5 SOME REMARKS ON THE PLANNING FOR A NEW PORT AT MWE BAY

The Mwe Bay is situated at a distance approximately 450 km north of Walvis Bay at the Skeleton Coast on approximately 19o23 south and approximately 12o42 east. At this point the shoreline is slightly indented while the coast line is unprotected and fully exposed to the harsh wave regime of the South Atlantic. The mainly south to south-west swell causes a strong south to north directed coast parallel transport of sand.

The position of a fishing port at this point is not very suitable because the port site has to be protected by expensive breakwater structures while the sand transport regime will cause a serious silting problem of the future port. But this site is, however, the most favourable and relatively protected site at an otherwise completely unprotected and void of any natural harbour sites coast line.

There exists a Pre-Feasibility Study [22] for the planning of a Fishing Port at Mwe Bay. The first phase of the port scheme until the year 2005 consists of a 300 m quay with a water depth of 4,5 m and a 250 m quay with a water depth of 6,5 m. Including the further expansions of the fishing port until the year 2015 which do not include the planning and design costs as well as the considerable soils and oceanographic investigation costs the total estimated construction costs are pictured in table 22:

TABLE 22 ESTIMATED CONSTRUCTION COSTS FOR THE MWE BAY PORT

Major Construction Activities

Million US $

Breakwaters/Seawalls

Dredging, Excavations

Quay walls/Jetties

Hardstandings/Sheds

40

8

23

10

TOTAL

80

The secondary infrastructural costs for all engineering developments like access roads, water and power supply, telecommunications etc. are estimated with US $ 220 millions. The social costs for the living quarters adjacent to the port have been estimated with a further US $ 200 millions. Thus the total costs for a Fishing Port of Mwe Bay can be estimated to US $ 500 millions.

In integrating the analysis it is useful to combine the various port projects into indicative port development programmes for comparison, first with and then without Mwe Bay (PDP1 and PDP2 respectively). The estimated capital cost of PDP1 is US $ 103,9 millions (excluding the secondary infrastructural costs and social infrastructural costs). It comprises a new Mwe Bay fishing port, the northern extension to the Walvis Bay fishing port and the fishing port extension at Lderitz [23].

The programme would be designed to optimise fishing base facilities for a fleet landing the maximum quantity of fish for shore processing. Apart from a small number of freezer trawlers, small and medium sized wetfish trawlers and line boats would predominate. Much of the fish would be delivered to shore processing, which would require integrated off-loading facilities and factory sites at or near to the ports.

Over the planning period the total running costs amount to US $ 98,2 millions, the operating capital costs to US $ 87,8 millions and interest charges to US $ 92,1 millions. Deducting the aggregate depreciated value of fixed assets, the net capital and operating expenditure is US $ 321,4 millions.

Revenue from craft licence fees and other vessel charges comes to US $ 107,8 millions, making US $ 115,5 millions in all. The deficit gap to break-even point is thus a substantial US $ 205,9 millions.

The total levy income for all fish levies is US $ 1.226,0 millions over the whole period. It would require 25% of this revenue flow to generate an IRR of 15,5%. The income from vessel licences and charges covers only 2,4% of the net expenditure, but all other port income covers more than one-third (36%). The financing of fishing port facilities would therefore depend on the application of a quarter of all levy income.

The estimated capital cost of PDP2 is US $ 35,6 millions. It comprises a larger northern extension to the Walvis Bay fishing port and the fishing port extension at Lderitz [24].

The programme would be designed to optimise fishing base facilities for a fleet landing the maximum quantity of fish for shore processing from the central and southern sea areas while trading off the high costs of a northern fishing port against a greater dependence on large freezer trawlers to fish the northern sea areas. Less of the white fish would be delivered to shore processing.

Over the planning period the total running costs amount to US $ 83,7 millions, the operating capital costs to US $ 37,0 millions and interest charges to US $ 38,8 millions. Deducting the aggregate depreciated value of fixed assets, the net capital and operating expenditure is US $ 121,1 millions.

Revenue from craft licence fees and other vessel charges comes to US $ 7,5 millions and from other port income to US $ 76,0 millions, making US $ 83,6 millions in all. The deficit gap to break-even point is thus a much smaller US $ 37,5  millions.

The total levy income is US $ 1.180,0 millions over the whole period. It would require 12% of this revenue flow to generate an IRR of 16,8%. The income from vessel licences and charges covers only 6,2% of the net expenditure, but all other port income covers nearly two-thirds (63%). The financing of fishing port facilities would therefore depend on the application of just over a tenth of all levy income.

Comparing the two programmes, it is apparent that the much lower capital cost of PDP2 brings it much closer to financial viability than PDP1. For a similar IRR, the proportion of the levy income required is less than half. This result highlights the conclusion that only if the wider developmental and economic gains including the creation of additional employment from a fishing port at Mwe Bay are adjudged to be significant on a national scale can the large extra costs be justified [25].

In order to do a thorough analysis of the flow of funds through a fishing port at Mwe Bay, the following are amongst the questions that need to be addressed. What sort of private processing industry could be attracted to Mwe Bay? Could existing processors absorb the cost of investing in new machinery in Mwe Bay? What are the operating costs of the fishing industry in Mwe Bay? What is the level of profitability of the fishing industry that could develop Mwe Bay? Can the industry absorb the costs of the Mwe Bay port? Will the industry pay enough direct and indirect taxes, excluding quota levies, to service the port debt? If so, how much will be left to service the costs of land based infrastructure? What equity contribution is the Government prepared to subscribe to the development of a fishing port in Mwe Bay? What is the expected return on capital? To what extent is the Government prepared to subsidise loan funds for a new port? Where would the subsidy come from? Can the Government establish a separate incentive scheme for the fishing industry?

What alternative revenue sources are available? Will the fishing companies operating on the land side of the Mwe Bay Port buy land from the port company (NamPort) to assist in reducing debt? What lease payments will be made? How is the depreciation of the port building costs to be charged? These do not represent a cash flow drain but will affect the profit and loss of the NamPort management and operating companies. To what extent will the industry be expected to cover the capital costs of the land based infrastructure? How is the development of housing and social infrastructure to be treated? Is it seen as incremental to development expenditure elsewhere in the country or as replacing it?

What economic assumptions should be made about the Opportunity Cost and shadow-pricing of labour? Is it assumed that surplus agricultural labour will be attracted into the industry or will existing skilled, semi-skilled and unskilled labour be diverted to the fishing industry? What assumptions should be made about the Opportunity Cost of Capital?

These questions are not comprehensive and go beyond the limits of the Pre-Feasibility Study [26] and this Study.

The size of the Mwe Bay Project envisaged should involve more than a simple project cost benefit analysis in each case, The development of any of the port options with or without the development of Mwe Bay will have important repercussions on Government strategy for the fishing sector as a whole, including taxation, industrial incentive subsidies, the use of external resources, including foreign investment, policy preference for vessel types, the level of quota levies to be paid by foreign vessels and local vessels.

The size of the projects will have impacts beyond the sector. The fishing industry is a major export earner for the country. Foreign debt funding will place a drain on the current account of the balance of payments. Is this sustainable? The switching of large portions of the development budget to support one sector will limit the room for development expenditure in other sectors and regions. How does this fit in with the Government regional policy?

All these questions have to be further investigated and analysed by a comprehensive Feasibility Study for a Fishing Port at Mwe Bay which concentrates on the financial and economic as well as environmental viability of the Mwe Bay Fishing Port.

The Ministry of Works, Transport and Communication has therefore in co-operation with the Ministry of Fisheries and Marine Resources has initiated to fully investigate the economic feasibility of the Mwe Bay Fishing Port Scheme in a comprehensive feasibility study.

ENDNOTES

[22] Klein, W.A.; Moorsom, R.J.B.; edited by Dr.-Ing. Klaus Dierks: A Pre-Feasibility Study of Future Port Facilities in Namibia, Windhoek, 30 November 1992 and Dierks, Klaus: Key Points on Namibian North Coast Port: Summary of the Pre-Feasibility Study on Future Port Facilities in Namibia with Special Reference to the Mwe Bay Port, Windhoek, 30 September 1994

[23] Dierks, Klaus: Key Points on Namibian North Coast Port: Summary of the Pre-Feasibility Study on Future Port Facilities in Namibia with Special Reference to the Mwe Bay Port, Windhoek, 30 September 1994

[24] Dierks, Klaus: Key Points on Namibian North Coast Port: Summary of the Pre-Feasibility Study on Future Port Facilities in Namibia with Special Reference to the Mwe Bay Port, Windhoek, 30 September 1994

[25] Dierks, Klaus: Key Points on Namibian North Coast Port: Summary of the Pre-Feasibility Study on Future Port Facilities in Namibia with Special Reference to the Mwe Bay Port, Windhoek, 30 September 1994

[26] Klein, W.A.; Moorsom, R.J.B.; edited by Dr.-Ing. Klaus Dierks: A Pre-Feasibility Study of Future Port Facilities in Namibia, Windhoek, 30 November 1992

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