THINK TANK

East Africa is an expensive place to move goods. In 2012, shipping companies spent an extra 22% on top of normal operating costs to clear container cargos, while collectively shippers forked out an additional $252 million calling at Dar es Salaam port alone.¹ While policy makers in the region recognise the need to expedite trade flows in East Africa, not enough is being done to address delays in its major ports. Is it time for governments in the region to cede complete responsibility to private operators in order to boost efficiency and remove trade barriers?

For a region considered as a major future energy player, East Africa’s port and transport network continues to burden domestic and foreign business. Cumbersome border procedures, road blockages and port congestion – known collectively as Non-Tariff Barriers to trade (NTBs) – plague companies by driving up the time and cost of doing business in the region. Not only does this impact on the East African economy, it deters foreign businesses from operating and investing in the region. It is not hard to see why: according to the World Bank (2013), the Tanzanian trade corridor, which stretches from Dar es Salaam (Tanzania) through to Lusaka (Zambia), is recognised as one of the world’s most expensive routes through which to move cargo. Similarly, the northern trade passage, dissecting Kenya and reaching up to Uganda and South Sudan, is dogged by costly clearance procedures and weighbridges, all of which place additional strain on freighters moving goods in and out of East Africa.

However, at the root of the problem are the region’s highly congested gateway ports (Mombasa and Dar es Salaam), both of which are highly inefficient and, thus, expensive for shippers/businesses. It is not uncommon for ships calling in Mombasa, for example, to be held-up for 10 days before being processed. And delays are even greater in Dar es Salaam, taking ships, on average, 10 days to berth, and a further 10 days to clear cargos at port.² This exposes cargos to criminality and misconduct, and delays deliveries to final destinations – a cost ultimately footed by private shippers and consumers operating in the region.

While regional policy makers have attempted to tackle congestion, particularly in the last six months, it continues to be a costly region to do business. This is evidenced by the fact that companies are known to bypass the gateway ports altogether in favour of smaller ones such as Beira (Mozambique) and Mtwara (Tanzania). If East Africa is to capitalise on the huge resource potential within its gas-rich basins, it is essential that the region is serviced by an efficient port network, meaning that significant changes are required to streamline the current state-managed ports. The sticking point is that governments are not prepared to cede control of the ports in favour of the private sector, despite calls in the region for change.

Indeed, many, including Uganda and Rwanda, have urged Kenya and Tanzania to hand over to private operators. Such a move, it is believed, would help remove inefficiencies and systemic corruption, while boosting competition at the interface of East Africa’s trade passage. Corruption is a particular concern. The Kenya Port Authority has in the past been found seeking bribes³ to facilitate goods clearance, and the Tanzanian Port Authority (TPA) has been investigated many times on claims of fuel smuggling and goods ‘disappearances’. Despite small, tokenistic personnel changes, neither country has done anything substantial about the issue. Kenya’s new President, Uhuru Kenyatta, is, for example, addressing trade barriers through small legislative changes along Kenya’s transport corridors – changes, it is agreed, that are unlikely to remedy Mombasa’s inefficiencies. While Dar es Salaam has had a helping hand from private sector contractors since 2000, many believe that improvements have been offset by the government-managed port authority, the TPA. It appears that neither Kenya or Tanzania are prepared to compromise their stake in the ports, despite the improvements it would undoubtedly bring to the regional economy.

It seems that little is actually being done to ease trade at port other than minor personnel changes and procedural adjustments along trade corridors. Kenya has flip-flopped over plans to privatise Mombasa in the past, but it is highly influenced by the strong role the unions play. Not wishing to upset the applecart and cut local jobs in the area, it looks likely in 2013 and beyond that President Kenyatta will continue to take a soft approach on port reform. As many regional and international players recognise, and have done for many years, ports in East Africa are likely to continue to pose problems for shippers until this attitude changes.

© GRAY PAGE ® 2013