Africa’s ports are undergoing a historic wave of investment driven by surging trade volumes, the promise of greater intra-African trade, the arrival of larger vessels and diversified investor interest, mostly from other regions of the world.
About $90bn has been invested in the pipeline of port infrastructure projects in Sub-Saharan Arica, most of it in new deepwater developments, container terminals and hinterland connectivity.
Over the past decade about $50bn has been invested in port upgrades in the region by major international players such as APM Terminals, France’s CMACGM, Africa Global Logistics (formerly Bolloré) and its parent MSC, China Merchants, and the UAE’s DP World.
The China Belt & Road Initiative Investment Report 2023 shows that investments in Africa grew by an impressive 114% that year to reach $21.7bn, with construction contracts increasing by 47% that year alone, many of them in the port and shipping sectors.
Development finance institutions such as the Development Bank of Southern Africa and Africa Finance Corporation are part of the mix of funders in this space.
The new tide of privatisation and foreign investment promises to turn congested, underperforming hubs into world-class gateways, says a new report published by the Brenthurst Foundation in SA.
Private companies now have access to long-term concessions in some of Africa’s fastest-growing ports, varying from 20 to 30 years. In addition to port management there has also been the privatisation of specific services, such as cargo handling, security and maintenance.
Several nations are reforming their port authorities, separating regulatory and operational functions to improve efficiency and attract private sector investment.
Private capital is helping to unclog notorious bottlenecks, introduce advanced technology and reduce turnaround times. Global logistics giants have brought with them expertise, scale and access to international networks.
Private capital is helping to unclog notorious bottlenecks, introduce advanced technology and reduce turnaround times.
Several big logistics companies, such as Imperial Logistics in SA, have been snapped up by foreign investors seeking quick competitive advantage.
This is a dramatic change from years of inertia, overzealous bureaucracy, lack of investment and inefficiency in state-run ports across the continent.
There is no shortage of ports in Africa, with 38 coastal and island countries each with its own port and often more than one. This is an opportunity despite the reality that many are very small, unprofitable or specific to certain areas or commodities.
The large number of landlocked countries also provide a strong case for investment as illustrated by the example of Ethiopia, a market of more than 100-million people.
Competition for investment in infrastructure has been a driver of governments loosening their grip on the “family jewels”, with pan-African institutions such as Afreximbank and the African Development Bank pushing for more optimal use of infrastructure. Big business, in the case of SA, is another player helping to move the needle, pushing the government to let the private sector manage failing assets.
There are concerns about this trend towards private investment. One is the long-term implication of foreign control of strategic infrastructure. Almost all investment in Africa’s port and multi-modal systems come from logistics conglomerates or state-owned enterprises outside Africa.
When control of a nation’s key maritime assets rests in foreign hands, questions of national security, pricing and policy alignment inevitably follow.
The sustainability of debt taken on to fund expansions is another concern, as is ensuring that port development benefits job creation and trickles down to the broader economy.
The size of the potential opportunity is enormous. Though more than 90% of Africa’s imports and exports move by sea, the continent is still a minor player in global trade, handling about 6% of worldwide sea cargo and just 3% of the world’s container traffic.
Africa itself has few shipping companies. One of the biggest, SA’s state-owned Safmarine, was taken over by Maersk a few years ago, and others are relatively small or regional operations.
Investment drivers
The rollout of the African Continental Free Trade Area (AfCFTA) is the key investment driver. Even though implementation has been slow, expectations are high of exponential growth in intra-African trade. Maritime freight is expected to more than double from current levels by 2030.
This though just eight countries have so far signed up to the Guided Trade Initiative, which aims to test the institutional, legal and trade policy environment under the AfCFTA. The secretariat does anticipate 30 more countries to join by 2026.
It will also take time to undo the legacy of years of underwhelming trade facilitation. Challenges include the vastly different state of readiness of participating countries, a dearth of value addition and industrial policies, lengthy customs procedures and corruption at borders, and fragmented legal and regulatory systems.
Investment is helping drive industrial developments near ports in many countries, including logistics hubs and special economic zones, to diversify production for export.
Investors are also banking on ramped up demand for critical minerals from the US, the EU and Asia as the energy transition gains momentum.
Rapid population growth is another driver. The continent is projected to account for 37% of the global population by the end of the century, compared to its current share of about 20%.
Rapid urbanisation and an anticipated rise in middle-class affluence population will increase demand for goods and services, spurring the need for better infrastructure and services support.
Competition for quality assets highlights the new wave of interest in Africa’s ports. The eastern seaboard in particular has become a theatre of competition as ports in relatively close proximity vie for international and continental business.
Capacity is being increased across the continent, with the constructions of new ports and the expansion of older facilities. A new deepwater facility is under way in Senegal to address capacity limitations at the Port of Dakar and the Port of Banana, a deepwater container port, is being built in the Democratic Republic of Congo.
Construction of Bagamoyo Port in Tanzania is finally under way after years of delays. Nigeria’s new Lekki Deep Sea Port is now operational and major port expansions are under way in Mozambique, Tanzania, Ghana, Egypt and others.
These developments signal growing demand for high-performance maritime and trans-shipment hubs, underscoring the opportunity for strategic investment in both ports and in linked inland logistics investment, says the Africa Finance Corporation.
Looking beyond the port is key to making investments feasible, say the experts. As one put it, “Logistics is not just ports, it is customs, trucking, freight forwarders and others. There is a long supply chain and all of it has to work. Logistics is not a product. It is a tailor-made solution.”
Many challenges remain but overall the sector is on a significant upward trajectory.
Creating new efficiencies and capacity and bringing down the costs of logistics and supply chains across Africa, which remains high relative to other global markets, will boost trade and provide good returns for investors.
• Games is CEO of business advisory Africa @ Work. The report Africa’s Ports: Investment Boom Drives Growth, was published by the Brenthurst Foundation.
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