TANZANIA: Tenders Invited for Dar General Cargo Terminal

By Ford, Neil

The experiment with private-sector management of Dar es Salaam container port has proved so successful that the Tanzania government is now inviting management tenders for the port’s general cargo terminal. Neil Ford argues that this could be the first step in increasing the volume of trade not only for Tanzania but for East Africa as well.

The Tanzanian government is set to step up its reform of the transport sector. With little threat to the authority of the ruling Chama Cha Mapinduzi party (CCM), the main debate in the country over privatisation seems to have been won by the reformers. Although there have been some problems with specific privatisations, such as that of Dar es Salaam Water Supply Authority (Dawasa), the overall trend seems to be in favour of increasing the role of the private sector.

Although the term ‘privatisation’ is generally used within Tanzania, it is somewhat inaccurate to describe the port and rail reforms as privatisations. The government does want to transfer the management of transport infrastructure to the private sector but private sector investors would only be prepared to commit themselves if they can be sure to recoup their investments in the long term. Tanzania has therefore opted for the landlord model, whereby private companies take control of assets, from strategic planning down to day-to-day operations, but the actual physical infrastructure remains the property of the state and the contracts are overseen by state owned authorities.

Hong Kong-based Hutchinson Port Holdings (HPH) has managed Dar es Salaam container terminal since 2000. Despite current problems with delays, the company has greatly improved efficiency at the terminal by introducing IT based cargo processing systems and investing heavily in cargo handling equipment. Turnaround times – the time taken to unload and then reload vessels – have greatly improved and Dar es Salaam has begun to seriously challenge Mombasa as East Africa’s main port.

The Tanzanian government has been so impressed with the performance of HPH that it has decided to offer a similar contract to manage Dar es Salaam’s general cargo terminal. However, the original tender process was subject to a series of delays before being cancelled in August 2006.

Under Tanzanian law, state owned authorities are not permitted to make capital investment in order to make state owned assets more attractive for sale or tender. However, according to Ephraim Mgawe, the chief executive of the Tanzania Ports Authority (TPA), the government has been able to take advantage of the cancellation to strengthen the financial position of the TPA, to make it more attractive to likely investors. The tender has now been relaunched and the new operator is scheduled to be in place by the middle of this year.

This seems to be an ambitious timetable in the extreme, particularly given the delays that have afflicted other tender processes in Tanzania and elsewhere in East Africa. Yet by setting such a short time frame for the tender, the government is setting out its stall that the tender will go ahead and that the contract will be awarded. While HPH was awarded just a 10-year contract, the winning general cargo terminal operator will receive a 20-year contract, presumably because it is felt that investors will require more time, both to turn around the terminal’s fortunes and to justify large scale investment.

At present, the general cargo terminal offers services to bulk and break bulk customers at seven berths. Reports in the East African press have suggested that private operators will be required to develop additional berths and while this is likely to be a long term goal, it seems far more important to improve terminal efficiency, deepening all channels and the depth alongside to ensure that larger vessels can enter the port. At present, the berths have a draught alongside of between nine and 12 metres, but greater than 12 metres is required for larger vessels.

This could persuade a larger number of the world’s major shipping Unes to include Dar es Salaam on more of the scheduled routes, providing East African traders with direct links to East Asia, South Asia and Latin America.

One of the reasons why many sub-Saharan African countries continue to rely on historic trading links with Western Europe and North America is because of the lack of shipping links with other developing regions. It is more expensive and much more time consuming to ship goods to Western Europe and then on to Brazil, than to transport goods direct.

Private sector participation in the Tanzanian port sector is unlikely to be restricted to the two Dar es Salaam terminals. Contracts to manage Tanzania’s other main ports, Mtwara and Tanga, are likely to be offered at the same time, although Dar es Salaam is by far the country’s most important port, handling about 75% of all cargo. The government has also revealed that it is keen to give a variety of private sector companies the opportunity to become involved in the port sector, probably through the award of ancillary contracts.

Further expansion of the container terminal is also likely. Dar es Salaam port manager Jason Rugaihuruza told journalists in Sudan in December that the terminal was built to provide a draft alongside of 10 metres and to handle vessels with up to 2,500 20-foot equivalent units (TEUs), which are the standard size of container. Many container ships now carry up to 10,000 TEUs, so the TPA will now invest in widening and deepening the harbour entrance channel.

The volume of cargo handled by the container terminal is set to increase to 260,000 TEUs during financial year 2006-07; 280,000 TEUs in 2007-08; and 320,000 TEUs by 2009-10.

Rugaihuruza said: “The development will also increase efficiency, productivity, security and safety, provide a better outlet to foreign markets for landlocked countries and enable human resource capacity building. Shipping and terminal operators will be more involved in ports developments that include development of dry ports and inland container depots to improve supply chain performance.”

The key to securing steep improvements in the Tanzanian transport sector will be ensuring the integration of the port and rail networks. If containers, bulk cargo and break bulk cargo can all be moved rapidly and reliably from around Tanzania and the rest of eastern Africa to the port and on to vessels bound for markets around the world, it would go a long way to boosting economic growth in the country.

While the tender for the contract to manage the Tanzania Railways Corporation (TRC) operations has also been subject to delays, a consortium led by Rites of India seems likely to take up its 25- year concession. With Chinese interests also likely to take over the management of the Tanzania Zambia Railway (Tazara), the Tanzanian freight sector is about to enter a new era.

Jason Rugaihuruza believes that Dar as Salaam’s port will be able to “increase its efficiency, productivity, security and safety to provide a better outlet to foreign markets …”

Zanzibar

Pemba wants more

While real progress has been made in strengthening the economy of mainland Tanzania over the past decade, the region’s historical economic powerhouse, Zanzibar, has languished in the shadows. Its relative economic decline has helped to pour fire on the flames of the archipelago’s political woes, while increasing general discontent with the union.

The crux of the Zanzibari problem has been the continued reliance on wildly fluctuating revenues from spice exports, coupled with uncertain tourist income.

Some spices are not harvested on an even rota each year, leading to a cycle of boom and bust. Fluctuations in the international price of cloves also have an impact.

The latest economic figures for the final months of 2006 indicate that the revenue from clove exports fell from $9.1m in October to $8.1m in November, yet still accounted for a massive 89% of export earnings. Total export earnings for the year to November stood at $89.7m, balanced out only by receipts from the tourist sector.

While relying on the export of a single commodity is rarely healthy, Zanzibar’s dependence on two such vulnerable industries is almost as insecure. The number of tourist visitors has varied in recent years in line with international worries over terrorism and instability on the islands themselves, but there seem few ideas on how to diversify the territory’s economic base.

Current economic thinking seems to focus on improving the security and political situations on the islands. According to reports in the local press, Zanzibar’s President Aman Abeid Karume wants more politicians and civil servants to move their operations to Pemba.

Although many people think only of the island of Unguja, with its capital Zanzibar Town, the northern island of Pemba is almost as heavily populated. Discontent at its relative exclusion has promoted periodic unrest on Pemba, where the opposition Civic United Front is the dominant political force.

Pressure for some form of greater self determination or even independence has divided political opinion on Zanzibar in recent years but Zanzibar Attorney General Idd Pandu Hassan has dismissed claims that the archipelago could join the East African Community \as an independent country.

Pleas for independence could subside if the improved financial performance continues. The current account for the year ending October 2006 saw a $12.6m surplus, a great improvement on the previous year’s $16.5m deficit. Coupled with increased foreign investment, a more deep-seated improvement could finally be in sight.

Zanzibar’s President Karume wants more politicians and civil servants to move their offices to Pemba to counter the islanders’ sense of marginalisation.

Copyright International Communications Mar 2007

(c) 2007 African Business. Provided by ProQuest Information and Learning. All rights Reserved.