The race to become West Africa’s central port hub intensifies
Two substantial port investments have been announced recently by Ghana and Nigeria: the awarding of contracts worth US$2.5bn to double Ghana’s port capacity by 2018 and the approval of Nigeria’s first deep-sea port at Lekki, which will take around four years to complete at an estimated cost of US$1.35bn. These announcements are indicative of the competition between West Africa’s ports, all of which are seeking to become the primary gateway to the region. However, it is the more western ports of Abidjan (Côte d’Ivoire) and Dakar (Senegal) that are proving most successful in attracting transit traffic.
West Africa’s proliferation of competing ports—six ports in the region handle more than 300,000 containers a year—is attributable to the concentration of economic activity along the coast. Although this competition encourages investment, it has also split it: West Africa has more projects than any other region (16) under the African Development Bank’s Program for Infrastructure Development in Africa, but they have a lower total value (US$6.2bn) than any other region bar North Africa.
A 2011 study by the African Infrastructure Country Diagnostic (AICD, a group led by the African Development Bank) showed that the region’s ports, together with those of Central Africa, had the highest average dwell time, truck processing time and container cargo handling charges on the continent. Fragmentation means that the region lacks a single efficient hub. Furthermore, although West Africa has the potential to be one of the world’s fastest-growing regions in the coming years, gridlocked ports represent a major threat to economic expansion.
Ambitious plans across the region
While Tema in Ghana and Lagos in Nigeria may be the two largest hubs in terms of current traffic and proposed investment, others are making efforts to close the gap. This year Guinea signed a deal with Mubadala Development and Dubai Aluminium to develop port facilities in Kamsar, as part of a US$5bn investment. Elsewhere, a consortium consisting of APM Terminals, Bolloré Africa Logistics and Bouygues was chosen by Abidjan Port Authority to build and manage a second container terminal, with plans to invest more than €450m (US$585m) over the 21‑year concession period, and the International Finance Corporation, the private-sector funding arm of the World Bank, arranged a €225m debt package for Lomé Container Terminal, representing Togo’s largest-ever direct foreign investment. In November alone, The Gambia announced plans to construct an inland port at Kuar; the Liberian presidential delegation to the UAE and Kuwait made ports and infrastructure a focal point of its trip; and the Sierra Leone Ports Authority reiterated its openness to partnerships and investment.
Inland infrastructure will be a driver of port demand
As the landlocked economies in the region grow—Burkina Faso and Niger are among West Africa’s fastest-growing economies—more attention will be paid to inland transportation. Progress in intra-regional tariff liberalization and the lowering of non-tariff barriers has led to increases in transit traffic, enjoyed predominantly by the western ports of Abidjan (a 126% increase in transit traffic volumes between 2008 and 2012) and Dakar (a 125% increase). These increases have been at the expense of ports further east, such as Ghana’s Tema, which experienced a 43% decrease over the same period.
Inland infrastructure developments will further this trend. A railway connecting Niger and Burkina Faso with Cote d’Ivoire, due to begin construction next year, will help Abidjan to increase its share of transit traffic. Road transportation, which accounts for 90% of inland transportation in West Africa, is expensive because of an oligopoly of trucking companies that enjoys profit margins of 30-40%: rail transportation in the Abidjan-Ouagdougou corridor is already 30% cheaper on average than road transportation. Niger and Benin are also planning to extend and rehabilitate the existing railway line between Cotonou and Niamey; Niger wants the work completed by 2015, although that is optimistic.
Piracy makes eastern ports less attractive
The rise of piracy in the Gulf of Guinea—there were 67 attacks in the first half of 2013, compared with 34 in the same period of 2012—will also push port traffic westwards. These attacks have a substantial impact on shipping: when 22 attacks occurred off the coast of Benin in 2011, the subsequent categorization of Beninese waters as “high risk” by insurance companies—a category that already includes Nigeria and Togo—led to a 70% decrease in port traffic, according to a report by the UN Office on Drugs and Crime.
Although there have been three attacks off Côte d’Ivoire this year, one off Sierra Leone and one off Guinea, the overwhelming majority of incidents occur east of Ghana, at an estimated cost of US$740-950m in 2012. This challenge is unlikely to be solved as effectively as it has been in the Gulf of Aden: the required regional co‑operation is likely to be hampered by the same bureaucratic challenges that have affected other regional efforts in the past, and the necessity of vessels to queue for port access—rather than passing through the waters off Somalia—makes them vulnerable.
Ghana and Nigeria lose out to Abidjan and Dakar
Investments in the port infrastructure of Ghana and Nigeria will help them to ease congestion and more effectively serve their growing economies. As the two largest economies in in the region, their domestic markets alone could ensure their position as the largest ports in the Gulf of Guinea. However, without accompanying efforts to improve inland transportation corridors and combat piracy, it is unlikely that either will become a dominant transit hub for the wider region. Instead, transit traffic will increasingly move westward. Abidjan and Dakar, which are already the two largest ports west of Ghana (handling 18m tons and 113m tons of cargo respectively in 2011), stand to gain the most from this shift.