Tuesday , 16 October 2018
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PwC: African governments should recognise that ports benefit trade

African governments need to recognise ports as facilitators of trade and growth instead of focusing on extracting revenue from them according to a new report from PricewaterhouseCoopers (PwC).

PwC asserted that contrastingly to China, in sub-Saharan Africa (SSA) “the business case for port expansion is often only defined once capacity is already constrained and thus many ports operate under severe pressure while investment decisions are being made”.

This continual lag, which often lasts years, reduces competiveness and takes no account of the resulting reduced trade impact on African economies, it added.

A 25% improvement in port performance in SSA could increase GDP in the region by 2%, its analysis found.

Growing congestion in many African ports means that the continent runs the risk of sacrificing further growth through a lack of investment in port terminal infrastructure, it noted.

Access to effective ports and interconnecting infrastructure would lead to reduced costs and improved overall freight logistics efficiency and reliability according to the ‘Big 4’ auditor.

According to its estimates, US$2.2bn per annum could be saved in logistics costs if the average throughput at the major ports in SSA doubled.

Andrew Shaw, PwC Africa transport and logistics leader, said: “The global transportation and logistics industry can no longer afford to ignore developments in Africa.

“Efficient ports can make countries and regions more competitive and thus improve their growth prospects,” he added. “The reliability and efficiency of each port terminal, including minimising delay to shippers, is critical to enhancing future trade facilitation.”

The report observed that currently the integration of ports in Africa’s wider logistics chains remains uneven, with some hubs serving large hinterland areas beyond national borders while others lag behind.

This makes African countries less competitive than they should be, PwC added.

While other parts of the world operate on a hub and feeder port model, individual African countries have tended to prioritise developing their own hub ports, observed the report.

However, PwC expects major hub ports to emerge in Africa citing Durban (South Africa), Abidjan (Ivory Coast) and Mombasa (Kenya) as the most likely options in Southern Africa, West Africa and East Africa.

Kuria Muchiru, partner, government and public sector PwC Kenya, stated: “Efficient port operations in Mombasa and Dar es Salaam are critical to increased throughput and evacuation of cargo. Investments in rail are seen as a major step towards contributing to improved performance.”

Greater containerisastion would help the continent increase its exports, the report noted, helping to reduce the trade balance which currently means that many containers leave ports empty while exports move as bulk freight.

Improving Africa’s trade potential to export manufactured, semi-processed or agricultural goods would significantly improve the imbalance in containerised trade, it added.

Most SSA ports are public sector owned and managed, which makes the raising of capital in a constrained economic environment difficult, found PwC.

“Almost all investors we spoke to during our research highlighted governance as the main risk consideration in their investment decision to support increased port investment,” it stated.