A silent but cruel battle for the shipping business is raging in East Africa, with Tanzania, Kenya, Djibouti and Somalia as protagonists.
Tanzania, home to the region’s most ambitious port project – the $ 10 billion port of Bagamoyo – has announced plans to revitalize the construction, which may turn the tables. The project includes a special economic zone and industrial park that will attract at least 700 business units and dominate the freight business along the African coast of the Indian Ocean and dwarf the equally ambitious Lamu port project in Kenya.
At a meeting with the Tanzania National Economic Council in Dar es Salaam, President Samia Suluhu recently announced that her government had revived talks with the Chinese government to resume negotiations on funding the project. The negotiations were torpedoed in May 2019 by President John Magufuli over the unfair investment conditions proposed by Beijing. The project was discussed by Magufuli’s predecessor Jakaya Kikwete and as one of his most important legacy projects. There is now great hope in Tanzania that the project will soon bear fruit.
But in Horn, DP World, a port operator in the United Arab Emirates, opened its modernized container terminal in Berbera, the main seaport in the semi-independent Somalia state of Somaliland, and put Berbera in a head-to-head rivalry with the port of Doraleh Container Terminal in Djibouti for business from the Ethiopian market.
At a time when Kenya’s Lapsset anchor project, the Lamu Port, is still gaining a foothold as a transshipment point, Nairobi is already shaken and is trying to prop up its business against the impending onslaught.
The importance that Nairobi and Dodoma attach to this sector is so great that they have placed modernization of ports at the top of their list of priority investments with increased budgets to increase efficiency and handling.
This battle of ports comes at an opportune time for users looking for improved services and competitive pricing, as well as a range of choices as to which port to use. Gilbert Lagat, chief executive of the Shippers Council of Eastern Africa, said the competition was working to their advantage.
Mr Lagat said the competition resulted in most ports investing in different modes of transport, but noted that the multimodal transport contract, which allows goods to be carried by at least two different modes of transport, needs to be adopted in order to avoid congestion to reduce.
“To ensure that freight is delivered on time, we need to include both road and rail in our transport system and, if possible, lakes. We cannot expect our ports to be relieved to make them competitive when we rely on a transport route to evacuate cargo from the port. But with the competition we see that governments are investing more in such infrastructures, ”said Lagat.
Revitalization of the port of Bagamoyo
The announcement of the revitalization of the port of Bagamoyo has delighted the players in the maritime business. The Tanzania Private Sector Foundation said the port would ease pressure on Dar es Salaam port, which is quickly running out of expansion space.
TPSF chair Angelina Ngalula said Bagamoyo is able to accommodate larger ships than Dar es Salaam due to its deeper waters, while also having similar strategic links to the standard gauge railway currently under construction via the central corridor and the Tanzania-Zambia Railway .
While Somaliland and Tanzania are banking on gold, Kenya is investing in the modernization of the port of Mombasa, the construction of the Dongo Kundu Special Economic Zone in Mombasa, the operationalization of the port of Lamu and the opening of corridors for freight evacuation.
Treasury Secretary Ukur Yatani committed $ 69 million to the Mombasa port development program during the reading of the $ 33 billion budget. A portion of the funds will go towards the completion of the second container terminal in the port of Mombasa, which will expand the facility’s capacity to more than 450,000 20-foot equivalent units (Teus) to meet growing demand. About $ 800,000 will be used to develop a free port and special economic zone in Mombasa, while construction of the Dongo Kundu Highway is underway to connect Kenya’s south coast and southern Tanzania across the Lunga Lunga border. The road is 75 percent complete.
Forecasts in the Mombasa Port Strategy Plan show that the port will handle 47 million tons over the next 10 years, up from 34 million tons today and eventually 110 million tons in the late 2040s.
After the commissioning of the first berth in the port of Lamu, Kenya has provided 69 million US dollars for the implementation of various projects in the South Sudan-Ethiopia transport corridor Lamu Port (Lapsset). Construction of the Lamu-Garissa-Isiolo-Moyale road, which will connect with Ethiopia, and the Isiolo-Loruk-Lodwar-Lokichogio road, which will connect with South Sudan, has already started and should be completed by the end of the financial year. The two corridors are an incentive for Ethiopia and South Sudan to use the port of Lamu, which is currently being transshipped.
Kenyan has announced incentives to encourage more shipping companies to use the ports of Mombasa and Lamu as a gateway to the East Africa region. These include exemptions from import and excise duties, VAT, railway development tax and import declaration fees on fuel supplied to shipping companies.
In Tanzania, the Samia government has tabled a budget of $ 15.7 billion, of which $ 1.3 billion has been allocated to flagship infrastructure projects in fiscal year 2021/2022. Finance Minister Mwigulu Nchemba has allocated funds to the ports of Dar es Salaam, Mtwara, Tanga and Bagamoyo.
In the port of Tanga, the government is investing in dredging work from four by 13 meters, the installation of navigation equipment and the completion of two draft berths. In 2013, at the port of Bagamoyo, about 75 km north of Dar es Salaam, Tanzania signed an agreement with China Merchants Holdings International to build the facility and a special economic zone.
To attract users, the Tanzania Shipping Agencies Corporation (Tasac) has already started programs, which are part of the Tanzania Ports Authority, to conquer new markets and increase their throughput after the World Bank funded extensive investments to expand the port operations. In March, Tasac began clearing other products, including fertilizers, industrial and household sugar, edible or edible oil, wheat, oil, liquefied petroleum gas and chemicals.
Dodoma appears to have begun to reap the benefits of the World Bank’s $ 345 million grant to the new Dar es Salaam Maritime Gateway Project, which has greatly improved its ports business.
Kenya and Tanzania are competing to position their facilities as preferred entry points into the region, particularly in domestic markets in landlocked countries such as Uganda, Rwanda, Burundi, South Sudan, and the Democratic Republic of the Congo.
The youngest participant in the race, Somaliland, has a new container terminal with a capacity of 500,000 Teus per year with the support of DP World. In the second phase, the capacity is to be increased to two million Teus per year.
The Berbera Economic Zone is intended to attract investment with an expanded port, an economic zone and a Berbera corridor to transform the port city into an integrated maritime, industrial and logistical center in the Horn of Africa.
The new container terminal with a draft of 17 meters, a quay of 400 meters and three ship-to-shore gantry cranes can handle the currently largest container ships, but its annual turnover is far below that of Mombasa.
As part of the Berbera plan modeled after DP World’s Jebel Ali Free Zone in Dubai, the economic zone is connected to the port and strategically located along the Berbera Corridor.
If the new negotiations are successful, the Bagamoyo Project will support Tanzania’s plans to expand its maritime transport portfolio in both the Indian Ocean and the Great Lakes region. The port is expected to handle 20 million shipping containers annually by 2045, which corresponds to 25 times the freight currently being handled in the port of Dar es Salaam.
About $ 58.3 million from Tanzania’s budget for 2021/22 has been earmarked for the implementation of several maritime transport projects in Lakes Victoria and Tanganyika, which aim to increase the volume of freight and passenger movements between Tanzania and neighboring countries.
According to the Ministry of Labor, a new ship with 600 passengers and 400 tons of cargo capacity will be built to sail Lake Tanganyika from the port of Kigoma and trade with Rwanda, Burundi and the Democratic Republic of the Congo alongside the 100-year-old, 70-year-old meter-long MV Liemba, which is currently being refurbished.
Meanwhile, Dar es Salaam and the other major ports in the Indian Ocean, Tanga and Mtwara, are also being expanded, modernized and upgraded to increase their capacity for large ships.
Seven of the eleven berths in the 2,600 meter long port of Dar es Salaam will be expanded from 191 meters to 327 meters and in depth from eight to 15 meters. The port of Tanga, which will be the exit point for Ugandan petroleum products through the up-and-coming East African Crude Oil Pipeline, will also be dredged from 3.5 meters to 15 meters, increasing its handling capacity to over a million tons per year.
Up to 90 percent of Tanzania’s international trade depends on the port of Dar es Salaam. Uganda, Rwanda, Burundi and eastern DR Congo are the destinations for cargo unloaded in the ports of Dar and Tanga, while the port of Mtwara handles cargo for Malawi, Zambia and Zimbabwe.
Rwanda is the leading EAC partner state using the port of Dar es Salaam, with around a million tons of cargo recorded in the port each year, according to TPA figures. Burundi depends on the port for 99.2 percent of its international freight, while Rwanda depends on 86 percent for both imports and exports.
In mid-June, President Samia paid an inspection visit to the construction of the 3.2-kilometer-long Kigongo Busisi Bridge – the longest in East Africa – over the southern end of Lake Victoria.
Construction of the $ 308.88 million bridge is 27 percent and is expected to be completed in early 2024. It is being jointly built by the China Civil Engineering Construction Group (CCECG) and the 15th office of the China Railway and will take the transport time across the lake from 35 minutes by ferry to just four minutes.
The $ 38.72 million construction project MV Mwanza Hapa Kazi Tu is being carried out by the South Korean companies Gas-Entec and Kangnam and is expected to be completed by December next year.
President Samia also inaugurated a $ 15.53 million slipway in the port of Mwanza South, which will enable further shipbuilding projects for Lake Victoria. She said the goal is to make Mwanza a key naval business hub in the Great Lakes region once the SGR project is complete, taking into account its strategic positioning.
Tanzania already has two large ships serving all three countries on Lake Victoria – the MV Victoria with a carrying capacity of 1,200 passengers and 200 tons of freight and the MV Butiama with a capacity of 200 passengers and 100 tons of freight.
Report by Anthony Kitimo, Apolinari Tairo and Bob Karashani