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Published: November 2017
Africa rising on a wave of burgeoning trade
The container trades between countries in sub-Saharan Africa and the rest of the world have staged a strong recovery this year.
According to data published by UK-based Container Trades Statistics, total two-way trading volumes for the first eight months of 2017 are 6.4% up on the same period last year. Imports rose by 4.6% to 4.38M TEU, and exports jumped 8.6%, with 1.88M TEU moved (see accompanying table).
During the first part of this year, many sub-Saharan countries benefited from rises in both demand and price for their key exports – dry bulk commodities, such as iron ore, coal and copper, and oil and gas. The resulting rise in revenue allowed governments and private consumers to spend more, and this sucked in imports of capital, industrial products, consumer goods and foodstuffs.
This certainly contributed to the growth in imports from Asia and North America, which, in the January/August (inclusive) period, rose by 4% and 11%, respectively. Based on current trends, it looks as if inbound volumes will post further strong growth in the remaining months of this year and throughout 2018.
As of early November, for example, oil prices stood at US$64 a barrel, and were at their highest level in more than two years. In particular, Angola and Nigeria are seeing significant improvements in their balance of payments. South Africa has benefited from the strengthening prices for its dry bulk exports.
Asia consumes a large proportion of the country’s mining products, and, when it comes to manganese and chromium ores, a significant volume is shipped in containers.
A trade that has displayed tremendous promise in recent years has been that between Africa and Central/South America. It proved to be one of the fastest growing routes in the first eight months of this year, with imports into Africa up more than 34.7% to 203,412 TEU. But exports collapsed, declining by nearly one quarter (see table).
Nonetheless, with several countries in the two regions at similar stages of the economic development cycle, and a variety of industries and agricultural systems that have common interests, it is clear how the exchange of information, intelligence and goods can be of great benefit. South Africa has been forging closer links with Brazil for many years, and recently turned its attention to strengthening its existing bilateral trade and investment relationships with Chile. Victor Mashabela, chief director of bilateral relations at South Africa’s Department of Trade and Industry, explained: “The purpose [of these discussions] is to diversify trade between our two countries, and to identify special areas of economic cooperation.”
He added that a business council between South Africa and Chile would be established. In addition, joint research programmes have been started in several areas, including in the seafood and forestry sectors.
Several analysts pointed to the strong rise in intra-regional container flows registered so far this year as being highly significant. It has long been argued that overall economic development in sub-Saharan Africa has been held back by a lack of trade between neighbouring countries, and so a change in this metric could pave the way for new investment, industrialisation plans and commercial projects.
Clearly, governments in several countries have taken conscious decisions to reduce their reliance on oil, and to encourage foreign investment, particularly from China, in manufacturing and other commercial ventures. It means that, once the investment in factories has taken place, companies then look to sell their products in neighboring countries, further boosting intra-regional trade.
To put developments into perspective, a record 156,720 TEU was moved intra-regionally in the first eight months of 2017. This was up by 41.5% on the same period of 2016, and it looks as if the end-of-year result will exceed 200,000 TEU. In the past three years, while Africa’s liner markets have lost traffic, the intra-regional routes have increased rapidly. In 2014, for example, less than 145,000 TEU was moved (see table).
With governments across the continent keen to build on recent successes, there is growing optimism that the African Union’s objective of creating a Continental Free Trade Area (CTFA) by the end of this year can be implemented.
A CTFA would create a borderless zone that, according to the United Nations Economic Commission for Africa (UNECA), could lead to a 52% rise in the value of intra-regional trade within five years.
Meanwhile, some highly significant and large-scale infrastructure projects have either recently been finished and/or are in various stages of development, and will enhance cross-border trading opportunities further.
- Ethiopia-Djibouti rail link - the 750 km track connects the port city of Djibouti with Ethiopia’s capital city, Addis Ababa. Freight trains can travel at speeds of up to 120 km/hour, and the journey can be completed in 12 hours. It can take four days by truck. The rail line opened earlier this year, and it cost US$4.2B.
- Ethiopia-Sudan-Kenya corridor - planned construction of 5,000 km of rail line linking Addis Ababa with Sudan, South Sudan and Kenya. At the border with the latter country, the network will connect with the highly ambitious plans of the Kenyan Government to build a 32-berth deepwater general purpose port at Lamu, along with a fully integrated transport corridor. This project is being coordinated by the LAPSSET Corridor Development Authority, and is being backed by European financial institutions and the African Development Bank, which recently advanced US$193M to the project.
- The Trans-African Highway – this project envisages nine major highways connecting the African continent east-west and northsouth, and spanning 60,000 km. Only one highway has been completed so far, and that is the 4,400 km Trans-Sahelian Highway linking Dakar with Ndjamena in Chad.
- West Africa Regional Rail Integration project - a 3,000 km long rail line linking Niger, Benin, Burkina Faso, Côte d’Ivoire, Ghana, Nigeria and Togo. It is important, as it will connect major mining communities with ports on the west coast of Africa.
The overall improvement in trading conditions has resulted in a number of ocean carriers resurrecting some services and revamping others, partly in anticipation of a much stronger peak shipping season. This year has also seen more ocean carriers deploy larger vessels in their sub-Saharan services, and, while this is related to the increase in traffic volumes and the improved economies of scale that result from using bigger tonnage, it is also attributable to the sizeable investments undertaken by ports/terminal operators in their facilities that allows such ships to call.
To date, the trend has been most evident in West Africa. This year saw developments at Lomé Container Terminal in Togo, to raise its handling capacity to 2.2M TEU a year, while work commenced on new APM Terminals facilities in TangerMed in Morocco and Tema in Ghana. Both facilities will have throughput capacities exceeding 1M TEU a year. Indeed, the planned construction of new ports, as well as modernisation programmes in existing ports, such as Pointe Noire, Conakry, Lekki and Abidjan, is expected to more than double the container handling capacity of ports located in the Dakar (Senegal)-Luanda (Angola) port range within the next five years or so.
On the east coast of the continent, ongoing developments in Mombasa (T3) and Dar es Salaam, as well as new deeper-draught ports being built/ planned at Technobanine (Mozambique), Bagamoyo (Tanzania) and Lamu (Kenya), suggest that larger tonnage will infiltrate the East African market too.
The number of container services in the East Africa/Indian Ocean trades will definitely expand as the region’s general cargo base is unitised. An increasing amount of copper mined in the Democratic Republic of Congo and Zambia is, for instance, being semi-processed locally, and then exported in containers. The process is being aided by developments on the rail front, with standard gauge track networks being put in place in Kenya and Tanzania, and rail companies investing in new locomotives and modern rolling stock.
Meanwhile, smaller regional ports are being modernised and their cargo handling facilities rehabilitated to service a larger number of container-friendly ships.
Within the past two years, DP World and its P&O Ports subsidiary have secured build-operate- transfer concessions in Berbera (Somaliland) and Bosaso (Somalia), respectively, and both plan to substantially increase each port’s container throughput capacity.
In the West African trading sector, Maersk Line/Safmarine and CMA CGM have reintroduced their jointly run WAX2/FEW5 service, which had stopped in February following the slowdown in cargo volumes. Although it now has a fortnightly sailing frequency, compared with weekly when the link was stopped, and its vessels are now about 12% smaller, its resurrection demonstrates the turnaround that has taken place, and shows just how quickly a rise in oil/gas prices can affect the region’s trading potential.
Nonetheless, the new service also features China Cosco Shipping Corp as a partner. China’s largest liner shipping company, which had launched a fortnightly Asia/West Africa (WAX5/ FA3) loop with Hong Kongbased Gold Star Line, decided to withdraw from that arrangement, and is instead contributing tonnage to the Maersk/Safmarine/ CMA CGM grouping. It cooperates with the latter line in the east-west Ocean Alliance.
The WAX2/FEW5/WAX5 service offers direct calls at Nansha, Singapore, Tin Can Island (Apapa), Cotonou, Singapore, and returns to Nansha. Six ships of 4,200 TEU capacity are deployed.
In other moves, Maersk Line and its sister Safmarine have altered the routing of their FEW7 service, which was only launched in August this year. Given its focus on the northern sector of the West African coast, and a decision to eliminate calls en route at Walvis Bay (Namibia), the service is now using the Suez Canal, rather than the Cape of Good Hope.
Effectively, it means a shorter routing, thus saving on voyage costs, and provides the opportunity for the shipping line to also load cargo in the Middle East, Eastern and Western Mediterranean regions, and to tap into Tanger-Med’s transhipment potential. Maersk Line and Safmarine’s fellow sister company APM Terminals operates Terminal 1 at Tanger-Med, while cargo growth on the Eastern Mediterranean/West Africa trade has been very strong over the past two years.
The revised itinerary of FEW7, which uses 11 ships with an average loading capacity of 4,000 TEU, comprises calls at Ningbo, Guangzhou, Singapore, Port Tanjung Pelepas, Salalah, Port Said (East), Marsaxlokk (Istanbul), Tanger-Med, Dakar, Nouakchott, and returns via Singapore to Ningbo.
Arkas eyes a niche
Izmir-headquartered Arkas Shipping sees West Africa as a growth market, and one that also enables it to expand outside of its Mediterranean basin heartland. The past two years or so have seen the operator enter the trade, and gradually increase its share of it. This year has seen a number of new arrangements put in place as the line has worked on improving its transit times and schedule integrity.
It has forged a close relationship with Hapag-Lloyd, and now contributes tonnage to the German carrier’s Northern Europe/ West Africa and Mediterranean/ West Africa strings. The latter operation also includes CMA CGM.
Noticeably, ocean carriers engaged in the African market are responding much more effectively to the needs of shippers, and particularly during the harvest seasons for various crops, of which there are many. In the case of South Africa, the country’s peak shipments during the citrus and deciduous fruit seasons have often been supported by operators of specialised reefer ships entering the market, and the SAECS (Southern Africa Europe Container Service) consortium deploying extra vessels and adding sailings to their European schedules.
Over the past six weeks, a number of carriers, including Marseilles-headquartered CMA CGM, have announced equipment and service arrangements that are designed to cater effectively for the peak citrus and cashew nut seasons in Morocco and Tanzania, respectively.
Maersk has also responded to these events, with its latest initiative being the start of a feeder service connecting the Tanzanian port of Mtwara with Mombasa. The link is being maintained with a 600 TEU ship, and sailings are provided on a fortnightly basis.
Africa’s liner trades are in a strong recovery mode, but the markets are expected to show big fluctuations in both imports and exports for the foreseeable future, as there is still a heavy reliance on the export of primary products, and pricing remains volatile for commodities, such as iron ore, coal and copper. But, as investments in manufacturing activities take place, and internal intra-Africa trades rise too, so overall stability within the region will improve....