Interview: Peder Sondergaard
What can African ports do to increase their share of trans-shipment activity?
PEDER SONDERGAARD: Essentially, the movement of trans-shipment containers has to be seamless. To ensure this, trans-shipment operations should be independent from other shipping. Ideally trans-shipment could take place in a free zone area, or the processes could run in the background so that general shipping never disturbs the flow of trans-shipment containers in terms of speed, reliability or cost.
The greatest benefits of trans-shipment are indirect. The segment creates economic activity and employment. Port operators must understand that the less important benefits are the direct charges to the shipping lines or terminal operators. Therefore, a government should focus on offering attractive pricing and consider potential incentives on value-added tax and other taxes to those who make it happen. Governments must also upgrade their port infrastructure to cater to larger and deeper vessels. The public-private partnership model has proven to be an effective means to ensure financing of such projects. Finally, port and shipping authorities must ensure that the port has a world-class private sector port or terminal operator delivering top-level speed and service to the shipping lines. Trans-shipment is a highly competitive market. Having internationally recognised operators helps to assure the business community that the port will be up to standard.
What impact does the lack of port infrastructure have on both traffic volumes and shipping costs?
SONDERGAARD: There is a significant economy of scale for larger vessels. If the ports are inefficient or only able to handle sub-standard vessel sizes, it has a negative effect on the total cost to trade, and it will increase the end-to-end cost of exports from China to Africa, for instance. It will have some negative impact on the volume of local import/export but it will likely eliminate the opportunity for vessel-to-vessel trans-shipment or the ability to act as gateway for the provinces or hinterland. Transit to landlocked neighbours is the largest opportunity for Africa’s coastal countries. As opposed to the trans-shipment segment, competition in this space is highly localised. Whereas West African countries would have greater difficulty competing on the trans-shipment market against more developed countries, transporting cargo to landlocked neighbours is a far more feasible way to boost shipping revenue in the medium term.
That being said, the African ports have actually done quite well in upgrading their existing port infrastructure. Most of it was built in the 1960s, and it has been privatised through a concession model to private international port operators. They have invested in rebuilding the existing facilities and brought know-how and IT systems to the table, and this has easily doubled, in some cases quadrupled, the annual volume capacity. In many cases it has also increased the port’s ability to handle larger vessels.
The norm for vessel sizes from Asia to West Africa is now around 4000-5000 containers, which is double the volume compared to just a few years ago. There is a continuing trend and pressure to upscale the vessels, but there is a limit to how much the old existing facilities can be upgraded. In some cases countries have developed completely new port complexes located outside of their highly congested cities. An example of this is the Badagry port project, which will be located some 50 km west of Lagos, Nigeria.
What role do multimodal connections play in reducing end-user shipping costs?
SONDERGAARD: Compared to some other African countries, the road network in Ghana is reasonably good. Ghana is a fairly large exporter for this very reason. However, the country should continue to upgrade the quality and capacity of the roads.
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