Concession extension for Dar

TICTS, owned by Hutchison Port holdings, was awarded a 10 year concession in 2000, but it was controversially extended to 25 years in 2005, so the new agreement seems to push the concession out to 2030.

The Tanzanian government has been considering how best to ensure an increase in container handling capacity at Dar and had considered following Kenya’s lead in building a new container terminal. However, it now seems to have concluded that TICTS is the best option, at least for the existing terminal. The annual lease fee paid by TICTS to the TPA will double from US$7M at present to US$14M for financial year 2017-18 and thereafter increase by a 3.8% a year. In return, TICTS will be allowed to increase the fee for each container its handles from US$13 to US$20, rising by 4% a year.

Tanzanian politicians have suggested for many years that the port concession should be revoked. Controller and Auditor General, Musa Assad suggested last April that the agreement should be reviewed and President John Magufuli asked the Tanzania Ports Authority (TPA) to reconsider the concession last September.

However, control of the Ubungo inland container depot (ICD) is to revert to the TPA. The government seems to have calculated that it was a mistake to transfer management of the ICD to TICTS because it has traditionally been a profitable operation.

The Minister of Works, Transport and Communication, Makame Mbarawa said: “We will make sure terms of the agreement are properly enforced to make this contract mutually beneficial. This new agreement has come at the right time. The process of negotiating this contract has taught us vital lessons on the need to review many other contracts.”

Kenya: DP World was awarded the concession for the new Mombasa terminal earlier this year, but it has been alleged that a KSh2.85B (US$275M) loan from the United Arab Emirates to the Kenyan government was connected to the contract. Treasury secretary Henry Rotich said: “We have cancelled the process and we are now exploring other ways of getting a new operator. As you know the first attempt was coupled with claims and complaints so we will have to redo it.” The original tender attracted twelve bids.

Competition between the second and original container terminals at Mombasa could be complicated. The existing terminal is operated by the Kenya Ports Authority (KPA), which would also be the port landlord for the concessionaire on the second terminal. It would therefore regulate the activities of its main competitor. At the same time, the KPA, which has operated the new project since it was completed earlier this year, argues that it can operate the facility as efficiently as any private sector operator.

The construction of the new terminal was funded by the Japan International Cooperation Agency (JICA). Phase 1 has three berths and annual handling capacity of 550,000 TEU. JICA is still expected to finance the Phase 2 expansion of the terminal. The Japanese ambassador to Kenya, Toshitsugu Uesawa, commented: “Mombasa port is a key economic gateway for Kenya and we put a lot of importance on the port for Kenya. Of course my government will be interested to play a role in the port operation but that is completely for the Kenya government to decide.”

• The World Bank (IBRD) has finally approved US$345M in funding for the Port of Dar es Salaam. The World Bank and the government of Tanzania have been holding talks over the financing for several years and the conclusion of the agreement could be connected to the government’s decision to allow Tanzania International Container Terminal Services (TICTS) to retain its concession for Dar es Salaam’s container terminal. Richard Martin Humphreys, the World Bank’s lead transport economist, said: “The project represents the start of an incremental process towards increasing the capacity of the port of Dar es Salaam and strengthening its economic role in the region.” Bella Bird, the World Bank’s Country Director for Tanzania, added: “Enhancing its operational potential will boost trade … and reduce the current cost of $200-$400 for each additional day of delay for a single consignment.”
• The two parties have agreed a yardstick by which to measure the effect of the investment: a goal of reducing the average waiting time for vessels from 80 hours to 30 hours has been set. The volume of cargo handled by the port has increased from 10.4 Mt in 2001 to 13.8 Mt last year and a goal of achieving 28 Mt by 2020 has been set. In addition to the loan, the World Bank is also providing a US$12M grant as part of what has been named the Dar es Salaam Maritime Gateway Project.
• Some of the money is expected to go to China Harbour Engineering Company, which has signed a US$154M contract to carry out a range of improvements, including berths 1-7 being dredged to a depth of 15.5m and the construction of a new ro-ro terminal.