DP World eyes sea trade opportunities in eastern Africa

The global seaborne trade continues to grow on improved demand despite an overall slowdown in world economies.

Maritime transport handles over 80 per cent of the volume of global trade and about 90 per cent of developing countries’ volume of international trade is seaborne.

New data from the United Nations Conference on Trade and Development (UNCTAD) shows global seaborne shipments increased by an estimated 3.4 per cent in 2014. This represents an additional volume of more than 300 million tonnes, taking the total volume to 9.84 billion tonnes.

Maritime trade in eastern and southern Africa has particularly registered good growth, buoyed by booming construction sectors and discoveries of large mineral and gas deposits.

The growth in global sea trade has partly been fueled by a recent drop in ocean freight charges due to technological aances, economies of scale, improved trade and transport facilitation as well as more fuel efficient ships and trucks have all contributed to the trend of a long-term decline in international transport costs.

Developing countries, especially in Africa and Oceania, however continue pay 40 to 70 per cent more on average for the international transport of their imports than developed countries, according to the UNCTAD Review of Maritime Transport 2015.

Eastern Africa is among those affected by the high maritime cost despite the region’s high dependence on seaborne trade.

DP World, the Dubai-owned port operator, recently took up concession deals in eastern and southern Africa. DP World has a concession to run Djibouti’s Doraleh container terminal which is Africa’s largest.

The firm also has a concession for the port of Maputo, Mozambique which serves as the main shipping terminus for land-locked regions of Southern Africa such as Gauteng Province, Swaziland, Botswana, Zimbabwe and Malawi.

The company is also bidding for the concession deal for the second container terminal at the port of Mombasa.

Sultan Ahmed Bin Sulayem, DP World’s chairman talked with Business Daily’s Allan Odhiambo in Dubai on the company’s strategy.

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You recently placed a bid to operate the second container terminal at the port of Mombasa and in the wake of similar deals in Djibouti and Mozambique, why the interest in the region?

We follow the demands of customers and go where they want us to be. Africa has immense potential for trade and we respect that. Eastern Africa is growing in terms of trade and we want to tap the opportunities presented by the region’s geographical placement as a gateway to several landlocked economies.

A new port is under construction in Lamu, has this caught your eye?

We are definitely interested in Lamu because of the prime location. If an opportunity comes to bid for the concession of the Lamu port we shall put in a request. Meanwhile we are hoping all goes well with our concession bid for the second container terminal in Mombasa.

Global ocean freight charges have dropped in recent years but most African nations, especially those in east and southern Africa have not enjoyed the lower shipment costs. What is the problem?

Inefficiency in port operation and connecting infrastructure remains the major drawback in lowering shipment costs. It is unfortunate that shipping a container from China to Mombasa costs about $600 but it costs one almost ten times to get the same container to Rwanda, Uganda and Burundi by road. This is not good for business.

What would be a solution to high shipment costs in East Africa?

Transportation through Lake Victoria could be a possibility to help lower shipment costs for the landlocked countries. South Sudan can for instance use the River Nile to move cargo and lower cost of shipment because water transport is cheaper than relying on trucks to ferry containers over very long distance. Expanding the capacity of sea ports and boosting efficiency is also key in lowering the cost of shipment.

What is your short term outlook for global freight cost?

I don’t expect any major changes in the short term. Costs have come down due to extra capacity by new vessels entering the market and this trend will continue for some time unless something major happens.

aodhiambo@ke.nationmedia.com