Mombasa and Dar es Salaam, Gateways for East Africa

Article published in the How We Made it in Africa, on the 1st December 2016

Also published in the Centre for African Studies, Nanyang Technological University, Singapore, on the 5th December 2016

Synopsis

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 and, since the colonial times, compete to be the most relevant in East Africa. Million of tonnes of goods are imported through both of them from other coastal countries and continents and exported to the world.

The two ports are vital to the economy of not only Kenya and Tanzania, but also to the landlocked neighbouring countries. These are connected to the ports through a network of roads and railways that allow trade with other East African countries and with the rest of the world.

Mombasa, Kenya

Strategically located about half way between the Port of Durban in South Africa and the major Middle East ports, the Port of Mombasa, in Kenya, is a gateway to East and Central Africa. It has been the 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 26.2 million 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 DR Congo, has also gone up at an annual rate of 8.2% between 2005 and 2015.

The Mombasa port has an expansion plan under way. A second container terminal started operating in April 2016, increasing the port’s overall capacity to 1.65 million containers. This is the first phase of a 3-stage project, which, when completed, will bring the total length of the container terminals to 1,740 metres and throughput of 2.75 million 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[1].

The port, however, receives more imports than it exports good. In 2015, only 2.4 million tonnes of goods were exported through Mombasa, while 23.8 million tonnes were imported. This imbalance means that containers will leave the port empty, which opens room for smuggling of all sorts of products[2].

In May 2015, Singaporean port authorities seized four tons 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[3].

mombassaMombasa has also become a preferred route for drug trafficking. In September this year,
US$ 5.8 million worth of cocaine were apprehended in the port[4]. Since all the surveillance equipment and active policing seem to not be enough to curb the rampant contraband, the theory says that 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 imported products to those countries pass through this port. In 2015, 76.7% of all transit cargo through Mombasa had Uganda as final destination, followed by South Sudan at 10.6% and 5.7% to DR Congo[5].

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[6].

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[7]. However, the project requires an additional US$ 30 million to ensure construction does not stall. The project is already running behind schedule by two years[8].

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 US$26 billion and will be fully completed by 2030.

Dar es Salaam, Tanzania

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 14 million tonnes of cargo. The port’s performance is far from satisfactory though. 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 US$1.8 billion 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 US$2.6 billion 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 US$750 million expansion project that aims to increase Dar es Salaam’s cargo handling capacity to 28 million tonnes in 2020 and to 34 million tonnes by 2025[9].

As the surroundings of Dar es Salaam are overcrowded and expansion of the port is limited, Tanzania is investing US$ 10 billion 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, are 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, who will also be responsible for much of the construction work. The other partner in financing the project is Oman’s State General Reserve Fund[10]. 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 20 million container unit capacity per year[11].

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 US$ 5.7 billion of goods in 2015, it imported US$ 9.8 billion in the same year[12].

Singapore is also an important trading partner of Tanzania. Singapore’s bilateral trade with that country amounted to US$ 132.4 million 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 US$ 123.5 million in 2015. Top exports included petroleum products, aseptic bags and medical instruments[13].

The Gateways to East Africa

Kenya and Tanzania still rank relatively low at the Logistic Performance Index. The indicator is a weighted average of each country score on the following 6 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 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[14].

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 also must be efficient and connect these ports to the country-side 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, but they are still 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 overas@ntu.edu.sg.  

[1] Mombasa Port thrives (The Star, May 2016)

[2] Annual Review and Bulletin of Statistics 2015 (Kenya Ports Authority, 2015)

[3] How Kenya’s Port of Mombasa Became the World’s Hub for Ivory Smuggling (Wall Street Journal, May 2015)

[4] Mombasa a favourite transit route for drug traffickers, say experts (Standard Digital, Aug 2016)

[5] Kenya invests $1 billion to boost Mombasa port capacity (The New Times, Dec 2015)

[6] The World Fact Book (Central Intelligence Agency, Kenya)

[7] Lamu Port and related infrastructure, Kenya (Environmental Justice Atlas)

[8] Kenya Ports Authority (KPA) says Lamu Port needs Sh3b to unlock construction stalemate (Standard Digital, May 2016)

[9] Tanzania aims for big results with Dar es Salaam port expansion (The National, May 2015)

[10] Tanzania starts work on $10 bln port project backed by China and Oman (Reuters Africa, Oct 2015)

[11] Tanzania says mega-port project will start in July (JOC.com, Nov 2016)

[12] The World Fact Book (Central Intelligence Agency, Tanzania)

[13] Singapore’s investments in Tanzania ‘encouraging’: Koh Poh Koon (Channel Asia, Apr 2016)

[14] International LPI Global Ranking (World Bank, 2016)

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