A move to privatise some of Africa’s biggest ports is underway as South Africa’s largest port announces a privatisation partner.
By Conrad Onyango
South Africa’s state-run Transnet has picked Philippines-based multinational port operator International Container Terminal Services (ICTSI) as an equity partner to run and expand Durban Container Terminal Pier 2. The move is the biggest signal yet of a trend that is transforming Africa’s port terminals.
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“The partnership with ICTSI will help reposition the terminal for best practice performance, ensuring growth in volume throughput, and will support the terminal in providing operational and commercial support to access global shipping line call routes,” said Transnet Group CE Portia Derby in a statement announcing the partnership.
The joint venture in which Transnet will be the majority shareholder- owning 50% plus one share – is part of a move to improve the port’s efficiency, reliability and global repositioning over the next 25 years, according to the country’s ports authority.
According to Transnet National Ports Authority, nearly three-quarters of the freight volume moved via Durban port goes through the flagship Pier 2 terminal, which also accounts for 46% of South Africa’s total port traffic.
Performance at the port has been hit by operational challenges leading to frequent delays and its current poor global rankings.
In its Container Port Performance Index 2022: A Comparable Assessment of Performance Based on Vessel Time in Port, the World Bank ranked Durban number 341 out of 348 ports.
In this ranking, South Africa had three ports ranked the lowest on the continent. Cape Town was the lowest at number 344, and Ngqura at position 338.
Initially, Durban Container Terminal Pier 2’s capacity will be expanded from 2 million to 2.8 million Twenty-Foot Equivalent Units (TEU) as part of larger plans to increase the total container capacity across the port from 3.3million to 11.4million teu.
“This will not only improve the logistics associated with servicing South African ports, but will play a significant part in stimulating exports and imports,” said Derby.
South Africa has also hinted at opening up other ports to private investors, starting with the Ngqura Container Terminal, whose process Transnet said will be outlined in due course.
“The partnership in Pier 2 is a major step forward for our programme to bring in global expertise to improve efficiencies at our terminals, and bodes well for our ongoing plans to crowd in the private sector in areas identified for growth,” says Derby.
Competition between East Africa’s biggest ports has resulted in similar privatisation pressures, with Kenya’s Mombasa port vying with Tanzania’s Dar es Salaam for control of entry points to the vast East African market. The ports handle imports and exports for inland countries and markets, including Uganda, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo.
World Bank Port rankings show the Port of Dar es Salaam has moved up four positions to 312 since 2021, after a US$357 million “gateway project” improvement program.
A drop in places for East Africa’s busiest harbour, the Port of Mombasa – from position 296 in 2021 to 326 – is attributed to a drop in the number of ships and cargo volumes at Kenya’s main port.
Kenya’s Economic Survey 2023 shows a 4.5 per cent drop in ships docking at the port. The cargo handled through the port fell by 1.9 per cent to 33.9 million metric tonnes in 2022.
In June, Kenya, through its development finance institution, Kenya Development Corporation (KDC), set out plans to lease the management and operations of its five key ports.
It listed Kilindini Harbour, Lamu Port, Dongo Kundu Port, Kisumu Port and Shimoni Fisheries Port as part of a US$10 billion public-private partnership initiative.
This comes against a backdrop of growing competition in East Africa. The World Bank has ranked Djibouti’s port at number 26 globally and the port of Berbera (Somalia) at 144.
Since the last quarter of 2020, there has been a marked rise in governments closing multi-million investment agreements to build new ports and improve efficiencies at existing ones.
In December 2020, the government of Senegal signed a 1.1 billion US dollar agreement with DP World to develop its deepwater port at Ndayane. This is the single largest investment ever made by the firm in Africa.
Senegalese authorities said the project would provide a strong engine of growth for the next phase of the country’s ‘Plan Senegal Emergent.’
In 2021, DP World began operations at the Port of Luanda following a 20-year concession agreement with the Angolan government, while Somalia opened a new container terminal at Berbera Port, and the Egyptian government entered into a 38-year concession with Hutchison Ports to construct a new port near Alexandria, the same year.
China Communication Construction Company is constructing an oil terminal at Kenya’s Mombasa Port, and the Chinese firm is also the contractor building Lamu Port in Kenya’s north, which will have the capacity to handle up to 18,000 TEUS.
In March 2023, the Togolese government commissioned the Lome Container Terminal (LCT), which allows the port to clear at least 2.2 million containers annually, up from the 1.6 million previously, situating the port as a key hub for maritime trade in West Africa.
Construction on the more than US$430 million project was funded by Swiss-headquartered shipper, Mediterranean Shipping Company, the China Merchant Group, and the government of Togo.
ICTSI already operates terminals in Nigeria, Madagascar, DR Congo and Cameroon. The operator beat nine other bids, including from APM Terminals, China Harbour Engineering, Guangzhou Port Co., COSCO, DP World, Global Ports Services, (South Africa’s) Grindrod together with Hamburger Hafen Und Logistik Aktiengesellschaft (HHLA), Red Sea Gateway Terminal and MMC Port Holdings, Star Classic Investments Limited and Abu Dhabi Ports and finally, from Terminal Investment Limited (TIL) and REMGRO Limited.