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A recent PwC report has found that Africa needs to take advantage of the economic potential of its ports and shipping sector if it is to realise its growth ambitions. Globally, ports are gateways for 80% of merchandise trade by volume and 70% by value. Investment in ports and their related transport infrastructure to advance trade and promote overall economic development and growth is therefore vital – particularly in emerging economies that are currently under-served by modern transportation facilities. However, port investment must be channelled appropriately to ensure financial sustainability and economic growth, the report states.

Ports could spearhead African growth“Investment is not always about building new ports or terminals – investment spent on infrastructure without cognisance of the efficiency and effectiveness of the performance of the port may not produce the desired results. Port performance must be seen in the context of not only port infrastructure shortfalls, but also the fact that port performance has a direct impact on the efficiency and reliability of the entire transport network in which the port is just a node for the transfer of goods.”

The report, Strengthening Africa’s gateways to trade, shows that a 25% improvement in port performance could increase GDP by 2%, demonstrating the close relationship between port effectiveness and trade competitiveness. With growing congestion in many African ports, Africa runs the risk of sacrificing further growth through lack of investment in port terminal infrastructure. Access to effective ports, interconnecting infrastructure and efficient operations to cope with current demand and future growth, will lead to reduced costs and improved overall freight logistics efficiency and reliability – all of which are fundamental to the region’s future success.

Despite the high volumes of goods that require transport, the development and integration of ports in Africa’s wider logistic chains remains uneven. Some ports are important generators of benefit and serve large hinterland areas, often extending beyond national borders. Others lag in terms of available facilities, reliability and efficiency in the handling of freight, which increase supply-chain costs. The disparities in performance between different ports impact on African transport logistic chains, and make African countries less competitive than they could be, the analysts found.

“Ports are a vital part of the supply chain in Africa, with many ports having a far-reaching hinterland often spanning a number of countries, which makes them a natural focus for regional development. In this report we show that the global transportation and logistics industry can no longer afford to ignore developments in Africa. Logistics service providers and ports in particular will continue to play a key facilitator role in trade competitiveness and thus facilitate trade and sustained economic growth across the region. Trade competitiveness requires governments and key stakeholders to see ports as facilitators of trade and integrators in the logistics supply chain. Efficient ports can make countries and regions more competitive and thus improve their growth prospects. The reliability and efficiency of each port terminal, including minimising delay to shippers, is critical to enhancing future trade facilitation,” says Dr. Andrew Shaw, PwC Africa Transport and Logistics Leader.

The report makes a case for a shift in focus and understanding of the role ports can play in growing African economies. “Historically, many governments have focused on the revenues that can be extracted from ports as opposed to recognising them as facilitators of trade and growth. In sub-Saharan Africa, 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. In contrast, China’s approach to port investment is instructive. China considers port investments on the benefits it receives from trade and thus regards ports as highly strategic investments in the national interest.”

High port logistics costs, poor reliability and low economies of scale in trade volumes have a negative impact on trade growth in Africa. According to PwC estimates, $2.2 billion per annum could be saved in logistics costs if the average throughput at the major ports in sub-Saharan Africa doubled. In other parts of the world, such a focus on volume and efficiency has led to a stronger emphasis on hub and feeder ports for containers and enhancing scale for commodity bulk terminals.

“Although individual countries in Africa have tended to push for developing their own hub ports (ports with the greatest volume potential), it is likely that we will see some ports eventually emerge as major hubs,” the report says. PwC’s analysis shows that, based on the degree of shipping liner connectivity, amount of trade passing through a port, and the size of the hinterland, Durban, Abidjan and Mombasa are most likely to emerge as the major hubs in Southern Africa, West Africa and East Africa, respectively.

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