The UK development finance institution CDC Group entry into a long-term investment with the DP World, a global ports operator, signifies the increasing importance of external support to build capital-intensive projects needed to speed up Africa’s long-term trade potential. The two signed a partnership agreement worth more than a billion dollars to boost DP’s three ports in the continent.
Despite Africa hosting a sixth of the world’s population, it only accounts for just 4% of global containerized shipping volumes. Port constraints and logistics inefficiencies limit countries’ capacity to serve their local economies.
DP World is contributing its stakes in the three existing ports initially and expects to invest a further $1bn through the platform over the next several years. CDC is committing approximately $320m initially and expects to invest a further $400m over the next several years.
Thus, the new partnership hopes to help address immense trade imbalance by supporting modernization and expansion of ports and inland logistics across Africa, where DP world has a stake. As a start, the Ports of Dakar (Senegal), Sokhna (Egypt), and Berbera (Somaliland) are initial beneficiaries.
The partnership specifically targeted these ports, as we expect them to provide a gateway to international markets for countless African businesses. In addition, they are supporting the growth of a rich ecosystem of nascent export industries in their respective countries, currently stymied by logistics inefficiency.
Asked on what was the partnership investing in, the CDC, through its website, on frequently asked questions responded thus;
“The partnership will focus on supporting projects to modernise and expand ports and logistics with distinct strategic importance to Africa, both at the seaboard and inland. These include seaports, free zones, inland cargo handling facilities or dry ports, and inland transport.”
Supporting investment in Berbera, CDC said the expansion will multiply its capacity to create a regional trading hub. This will help drive much-needed development for some of the most vulnerable in Somaliland and support the continuing growth of Ethiopia, which will have a positive knock-on effect on the wider Horn of Africa region.
In Dakar, CDC said that the expansion of the port will add much-needed capacity to West Africa, where other regional ports are already stretched, depriving hinterland trade routes of opportunity.
“Dakar city is choked by over 1,000 trucks entering the container terminal each day. This inevitably leads to supply chain disruptions and increases the cost of essential goods. The port expansion will support trade with landlocked Mali and help Senegal become a hub of economic activity for the region,” CDC said.
In Sokhna, the ongoing expansion of the port will continue to cement Egypt’s position as a global logistics and manufacturing hub, according to CDC officials. It will also support Egypt’s trade with the Middle East and Asia in particular, and the industrial growth centered around the southern end of the Suez Canal and New Cairo.
By 2035, an estimated $51 million in additional trade is projected to pass through these ports, equivalent to 3% of Senegal’s GDP, 3% of Egypt’s GDP, and 6% of Somaliland’s GDP. They also expected the partnership to create 138,000 jobs through the ongoing expansions and modernizations, and improve supply chains for critical goods and staples, with a direct benefit to over 35 million people in the wider Horn of Africa and parts of the Sahel.
The move by many African ports to boost their competitiveness has made them attractive to foreign direct investments flowing into the continent. In fact, in 2017, A.P. Møller- Maersk, the parent company of the world’s largest shipping line, established A.P. Moller Capital (APMC), tailored to raise enormous sums of money for investments in growth markets. The investment fund has gone further to dedicate an exclusive African portfolio – The Africa Infrastructure Fund. Currently, the fund has recorded a subscription of close to $1 billion and supports 15 investments around the continent.
“Choosing Africa as the geographic area of interest for our first investment fund came naturally since the continent’s infrastructure investment requirements are extremely vast and yet remain under-financed. For now, we have invested in four African countries, including our recent investment in the African port platform Arise Ports and Logistics, which operates or develops port infrastructure in countries such as Cote d’Ivoire and Gabon,” explained Kim Fejfer, CEO of A.P. Moller Capital.
Indeed, the African port sector has transformed for the past two decades. According to a report by Okan Finance and Africa CEO Forum, it characterizes this progress in terms of an increase in sizable investments, the growing involvement of major economic powers and private international operators, and the emergence of world-class ports- Morocco’s Tangier Med and Durban in South Africa.
Between 2005 and the first half of 2019, private investment in African ports totaled $15 billion- and more than $50 billion when considering the public investment. This is 13 times more than the investment over the 1990-2004 period.
