Ian Lee and Isabelle Low from IE Singapore’s Middle East and Africa Desk and Jonathon Kam from the Transport & Logistics division urge Singapore companies to invest in the numerous opportunities available in African ports

As an emerging market with immense business potential, Africa is a continent of strategic interest to Singapore. In order to access the numerous opportunities available in the region, it is of utmost importance for companies worldwide, including Singaporean companies, to locate an entry point for their goods.

Given that port efficiency and performance in African ports have yet to match international standards, there is an opportunity for Singapore companies to invest in developing these ports to raise their capacities in serving the expected increase in African maritime trade volume.

Africa’s main trading partners are the European Union and North America, accounting for 40 per cent and 25 per cent of its exports, respectively. The leading exporting countries are in different regions of Africa – Algeria in the north, Nigeria in the west and South Africa in the south. Together, these countries accounted for an export volume of US$195 billion (S$268.51 billion*) in 2007.

Sub-Saharan Africa is the largest exporter of fuels among developing regions. In the last decade, export of fuels from Africa grew by an estimated 20 per cent annually. At the same time, Africa imports the largest quantity of agricultural goods worldwide.

Ports are integral to the continent’s competitiveness

The high level of dependence that African countries have on foreign trade means that maritime ports are integral to the continent’s competitiveness. Similarly, Africa’s positive trade outlook suggests bright prospects for maritime ports in the region, particularly in the handling of fuels (including coal) and agricultural products.

Across all types of cargo – containers, general, bulk (dry and liquid), and project – port volume is forecasted to surge in the next few years. In particular, over the last decade, Southern Africa experienced the fastest growth in general cargo traffic, while Western Africa experienced the fastest growth in container traffic. Export volumes are largely dominated by dry and liquid bulk cargo, while import volumes mostly arise from general and containerized cargo. 

The rise in port volumes over the past few years can be attributed to the rapid economic growth in Sub-Saharan Africa, leading to growing global trade with the region. At the same time, the privatization of ports and the advent of modern container vessels have accelerated containerized traffic growth.

Good prospects due to rising inter-continental trade

Against the backdrop of rising inter-continental trade with Africa, the prospects for African ports are optimistic. Yet, among Sub-Saharan ports, few of them are well equipped to capture the increase in port volume. In the short term, most of them face severe capacity constraints, indicated by frequent congestions. It has been highlighted that these ports suffer from low capacity in the aspects of terminal storage, maintenance and dredging capability.

While transport corridors are common for ports to serve inland countries, these lack full integration and require refurbishments to effectively serve their purposes.  Containers cannot easily access land-locked hinterlands which represent huge markets due to connectivity constraints.

In the last decade, African ports saw an increase in shipping container traffic of 11.8 per cent. Over the same period, general cargo traffic increased by 9.7 per cent.  As trade volumes in Africa rise, it is even more important to invest in improving port infrastructure and operations. While many projects have been rolled out for this purpose, they are not enough to meet the rapidly growing demands on African ports. There remain many opportunities for private sector involvement in this sector.

Singapore companies can expect high returns from investing in strategic African ports, owing to the massive leap in port volume which can be attained through better infrastructural and operational capacities.

*Exchange rate correct as at 20 July 2010