Tanzania Ports Authority

1

• Tanzania Ports Authority
• CONCESSIONING OR PRIVATISATION AS A BETTER OPTION
  FOR AFRICAN PORTS
• CASE OF DAR ES SALAAM PORT
• By Samson Luhigo
• CEO

2
OUTLINE

• AFRICAN PORTS
• WHY PRIVATISATION/CONCESSIONING
• HOW TO PRIVATISATION/CONCESSIONING
• MONITORING CONCESSION AGREEMENTS
• CASE OF DSM PORT
• CHALLENGES
• CONCLUSION

3
CHARACTERISTICS OF AFRICAN PORTS

• Publicly owned
• Service/tool ports
• Low productivities
• Low traffic volumes
• High imports and low exports volumes
• Low IT utilization

4
CURRENT TRENDS

• Upward traffic growth trends
• Fast Technological changes in ports and shipping
  industries
• Increased need for specialized ports and
  terminals
• Increased pressure from users to improve
  efficiency and productivity
• Greater demands for IT
• Total logistic approach

5
WHY CONCESSION

• To attract FDIs for port development to cope
  with increased traffic trend
• To transfer future investment and the associated
  risks to the private sector
• To improve the efficiency and enhance the quality
  of services to customers
• To improve the competitiveness of ports
• To liberalise the industry and introduce
  competition.
• Government to retain control and ownership of
  port asset through the Landlord port authority

6
EXPERIENCE

• WHY?
• To meet the requirement of globalised and
  liberalised outward oriented trade regime
• To address inadequate capacity
• To address overstaffing and low productivity
• To achieve International productivity norms
• To address qualitative inadequacy
• To address inadequacy of logistic chain
  infrastructure

7
EXPERIENCE

• Preference mostly on
• Specialized Terminals or ports e.g Container
  terminal etc
• Attractive return on Investment
• High future potentials.
• Less labour intensive.

8
HOW TO PRIVATISE

• Generally awarded through tender route. However,
  captive facilities can be given on nomination
  basis.
• Revenue sharing should be preferred over royalty
  payment
• surplus workers are taken over by successful
  bidder
• Performance criteria
• Minimum guaranteed throughput (MGT) will be a
  pre-requisite
• Productivity
• Port Authority be encouraged to participate in
  providing hinterland connectivity

9
MONITORING CONCESSION AGREEMENTS

• Legal framework
• Labour relations
• Financial Issues
• Investment requirements
• Management of changes
• Transition period

10
CASE OF DAR ES SALAAM PORT

• Govt policy
• Retain 100 ownership of Assets
• Unbundling of Activities through
• Lease/Concession
• Joint Venture

11
PROCESS

• 1994 - Performance Contract with
  Government
• 1996 - 1997 Commercialisation/Privatisation
  Study -
• 1999 - 2000 Privatisation of Container Terminal
• Activity leading to privatisation
• Preparation of Bidding documents
• Public Tendering as per World Bank procedures

12
RESULTS

• Container Terminal Privatised in 2000
• Terms - 10years lease.
• Lease fee
• Fixed annual fee
• Royalty based on TEU handled.
• Responsibilities
• Lessee Maintenance of Infrastructure and
  procurement of additional equipment
• Lessor major investments
• Significant improvements in Terminal Operations
• Privatization of the remaining units in progress

13
LESSONS

• Scale of operations is the main attraction to
  serious operators.
• large scale operations
• Cost of managing small units always high.
• Preference on profit making units
• Investments prior to concession has insignificant
  impact on the bid price
• Mass retrenchment inevitable
• Govt intervention inevitable on
• Long term Infrastructure investments e.g
  Dredging, navigation aids etc
• Port development
• PSO loss making units

14
CHALLENGES

• How to deal with surplus labour
• How to determine concession period
• Should shipping lines be allowed to operate
  Terminals
• Should flexibility of review and renegotiation be
  incorporated in agreement
• Exclusivity

15
CHALLENGES

• Clear definition of major vs minor investments
• Port infrastructure replacement funds to leverage
  port investment
• Possibility of extending financial support for
  the development of minor ports
• Tariff control be left to market forces
• Who is to provide hinterland connectivity
• Landlord port also be a terminal operator

16
CONCLUSION

• The focus of private sector participation should
  be
• Augmentation of capacity
• Achievements of international productivity levels
• Reduction in transaction cost
• Generation of intra and Inter Port competition
• Govt. to facilitate creation of supporting
  infrastructure and ensure time bound development
  
• Flexibility in contract agreements to ensure
  potential future requirements considerations
• With increasing competition the landlord port
  needs to be an active partner in the risks
  involved

17
End of Presentation back to www.tanzaniaports
.com