Port Development and Competition in East and Southern Africa Prospects and Challenges

INTERNATIONAL DEVELOPMENT IN FOCUS Port Development and Competition in East and Southern Africa Prospects and Challenges Martin Humphreys, Aiga Stokenberga, Matias Herrera Dappe, Atsushi Iimi, and Olivier Hartmann © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 22 21 20 19 Books in this series are published to communicate the results of Bank research, analysis, and operational experience with the least possible delay. The extent of language editing varies from book to book. This work is a product of the staff of The World Bank with external contributions. The findings, interpre- tations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Foreword International trade patterns have changed markedly in recent years, in terms of both trade partners and volumes. Over the past decade, Africa’s trade has slowly trended away from developed countries and toward emerging economies. Whereas Western European countries accounted for the bulk of Africa’s trade in the late 20th century, countries like China, India, Indonesia, Russia, and Turkey have since grown in importance as export destinations for the resource-rich economies. Emerging economies have also become origins of a significant share of imports for nearly all African countries, the total trade of the latter with China increasing twenty-fold in the last two decades. The changing trade relationships and needs require that Africa’s external transport connections evolve as well. The changing structure and intensity of international trade is increasing the region’s infrastructure needs and demand for more specialized transport and logistics services at the maritime gateways and on the key trading corridors: Africa has 16 landlocked developing countries, which represent 30 percent of the region’s population, and which are entirely dependent on the key trading corridors through neighbors for access to the sea. Trade costs for these countries tend to exceed the global average 3 to 4 times. In some of these countries, transport costs represent upwards of a quarter of the final price of goods, including crucial production inputs such as fertilizer and fuel. Connections to gateway ports are key to allow these countries to engage in global trade and value chains. In other words, East and Southern Africa’s ports are the nodes of entry not only to their coastal host countries but also the landlocked hinterland. Investments in ports will have implications far beyond the port gates. Against this backdrop, the existing port facilities and current operational practices in the East and Southern Africa region are inadequate, with insufficient capacity to serve not only their coastal countries, but also the hinterland of landlocked nations. The visible result has been high ship waiting times, high berth occupancies, congestion on both the land and maritime side, and increased costs. East and Southern Africa now stand at a pivotal moment. The accelerating growth of its consumer class is rapidly increasing the demand for imported goods and, hence, the need for improvements in containerized cargo transport services that would allow delivering the goods efficiently and at minimum cost. New discoveries of oil and gas resources have the potential to transform regional vii viii | Port DEVELOPMENT AND COMPETITION IN EAST AND SOUTHERN AFRICA markets, provide significant revenues for government, and improve living standards. They will also require further investment in infrastructure capacity to support exploitation, some of which might be quite urgent. However, this growth and prosperity will require not only new infrastructure on both the maritime and landside, but also policy reforms, the greater use of specialized private operators, and the leveraging of private investment, both to deliver transport infrastructure and to ensure its efficient use. This book assesses the capacity expansion needs, the operating efficiency, and the landside access gaps of the fifteen main ports in East and Southern Africa within the context of these broader global and regional trends. In doing so, it provides detailed policy recommendations for each of the ports regarding the needed port and access infrastructure, the port sector regulations, and the institutional and management approaches to port operation and development. The World Bank looks forward to working closely with member countries, other development partners, and the private sector to deliver solutions and results that will help bring the region’s development vision to life. Guangzhe Chen Senior Director, Transport The World Bank Foreword Over the last two decades, the countries of East and Southern Africa (ESA) have taken concrete steps to improve the efficiency of their transport networks and to reduce the costs of trade. These actions have included significant physical investment in the main regional corridors, increased attention to intermodal connectivity, and implementation of trade facilitation measures to enable cross-border trade and to smooth the intraregional movement of labor. These efforts have also led to improvements in the region’s performance as evaluated by the international Logistics Performance Index, with most ESA countries climbing in the ranking relative to their global peers. Today, the region is better connected and more resilient to economic shocks than it was at the turn of the century. Improved connectivity and reduced trade costs have contributed to a rapid rise in the consumer class, reaching 8–10 million in Ethiopia, Kenya, and Tanzania, and sur- passing 35 million in South Africa. The positive developments notwithstanding, the region’s growth and progress in poverty reduction going forward will require not only significant investment in infrastructure, including in roads, rail, sea ports, and logistics platforms. It will also necessitate bold policy reforms that promote the efficiency of transport service provision, improve transport safety, and ensure that improved connectivity helps boost firm productivity, country competitiveness, and human capital, while helping reduce existing spatial economic imbal- ances. Countries would have to continue making progress toward economic integration and allowing people to get the full benefits of economic integration. Infrastructure connectivity is critical, but by no means sufficient, as it needs to be accompanied by “soft” policy and regulatory reforms, creation of value chains, and trade facilitation measures. Despite impressive reductions in the average poverty rates, Sub-Saharan Africa (SSA) remains home to more than half of the world’s poor, exceeding 410 million, and in individual countries the inequality between the bottom 40 percent and the rest has grown in recent years. Just five ESA countries alone — Ethiopia, Kenya, Madagascar, Mozambique, and Tanzania — jointly represent about a quarter of SSA’s poor population. Employment in low- productivity, informal agricultural activities remains dominant in much of the region, the overall share of agricultural employment remaining at about 30 percent.

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