An interesting take on SADC developments and the lack of progress

AfricaMap_SADCThe following article titled ‘Cross-border projects dependent on cost’ was recently published by Transport World Africa. It deals essentially with cross border logistics and provides an insight into regional infrastructure and logistics projects – successes, failures and their impact on transport logistics. It emphasizes the need for greater and closer public and private partnerships, but alas sovereign states appear to be more focused inwardly on their domestic affairs. 

Implementers of projects have the knack of focusing on what they know very well, often leaving out what they do not know. Usually, this comes back to bite them. An example is in the integration of leadership. Countries in the Southern African Development Community (SADC) region compete with each other for demand and capacity provision, which results in the inflated cost of logistics.

Rather, countries should work together. Integrating ports and funding is relatively easy. What is not available is integrated leadership in the region (excluding heads of various states), agreeing that SADC is ‘one country’. Logistics planning is still done at the country level, which is not practical, because then supply chains are being developed that are competing with each other. The sector should be cautious about acceleration, and about what is funded. One example is Transnet, whose plans should fit into regional plans, but right now they do not.

The softer issues in project development often go ignored, but they are at times the most important. There should be a halt to focusing mainly on mega-projects, since they take time and money, as well as resulting in complications (excluding Grand Inga). Despite this, mega projects do create a common vision for a region. Do sponsors have the capacity to support these projects? Institutional capacity is certainly needed. At the political level, southern Africa has done well, top–down approaches are there, but things go off course when there is the attempt to get others to plug-in to this.

One-stop border posts are very important. It was cautioned that the region must be careful not to follow the architecture of colonial extraction, which means focusing on intra-Africa trade rather than too great a focus on ports and exports. Government and private sector must both drive natural winners and losers in markets. There is sufficient funding and policies, but project preparation is limited. What is needed is to decide how to make hubs of excellence, and decide who is going to do what.

The high-level work has been done, but now the sector is facing an implementation challenge. Governments do not do regional integration very well. The private sector does the regional integration, and they suffer most when it does not work. Regional infrastructure will not happen unless there is public support for it. The most successful cross-border project was a PPP: the M4 toll road. This had a large economic impact.

Also, the Port of Maputo has been successful in generating income. Ports without land side integration are useless. Projects need a soft-issue mediator; otherwise there are great ideas, but no implementation. The private sector should not see itself as a messiah, but should rather have a sense of responsibility for developing supply chains. There needs to be a clear understanding of soft issues, clear legal and policy understanding, and communication. SADC has been driving the implementation of harmonisation of vehicle load management for twenty years. A mediator between the public and private sector (such as Maputo Corridor Logistics Initiative (MCLI) is absolutely necessary.

It is a stark reality how little intra-African trade there is. To address this there should be a clear target for development in future. In Namibia, there are efforts to focus on the positives in regards to transport development, even with limited resources. Namibia has been independent for 25 years; 15 years ago the Walvis Bay Corridor was created as a focus on regional integration and regional development. There are 2.2 million people in Namibia, which means a small economy.

There is no real choice but to take into consideration the region and recognise the value Namibia can add. In regards to planning, in 1995 it developed its first transport master plan, and in 2014 it developed its second transport master plan (this was twenty years apart). In February 2015, it developed a logistics master plan to develop Namibia into a logistics hub in the region. It has focused on transport modes because it has a port emphasis. It started roads development.

Currently, Namibia is building its first dual-carriage road (65 km), which is a big step for such a small economy. It would like to do more with sufficient funding. Namibia is also looking into what to do with aviation. As a whole, the country is trying to develop as an alternative trade route for southern Africa. Five to seven years ago, Walvis Bay was just a fishing port, but now R500 million is coming into Namibia’s economy through this post (from zero rand 10 years ago). Namibia is trying to create a better alternative in the SADC region. Now it is looking to focus on developing the manufacturing sector. Namibia is working with South Africa to develop partnerships (excluding transport corridors to production corridors). Continue reading →

The Top 5 Largest Economies in 2020

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), International Financial Statistics (IFS)Note: Purchasing Power Parity has been used as this is a method of measuring the relative purchasing power of different countries' currencies over the same types of goods and services, thus allowing a more accurate comparison of living standards.

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), International Financial Statistics (IFS)Note: Purchasing Power Parity has been used as this is a method of measuring the relative purchasing power of different countries’ currencies over the same types of goods and services, thus allowing a more accurate comparison of living standards.

By 2020, three of the world’s five largest economies will be emerging countries, accounting for 30.4% of global GDP in PPP terms. Advanced economies are being displaced by emerging market superpowers, notably the BRIC countries, which has been accelerated by the seismic effects of the global economic downturn of 2008-2009. Euromonitor International predicts that China will become the world’s largest economy in PPP terms in 2017.

Additionally, Russia will overtake Germany as the fifth largest economy in 2016. These shifts will influence global politics, business environments and investment flows while consumer markets in developing countries will rise in importance as the middle class expands.

1. China: Set to become world’s largest economy in 2017

A large manufacturing base, cheap labour costs, the world’s largest population and economies of scale have resulted in unprecedented economic growth in China. Although growth is slowing, the delayed recovery in advanced economies from the global economic downturn means China will overtake the USA as the world’s biggest economy in 2017, and account for 19.0% of global GDP in PPP terms by 2020. Challenges loom large, however, including rising labour costs, pollution, a potential real estate bubble and rapid ageing arising from the government’s one child policy. Euromonitor predicts that China’s working age population (aged 15-64) will decline from 2014.

2. USA: End of the American dream?

The USA will lose its position as the world’s number one economy in 2017. In 1990, the USA accounted for a quarter of global GDP in PPP terms but we forecast this to plummet to 16.0% by 2020. The country was where the global financial crisis began in 2008 and it has failed to recover to its potential while also slipping in global competitiveness rankings. Although the government avoided the “fiscal cliff” in 2012, one of the biggest challenges remains a budget deficit reduction strategy, without the ensuing political gridlock. Nevertheless, the USA retains advantages, namely as the world’s largest consumer market and a leader of technological innovation.

3. India: Demographic dividend to benefit country beyond 2020

India overtook Japan as the world’s third largest economy in PPP terms in 2011 and its demographic advantage means the country could become the world’s biggest economy in the coming decades. India has a young population where it is benefitting from its demographic dividend (when there are more people of working age and the proportion of the child population declines). Euromonitor forecasts that India will become the world’s largest population by 2025 and that its working-age population will increase by 11.6% in 2013-2020 compared to -3.1% in China. However, India lags in major indicators including educational attainment and infrastructure development.

4. Japan: Paying the price for decades of economic stagnation

Structural problems beset Japan, with decades of weak economic growth and deflation while it has totalled the highest proportion of public debt in the world at 235% of GDP in 2012. Although the country has not yet suffered a eurozone-style sovereign debt crisis, as the majority of its debt is domestically-owned, an increase of foreign debt could trigger a Japanese debt crisis. It has the oldest population globally (mean age of 44.7 in 2012) and a shrinking labour force which will add considerable strain on government finances, while a strong currency makes its exports uncompetitive. Yet Japan’s location within Asia means it can take advantage of cheaper production costs in the region and growing demand for its high-tech products from a burgeoning Asian middle class. Like the USA, it is a global technological leader, giving it a competitive edge over its emerging neighbours.

5. Russia: Overtakes Germany as fifth largest economy in 2016

Russia will become the world’s fifth largest economy in 2016 in PPP terms, driven by its energy sector, as one of the top oil and natural gas producers worldwide. It also offers potential in its rapidly expanding consumer market, which Euromonitor forecasts will be the ninth largest globally in real terms in 2020. Its accession to the World Trade Organisation in August 2012 further cements its integration into the global economy. The lack of economic diversification and modernisation remain key long-term challenges with government policy aiming to tackle this, for example, by investing in the Skolkovo Innovation Centre Project, Russia’s equivalent to Silicon Valley. Corruption, state control and bureaucracy also hamper the business environment in Russia. Like elsewhere in Eastern Europe, the Russian working-age population is in decline (-4.5% in 2013-2020) despite a short-term baby boom, which will pose a demographic challenge to sustaining non-oil economic growth. Source: Euromonitor.com

Durban “Dig-out” port – a flagship PPP initiative?

Artistic impression – Durban Dig-out Port

Freight and Trade Weekly (FTW) reports that a team has been assembled to sort out the funding for the new dig-out port on the old Durban International Airport site (FTW November 9, 2012) – a project that represents a potential major shot in the arm for the economy of the region and the country. The consortium is composed of the well-known Dutch port consultants, MTBS; the highly respected international engineering firm, Arup; and Durban-based lawyers,Van Velden Pike Incorporated, in association with Nichols Attorneys.

This consortium is to act as transaction advisers to Transnet, on what is, according to government, likely to be SA’s flagship public/private sector partnership initiative.That will be part of the team’s studies, according to Andrew Pike, partner in Van Velden Pike. However, the study, although started, is still very much in pre-feasibility stage, and there is obviously still no firm comment to be made on what direction the public/private element will take, he told FTW.

Further abroad, AECOM has announced (Oct 2012) that Transnet has awarded the company a US$3.4-million contract to initiate the design of the Durban Dig Out Port in South Africa. AECOM’s has experience delivering creative design services for major ports around the world, such as the New Port Project in Doha, Qatar. As part of the contract, AECOM will provide concept and pre-feasibility design services for the new port and container terminals, including all associated infrastructure relating to its operation. A critical aspect of the design will be ensuring the sustainability of the port throughout the construction phase as well as all of the operational phases of its development.

The Mercury reports that work on the multi-billion rand project is expected to commence in July 2016, with the first phase of the project completed by 2019. Development of the project is to be over a 30-year period. The construction phase will provide an estimated 64,000 jobs, while 25,000 permanent jobs are envisaged in the functioning port.

The scale and details of the project are staggering. The port will involve liquid fuel, automotive and container cargoes. The siting of the entrance to the port will require the relocation of the Shell and BO Refinery’s (Sapref) single buoy mooring. The construction of the southern breakwater alone will absorb 16% of the total cost and will require special sources of quarry stone. Environmental concerns are being taken very seriously. For example R85-million has been budgeted to relocate some 2,000 chameleons which inhabit a part of the northern section of the airport site.

Of particular significance is that without the dig-out port, Durban will stagnate as a port of call and experience decline. Already Cape Town does not have the capacity or berths deep enough to handle the new generation of 18,000 TEU ships that are due soon. Durban’s proximity to the Witwatersrand makes it the logical and preferred destination for container shipping. Studies have shown that the old airport site is ideal for the construction of a new harbour designed specifically to manage the size and volume of container shipping. Durban’s geographical location in the southern hemisphere is particularly advantageous as regards intercontinental shipments from the east to South America and beyond to the north Atlantic. Sources: FTW, AECOM, and The Mercury.

 

Major trade route now reaches Katanga

Port of Walvis Bay – Namibian transport corridor

A new regional trade route reaching from the Katanga Province in the Congo all the way to Walvis Bay as point of entry, is on the radar of the Walvis Bay Corridor Group following an agreement between Namibia and the DRC. Development of this major link started its first tentative steps recently when the Corridor Group opened an office in Lubumbashi, on the border of the DRC and Zambia.The Corridor Group said earlier this week it had launched an office in Lubumbashi, DRC, to create a strong business presence in the mineral-rich Katanga Province.

The Walvis Bay Corridor Group Lubumbashi office was officially opened by the Governor of the Katanga Province, Hon. Moïse Katumbi Chapwe, supported by the Namibian Ambassador, Mr Ringo Abed, Corridor Chairman Mr Bisey Uirab, and Corridor Group CEO, Mr Johny Smith.

The need for landlocked countries to gain access through an alternative trade route to and from sea was recognised, where neigbouring countries and beyond could benefit from access to the Port of Walvis Bay that offers importers and exporters reduced time and cost savings, high reliability, and cargo security. The Katanga Province offers a market of more than 2 million consumers and with the fast expanding mineral rich DRC there is also a need from the DRC Government for the Walvis Bay-Ndola-Lubumbashi Corridor to extend further towards other Provinces in the DRC. Walvis Bay is surely growing as an alternative trade route for Southern DRC in that various commodities are being moved via the Port of Walvis Bay such as copper, frozen products, machinery & equipment and consumables.

The office in Lubumbashi, DRC is now the third branch office of the WBCG beyond Namibia, with the other branch offices in Lusaka, Zambia since 2005 and Johannesburg, South Africa in operation since 2008. The Walvis Bay Corridor Group is currently hosting the Walvis Bay-Ndola-Lubumbashi Development Corridor Technical Committee, which is a Public Private Partnership between the government departments responsible for transport of the DRC, Namibia and Zambia to address the bottlenecks that impede the flow of traffic along this trade route using the Port of Walvis Bay. Source: Economist (Namibia)

Private sector finally welcome in Africa?

The acceptance of private sector participation in ports in Africa is gaining traction, and not before time. At least that’s what a meeting of port minds in Nigeria would have us believe. The Port Management Association of West and Central Africa at its 35th Council Meeting and 11th Round Table Conference held recently in Lagos, Nigeria, came out firmly in favour of increased private sector participation in ports as a means of achieving cost efficiency improvements.

The Council meeting, held under the theme ‘Impact of Port Concession on the Socio-Economic Development of Our Countries’ ended with the resolution that, “member countries should put in place robust legal frameworks that will sustain the growth of Public Private Partnerships in port management systems”. Words that are encouraging to hear and that generally reflect a much changed position from a decade ago when there was still a strong belief in the public versus private system of port operation.

Successful privatisation programmes such as the major one that has been implemented in Nigeria have, however, brought some insight into what the private sector can do better than the public sector and hence a changed perception, although the learning curve is by no means over in this respect. What would also help facilitate this however is improved process to the goal – what can perhaps be termed Step 2. In particular, concession processes that are not weighed exclusively by cash received considerations but place greater emphasis on technical considerations in the broadest sense of the word.

A better balance between the two elements can lead to the selection of a more appropriate long term strategic partner and potentially to all-round greater economic benefit. The trouble is of course that such systems are not high on the agenda of African nations where cash considerations are usually to the fore especially in today’s troubled economic times. A system of this ilk is more likely to be found deployed in a mature economy than an emerging one. It remains a laudable goal, however, as a longer term objective and as part of efforts by the IMF, World Bank and aid agencies to develop Africa’s infrastructure, particularly in Sub-Saharan Africa. Source: Port Strategy