Ditching old ties and taking new bearings

Western African business has long been conducted along European lines, but this looks set to change as eastern influences emerge, writes Steve Cameron

The huge growth in demand for natural resources has generated a new scramble for Africa. This has stimulated not just increased growth in container volumes, but also project cargo, general cargo and ro-ro traffic. This trade growth means that the recent round of terminal concessioning has only just enabled capacity to keep up with demand. There is already pressure on existing ports, and considerable change and investment is required in new terminal facilities that need to come on stream within a few years if capacity is to keep up with the increase in trade growth.

Initially served by specialist niche operators, West Africa is now also well served by the major liner operators with worldwide networks, giving African traders greater access to global markets. This has opened the door for Africa to compete and as more operators provide weekly services and the benefits of terminal privatisation take effect in major West African ports, shipping cargo to/from Africa – and the physical terminal handling processes – have become more straightforward. However, these are only parts of the supply chain and the improvements are now focusing attention on the other areas that are hindering Africa’s development. Customs procedures, hinterland transport infrastructure, border crossings and unofficial check points continue to strangle African trade. Africa’s natural resources and her trading opportunities may be in high demand, but the continent still has to compete with South America, India and the Far East, where transport networks are better developed and support, rather than hinder, trade. In today’s business environment there exists an opportunity for West Africa, but it must act now if it is to deal with all its trade blocks, improve its transport infrastructure and compete successfully. This is urgently required to stimulate and support the growth in trade that is essential for Africa’s poverty reduction, its future success and stability. Africa has changed significantly for the better in the last 10 years and this progress should accelerate. However, thanks to the media and the marketing tactics of some charities involved in Africa, outside perception is still often that of war and famine. Yet since the beginning of this decade, there has been a wide satisfaction over the reduction in the number of conflicts in Africa.

The major wars in the south, in Angola and Mozambique are now over, and even the Democratic Republic of Congo, has had a form of political settlement, and held an election. Sierra Leone is making steady progress after its second round of successful democratic elections since its civil war. Also, the unexpected arrival of Africa’s first woman president, in the shape of Ellen Johnson-Sirleaf, helped further to consolidate the peace in Liberia.

The jury is still out in the case of Côte D’Ivoire, but since the failed coup of September 2003, the country has for the most part been in a state of "no war-no peace". Since the agreement in Ouagadougou in March (brokered by Burkina Faso’s president, Blaise Compaoré), there has been a genuine engagement to overcome the deep antagonisms between government and the rebels of the New Forces. The baton changed hands in Nigeria in April last year, passing to the chosen successor Umaru Yar’Adua who is from an aristocratic Fulani family in Katsina, northern Nigeria, and won the highly controversial election for the ruling People’s Democratic Party (PDP). The outgoing president, Olusegun Obasanjo (also PDP), stated in a televised address that the election "could not be described as perfect". Yar’Adua has since promised a review of the electoral procedures and there now seems to be general acceptance of the PDPs right to govern. Ghana continues to set a number of benchmarks for other West African countries. Its continued political stability has made it a favoured country by major institutions and has helped it attract considerable investment, which in turn continues to stimulate its economy. West Africa is moving to the next phase of development, with political stability stimulating economic growth and investment. Currently it is the increasing price of raw materials, precious metals, and the oil and gas sectors that are really driving the economic growth and hence cargo volumes in much of the region. The way in which each African country has developed has had a lot to do with the colonial influences prior and since independence, which for most African countries occurred in the 1960s. The independence of the ex-French colonies in the 1960s was largely political with economic support retained by the linking of the CFA Franc. On 13 January, 1994, after the CFA franc was devalued by 50% in foreign currency terms, the governments of Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal and Togo signed a treaty creating the West African Economic and Monetary Union (WAEMU). The government of Guinea Bissau joined the union as an eighth member in May 1997. Since 1999, the link has been to the euro. This is still the case today with the CFA Franc in all Francophone countries effectively part of the Euro Zone, having a fixed exchange rate to that of CFA656 to t1. This underpinning of the currency, unlike other African currencies, has enabled it to be traded in a similar way to hard currencies and has stimulated investment and trade within much of the Francophone zone. As a consequence, for many years after their independence, the Francophone countries attracted more investment and benefited from better infrastructure, and well organised and effective business services in the insurance and banking sectors than Anglophone countries. The Francophone ports were no exception in terms of investment, and generally developed more effectively than those in the Anglophone sector. This was in part due to the French model adopted, where the port authority acted as the landlord and granted operating licences to companies that provided stevedoring services to ship operators. Licences were granted to a number of different companies in each sector, and this choice stimulated competition between the stevedores as they vied for the shipping lines’ business, and invested in cargo handling equipment to provide the service levels required. The stevedoring cost of US$50-100 per box was reasonable. However, it was effectively subsidised by parts 2 & 3 of the tariff. Here, the "across-quay" and "lift-to-truck" charges were levied by the stevedores to captive clients of the lines using the stevedores’ facilities. A common tariff was set, in theory, by government and consignee charges based on cargo weight and commodity, ranged from $150-350 per container, and was a big cash generator. It was not surprising there was so much interest by regional and international players when the terminals were put up for concession.

The Anglophone ports followed a different model, with the port authority providing the landlord function, marine service and cargo handling. The fact there was at least a choice of companies to source the labour from was of little benefit when cargo handling equipment was in short supply or broken. To ensure that operations were carried out at a handling rate that would turn round vessels within a cost-effective period, and cargo was handled free of damage, it was necessary for shipping lines to invest in their own cargo handling equipment and train their own drivers. In line with global developments this region is also witnessing a greater move towards privatisation and the evolving models of port governance. Today, the process of privatisation has started to merge the Anglophone and Francophone models so that they will tend to be very similar in future as concessioning continues. It is an often quoted statistic that Africa, despite having 15% of the world’s population has only 3-5% of global container traffic, and there is a large disparity between population and economic growth. This, however, is changing. Its economy is growing at nearly 6% and trade is also experiencing exponential growth. This suggests that if trade and containerisation grows to match the levels of the rest of the world, container traffic could grow by as much as threefold. Meanwhile, China and other Asian countries with expanding manufacturing industries are racing to secure the raw materials and invest in the logistics required to support the supply lines. China, with nearly $1trn in reserves and a voracious appetite for natural resources, has decided to spend some of its wealth to secure access to the oil, gas, copper, coal and other mineral-rich opportunities. This aggressive – sometimes brazen – approach is causing angst among Africa’s traditional partners. There is general unease about the potential moral hazard of an Africa whose debt has been cancelled by the West, taking the opportunity to accumulate new debt from China. China knows what it means to be poor and has evolved a successful wealth creation formula that it is willing to share with African countries. China is ready to transform savings into investment projects in Africa in exchange for access to mining rights. It is also paying to secure access to African oil.

Africa’s need for infrastructure investments – estimated at $20bn a year for the next decade – is understood and supported by China, which is willing to invest in railways, roads, ports and rural telephony across African countries as part of its winning programme for economic development. cs