Tenders Invited for Dar General Cargo Terminal
Ford, Neil, African Business
The experiment with private-sector management of Dar es Salaam container port has proved so successful that the Tanzania government is now inviting management tenders for the port's general cargo terminal. Neil Ford argues that this could be the first step in increasing the volume of trade not only for Tanzania but for East Africa as well.
The Tanzanian government is set to step up its reform of the transport sector. With little threat to the authority of the ruling Chama Cha Mapinduzi party (CCM), the main debate in the country over privatisation seems to have been won by the reformers. Although there have been some problems with specific privatisations, such as that of Dar es Salaam Water Supply Authority (Dawasa), the overall trend seems to be in favour of increasing the role of the private sector.
Although the term 'privatisation' is generally used within Tanzania, it is somewhat inaccurate to describe the port and rail reforms as privatisations. The government does want to transfer the management of transport infrastructure to the private sector but private sector investors would only be prepared to commit themselves if they can be sure to recoup their investments in the long term. Tanzania has therefore opted for the landlord model, whereby private companies take control of assets, from strategic planning down to day-to-day operations, but the actual physical infrastructure remains the property of the state and the contracts are overseen by state owned authorities.
Hong Kong-based Hutchinson Port Holdings (HPH) has managed Dar es Salaam container terminal since 2000. Despite current problems with delays, the company has greatly improved efficiency at the terminal by introducing IT based cargo processing systems and investing heavily in cargo handling equipment. Turnaround times--the time taken to unload and then reload vessels--have greatly improved and Dar es Salaam has begun to seriously challenge Mombasa as East Africa's main port.
The Tanzanian government has been so impressed with the performance of HPH that it has decided to offer a similar contract to manage Dar es Salaam's general cargo terminal. However, the original tender process was subject to a series of delays before being cancelled in August 2006.
Under Tanzanian law, state owned authorities are not permitted to make capital investment in order to make state owned assets more attractive for sale or tender. However, according to Ephraim Mgawe, the chief executive of the Tanzania Ports Authority (TPA), the government has been able to take advantage of the cancellation to strengthen the financial position of the TPA, to make it more attractive to likely investors. The tender has now been relaunched and the new operator is scheduled to be in place by the middle of this year.
This seems to be an ambitious timetable in the extreme, particularly given the delays that have afflicted other tender processes in Tanzania and elsewhere in East Africa. Yet by setting such a short time frame for the tender, the government is setting out its stall that the tender will go ahead and that the contract will be awarded. While HPH was awarded just a 10-year contract, the winning general cargo terminal operator will receive a 20-year contract, presumably because it is felt that investors will require more time, both to turn around the terminal's fortunes and to justify large scale investment.
At present, the general cargo terminal offers services to bulk and break bulk customers at seven berths. Reports in the East African press have suggested that private operators will be required to develop additional berths and while this is likely to be a long term goal, it seems far more important to improve terminal efficiency, deepening all channels and the depth alongside to ensure that larger vessels can enter the port. At present, the berths have a draught alongside of between nine and 12 metres, but greater than 12 metres is required for larger vessels. …