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Date : 26/05/2003
Source: Department of Public Enterprises
Title: Radebe: IAPH World Ports Conference


ADDRESS BY JEFF RADEBE, MP, SOUTH AFRICAN MINISTER OF PUBLIC ENTERPRISES, AT THE OFFICIAL OPENING OF THE 23rd IAPH WORLD PORTS CONFERENCE, Durban, 26 May 2003

PORTS - THE CATALYTIC IMPACT: UNITING WORLD ECONOMIES THROUGH PORTS AND HARBOURS"

I am delighted and honoured to participate in the 23rd World Ports Conference of the International Association of Ports and Harbours. It is especially gratifying that your conference coincides with Africa Day celebrations to honour the 40th anniversary of the formation of the Organisation of African Unity and when we are hard at work to secure the success of NEPAD. Africa's recent economic performance has been encouraging, and specifically in the area of ports and harbours administration and development, important steps have been taken to accommodate Africa firmly within the ambit of the global economy.

With your permission, I wish to attempt just three things in my comments to you this morning. Mindful of the fact that this is an international conference, I wish to share some perspectives on the global strategic and economic environment that may influence the role of ports and harbours within the context of maritime security, the welfare of nations and the global economy. Second, I suggest a layman's view of some issues identified in the working sessions you have planned. Finally, I shall reflect - with a view to encouraging debate even beyond the Conference itself - on the role Africa's ports play today and into the future.

Although your conference agenda was set nearly two years ago, the integrity of that programme is reinforced by recent developments. Since the IAPH last met in Conference in Montreal in 2001, momentous changes to the international strategic framework have occurred that impact on the global economy. Global economic growth has faltered, although the impact is uneven. More noticeable is the manner in which security considerations have emerged as a key element everywhere, precisely at a time when global initiatives towards trade facilitation and incorporation have advanced. Critical to the present time, therefore, is for this Conference to reflect on how to ensure the necessary balance between trade facilitation and the security not only of trade but of the overall system in which sea borne trade takes place.

The UN Conference on Trade and Development's most recent Review of Maritime Transport summarises developments in international sea borne trade during 2001 that I will not repeat here, except to highlight a few of their findings. First, they find that "the rate of economic growth of African countries over the last three years has exceeded the average growth rate of the last decade." Most notable have been the successes of Morocco, Tunisia, Cameroon, Ghana, Nigeria, Algeria and South Africa, all with growth rates between 5% and 2.1%. The growth in export volumes for developing countries in Africa and South America was 2.5% and 2.7% respectively during a period when the volume of world exports actually contracted by 1.5%. Digging deeper, the IMF found that in 2000, Asia, America and Africa accounted for some 25, 17 and 2% of imports to the USA, collectively representing a significant slice of total American trade. But that trade to the USA represented, for the country groupings outlined, 23, 54 and 19% respectively.

UNCTAD further predicted that although the stage was set for slight growth in 2002, they pointed to the possible negative impact on world trade of higher insurance and security costs, increased transport costs, increased demand and investment in the IT sector. They also foresee that "the structure of exports from developing countries is likely to continue the shift from commodities to manufacturing exports, leading to greater use of containers." Indeed, world container port traffic continues to expand at a remarkable rate, particularly in the developing world where ports handled nearly 42% of the total number of TEUs.

It is also interesting to note the continental breakdown of sea borne exported goods. In 2001, Oceania's share of world exports was 7.4%, Africa's 9.4%, the USA 20.9%, Europe 25.5% and Asia 36.8% of the total tonnage, with the expectation that such a division would remain stable down the line. Similarly, UNCTAD predicts stability in the identity of the major trade routes as well, all of which generally bypass sub-Saharan Africa, South America, and the perimeters of the Asian rim. It is also clear that with the development of significant new classes of vessels, especially in the container environment, that we consider the impact the post-panamax giants will have. For example, already there has been some negative impact in some developing country ports, where shipping lines are using larger capacity container vessels than before that places extreme pressures on administration and infrastructure alike. There will also clearly be a refinement of the "hubs and spokes" philosophy we use to understand many of these linkages.

There are a number of ways of defining the role and function of harbours and ports in today's world. Two examples from the literature highlight aspects of an evolving pattern. A common generic view is that:

"Ports are the jugular between the ocean movement of goods and their overland movement. They play a critical role in the success of the international trade as a whole and in the economic growth of countries and regions specifically... They are also a processing center for efficient routing of goods, regulatory inspections, and payment of all the parties involved in the logistical system. Ports often have ancillary business, such as storage, container stacking, and packaging. They may also be home to industrial parks serving companies that need proximity to a maritime delivery/shipment point. "

Another perspective emphasizes more particularly the nature of the relationship between ports, and provides a useful dimension on the importance of how port operations relate to each other within the context of the global economy:

"...Globalisation... has resulted in a fragile socio-economic structure susceptible to disruption at many places and in many ways. For instance, consumer goods are seldom produced in one plant or even one country today, they are now assembled from component parts made around the world. Similarly, raw materials are largely refined in places other than where they were extracted. ...creating a production and market system dependent on various means of transportation of which the container industry is a key element. This system is managed by the transfer of data, orders, and capital by satellite and, increasingly, fibre-optic networks. The shift ... to a policy of "just in time delivery" for raw materials, component parts, and finished goods greatly increases the system's susceptibility to disruption. ....Further, the suppliers of international transport are consolidating into fewer but larger global organisations, which includes not only shipping lines but also port operators, forwarders, insurers, and ship builders. Therefore, the global economy can be brought to its knees quite easily. "

What do these two lengthy quotes tell us? First and foremost, they emphasise the strategic and critical link that ports and harbours play not only for individual countries and regions but also within the global economy itself in this era of increasing interdependence and reliance. Second, they encourage us to think of the global economic system as fragile and subject to potential disruption as much through terrorism as through inefficient operation or the proximity of ports to major trade routes, and their linkage to interior import and export markets. Third, the authors test us to propose ways and means to build international interdependence to promote growth, development and progress for the citizens of our individual states. Fourth, they suggest that the real answers to problems such as congestion, delayed or early arrivals of vessels and cargo, inadequate communication, IT, or infrastructure, may indeed lie in a better appreciation of how the whole system itself works, than on simplistic isolated solutions.

Three examples of disruption and anti-social activity may serve to highlight some of these questions. The terrorist attack on the French tanker Limburg on 6 October last year caused a reduction in half of port activity, amounting to a loss of around $3.8 million a month, largely through the imposition of a 300% increase in premiums by insurance underwriters and the application of a $250 war risk surcharge per TEU by ship owners that led to a number of vessels rerouting to competing ports.

UNCTAD also highlights the massive $10 billion effect of cargo theft in the USA and in respect of China where damages to fruit and vegetables, that according to Lloyds was a result of poor transport management, totaled "close to $9 billion...or enough food to feed a staggering 200 million people." Thus, the cost of poor transport security infrastructure cannot be underestimated and is precisely one of the reasons why we in Africa, through NEPAD, have highlighted this as a top priority.

Another problem for the shipping industry is the increasing incidence of piracy, robbery, hijacking of vessels or their disappearance, especially when we note the increasing number of incidents affecting vessels at anchor or berthed in ports. Whilst the vast majority of these incidents involved gangs of robbers, the vulnerability of vessels at sea and while berthed at a number of ports and harbours, particularly in developing areas of the globe, must be a cause for concern by all.

A critical challenge is the development of an efficient and secure transport system world-wide in a manner that accommodates the actual capacity of states and regions, reflects the reality of an asymmetric world in terms of wealth and poverty, and balances the universal concept of the threat of contemporary terrorism against realistic threats in particular regions.

This is no easy task, but a necessary one nonetheless, but I am encouraged by looking at the topics of your conference work sessions and the titles of specific contributions that this Conference will come to conclusions that will assist us. This Conference is timeous to say the least, as countries around the world grapple with the need to assess the International Maritime Organisation's amendments to SOLAS 1974, and especially the new chapter on port facility security and administration and the tight timeframes it adopts. Together with new customs and trade regulations, these provide new challenges and implementation may add to the financial and administrative burdens ports and harbour administrations face in many developing countries.

I merely refer conference delegates to UNCTAD's technical note on the "The Impact of Transport Security Initiatives on Developing Countries" and express my confidence that constructive solutions to the questions raised will emerge in due course. In particular I refer to the sobering comment the report contains where it reflects that "Developing countries that view these additional costs as undermining their competitiveness in accessing the US market may be compelled to direct their trade elsewhere, if that is an option." And I would add that we should examine closely the initial indications from other parts of the globe that shifts in trade patterns within continents and countries brought about by developments within global trade have been accelerated through the selective negotiation of agreements and participation by some ports in a number of the new security initiatives.

What place, then, for African ports? And what role in the future?

Africa's economic recovery remains a fragile yet critical project. The impact of disruptions referred to earlier may in all likelihood have a greater relative negative impact on our continent than elsewhere. Africa's 90 or so ports handled about 6% of world traffic in 2000. But just 8 ports in Egypt and South Africa handled 52% of the continent's container traffic. In global terms, our ports and harbours are small operations, with Durban, according to Piers, ranked 44th and Alexandria 75th in the global pecking order in 2000. Clearly, the economic and strategic importance of these ports to Africa's development as a whole cannot be reduced to mere percentages. There is an intricate yet extremely fragile railway system and generally poor road infrastructure within the continent. Inland container terminals are often poorly maintained not for lack of will, but for a tight squeeze on resources. Nor should we forget the numerous river ports and those of inland lakes that serve potential markets. Conflict and civil war has had a profoundly negative impact on ports in affected regions. Infrastructure and other problems have together influenced congestion patterns, including Durban and other South African ports, in ways that underline general capacity problems that are drawn in sharper terms precisely because of the manner in which the global economy is structured.

At the same time as Africa confronts these new problems, the process of reform, restructuring and the reorganization of Africa's ports continues. Although it is still early days, initial analysis suggests that container throughout has increased, performance indicators improved and the quality of services has strengthened. Roughly 80% of Africa's ports are now undergoing reorganization of one sort or another. Of these, about 40% have opted for the concession of some operations and services, whilst fewer have gone the route of outright privatization. South Africa is moving steadily along the path of concessions for selected port operations, beginning with the Durban Container Terminal. As usual, legislation that encompasses roles and responsibilities, provides security or comfort for users and owners alike, and identifies the regulatory regime, is currently before Parliament. Intricate issues that deal with cross-subsidisation or indeed labour issues such as the impact of casualisation and employment are being addressed through agreed structures and processes. These are not simple matters, nor are the decisions involved taken lightly. Nor can they be, as these decisions can have a decisive impact on future prosperity of the country as a whole as well as the immediate workforce and sustainability of the business.

There are also indications of greater cooperation between ports within Africa, and I might just cite South Africa's National Ports Authority activity at Tema in Ghana, and proposed partnerships in Kenya, Nigeria, Angola and Gabon as but one example of joint African initiatives to build capacity on the continent. But at the same time, it is clear from projections for the nest 10 to 15 years that we somehow do not expect any substantial increase of sea borne trade between African countries or regions. Surely the challenge of NEPAD should include taking advantage of our coastal trade routes to a much greater extent than the statistical forecasts suggest?

In summary, what does this all tell us? Underlying the statistics of international trade and development is a particular structure of the global economy that is fragile and subject to very costly disruption. Ports are at once a critically important link in the logistics chain, and a point of tension, where, because of the new economic and political conditions, their importance marks them either as targets for mischief or through their own inadequacies, disruptive agents in the trading system between states. Africa's dependence on properly functioning ports and harbours is more strategic precisely because of where we come from, a legacy for whatever reasons of poor transport infrastructure generally, distortions in development, and an unequal relationship with the developed world. Thus, infrastructure development, modern administrative systems, adequate and forward-looking IT communication systems, integration and sustainable development are key words in our ports' reorganization language. The costs of doing business in Africa, especially where these relate to unreasonable tariffs and rates, poor service, and so on, have to be reduced. At the same time, we must be wary that our distance from dominant routes, and the reality of our capacities right now, and that the mix of different vessels calling at African ports, particularly those carrying containers, will continue to provide challenges to the creation of a seamless system. All in all, we in Africa have to ensure that the stirring of our ports, their rejuvenation and development, is nurtured in the middle of extremely testing times.

Allow me to conclude.

Africa has a long history of maritime adventure and sea borne trade has helped shape its history from the earliest times. The Indian Ocean trade system centred on the Swahili coast and incorporated China, India, and the Arab countries. It brought the East into contact with Africa's interior, as far as the eastern corners of present day Angola and the DRC. The extensive trade routes from the "ports" of the Sahel in West Africa, like Timbuktu, Niamey or Jenne, crossed that mighty ocean without water, "the Bahr bela ma", or Sahara, to the North African coast. Before Europe rose from its darkness to dominate the globe through aggressive exploration and military and naval conquest, Africans plied the seas, built magnificent ports, and developed intense cultures. Along the East African coast, the magnificence of the ports of old, like Kilwa, Sofala, Lamu, Mombasa, Malindi, Djibouti, Zanzibar, was ravaged in the immediate aftermath of the Portuguese adventure into the Indian Ocean. The impact of those times for African development is captured in the 1815 epic poem, Utendi wa Inkishafi, of a now long forgotten poet of Lamu, when he wrote in the deep Swahili of the time:

"Madaka ya nymba ya zisahani
Sasa walalilye wana na nyuni...."

This has been translated as recalling:

"Where once the porcelain stood in the wall niches,
Now wild birds nestle their fledglings..."

It is our fervent collective task, as we celebrate Africa Day, and as this august international company of ports and harbour experts, administrators and officials gathers to discuss pertinent issues, that we ensure that the wild birds that have nested for so long in the ruins of long-lost greatness will be displaced by a renewed prosperity, despite current challenges and the fragility of our world. I am sure that my African colleagues who are here this week will agree with me that the task is indeed within our reach. It must be so.

I wish your deliberations success and look forward to the report of Conference as a whole.

I thank you.

Source: Department of Public Enterprises (http://www.dpe.gov.za)

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