With a USD 1.5 billion investment announced for a new multi-purpose port in Ghana and progress on similar plans in Nigeria, APM Terminals and its public and private partners are lowering trade costs and supporting employment and economic growth.
A line of cargo ships snake out to sea from the port of Tema in Ghana. The ships, less than half the size of those serving Europe and Asia, wait to bring cars, fuel, machinery, food and more into the West African nation.
Transformed from a fishing village more than 50 years ago, Tema is Ghana’s largest, busiest and most important port today and handles 70% of the country’s trade. And, like many other ports on the continent, it is straining under the country’s rapid rate of growth.
“In ports that are critical to trade in the region like Tema and Lagos, Nigeria, the port infrastructure is reaching its limits,” says Peter Votkjaer Jorgensen, Head of Africa & Middle East Port Investments for APM Terminals. “These ports need more cargo space, modern equipment and deeper channels for larger ships in order to efficiently handle the volume and variety of cargo they will see in the coming decades.”
A trade package for Ghana
In Ghana, APM Terminals and its partners are investing USD 1.5 billion to build an entirely new port in Tema that will achieve all of this. It will be a modern, multi-purpose port, located on what is today an undeveloped beach adjacent to the existing port. The projected positive socio-economic impact will be significant.
In ports that are critical to trade in the region like Tema and Lagos, Nigeria, the port infrastructure is reaching its limits.
The new multi-purpose port will make room for an initial 3.5 million twenty-foot containers and allocate space for a variety of different terminal operators. Eventually, it will boast 17 berths for vessels of all types, including container ships capable of carrying 13,000 containers, nearly three times the capacity of the ships that call the existing Tema port today.
To ensure the impact of the new port does not stop at the port gates, the total investment will also include an additional USD 200-300 million to be used for expansion and upgrade of the country’s main highway, the Accra-Tema Motorway. The 19 km highway is the country’s most important travel and commercial corridor, linking the port with the capital Accra, the primary destination and origin for cargo coming through the port.
Leveraging public-private cooperation
For customers of the existing port, the expansion and upgrades promised with the new port are more than welcome. Melcom, Ghana’s leading retailer of general merchandise, expects the new port will help them lower costs and improve profitability.
The company imports nearly all of the 40,000 items it sells in its web of retail stores located around the country, so the port and connecting roads form a critical part of its supply chain and distribution network. Currently, Melcom attributes a large amount of its total costs to shipping inefficiencies caused by the strain of the current infrastructure.
“Our ambition is to be the place where Ghana shops for all its needs and that means we have to keep the shelves stocked with the products our customers have come to expect, says Mahesh Malwani, Joint Group Managing Director for Melcom. “Improvements in port productivity, truck turnaround times, documentation, clearing and forwarding processes, among many other things, will all help remove time and waste from our supply chain, lowering our inventory and storage costs in the process and enabling us to grow the business.”
Construction of the new Tema port will begin in 2016. The first phase is expected to be completed by 2019, after which it will growing in phases.
According to QBIS Consulting, which conducted a socio-economic impact study of the project on behalf of APM Terminals, the new port at Tema will impact Ghana in two ways, through the labour, goods and services required for its physical construction and subsequent operation, and the improved cargo handling services that will facilitate improved import and export of goods.
“While both will create jobs, employee earnings, business sales and taxes,” says Thomas Westergaard-Kabelmann, CEO of QBIS Consulting. “The second way will have the most significant impact—as it will improve Ghana’s competitiveness, leading to boosted export and imports.”
According to QBIS estimates, the increase in trade will increase the revenues of Ghana’s import and export companies, which will lead to as much as a USD 1.1 billion rise in Gross Value Added to the Ghanaian economy and as many as 450,000 new jobs.
“More capacity, modern equipment and deep water access for larger ships will help attract trade and also lower the overall costs of trade and transport. And it will relieve a lot of the congestion major ports in this region have become accustomed to,” says Peder Sondergaard, Africa-Middle East Region Head for APM Terminals. “If seen as a package, the benefit of this infrastructure to the society and economy will be substantial.”
In 2014, Maersk introduced a new sustainability strategy aimed at addressing significant sustainability challenges in a way that creates value for society and Maersk.
Three priority areas were identified in connection with focusing the Maersk Group’s efforts to unlock growth: energy efficiency, enabling trade and education. Alongside this, the Group continues to integrate sustainability in its operations, mitigating risks and raising performance levels.
In 2015, one of the projects linked to this strategy was a study of the documentation process that accompanies—and hinders—trade. It focused on the impact this has on Kenyan trade in general and more specifically its impact on two of the country’s most important exports, avocadoes and roses.
This is not an Africa or Europe problem. Documentation is a costly and complex process for all trade.
Working closely with TradeMark East Africa and a variety of public and private sector stakeholders, Maersk PhD researcher Thomas Emil Jensen uncovered the extent of the complexity. To reach Europe, containers of Kenyan roses and avocadoes have to pass through a jungle of 30 people and organisations (public and private) on both continents, a process that includes more than 200 different interactions and communications between the involved parties.
“Various studies have estimated that, in general, the average border related administrative costs of trade constitute 21% of the total cost, compared to 8% for transportation. What we’re aiming for is to remove as much of that 21% as possible with the help of an Internet-based ‘shipping information pipeline,’ in order to slash the cost of international trade in the region,” says Jensen.
Jensen’s suggestion to move the physical documentation process to an Internet-based platform—a Shipping Information Pipeline—is being piloted for Kenya’s flower and avocado trades. The platform’s potential use for other products in Kenya and other countries is under consideration.
A mega port for Nigeria
In Nigeria, Africa’s largest population and economy, the port city of Lagos is another illustration of the promise and challenges of growth. Though experiencing a slowdown, the port is busy with ships calling to deliver and pick up cargo, while hundreds of trucks carrying cargo choke the roads in and out of the surrounding city.
“Like many ports in Europe and the United States, Lagos grew from a port into a city and at some point, the limitations of that combination is reached,” says Peder Sondergaard, Africa-Middle East Region Head for APM Terminals. “Eventually, all ports have to relocate to coastal areas with deep water access to make room for the population and also to allow better access for bigger ships. In Nigeria, Badagry is that future port.”
Proposed by APM Terminals and its partners to the Nigerian government in 2014, in order to accelerate infrastructure improvements, create jobs and attract foreign investment to Nigeria, Badagry is a huge multi-port, covering 1,100 hectares, located 55 km west of Lagos.
The final approval process and negotiations with the Federal government and Lagos state are currently ongoing. Once implemented, Badagry port will be the most modern multi-purpose port on the African continent. With its container, bulk, petrochemical and RoRo cargo-handling capability located far enough outside the city of Lagos and its 20 million people, it will help decongest the area while being close enough to continue serving this commercial and financial hub.
“Ports are linked to the industrial development of a country and we welcome more port investment. We are excited about the Badagry port project and how this multi-purpose facility aligns with our industrial development plans for the nation,” says Mr. Olusegun Aganga, Nigeria’s former Federal Minister of Industry, Trade & Investment.