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State and Merchant Fleet Development

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State and Merchant Fleet Development Chapter 1 Introduction Background of the Study A number of newly-independent countries of West and Central Africa established national shipping lines in the late 1950s and 1960s as part of economic strategy to create employment, earn foreign exchange, attract technology transfer to their mainly agricultural societies and thereby industrialise their economies. They were also motivated by national pride to show their flags around the world. As at 1980, Nigeria had 27 ships, Ghana, 16 and Cote d'Ivoire 15 in a market which grew to one hundred and twenty ships belonging to 40 African and European carriers, with about sixty belonging to African states.1 At the same time, six major shipping conferences, namely Continent - West Africa Conference (COWAC), Mediterranean Europe - West Africa Conference (MEWAC), United Kingdom - West Africa Joint Service (UKWAL), Continental Europe - West Africa Lines Conference (CEWAL), America - West Africa Freight Conference (AWAFC) and Far East - West Africa Conference (FEWAC) operated in the sub- region.2 Their competitors were non-conference lines such as Maersk Line, Transmar, Grimaldi, O T Africa Line, G + C Africa Line, Nile Dutch, Rhein Mass und See (RMS) and Deep Sea Shipping, and they were the major owners of the high-yielding container ships and ro-ro vessels. Of the 120 ships in use, 29 were general cargo ships, 50 multi-purpose and semi- container ships, 3 were lighters-carriers, 21 were container ships while 17 were roll-on roll-off vessels.3 The West African fleets were mainly composed of general cargo and multi- 1 purpose/semi-container ships. The total volume of African maritime trade at the dawn of political independence was small, barely 5% of world total (in 1950) but the freight component of goods prices was the highest in the world at 12.90% as against the global average of 5.24% 4. This was blamed on the poor maritime and road transport infrastructures in Africa. Moreover, the continent's geographical location at the periphery of the industrial centres of North America, Europe and the Asia Pacific Rim was deemed a logistical disadvantage. Thus, for the new leaders of Africa, the maritime sector was the vantage ground because ocean shipping provided an outlet to the world and a lucrative opportunity to the global market where their exports, predominantly raw materials, could be converted into tangible earnings and potentials for building the modern industrial society they had promised their electorates. The major focus of this study, that is, Ghana and Nigeria, have various similarities and contrasts. They are multi-ethnic societies, with Ghana having a population of 25.9 million and land mass of 227,540 square kilometers while Nigeria‟s population is 173.6 million, with a land mass of 910,770 square kilometres, according to the World Bank.5 During the period covered by this study, they were mainly exporters of agricultural raw materials, forest products and minerals such as cocoa, coffee, palm produce, groundnut, rubber, timber, aluminum, gold, coal, tin and crude oil. Their imports were mainly the manufactures of Europe such as processed food, cement, corrugated iron sheets, bicycles, clothing and textiles, farming implements, salt, sugar, wheat and grains. The urgency to participate in sea trade was all too evident in the two countries. According to Robert Fiawoo, Ghana's Black Star Line (BSL) was formed so hurriedly that President Kwame Nkrumah‟s private yacht was the only available training ship for the young nation6. Similarly, the Nigerian National Shipping Line (NNSL) was formed even before independence in 2 1960, following popular clamour by nationalist leaders that a national carrier was a priority for economic wellbeing of the new nation.7 They were quickly set up in a haste that revealed other motives, such as, mitigating the unfavourable regime of high freight rates, which the dominant European shipping conferences forced on the African markets throughout the pre-colonial and colonial periods when they held sway in the area. (See Table). Table 1: Comparative Freight Rates Applied in UK/West Africa and Other Trading Areas of the World (1900-1906) Consignment Trading Area Price per ton Lagos (West Africa) 20s.0d America (USA) 4s.6d4s.6d Calcutta (India) 4s.6d Salt South America 11s.3d Yokohama (Japan) 15s.0d Gold Coast (West Africa (Ghana) 35s.0d Flour New York (USA) 7s.6d West Africa Port to Mersey side 35s.0d United States Port to Mersey side 20s.0d Timber West Africa Port to Mersey side 45s.0d United States Port to Mersey side 7s.6d Cotton Source: P. N. Davies, The Trade Makers: Elder Dempster in West Africa 1872-1972, (London: George Allen and Unwin, 1973), 154. Their justification was the steaming distance and the undeveloped nature of port and cargo handling facilities in the region. However, the two countries braced to the challenge. The Convention Peoples Party (CPP) manifesto in 1953 proposed the formation of a Gold Coast Shipping Company and mandated the Gold Coast Cocoa Marketing Board to form it while the Nigerian Produce Marketing Board spear-headed the incorporation of the Nigerian National Line (as the NNSL was initially called), as the major shareholder on behalf of Nigeria.8 3 The pioneer liners in the trade, notably Woermann Line and Elder Dempster, had covered the route for liner shipping since the late 1840s, with stops at wharves, beach heads and surf ports, from Senegal down to the Congo River and destinations in-between. (See map below). This and other factors, such as access to the Atlantic Ocean and the endowment of many inland rivers and lakes encouraged West African countries to form national shipping lines. Map 1: Showing Ports and Inland Jetties for the West and Central African Shipping Route. Source: Retrieved from www.elderdempster.org on November 3, 2010. Moreover, African leaders saw the prosperous business that European lines such as Elder Dempster, Hoegh Line, Woermann Line and Palm Line made out of liner and tramp shipping on the West African route; a business that, by the 1950s, had lasted one hundred years and survived two world wars. Therefore, maritime trade offered opportunities for wealth creation, to check 4 capital flight and enhance balance of payment, to train their citizens in new skills and for the diversification of the work force, all in a bid to uplift living standards for Africa's rising population, which in 1950 was 178 million.9 After independence, the nation states came together under a grouping called the Ministerial Committee of West and Central Africa States on Maritime Transport (MINCONMAR) formed in 1975 with the objective of harmonising and modernising the maritime transport policies of member states to achieve regional integration. In 1999, the organisation was reformed and its name was changed to Maritime Organization of West and Central Africa (MOWCA) with headquarters in Ivory Coast.10 However, the national carriers soon began to grapple with financial mismanagement, ship maintenance problems, bureaucracy from the supervisory ministries, indiscipline and corruption, among others. They also faced reduced cargo volumes due to the global recession of the 1980s and could not upgrade to modern ships with designs for fuel efficiency and economic speed.11 The introduction of containerization was another technological game changer, which left the African fleets behind as their general cargo ships had provision for only few containers. In 1990, following a complaint brought by non-conference members in the Europe-West Africa trade, the European Union imposed fines of ECU5,000; FF105 million and ECU10.1 million in a series of punitive measures against Secretama, the Bollore Group and members of the European Shipowners' Committee respectively, for taking part in bilateral cargo allocation agreements between France and eleven member states of MINCONMAR.12 These measures, imposed by the might of the EU, sounded the death knell of the United Nations Conference on Trade And Development's 40-40-20 code of conduct for liner conferences, which had hitherto provided the fledgling African carriers a cover from the fierce competition and dominance of European shipping lines. By the mid-1990s, almost all the national carriers were too distressed 5 to be salvaged. The BSL and the NNSL were liquidated, while the rest became dormant, leaving their national economies exposed, once again, without national tonnage and at the mercy of foreign ship owners. 1.2 Statement of the Problem West Africa's national shipping lines, such as BSL and NNSL, which were formed in the 1950s for the countries to actualise their dreams of becoming flourishing maritime nations soon became distressed as state-owned enterprises. This was despite the availability of a huge shipping market and the promulgation of favourable laws to create enabling environment for their success. As a result of the failures, the sub-regional economies reverted, in various degrees, to the pre- independence status of net-importers of ocean shipping services, with all the inherent disadvantages, including capital flight, which were injurious to their economies. What factors accounted for the mass failures of these West African national carriers in a market whose fundamentals still supported the trade of their competitors? Why could they not recover from their distress and reclaim their lost grounds as other shipping lines did? These are germane questions this study is looking at. A school of thought posits that there are peculiarities in the socio-economic set up of African
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