13th Round Table Conference of PMAWCA Managing Directors June 29-30, 2015 – Abidjan Cote d’Ivoire

1. Private sector participation
in West Africa Container
Terminals
World Bank
13th Round Table Conference of PMAWCA Managing
Directors
June 29-30, 2015 – Abidjan Cote d’Ivoire

2. West Africa ports in the early
2000s
• The containerization of the West
Africa liner trades was mature, but
ports had not fully adjusted:
• Inadequate facilities: quay cranes were
rare, imposing geared vessels
• Poor hinterland connections
• High level of container stripping in
ports
• Despite comparatively low traffic
volumes, most West Africa ports
were reaching saturation:
• West Africa was perceived as a niche
market by shipping lines
• Shipping lines were heavily penalizing
trade by levying congestion surcharges
• Future trade growth constrained by
capacity limitations
• Governments and Port Authorities had
insufficient resources to develop
container terminals
• Private sector participation was seen
as the ‘silver bullet’ to transform and
modernize the West Africa ports:
• Global push towards the landlord port
authority (including from World Bank)
• Reforming and modernizing the sector
was clearly needed, but reforming
from within is usually difficult, and
bringing in private sector was a means
to an end

3. The waves of container terminal
concessions in West Africa
• The first wave for existing
facilities between 2004 and
2010
• First concession signed in
2003 with Abidjan, with take
over of operations in 2004
• By 2010, almost all terminals
were under concession,
leaving out Banjul, Takoradi,
Bissau …
• The second wave started end
of 2012, for greenfield
developments:
• Lome LCT
• Abidjan TC2
• Tema expansion
• Lekki & Badagry in Nigeria
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
MillionTEUs
West Africa Ports Total Traffic
Terminals under concession Not under concession

4. So, was PSP the ‘silver bullet’?
Yes, on a number of counts
• West Africa ports have been transformed:
• Concessionaires have developed real
container terminals out of multipurpose
berths
• Port capacity has increase through
immediate productivity gains, creating
space for physical infrastructure
development
• New financial space has been opened:
• Private sector tapped into resources not
easily accessible to governments
• Governments now directly receive a
portion of concession fees and revenues
But with strings attached
• A public monopoly was replaced by a private
monopoly without adequate regulation:
• Container terminal concessions are
dominated by a duopoly (BAL and APMT)
• Port tariffs have not seen a decline
• Weak oversight capacity from the public
sector
• The jury is still out on the comparative
advantages of public versus private sector
for productivity
• Most port challenges have been addressed
but ports are not the only weak link in West
Africa Transport networks:
• At ports, dwell time still an issue
• Inland, trucking services, transit regimes
are still an issue

5. The gains from PSP: Container
Terminal capacity and demand
• Port capacity has been increased
through immediate gains in port
productivity by:
• Investing in quay (STS) and yard (RTG)
handling equipment
• Training of terminal personnel, and
• In some cases physical infrastructure
(additional quays, more yard space)
• Container traffic has been growing
faster than GDP over the last decade:
• Average growth rate has been 8.5%
per year, reaching 5M TEUs in 2013
• Transshipment will grow, adding to the
organic growth
• But demand may take a few more
years to build up to that level:
• GDP growth forecast revised
downwards for some countries
• Uncertainties on transshipment
strategies
-
2
4
6
8
10
12
14
16
18
20
2006 2011 2017 2020 2025
MillionTEUs
West Africa Ports Traffic and Forecasts
Transhipment
Trade related for landlocked countries
Trade related for coastal countries

6. Gains from PSP: Terminal Capacity
Development
• Greenfield projects
emerged to cater for
longer term demand:
• Lome LCT
• TC2 in Abidjan
• Tema
• Lekki
• Badagry
• Port du Futur in Dakar

7. Gains from PSP: Transformation of
the liner services
• The transformation of the ports
enabled shipping lines to
upgrade their services with the
growth of the container demand,
leading to lower freight rates,
and the elimination of the
congestion surcharges
• Example on the Asia West Africa
trade:
• Historically, Europe was the main
trade, but it shifted to Asia in
2008
• Dominance of European service
continued a few more years
because of transshipment in a
Mediterranean hub
• Tipping point: the WAFMAX ships,
when direct Asia service with
larger ships became competitive
versus transshipment solutions
0
1000
2000
3000
4000
5000
6000
7000
0
100000
200000
300000
400000
500000
600000
700000
2009 2010 2011 2012 2013 2014
ShipsizeinTEUs
Totalcapacitydeployed
Asia – West Africa lines
(Source: Alphaliner)
Less than 2,000 TEUs 2,000 - 3,000 TEUs
3,000 - 4,000 TEUs 4,000 - 5,000 TEUs
Over 5,000 TEUs Average ship size
Min ship size Max ship size

8. The gains from PSP: Financing
• Terminal operators tap into several financing sources: internal,
commercial banks, IFIs, etc.
• Example of Dakar: DPW’s investments are financed from US$165
million in equity, and about US$ 150 million in debt sourced from
commercial banks and donors and the remainder to be funded from
concession revenues.
• Government benefit from revenue streams:
• Example of Benin: GoB received US$33 million as entry fee, and annual
royalties of US$ 29/ TEU for the duration of the concession
• Shareholding of terminal operators is dynamic:
• Example of Lome LCT: 50% of the concession company shares were sold
by TIL/ MSC to China Merchant Holding for 150 million Euros
• Greenfield developments require financing of a different order of
magnitude:
• MoU MPS-GPHA for extension of Tema at US$1 billion
• US$1.5 billion for Lekki

9. The strings attached: Rents & risks
• For the container terminal
concessions, half were
competitive, the other were
negotiated
• Negotiation often builds from
existing presence, in Abidjan
and Lome for instance
• Greenfield projects are
promoted by operators
directly
• Two groups emerge in the
awards for the first wave of
concessions: Bollore Africa
Logistics and APM Terminals
• For the second wave, the
operators are more diverse

10. The strings attached: competition
and monopolies
Inter-port competition
• A large part of the containerized
traffic is captive, with only two
‘volatile’ segments:
• Transit, but less than 10% of total
throughput
• Transshipment, but still limited
• Regulation through competition by
neighboring terminal operators is
therefore limited in theory, and even
more in practice considering that
competition among two terminals
managed by the same operator does
not make economic sense, from the
operator perspective
• No mechanism for planning at
regional level
Intra-port competition
• Ports are natural monopolies, with
significant economies of scale
(mostly fixed costs and large sunk
investments):
• Only Lome and Lagos (and to some
extent Cotonou) are hosts to several
terminals
• Shipping lines are the terminal
customers, not the shippers:
• Choice of terminal is determined by
line, not the one who pays the bill
• Switch of terminal operators by lines
unlikely considering group logic (TIL
part of MSC, APMT part of Maesrk
Lines)
• Weak capacity at national level for
regulation and enforcement

11. The strings attached: imperfect
concession process
• Negotiated or competitive?
• For brownfield terminals, the
weight of legacy influences the
process: often, private sector was
present as licensed stevedore
before the concessions
• Privileging strategic partnership
over competitive bidding seems
more systematic for greenfield
developments
• Concerns about transparency:
• Separate claims from ‘sore losers’
from the legitimate concerns
• Predominance of financial over
economic benefits:
• The implicit (sometimes explicit)
selection criteria boils down to
maximizing government revenue /
investment
• No (or little) consideration of the
economic impact
• Concession contract focus on
investment, more rarely on
performance
• Margins for tariff reduction not
exploited:
• After concession, tariffs increased,
whereas traffic growth opens
possibility of tariff reduction
• The function of regulator is not
clearly defined

12. Gains from PSP? Productivity
• Undeniable improvements in
port productivity (but we
need more data to quantify)
• Increased terminal efficiency
under concession
• But:
• Qualitative jump largely linked
to equipment (STS versus
ship’s gear, yard planning and
equipment)
• Not a private sector ‘secret
ingredient’: public ports in
Eastern and Southern Africa
also modernized and
improved performances
(South Africa, Kenya,
Mauritius, to name a few)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 200,000 400,000 600,000 800,000 1,000,000
Container terminal efficiency
(throughput versus terminal
characteristics)
Under concesion Before concession
Log. (Under concesion) Log. (Before concession)

13. Open for discussion
The World Bank Study Team
Kavita Sethi ksethi@worldbank.org
Gozde Isik gisik@worldbank.org
Antoine Coste acoste@worldbank.org
Jean-Christophe Maur jmaur@worldbank.org
Olivier Hartmann ohartmann@worldbank.org