Durban port leads way for African trade

Transporting goods by sea remains the most common way to trade globally, but in Africa cargo spends an abnormally long time in ports before it is moved inland, presenting a serious obstacle to the successful integration of sub-Saharan economies in worldwide trade networks. The port of Durban, however, has managed to buck the trend.

A World Bank study, titled Why does cargo spend weeks in sub-Saharan African ports?

Lessons from six countries, found the average cargo waiting time to be 20 days and that more than half of the time needed to transport cargo from ports to ­hinterland cities in landlocked countries in sub-Saharan Africa is wasted because of the time it spent in ports.

The average cargo "dwell time" in Durban is four days, which is on a par with ports in East Asia and Europe.

The African Development Bank's definition of dwell time is the time cargo remains in a terminal's in-transit storage areas while awaiting shipment for export or onward transportation by road or rail for import.

Dwell time is one indicator of a port's efficiency: the higher the dwell time, the lower the efficiency. And longer dwell times have an adverse effect on economic growth.

Long transport times reduce trade
A 2012 working paper produced by the National Bureau of Economic Research, titled Time as a trade barrier, concluded that longer transport times dramatically reduce trade and estimates that each day in transit is worth 0.6% to 2% of the value of the goods.

Long transit delays also significantly lower the probability that a country will successfully export its goods.

Africa's estimated infrastructure deficit of $48-billion a year is often singled out as the culprit for hampering trade in and around the continent, but reasons for bottlenecks are far more complex and a lot more challenging to resolve.

Shantayanan Devarajan, the World Bank's chief economist for the Africa region, says that long dwell times are in the interest of certain players in the system and that dealing with the proximate cause of the problem, such as the apparent lack of berths in African ports, is unlikely to trigger a solution.

"Specifically, importers use the ports to store their goods; in Douala [Cameroon], for instance, storage in the port is the cheapest option for up to 22 days," Devarajan wrote in the foreword of the World Bank study .

"Customs brokers, meanwhile, have little incentive to move the goods because they can pass on the costs of delay to the importers. Worse still, when the domestic market is a monopoly, the downstream producer has an incentive to keep the cargo dwell times long as a way of deterring entry of other producers."

Discretionary behaviours
The evidence in the study shows that discretionary behaviours increase system inefficiencies and raise total logistics costs.

"In most ports in sub-Saharan Africa, the interests of controlling agencies, port authorities, private terminal operators, logistics operators (freight forwarders) and large shippers collude at the expense of consumers," the report said.

Surveys demonstrate that low logistics skills and cash constraints explain why most importers have no incentive to reduce cargo dwell time as, in most cases, doing so would increase their input costs.

"Moreover, some terminal operators generate large revenues from storage, and customs brokers do not necessarily fight to reduce dwell time because time inefficiency is charged to the importer and eventually to the consumer."

Durban port is considered a good benchmark for sub-Saharan ports. Its average four-day waiting period for import and export cargo is much closer to best practice in East Asia and Europe, which is a three- or four-day waiting period.

South Africa's commercial ports have been placed firmly in the hands of the state through Transnet. With the exception of these ports and Mombasa in Kenya, all other ports surveyed in the study are run by private container terminal operators.

Lessons from the Durban port
The demand at South African ports surpasses all countries in East and Southern Africa and has a critical role to play in the international trade landscape for the region, according to a 2011 World Bank working paper.

It said Durban port could teach sub-Saharan African ports a few lessons — namely that the onus was on public sector players such as customs and the ports authorities to put pressure on the private sector of port users to comply and reduce cargo dwell times.

"Prohibitive charges for storage, coupled with strict enforcement and the possibility to preclear with customs — with advantages attached to it and service level agreements binding both parties — are critical tools for the reduction of cargo dwell time," the paper said.

In the late 1990s, Durban port was notoriously inefficient with high levels of congestion, characterised by long berthing delays for container vessels, long train turnaround times in the port and long queues for road trucks, which resulted in dwell times of six to seven days on average.

But in 1998, the paper said, shipping lines lost their patience and introduced a vessel delay surcharge.

"This was a [wake-up] call for Transnet Port Terminals and the National Port Authority. A committee was created involving the port stakeholders with a defined strategy and several measures, which seem to have had the most important impacts."

Storage charges
Major stakeholders acknowledge that the introduction of the "punitive storage charge" after day three is probably the most important single factor affecting dwell time at Durban port, the working paper said.

This means that, after 72 hours, containers incur heavy storage charges. The result is that storage charges in Durban are almost six times as high as other ports in the country.

But investment in infrastructure has certainly also helped the process. At the time when Durban adopted its port liberalisation policy, South Africa's trade infrastructure was ageing and had been neglected for many years, and most of the country's ports were not performing well.

From 2002, Transnet invested more than $700-million in ports over a five-year period, focusing on creating capacity and equipment. An average dwell time for cargo of four days at Durban port has been achieved and maintained since 2006.

More investment is also on the way. Just last month, Minister of Public Enterprises Malusi Gigaba unveiled Transnet's seven new state-of-the-art ship-to-shore cranes at the Durban Container Terminal as the company surges ahead in its drive to boost productivity and efficiency in arguably the southern hemisphere's biggest and busiest port.

"The cranes are part of Transnet's rolling R300-billion seven-year investment programme — the market demand strategy", the state-owned enterprise said.

"Over the next 20 years, Transnet Port Terminals, which currently operates 45 cranes in seven ports across the country, will buy 39 new ship-to-shore cranes."

Improvements
While Durban may remain top dog when it comes to the continent's ports, improvements elsewhere will undoubtedly have positive spin-offs for South Africa.

Gaël Raballand, World Bank senior economist and co-author of the cargo dwell-time study, told the Mail & Guardian that reducing dwell time could possibly increase competition in Sub-Saharan Africa.

But, he added, "what matters in transport are economies of scale and, therefore, there is somehow a first- mover advantage — the biggest economy is likely to attract more flows, which are going to lead to reduced transport costs, which will reinforce its position. South Africa is the gateway because it is also the largest economy."

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