries of the African Development Bank.

WALL CHART ON THE MDGS The chart provides data on progress towards attaining the Millennium Development Goals in allRegional Member Countries.

Copies of these publications may be obtained from:

Development Research Department (EDRE)African Development Bank

Headquarters Temporary Relocation Agency (TRA)01 BP 1387 Abidjan 01, Angle des trois rues, Avenue du Ghana,

COTE D’IVOIRE rues Pierre de CoubertinTELEFAX (225) 20 20 49 48 et Hedi Nouira

TELEPHONE (225) 20 20 44 44 BP 323 — 1002 TUNIS BELVEDERETELEX 23717/23498/23263 TUNISIA

Web Site: www.afdb.org TELEFAX (216) 71351933EMAIL: [email protected] TELEPHONE (216) 71333511

Web Site: www.afdb.orgEMAIL: [email protected]

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