Wave of support for concessions: while the debate between state ownership of key enterprises and wholesale privatisation rages across the continent, a very workable compromise seems to have been found by the ports and harbours sector. Neil Ford has the details

African Business, June, 2008 by Neil Ford

Discussion of economic development on the African continent has long focused on the debate over public versus private ownership and management. Companies and important infrastructure can be operated by state owned operations for the benefit of the people but are generally relatively inefficient and poorly funded.

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On the other hand, private sector enterprise takes profits out of the host country, despite its better access to finance and more modern management methods.

The port sector has been the scene of particularly intense conflict between these two approaches but there are signs that private sector companies may finally be winning the argument.

In the continent's most successful economy, South Africa, the government appears to have abandoned plans to transfer control of its key ports to private sector firms.

Richards Bay Coal Terminal (RBCT) is owned by privately owned mining firms, but the country's other main port facilities are ultimately controlled by the state owned transport umbrella organisation Transnet. Yet in neighbouring Mozambique, the government has put its faith in the private sector to rehabilitate both port and rail infrastructure.

Further up the coast of East Africa, there is another example of conflicting styles, where Hutchison Port Holdings (HPH) of Hong Kong has revolutionised the standing of Dar es Salaam container terminal and its investment has allowed the Tanzanian port to close the gap on its regional rival, Mombasa.

Despite transferring control of the Mombasa to Uganda railway line to a private sector consortium, the Kenyan government seems committed to keeping the port of Mombasa under state control.

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However, the trend towards private sector management marks something of a break with the traditional debate over public versus private control. The ownership of port facilities is not generally transferred to private sector companies; rather, potential operators are awarded fixed-term contracts to operate and improve services and infrastructure.

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The actual port and terminal facilities remain the property of the government in question, while contracts are overseen by a state owned sector regulator, which has the power to revoke agreements if they are broken, in what is usually referred to as the 'landlord port model'.

The Nigerian government struggled to introduce the landlord port model during the two terms of office of President Olusegun Obasanjo. Many concession processes were finally completed towards the end of his second term of office and over the past few months it has become clear that other countries in West and Central Africa are following suit.

APM Terminals, an offshoot of Danish firm Maersk, is particularly active in the region. It already operates terminals at Douala in Cameroon, Abidjan in Cote d'lvoire, Tema in Ghana, plus Lagos and Onne in Nigeria.

Then, in July 2007, it was awarded a 20-year concession to manage Luanda container terminal in Angola, in a joint venture with Gestao de Fundos, an Angolan pension fund. Equity in the operating company, named Sogester, is to be split between the two partners 51% to 49% and as on most similar ventures, APM will be required to train Angolans to take up many positions at the terminal.

The head of APM Terminals Africa Region, Simon Pitout, said: "Sogester plans to make substantial investments and improvements to the container yard, quayside and terminal handling equipment." Also in July last year, APM opened a new container terminal at the port of Tangier in Morocco, alongside local partner the Akwa Group.

Operators from the Gulf and Malaysia

Another of the world's biggest port operators, DP World of Dubai, took over control of Dakar container terminal in September 2007. It will increase the handling capacity of the existing Terminal a Conteneur from 250,000 20-foot equivalent units (TEUs) to 550,000 TEUs by 2010 and will operate the terminal until 2032.

Under a separate contract, the Gulf firm will develop and operate a brand new container terminal, Port du Futur, with handling capacity of 1.5 million TEUs. The facility should be completed as soon as 2011 and appears to be designed for transit trade, given its large capacity.

The chief executive of DP World, Mohammed Sharaf, said: "We are pleased to have won this important concession. Senegal's stability has enabled it to become one of the most progressive West African countries, which in turn has brought direct foreign investment and growth in trade. In addition to its strong local economy, Senegal is an important transit gateway to West Africa, and is strategically located at the crossroads of several major trade lanes." Another Dubai firm, Jafza International, plans to develop a special economic zone at the port that will hopefully attract industrial and manufacturing companies to the city.

Also in September, the government of Gabon selected Portek International of Singapore to operate the country's two main ports for the next 25 years.