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Can Bagamoyo be East Africa's gateway?

Summary: A new port could ease congestion in Dar es Salaam and transform Tanzania into a trade and manufacturing hub.

Tanzania is turning a harbour, once known for its ivory and slave trade at the beginning of the 19th century, into one of the regions largest ports. The new development at Bagamoyo port, estimated to cost around $11bn, will act as an important gateway to booming trade between the east coast of Africa and the rest of the world.

It is also hoped that the new development will ease pressure on other ports serving the region, including the ports in Mombasa, Kenya; Djibouti; and Tanzania's main harbour in the country's capital Dar es Salaam.

The development, just 75km north of Dar es Salaam, will include 800 hectares of Bagamoyo port, and an ad- ditional 1,700 hectares of a Portside Industrial Zone -- a specially designated area for industrial development. The port and the industrial zone will be developed under the tripartite agreement between the govern- ment of Tanzania, China Merchants Holdings Inter- national and the State Government Reserve Fund of Oman. According to the agreement, financing will come through interest-free or low-interest loans.

Also included in the agreement is the development of a $500m railway linking Dar es Salaam to the port and the industrial zone, funded by the Export-Import Bank of China.

"The new Bagamoyo port will be the biggest in the region, handling larger fourth-generation ships," says Makame Mbarawa, minister of works, transport and communication in Tanzania.

"It will have no competitor in Eastern Africa.

" The port will be used in large part to transport iron ore and coal, he says, and follows a $3bn deal signed in September 2011 by China's Sichuan Hongda Limited with Tanzania to mine coal and iron ore in Mchuchu- ma and Liganga mines, both in southwest Tanzania. According to the agreement, Sichuan Hongda will own 80% of the joint venture project, with the remaining stake held by Tanzania's state-run National Develop-ment Corporation.

As Charles Tizeba, Tanzania's deputy minister for transport, points out, the port is part of the country's ambitious plan to shift its development agenda towards industrialisation as well as encourage the development of light industries for the processing of agriculture- based raw materials. The Tanzanian economy is heavily based on agriculture, accounting for 24.5% of GDP.

The combination of the special industrial zone and the port aims to ensure that the country's economy improves. "Initially, we would export our agro-based raw materials to foreign markets without adding any value," says Sauda Bakari, a nut farmer from Mzenga, Dar es Salaam. "This made agriculture unattractive as the returns were a bit low. Perhaps this new develop- ment will change this."

Export Processing Zones Authority director general Adelhelm Meru observes that the industrial zone will contain warehouses, an inland container depot, train- ing centre, showrooms and assembly plants. "All these projects will make Tanzania an investor destination of choice," says Meru.

People familiar with the port construction project say the idea was hatched in 2008, when former Presi- dent Jakaya Kikwete of Tanzania paid a state visit to the then Chinese President Hu Jintao in Beijing. A follow-up discussion was later held during the Forum on China-Africa Cooperation in 2012.

Professor Mbarawa says once completed, Bagamoyo port will play a pivotal role in the country's economy. The Tanzania Ports Authority (TPA) estimates that Dar es Salaam port handles $15bn worth of cargo every year, serving East Africa's landlocked countries includ- ing Zambia, Rwanda, Malawi, Burundi and Uganda.

But the port has failed to work at full capacity. Ac- cording to data from the World Bank, inefficiencies in the port cost Tanzania and its neighbouring countries up to $2.6bn annually.

More modernisation

TradeMark East Africa, a not-for-profit organisation that supports the growth of trade -- regional and inter- national -- in East Africa, pegs the inefficiency problem to the strong growth of transport demand for the Dar es Salaam port, creating congestion and delays.

"Studies have shown that the Dar es Salaam port layouts, off-take processes, stacking arrangements and marine services are in drastic need of modernisation. They must suit the needs of modern container, dry and liquid bulk-handling requirements and technologies, and the sharp growth in traffic and daily freight tasks," says Josaphat Kweka, TradeMark East Africa country director for Tanzania.

Kweka argues that the land immediately surround- ing Dar es Salaam port is characterised by poor and inadequate infrastructure, uncoordinated development and a mushrooming of poorly regulated activities.

It is on the back of this that TradeMark East Africa recently said it would offer technical aid and financial support to the TPA or the port's modernisation. "This will make the port an efficient trade gateway through public and increased private sector investment," says Kweka.

The modernisation, which started in April 2015, will cost $596m. Carried out in two phases, the first part of the project involves enhancing the port's efficiency through the relocation of sheds, upgrading roads and gates to introduce a single-way traffic-flow system, and improving productivity and operational processes.

Although the timing has not yet been defined, the second phase is funded by the World Bank and the UK's Department for International Development, and seeks to strengthen and modernise the dredging and berths to allow the handling of bigger vessels. This will improve the port's competitiveness in the global arena. Ultimately, on completion in around 2020, analysts say the Dar es Salaam port capacity will have doubled to 28m tonnes.

However, not everyone is happy with the construc- tion of the proposed Bagamoyo port. Shipping agents say it would be a waste of resources to build such a mega facility, which may have little or no positive impact on the Tanzanian economy in the next two decades. They observe that the East African countries' economic growth is so lukewarm that they may only use the mega port after 20 or so years.

"Shipowners still struggle to fill vessels that ac- commodate between 1,500 and 2,000 TEU (20-foot equivalent units -- standard-sized containers). In many instances, they are compelled into mergers to cut operational costs. Yet Bagamoyo port will have the capacity to accommodate vessels of over 6,000 TEUs. Where will this cargo be found?" says the Tanzania Shipping Agents Association.

The Tanzania Ports Authority estimates that Dar es Salaam port handles $15bn worth of cargo every year.

All these projects will make Tanzania an investor destination of choice.

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Publication:African Business (Al Bawaba (Middle East) Ltd.)
Geographic Code:6TANZ
Date:Mar 31, 2016
Words:1083
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