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Published On: Sun, Jun 22nd, 2014

Somaliland: Port challenges in East Africa afford a golden opportunity for Berbera

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The issue of ports in East Africa has long been an issue that has exercised policy makers, providers and clients alike. The three ports of Mombassa, Dar es Salaam and Berbera amply illustrate the current situation, one that is in some cases a cause for considerable frustration and in others reason for cautious optimism. Whilst some commentators may continue to ignore or overlook this part of Africa, the dynamics are such that when it comes to ports and all that goes with them East Africa and the Horn provides some fascinating insights into what is taking place.

The Kenya Ports Authority (http://www.kpa.co.ke) claims that it has a vision to provide ‘World class seaports of choice’, a noble and seemingly lofty ambition. On the strength of wealth of anecdotal evidence from clients using the Port of Mombasa it would appear that in the case of Kenya’s premier port it is evident that the KPA has a lot more work to do. Complaints are legion, with the three most common words used to describe the response to poor service and delays being; “arrogance”, “complacency” and “indifference”. Makhtar Diop, the World Bank Vice-President for Africa on a visit to Mombasa voiced his concerns over inefficiencies, so it is clear that the problem is a serious one. The parlous situation at the Port of Mombasa mirrors that of its great rival the Port of Dar es Salaam, with both of these Kenyan and Tanzanian strategic gateway ports have become synonymous with poor management, inexplicable delays, high port charges, theft and corruption. Landlocked countries such as Burundi, Rwanda and Uganda are also beginning to express their dissatisfaction, with Ugandan MPs claiming that the port’s inefficiencies are forcing up their country’s business costs. Matters have not been helped by the fact that the National Government has viewed the Port of Mombasa as little more than a milch cow. Years of underinvestment and the sticky fingers of politicians have meant that a port with enormous potential has consistently fallen short of expectations. Growing international interest in East Africa and adjacent regions has begun to encourage serious exploration of alternatives and this has acted as something of a wake-up call. It would be churlish to deny that there has been some attempt to address matters. A new cargo berth is being constructed by the China Roads and Bridge Corporation, whilst a Dutch company, Van Oord Dredging and Marine Contractors have carried out vital dredging work at the Kalindini channel. The Japanese funded Mombasa Port Area Roads Development Project otherwise known as the Dongo Kundu Bypass will also go some way to alleviating the traffic bottlenecks that have blighted Mombasa and its environs. Many would like to see the port privatised, but there are legitimate concerns locally that this could have an adverse impact on employment prospects. The dynamic local Governor, Hon. Hassan Ali Joho (http://www.hassanjoho.com) is well aware that maintaining the status quo is not an option. In the recent past he has made a visit to Malaysia to meet potential investors with a view to the development of a free port project that could see Mombasa emulating Port Klang, the largest port in Malaysia.

Mombasa is eager to ensure that the port works effectively, and to ensure that a reasonable share of income generated stays in the region. Kenya’s second city has its own traditions and in many ways a quite different outlook and feel to Nairobi. Rather less frenetic and seemingly more ethnically diverse than the Kenyan capital, Mombasa takes a degree of pride in being different. The Swahili language predominates, as does a more relaxed coastal manner. Business visitors and tourists alike soon sense that here is a place that enjoys its languor and feels that it has little need to prove itself. Upon arrival one soon discovers that the traffic management system (if one exists) is chaotic and many of the buildings appear shabby and neglected. As in many cities in East Africa appearances can be deceptive, a spirit of commerce abounds and there is ample evidence of some substantial investments being made across a variety of sectors, a good example being English Point Marina (http://www.englishpointmarina.com/mombasa.html). Mombasa is increasingly becoming an industrial city, one that is eager to capitalise on East Africa’s projected oil boom. Mombasans

seem at ease and genial as befits their tropical coastal climate. That said, the city has its own challenges, street crime does exist, often fuelled by the scourge of youth unemployment, in addition it has its own secessionist movement in its midst in the form of the Mombasa Republican Council. Sadly, Kenya’s distinctly patchy record when it comes to serious and sustained investment in the regions does not exactly inspire confidence. That said, Mombasa knows that if it is to continue to prosper and enjoy a degree of local autonomy it needs a thriving and efficient port, something that will go a significant way to helping stimulate and drive local as well as national economic development.

Dar es Salaam Port – Mombassa’s great rival, continues to wrestle with the challenges of ever increasing demand and the ever rising numbers of complaints from existing customers. Ports across East Africa and the Horn such as Berbera, Dar es Salaam, Djibouti and Mombassa are in enormous demand. For all the fact that the Port of Dar es Salaam contains two kilometres of quays with eleven deep-water berths there continue to be holdups as vessels are forced to anchor out in the Indian Ocean waiting to be processed. Some effort is being made to address current challenges with the Tanzanian Ports Authority (www.tanzaniaports.com) finally managing to secure a $60 million loan to upgrade the Kurasini Oil Jetty (KOJ). The pressures are huge and have not been helped by ongoing concerns regarding the efficient supply of electricity. Still it would appear that improvements are unlikely to keep pace with the huge demand, particularly as it also serves the neighbouring and landlocked countries of Burundi, the Democratic Republic of Congo, Malawi, Rwanda, Uganda and Zambia. For all the infrastructural challenges and poor cargo clearance times there is still plenty of business for the likes of Azam Inland Container Depot (www.azam-icd.com) in the Changombe Industrial Area of the Tanzanian capital. That said, the situation beyond the port and dry cargo areas provides its own challenges.

Organisations such as Trademark East Africa (TMEA) are becoming increasingly vocal in advocating for the removal of trade barriers and the introduction of new initiative the help rather than hinder business. The removal of non tariff barriers intended to diminish on transport costs that hinder East African Community (EAC) citizens in landlocked partner states such as Rwanda and Uganda are a priority. In Rwanda a feasibility study is underway in connection with the possibility of the construction of One Stop Border Post (OSBP) on Kagitumba-Mirama Hills (Rwanda/Uganda border). Out of the five EAC member states, only Tanzania and Kenya have direct access to the sea through Dar es Salaam, Tanga, Mombasa and Malindi. Countries such as Burundi, the Democratic Republic of Congo, Rwanda and Uganda frequently bemoan their fate as landlocked countries, especially as their trade suffers due to congestion, inefficiency and poor management at strategic regional ports such as Mombassa and Dar es Salaam. The urgent need for efficient border crossings is such that TMEA has committed to invest $75 million in OSBPs at the following locations: Busia-Busia (Kenya/Uganda), Kagitumba-Mirama Hills (Rwanda/Uganda), Taveta-Holili (Kenya-Tanzania), Mutukula-Mutukula (Tanzania/Uganda), Kobero-Kabanga (Burundi/Tanzania), Tunduma (Tanzania/Zambia) and Elegu/ Nimule (Uganda/South Sudan). Once fully operational these changes may well make a significant contribution to helping the free movement of goods across the region.

Regional transportation costs remain exceptionally high, something that continues to deter investors and blight development. On average transportation costs are 60-70% higher than those in Europe or North America. Regional trade is still hampered by high transport costs, inadequate physical infrastructure and national policies that are incompatible with the EAC goals of regional integration. No business can afford to ignore the impact of the bottlenecks that currently exist in the regional transport and logistics chain. Whilst tariffs and transportation remain a constant headache, there are signs that regional governments and policy makers are prepared to address these issue. One only has to look at the ambition of the likes of the Mwambani Economic Corridor Project in the Tanga region of Tanzania to gain a sense of what is in the pipeline. The project aims to involve the construction of a deep sea and free port at Mwambani, in Tanga, and a new heavy haul standard gauge railway from there that would be operated by MWAPORC, an acronym for Mwambani Port and Railway Corridor (motto: Connecting Oceans Through Africa) This ambitious project aims to see the

construction of a deep sea and free port at Mwambani, airport, water, gas and oil pipelines and should it be completed in its entirety would link the Indian Ocean to the Atlantic. Such a project is to be welcomed providing those driving them take cognizance of local and environmental concerns and endeavour to raise the bar when it comes to sustainability and transparency. A point underscored by those who have highlighted some of the dubious activity that has been seen in connection with the Lamu Port and Lamu Southern Sudan-Ethiopian Transportation Corridor (LAPSETT).

With increased economic activity throughout the Horn and East Africa the regions ports are more important than ever. Mombassa and Dar es Salaam are at full capacity, Djibouti is undergoing further expansion, which leaves Berbera Port the only other viable entry/exit point until the Lamu development is completed. Berbera Port sits in a very strategic location on the Red Sea and looks set to become a major port in the region for Somaliland, Ethiopia, Somalia and South Sudan. Somaliland’s government has signaled its eagerness to attract Foreign Direct Investment (FDI) projects and views the upgrading and expansion of the port as integral to the development of the Berbera Corridor. In recent years a number of companies including France’s Bolloré Africa Logistics the Hong Kong based, Hutchison Port Holdings (HPH), and Holland-based, APM Terminals have expressed an interest in playing a role in the Port of Berbera, with the French company committed to being a key investor. Further interest looks set to follow and before too long Berbera will be in a position to offer effective competition to Djibouti.

Berbera has very considerable potential, but whether that is fully realized will depend on whether those in a position to affect change have the vision and drive to carry things forward. Economic activity across the region is undergoing a tremendous period of realignment, with major investors tending to view things in a regional rather than a national context. Whilst Somaliland’s current status and recent history may discourage some investors, for others they can see a real opportunity for Somaliland to emulate at Berbera the success of Iran’s Chabahar Free Trade & Industrial Zone and similarly that at Quesh and Kish Island, both of which are free trade zones. Rather than merely looking at Berbera as a trade entry and exit point, it needs to be viewed as a regional hub, one that is a magnet for investment and a key centre for employment and capacity development. If a Berbera Free Trade & Industrial Zone were to be created it would be essential that it offered incentives comparable with similar zones across the region. Reasonable elements would include:

15 years tax exemption

No entry visa requirement

100% foreign ownership possible

Flexible monetary and banking services

Extended legal guarantees and protection

Berbera Port would need to try to avoid the mistakes that continue to dog both Mombassa and Dar es Salaam. The twin foci should be efficiency and security. Planners would be required to give thought to ensuring provision for the handling of dry cargo, bulk liquid cargo, general cargo and containerized cargo. Aerated and temperature controlled grain terminals add considerable value, as does the ability to offer fumigation services. The emphasis needs to be on modern handling and warehousing equipment, with computerized warehouse management systems and state of the art inventory controls. Use of blended energy solutions, especially solar and wind would be integral to the success of such a port, especially one that will be required to offer refrigeration and storage facilities as well all the attendant anti-theft measures. The provision of bonded warehouses and engineering and maintenance facilities will be essential. Building sustainability into the port will help efficiency, but also enable a keener appreciation of waste as potential assets, as well as ensuring staff are vigilant in regards to the handling and security concerning the handling of hazardous materials or potential pollutants. Planners and management will also be required to give thought to:

Integrating ports, inland terminals and logistics network to improve supply chain performance

Expectations from exporters and shipping lines

Transport capacity and efficiency planning

Time and motion studies

Robust vetting and due diligence mechanisms

Appointment on merit

Somaliland’s remarkable resilience, especially over the last 23 years speaks volumes of its inner spirit, but the development of a highly efficient and effective port, with adjacent free trade and industrial area will require a truly Olympian effort. A lack of international recognition coupled with confirmation bias means that attracting the appropriate funding levels required will be tough and potential investors are anxious to see a genuine commitment to business friendly policies. Potential investors are decidedly wary, especially as they have seen or heard how factionalism, patronage and nepotism have undermined efforts elsewhere. Regional security issues continue to loom large, as do anxieties is certain quarters concerning China’s potential involvement in view of its so-called ‘String of Pearls’ policy. Berbera Port Authority (www.berberaseaport.net) has begun to articulate its message with greater clarity, but if Berbera’s true potential is to be realized it is vital that the port is seen as part of a far more ambitious project, one that will not just benefit Somaliland, but the region as a whole. As for Berbera itself, the city will require measured and sensitive development that draws inspiration from vernacular architectural traditions, whilst incorporating the features expected of a forward thinking commercial centre. Special attention will be required to provide safeguards and measures designed to protect its delicate coastal habitat, and a concerted effort made to green the city to reduce dust and help provide filter for pollutants as the city grows and expands. As things stand it looks as though activity in Mombassa and Dar es Salaam ports will continue much as before, thus Berbera has a golden opportunity to position itself as a lean and efficient player. Such enlightened development if it takes place will not only provide much needed employment, but may help to change some of the preconceptions and misconceptions that have proved so harmful to the region and to the continent of Africa as a whole.

Mark T Jones

(International Speaker & Leadership Specialist)

http://www.marktjones.com

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  1. dheeg says:

    Few other infrastructure developments in Africa makes more sense than the Berbera-Addis corridor. It makes sense politically, socially but most importantly of all it makes huge economic sense for Ethiopia, Somaliland, Southern Sudan and all the way to Northern DRC. The benefits are obvious for Somaliland so lets look at how such project could transform Ethiopia. It will free her from the dependence on djibouti. The railroad will go through Ethiopia’s northern Ogaden transforming this backward and restive region and binding it to Ethiopia strenghtening Ethiopia’s cohesiveness. The extension of railroad and eventually oil pipeline to SS will free that country from yoke of the ghastly regime in Khartoum. The second phase of the project could open up huge areas of farmland right into heart of Ethiopia to central Africa with possibility of leasing land to the Gulf Arabs and eventually even perhaps selling them Ethiopian water and hydrolelectricity
    So the question why is this project not up and running? the reasons are political. Non-recognition of Somaliland and the hostility of US State dept in particular to Somaliland is a major obstacle to investors(suspicioulsy the US issues decalarations about its support for a ‘united Somalia’ everytime a major investor shows interest in Somaliland).
    Ethiopia is also allegedly worried about the takeover of Somaliland by salafist fanatics and their puritanical ideology which is viscerally hostile to Ethiopia. The sal;afists already run the police, the judiciary and swathes of the economy. Ethiopia is jittery about handing over its destiny to a place that might soon become a hornets nest of Boko haram on horn. Still all great projects faced similair chjallenges during theuir time: suez, panama, oil exploration in Persia and Hejaz. The problem is that Western investors in particular lost the nerve for risk taking their culture once had.

  2. NLander says:

    I keep telling people if you want to be recognized you need to modernize and stop acting like salafists thanks for confirming dheeg.

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