FROM MAGAZINE: Bridging the infrastructural gaps in African logistics
Historically, societies in the African continent had to manage with insufficient infrastructure that kept them from growing and left a crippled business environment. Though the continent still has a whooping infrastructural gap, African countries, more than ever before, are coming together to open their market
Historically, societies in the African continent had to manage with insufficient infrastructure that kept them from growing and left a crippled business environment. Though the continent still has a whooping infrastructural gap, African countries, more than ever before, are coming together to open their market within the continent and building logistics capabilities together.
On 25 May 2013, on the 50th anniversary of Organisation of African Unity (OAU), the heads of state and government of this great continent came together at Addis Ababa, Ethiopia and signed a ‘solemn declaration’ to transform Africa into a global powerhouse of the future.
The third portion of the fourth affirmation inside the declaration reads “Accelerate Africa’s infrastructural development, to link African people, countries and economies; and help to drive social, cultural and economic development. In this regard, we commit to meet our strategic in transport, ICT, energy and other social infrastructure by committing national regional and continental resources to this end.”
The visionary document, ‘Agenda 2063’ with the tagline ‘The Africa We Want’, is the manifestation of this commitment to put the African continent on a developmental trajectory in the next 50 years from 2013 to 2063. With 14 flagship projects, including the integrated high-speed train network and African Continental Free Trade Area, the agenda is the blueprint and master plan of the 55-member association, African Union.
Whatever the projects and programmes are, two crucial ambitions of African Union stand out: bridging the infrastructure gap and accelerating intra-African trade. And both the ambitions may have a crucial impact on the evolution of logistics operations in the continent.
“By 2063, the necessary infrastructure will be in place to support Africa’s accelerated integration and growth, technological transformation, trade and development. This will include high-speed railway networks, roads, shipping lines, sea and air transport, as well as well-developed ICT and the digital economy,” reads the agenda.
Infrastructure
Historically, people in the African continent were forced to struggle with inadequate infrastructure, which inhibited growth, eroded trust and crippled the business environment. For consumers in Africa, it’s difficult to find goods and more difficult to shop than anywhere in the world.
During the ‘Programme for Infrastructure Development in Africa’ (PIDA) Week, under the Agenda 2063, held in Cairo, Egypt, Khaled Emara, Egypt’s assistant foreign minister said, “The world is eager to do business with Africa but finds it difficult to access the continent due to poor infrastructure. The lack of infrastructure in Africa is an obstruction to economic growth, hence the need to expedite infrastructure development projects to achieve the 2063 development agenda.”
During the ‘Africa Investment Forum’ held in Gauteng, South Africa in November 2019, the African Development Bank (AfDB) put down the reality of infrastructure in Africa and allowed the numbers to tell the story.
“Needs of African infrastructure currently amount to a whopping $130 to $170 billion per year with a financing gap of $68 million to $108 billion. While this may sound insurmountable, it also presents an opportunity to foster innovative financial solutions and partnerships that have the potential to unlock funding,” says the bank release.
Intra-Trade in Africa
According to the United Nations (UN) report ‘Economic Development in Africa Report 2019’, Intra-African exports were 16.6 percent of total exports in 2017, compared with 68.1 percent in Europe, 59.4 percent in Asia, 55 percent in America, and 7 percent in Oceania.
On March 21, 2018, in the Rwandan city of Kigali, 44 of 55 members in the African Union signed a path-breaking agreement for the materialization of ‘African Continental Free Trade Area’ (AfCFTA), making the worlds largest free trade area. The agreement demands its members to remove tariffs on 90 percent goods and allow the free flow of goods and commodities across the African continent. In other words, AfCFTA will open the doors for a single economic entity with a single logistics system in Africa.
The intention of African Union with the implementation of AfCFTA could be read as “Accelerating intra-African trade and boosting Africa’s trading position in the global market by strengthening Africa’s common voice and policy space in global trade negotiations.”
Let us now turn to five most inspiring infrastructural ventures going on in Africa that could transform the economy of Africa and particularly the logistics sector.
Lamu Port, South Sudan, Ethiopia Transport Corridor (LAPSSET)
The $2,403 trillion LAPSSET project is one of the most ambitious in the history of this continent that envisions connecting three African countries— Kenya, South Sudan and Ethiopia— and then linking them with other neighbours by building a port, four highways, four railway lines, three airports and three resort cities along with other infrastructure projects.
In March 2013, through the Presidential Order, Kenya established the LAPSSET Corridor Development Authority (LCDA) with a mandate to plan, develop and coordinate the implementation of LAPSSET.
Mombasa Port, Kenya
The project that can have a tremendous impact on the future of African logistics plans to build a 32 berth deep seaport at Lamu in North-East Kenya. Kenya already has the biggest port of East Africa at Mombasa port. LAPSSET will have four interregional highways of 880 kilometres connecting Luma to Isiolo, Isiolo to Juba, Isiolo to Addis Abba, and Luma to Garsen. Four Interregional Standard Gauge Railway lines of connecting Lamu to Isiolo, Isiolo to Juba, Isiolo to Addis Abba and Nairobi to Isiolo will be created. The completion of the project will also see three international airports in Lamu, Isiolo and Lake Turkana. The port along with the roads and railways have the potential to take international goods from different parts of the world to the hinterlands of East Africa.
The Kenya and Ethiopia have agreements to jointly supervise and inspect the construction of road networks as well as the Railway along the LAPSSET Corridor route. Landlocked Ethiopia has set up an office in Lamu, and wants to shift some of its logistics operations to the Kenyan coast, while the Kenyan government committed to enable Ethiopia set up its logistics facilities.The two countries are also planning to transform Moyale town in Ethiopia into a cross-border trade hub.
Lagos-Calabar coastal railway
During the bilateral meeting between Nigerian president Muhammadu Buhari and Russian president Vladimir Putin, the Russian government agreed to support Nigeria in building the $11 billion, 1400 kilometres long coastal railway line known as Lagos-Calabar Railway. China already has an agreement with Nigeria to build and finance this project.
Kenya Railways
The west to south-east rail line will eventually connect all Nigerian seaports from its biggest port at Lagos to its oldest port at Calabar. This will smoothen the cargo movement across all big and small ports in Nigeria and form business hubs along the rail line and help the already overburdened Lagos. Logistics costs along coastal Nigeria can be brought down with cargoes shifting from road to rail. Also connecting the new rail with the existing rail lines throughout the country can help move freight in a much faster pace.
For example, Calabar is a port city and capital of the Cross River state in South South zone of Nigeria, situated on the banks of Calabar River and close to the border with Cameroon, it is the most accessible port for North-Eastern parts of Nigeria. The port was a major source of slaves in the 16th and 17th century and then for exporting palm oil in the 19th century, but lost its prominence due to the emergence of Port Harcourt along the Niger Delta in the 1920s. The Lagos-Calabar Railway has already shown signs of bringing Calabar back into the picture by receiving its first container vessel on September 30, 2019, after many years.
On January 16, 2020, the overlord of the Dagbon, Yaa-Na MahamaAbukari II visited the president of Ghana Nana Addo DankwaAkufo-Addo at his Jubilee House in Accra and thanked the president for bringing peace to his region. The president, in turn, guaranteed greater days ahead for Dagbon and explained to him the infrastructural upgradation going on in the region. One of the infrastructure projects that he mentioned was the interchange project happening at the centre of Dagbon’s biggest and Ghana’s third-largest city, Tamale.
Tamale is reported as the fastest growing city in eastern Africa for more than a decade now due to its geographical significance as the logistics hub. Tamale transports all the agricultural and industrial production of northern Ghana to its capital city Accra and Kumasi, both in southern Ghana.
The city can also connect the region with countries like Côte d’Ivoire in the east and Burkina Faso in the north. But what stops Tamale from growing to a truly logistics city is the condition of its roads. The city still struggles from unpaved roads, accidents and the lack of security. The under-construction Tamale Interchange project can be a game changer for the region.
While launching the $2 billion Government of Ghana – SinoHydro Project Agreement for the construction of the Tamale Interchange in April 2019, the president said “Government is also ensuring that, in accordance with the local content law, a minimum of 30 percent of works will be undertaken by Ghanaian contractors, and supervised by Ghanaian consultants. Thousands and thousands of jobs will be created for our youth, our country will be opened up for sustained growth and development, and, thereby, help put Ghana onto the path of progress and prosperity.”
Bagamoyo Port
Tanzania is moving ahead to build the biggest African port in the Indian Ocean that can handle 20 million TEUs by 2045 and a 1700 hectares big special industrial zone around the port. The plan is a tri-government project in which Oman will be investing for the special industrial zone and China contributing to the port. But the port that may cost $10 billion went into trouble in October when Tanzania government rejected demands of the Chinese investor who wanted 99-year lease and tax-free operation around the construction of the port.
But upon materialising, the port could be a logistics game-changer in the African coast of Indian Ocean, as the new port will put tough competition for Kenya’s Mombasa and other ports coming up in the region.
“The new megaport is to possess a capacity of 20 million TEUs, much larger than the 800,000 TEU capacity of the port at Dar es Salaam. It would also dwarf the port at Mombasa. Moreover, the upgraded project is also slated to involve the extensive construction of infrastructure to support the port. The infrastructure around Bagamoyo will connect the project area to the national road network, with the first road from Tageta to Bagamoyo, as also roads from Bagamoyo to Portside in theImbegazni region, and Bagamoyo to Mlandezi in the Morogoro area,” says the November 2019 monograph released by Institute of Chinese Studies in New Delhi about African investments of China.
Announced in December 2019, African Development Bank (AfDB) is planning to finance $381 million for road construction that will connect three million people in Kenya and Tanzania. European Union is also providing a grant of $33 million to the Mombasa-LungaLunga/Horohoro and Tanga-Pangani-Bagamoyo roads.
“Producers, manufacturers and traders will be able to move goods more quickly and cheaply. In addition, farmers and fishermen will benefit from improved access to local and regional markets and amenities, including better schools and health centres,” says the AfDB release.
The Bank anticipates that the intervention will boost regional integration by reducing transit times, facilitating trade and the cross-border movement of people, opening access to tourist attractions. The project will also link the ports of Dar es Salaam, Tanga and Mombasa, and stimulate the blue economy in coastal areas.
“The project will have spillover benefits for hinterland countries such as the Democratic Republic of the Congo, Burundi, Rwanda, Uganda and South Sudan that depend on Mombasa as the gateway to global markets,” said Hussein Iman, Regional Sector Manager for infrastructure, private sector, and industrialization, AfDB.
Private investment to bridge the gap
Regarding the bridging of the infrastructural gap in Africa, let us turn back to the words of AfDB heard in the Africa Investment Forum.
“Encouraging greater private sector investment is fundamental to accelerating sustainable infrastructure development in Africa and attracting private capital to the region requires that investors be presented with bankable and investment-ready projects,” says the release.
The release also gives an example, “the Bank hosts the NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF), a multi-donor special fund providing expertise and grants to transform early-stage projects into bankable projects and viable investment opportunities for public and private investors. Since its inception, the fund has contributed $61.23 million in support of transformative continental infrastructure projects, catalyzing downstream financing to the tune of $24.6 billion across energy, ICT and transport sectors.”
This feature was originally published in January - February 2020 issue of Logistics Update Africa.