The east African coast occupies a strategic position that allows maritime connections between the African continent and the Middle East and Asia. The ports of Mombasa, in Kenya, and Dar es Salaam, in Tanzania, are the most important in the region.
Vital to the economies not only of Kenya and Tanzania, but also to the landlocked neighbouring countries, these ports are connected to their neighbours through a network of roads and railways that allow trade with other east African countries and with the rest of the world.
Strategically located about halfway between the Durban port in South Africa and the major Middle East ports, Mombasa’s port is a gateway to east and central Africa. It has been a hub for international trade in the region since it was developed under British rule in the late 19th Century.
In 2015, Mombasa handled a total of 26.2m tonnes of cargo, more than double the volume handled in 2005. Transit cargo to the hinterlands, which consist of Uganda, Rwanda, South Sudan, Burundi, Somalia, northern Tanzania, and eastern parts of the Democratic Republic of Congo (DRC), have also gone up at an annual rate of 8.2% between 2005 and 2015.
The Mombasa port has an expansion plan underway. A second container terminal started operating in April 2016, increasing the port’s overall capacity to 1.65m containers. This is the first phase of a three-stage project, which, when completed, will bring the total length of the container terminals to 1,740 metres and throughput to 2.7m containers per year.
A new oil terminal to receive petroleum products imports is also projected for the coming years, additional to the construction of a modern cruise terminal and rehabilitation of the port’s quay.
The port, however, receives more imports than it exports. According to the Kenya Ports Authority, in 2015 only 2.4m tonnes of goods were exported through Mombasa, while 23.8m tonnes were imported. This imbalance means that many containers leave the port empty, which opens room for the smuggling of all sorts of products.
In May 2015, Singaporean port authorities seized four tonnes of ivory hidden inside containers of tea coming from the Mombasa port. Two of the biggest ivory seizures in Asia in that year originated in Mombasa. However, Kenyan authorities successively failed to find any contraband at the point of origin. The 600 surveillance cameras, alarms with motion detectors, fingerprint scanners and dogs to sniff out drugs and ivory – all the additional measures implemented in the port to try to prevent smuggling – were futile.
Mombasa has also become the preferred route for drug trafficking. In September this year, Kenya’s Standard reported that US$5.8m worth of cocaine was apprehended in the port. Since the surveillance equipment and active policing seem to not be enough to curb the rampant contraband, one of the theories for what is most likely happening is a complicit agreement between government officials and criminals. The few cases where illegal products are seized are probably the result of a clash between rival criminal networks for spoils.
Regardless of the many issues preventing Mombasa from operating with excellence, the port is important to the hinterlands past Kenya. Most of the products imported to those countries pass through this port. In 2015, 76.7% of all transit cargo through Mombasa had Uganda as the final destination, followed by South Sudan at 10.6% and 5.7% to DRC.
While most of the exported goods that cross Mombasa are tea, horticultural products, coffee, petroleum products, fish, and cement, Kenya also imports machinery and transportation equipment, petroleum products, motor vehicles, iron and steel, resins, and plastics through the same port.
China and India are the largest exporters to Kenya. These two countries account, respectively, for 30.0% and 15.5% of all goods that enter the country. The United Arab Emirates comes in third place, totalling 5.7% of the imports that arrive in Mombasa.
Kenya is developing another port that hopefully will balance the growing constraints observed in Mombasa. The Lamu port is part of a long-term vision to transform the economy of Northern Kenya, which will also include the development of the Lamu Southern Sudan Ethiopia Transport Corridor (LAPSSET). This project is one of the largest infrastructure projects on the African continent. LAPSSET is set to include the port in Lamu’s Manda Bay; a standard-gauge railway line to Juba, South Sudan’s capital; oil pipelines to South Sudan and Ethiopia; an oil refinery; three airports; and three resort locations in the Kenyan towns of Isiolo and Lamu and at the shores of Lake Turkana. However, the project requires an additional $30m to ensure construction does not stall, and is already running behind schedule by two years.
The LAPSSET project, once completed, will link Kenya to its two northern neighbours, Ethiopia and South Sudan, opening up the region to immense socio-economic development, especially in the northern, eastern and north-eastern parts of the country, and promote cross-border trade. The whole LAPSSET Corridor is estimated to cost $26bn and will be fully completed by 2030.
Dar es Salaam
Competing head-to-head with Mombasa, the port of Dar es Salaam in Tanzania handles about 90% of the country’s international trade, with an annual capacity of more than 14m tonnes of cargo. The port’s performance is far from satisfactory, however. According to the World Bank, trade costs are 60% higher between Tanzania and China than between Brazil and China, despite the distance being double. If the Dar es Salaam port reaches the same level of efficiency as that of Mombasa, the Tanzanian economy would gain almost $1.8bn a year, according to a World Bank analysis, which also said that inefficiencies at Dar es Salaam cost Tanzania and its neighbouring landlocked countries up to $2.6bn in 2014.
With the government forecasting throughput growth of 10% per year, Dar es Salaam is projected to reach full capacity by 2020. In order to cope with this situation, Tanzania Ports Authority, TradeMark East Africa, the World Bank, and the UK’s Department for International Development (DFID), signed a memorandum of understanding in September 2015 for a $750m expansion project that aims to increase Dar es Salaam’s cargo handling capacity to 28m tonnes in 2020 and to 34m tonnes by 2025.
As the surroundings of Dar es Salaam are overcrowded and expansion of the port is limited, Tanzania is investing $10bn to develop the Bagamoyo port, located 75km north of Dar es Salaam. The port, together with new investments in Dar es Salaam and other spending on roads and railways,is part of efforts by the government to create a transport hub that can challenge the dominance of Mombasa in neighbouring Kenya. The port will occupy 800 hectares with an adjacent 1,700 hectare industrial zone.
The project is financially backed by China Merchants Holdings, China’s largest port operator, which will also be responsible for much of the construction work. The other partner in financing the project is Oman’s State General Reserve Fund. The development is expected to take many years until completion. It may even take more than a decade. However, the ultimate plan is to grow the port to a 20m-container unit capacity per year.
From Dar es Salaam, gold, coffee, cashew nuts, manufactured products, and cotton are exported to the world. India and China are the main importers of Tanzanian commodities with 21.4% and 8.1% of Tanzanian exports going to these countries, respectively.
Most of the imports come from China and India as well. These two countries account, respectively, for 34.6% and 13.5% of all goods imported to Tanzania. Of the total imports, 4.4% come from the United Arab Emirates. The most imported items to Tanzania are consumer goods, machinery and transportation equipment, industrial raw materials and crude oil. Similarly to Kenya, the trade balance leans to the imports side. While Tanzania exported $5.7bn of goods in 2015, it imported $9.8bn in the same year.
Singapore is also an important trading partner of Tanzania. Singapore’s bilateral trade with that country amounted to $132.4m in 2015, a 37.2% increase year-on-year. The bulk of trade between the two countries consisted of Singapore’s exports to Tanzania, which amounted to $123.5m in 2015. Top exports included petroleum products, aseptic bags and medical instruments.
The gateways to east Africa
Kenya and Tanzania still rank relatively low on the World Bank’s Logistic Performance Index. The indicator is a weighted average of each country score on the following six performance dimensions: efficiency of the clearance process by border control agencies; quality of trade and transport-related infrastructure; ease of arranging competitively priced shipments; competence and quality of logistics services; ability to track and trace consignments; and timeliness of shipments in reaching a destination within the scheduled or expected delivery time. This measure indicates the relative ease and efficiency with which products can be moved into and inside a country. While Germany has the highest score, Kenya and Tanzania, respectively, are ranked at 42 and 61, out of 160.
While the East African countries show promising opportunities for trading, the two main gateways to this region still lack in terms of infrastructure. Mombasa and Dar es Salaam have to improve their operations. Corruption has to be tackled and bureaucracy in handling cargo must be eased. This will not only bring down importation and exportation costs, but will also increase the confidence level of foreign investors considering the east African market. Roads and railways must also be efficient and connect these ports to the countryside and to the landlocked countries of the region. Trade with India and China is already a reality. Expanding business to other regions will require an increased level of professionalism that the two ports are already pursuing – though they remain a few years behind.
The author, Otavio Veras, is a Research Associate of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. Otavio can be reached at [email protected].