WALVIS BAY - KEY ELEMENT OF THE
INTEGRATED DEVELOPMENT CHAIN FOR
Dr. Klaus Dierks M.P.
Deputy Minister for Works, Transport and Communication:
CONFERENCE: Marketing of the Walvis Bay Corridor
Windhoek: 10. April 1997
Honourable Ministers, Ladies and Gentlemen.
The realisation of the combined upgrading of the Walvis Bay Port and the creation of the Walvis Bay Corridor (Trans-Kalahari and Trans-Caprivi Highways) is an African dream! When we started to realise this dream at day one after our Independence many people said this dream is a pipe dream! In the mean time we have realised the re-integration and subsequent upgrading of the Port of Walvis Bay and the construction of the major segments of the two western corridors. This most important development initiative so far by the Government of Namibia is not a single development project but a whole integrated development chain which will change the face of Namibia. This development chain consists of the various "Economic Processing Zones" and the upgrading of the Port of Walvis Bay as a major and quick, as a most efficient and reliable hub port for southern Africa with the shortest routes to Europe, the two Americas and North and West Africa.
This integrated development chain is of major significance for the Namibian business sector. The possibilities of Namibias integrated development chain are limitless as far as manufacturing, development and research of technological components as well as the transit, import and export of goods between Gauteng in South Africa, Zimbabwe, Zambia and Botswana and the Port of Walvis Bay are concerned.
But, in order to fulfil our Namibian development dream we had to break the old colonial "Noose or Lifeline situation" with an one-sided road system geared towards South Africa and to create the above mentioned new "West Coast Transport Corridors". Namibia´s integrated development chain creates not only the basis for increased industrial production in the "Economic Processing Zones" but creates the foundation for Namibia´s function as a "transit country" and a service centre for the whole of southern Africa.
In my presentation here to-day I would like to focus on the following aspects:
the shipping policies to be pursued by Namibia;
measures in order to improve the shipping services to and from Namibia, in particular the transport of containers by liner services;
the role of the Namibian Government in promoting better shipping services to and from Namibia.
More specifically, I will consider:
if and to what extent the Government should play a more active role in the shipping sector;
to what extent the TransNamib Limited shipping ventures - Namibia Shipping Lines and Swakop Lines - could play a role in this connection.
As mentioned by the Honourable Minister, we now need to have your response to some of the ideas which we have developed over the last couple of years in order for the Ministry of Works, Transport and Communication to conclude its work in this field and to make appropriate recommendations to the Government, including the CCEDP and Cabinet.
2. THE WHITE PAPER ON TRANSPORT POLICY
Let me begin with by going back into history. When Namibia became independent in 1990 it took over the shipping policies of South Africa, as embedded in various laws for the maritime sector. Now in terms of these laws, South Africa practised a liberal shipping policy. Essentially shipping was a free trade, and there were no restrictions on capacity, pricing and on who was allowed to carry cargo etc. Indeed, South Africa even allowed for international competition in the field of cabotage.
So from a legal point of view, the South African shipping sector was very much attuned to developments in the international shipping sector. This sector had traditionally been a free trade - as reflected in the phrase the freedom of the seas. But later and after the first World War and until the end of the 1970s governments often took increasing interest in the trade and also became more directly active in the industry. The 1980s then saw a reverse in this trend towards increasing emphasis on a market driven trade.
Of course, it should be recalled that the South African Government did play a very active role in shipping for a long period of time - by using other means such as the direct control over some cargoes - which came to play a very important role in the development of the South African shipping industry. The result of this can now be seen in the prominent role played by South African shipping companies in the conference lines serving southern Africa. But this policy was phased out during the 1980s, in line with changes elsewhere in the world.
One of the first things that this Ministry did after Independence was to initiate a transport policy review. This review focussed on the transport operators, including the regulatory framework for these transport operators. Most important to that review was the road transport policies, but also shipping policies as well as the policies with respect to intermediaries and intermodal operators were reviewed. This work was initiated already in 1991 and culminated in the acceptance by Cabinet in 1995 of the White Paper on Transport Policy. The White Paper was subsequently tabled in the National Assembly.
The research undertaken as part of the White Paper indicated that the shipping industry serving Southern Africa was being subjected to strong competitive pressure. It was also found that although certain operators, the traditional operators associated with the conferences operating between southern Africa and overseas countries, dominated the market, and in particular the trades to and from Namibia, there was little indication that these traditional operators could exert any real market power. There were two indications supporting this.
(i) the over tonnage that had characterised container services during the past decade;
(ii) the presence of non-conference operators, so-called outsiders on the trades to and from southern Africa.
The fact that the nominal price of a tonne of container load in the southbound trade from Europe to South Africa decreased from 90 USD in 1979 to 87 USD in 1990 gave support to this impression.
It was also found that the trade would continue to be competitive. For this reason it was recommended that there should not be any changes made to the Namibian shipping policy. It was also concluded that the Government should encourage any Namibian interests to participate in shipping, but without providing direct support in the form of subsidies or applying restrictive measures against lines of other nations.
These recommendations were subsequently endorsed by the Transport Advisory Broad and accepted by the Namibian Government.
3. THE POLICY REVIEW DONE IN LATE 1996 - EARLY 1997: MAIN FINDINGS
As mentioned, late last year the Ministry initiated a new review of the shipping sector, and of course one of the questions that was to be tested was whether there was any reason to change the assessments made in the early 1990s. Let me summarise some of the findings.
Although there are currently a number of callers at Walvis Bay, container services are still dominated by the established operators. Also the dominant market is South Africa as concerns origin and destination of the traffic. The total traffic in terms of containers amount to about 20 000 TEUs per annum at present. In approximate terms, 40-45% is to and from Africa - almost all South Africa - and 25% is European traffic. Some additional traffic is brought to and from Cape Town, directly by truck transport, but these quantities are not believed to be substantial in comparison with the traffic via Walvis Bay.
It is estimated that more than 90% of the containerised traffic is today either carried by the consortia serving South Africa, on the one hand, and Europe, North America and the Far East on the other, or Unicorn Lines. The members of the consortia are the conference lines, with Safmarine normally as the dominant operator. Also, the consortia all make use of Unicorns weekly service to and from Cape Town where the traffic normally is transshipped to and from Europe, the Far East and North America. The remaining container traffic - say 5-10% - is handled by other operators through direct calls at Walvis Bay.
Notwithstanding this, there is no indication that competition in the market for the transport of containers between southern Africa and the main overseas markets as a whole is weak or has become weaker than before. On the contrary, indications are that competition on the trades between southern Africa and overseas markets is increasing, and that several other operators now have made substantial inroads into a market traditionally dominated by the conference operators. This evaluation is supported by the observation that the freight rates for containers between southern Africa and Europe have continued to be falling not only in real but also in nominal USD dollar terms during the 1990s. Also, one of the outsiders, Mediterranean Shipping Lines, makes claim to be the largest shipping line carrying containers and serving southern Africa today.
The increasing competition is also borne out by the fact that Maersk Line has instituted a new service between South Africa and Europe as from March 1997. This service connects Durban and Cape Town with Algeciras in Spain with a fortnightly service. Walvis Bay is served on the Northbound leg, and containers from Europe are therefore not unloaded until the ship has turned around in South Africa. It is understood that the Maersk service focuses on container reefer traffic, i.e. the transport of chilled or frozen goods, and therefore not on all kinds of traffic.
Also the coastal service provided by Unicorn appears to be subject to tough competition. Competition is mainly for the transport of goods between South Africa and Namibia. It can be argued that competition in that market will become even harder in the future with the completion of the Trans Kalahari Highway, which will allow direct transport between Gauteng and central and northern Namibia. It is, however, noted that there are also new coastal operations between Angola and South Africa, which sometimes call at Namibian ports, and which could grow in importance in the future. In addition, CMBT - a Belgian line partly owned by Safmarine - operates a service between South African and some West African ports which also calls at Walvis Bay.
Thus we can argue that the services to and from Walvis Bay, in principle, are not bad at present. On the other hand it is also stated that a problem associated with the present service via Cape Town is that it has not always functioned fully - for several reasons - and these problems have resulted in delays and have tarnished the image of the service. It also involves a transshipment, which is a situation that shippers wish to avoid although it is a very frequent and normal situation on most trades.
4. RECOMMENDATIONS WITH RESPECT TO SHIPPING POLICIES
According to our analysis the Ministry of Works, Transport and Communication do not recommend that the present shipping policies be changed. This also means that the Ministry do not believe it to be appropriate for the government to become more active in shipping either. This is because of the small market and the strong competition on the routes between southern Africa and in particular Europe.
The significance of the small size of the market is that it appears clear that there is no possibility for any direct service only between Walvis Bay and Europe at the present point of time, unless a ship of very small capacity would be used, for example a vessel with a capacity of say 350 TEU. This is much smaller than the ships normally used. The drawback of such a solution is that it will make the cost of transport much higher, probably about three times as high as the present services. In addition, smaller vessels operate at lower speeds, so the total transit time to a port in Europe, in comparison with the present situation, would only be reduced with, say, four days in place of six to eight days.
Therefore, at the present moment any service calling at Walvis Bay would also have to call at other ports either in South Africa before Walvis Bay or in Africa after Walvis Bay en route to Europe, and vice versa en route from Europe to Walvis Bay, in order to be able to offer competitive rates. Also traffic to, for example, the Mediterranean would have to be transshipped somewhere. The implications are that any new such service would have to face up to the full competition now characterising the trades to and from southern Africa. But, it has to be clearly understood that we are relentless working to make Walvis Bay a major hub port for southern Africa which will carry a fully fledged service between southern Africa and Europe and the two Americas.
However, at the moment any attempt to enter the market with any new service is going to be risky. As it was argued before: new and better services will eventually materialise provided some other actions are taken. As far as the future of the shipping ventures of TransNamib are concerned it has to be stated that they should be determined wholly on their own commercial merits. This is a matter for the Board of TransNamib to act on.
5. RECOMMENDATIONS WITH RESPECT TO HOW TO IMPROVE SHIPPING
All the analysis made by the Ministry shows that it can be argued that the market is working to the advantage of Namibia, and that any direct involvement by the Government in shipping would be unwise and unnecessary. There are, however, some measures which Namibia can and should take in order to facilitate the process of introducing better services to and from Walvis Bay.
The first relates to the presently ongoing upgrading programme of the Port of Walvis Bay, like the construction of a new container terminal and other facilities and in particular the deepening of the port. The present depth of the Port limits the size of the ships that can call at Walvis Bay. This limitation implies that the size of the container ship that may enter the Port at present is in the range of up to about 2 000 TEUs. While several of the shipping companies now using the waters to and from southern Africa still make use of container vessels of this size, the standard type of vessel being used by the large operators, such as the Southern Africa Europe Container Services and the Mediterranean Shipping Company, normally are larger, and have a capacity in the range of 2 000 to 3 000 TEUs. In order to be able to handle vessels of this size and be competitive, the Port must be deepened from the present -10.00 m to -12.80 m. This is the same depth as in the competitor ports of Durban and Cape Town.
I believe we will hear more about this aspect later here today. I just want to state now that the Ministry believes that this question is of strategic importance and we therefore argued that a full scale feasibility study had to be initiated. This comprehensive feasibility study is already ongoing under the auspices of NAMPORT.
Let me add here that the Ministry has already approached the EU regarding a grant for
financing of the deepening of the port of Walvis Bay. At the same time, the Ministry believes that it would be beneficial to execute a study that would allow for an analysis of the full economic and financial implications of the proposed project. It is recognised that the project may be of significant importance and that all possibilities should be explored, provided the project is economically and financially sound.
The second measure relates to the size of the market and how to increase the size of the market in order to develop the full potentialities of the Walvis Bay Corridor integrated development chain. The Ministry is convinced that with some growth in the traffic through Walvis Bay, the volume of containers will eventually become large enough in order to entice an operator to start serving Walvis Bay for all kinds of containers, most likely then en route between South Africa and Europe.
There is therefore a need for promoting the use of Walvis Bay. As concerns the transport of containers to and from Namibia itself - which is the present market - indications are that there will not be any substantial change in the next few years. It would be useful to hear from the auditorium here to what extent this prediction is deemed to be appropriate. Anyway, it can therefore be argued that the most important source in order to add to the market is, to promote Walvis Bay also as a port for goods destined for or originating in neighbouring countries. This will be possible through the completion of the Trans Kalahari and Trans Caprivi highways, but it might also be possible to attract traffic to and from southern Angola and parts of the Cape Province in South Africa.
Can the government do anything to prime the pump? Some of the most important measures were already taken, i.e. (i) investments in the Trans Kalahari and Trans Caprivi highways; and (ii) the implementation of the SADC and SACU road transport arrangements. They, however, place great emphasis on the importance of timely actions by the Government to ensure that these arrangements, which will enable the smooth passing of trucks and their loads across borders, are being put in place as quickly and efficiently as possible.
Notwithstanding this, it is claimed that there is a need to market Walvis Bay as a gateway and port more aggressively than at present, particularly with access to new areas in the interior of southern Africa being opened up with the completion of the Trans Kalahari and Trans Caprivi highways. But I believe that the marketing effort should be viewed as primarily being a responsibility of the commercial sector of Namibia, which would stand to benefit from improved and expanded operations at Walvis Bay, i.e., of shippers, freight forwarders, transport operators, port operators and the port itself. It is, however, also argued that there could be a role for the Government to support this effort, but without playing a leading role as operator in it.
Thus it should be clearly understood that the ball is in the corner of Namibias business community as far as the realisation of the full potentialities and the aggressive marketing of the Walvis Bay Corridor integrated development chain is concerned. The Government can act as a facilitator only and has laid the foundation by the realisation of these development schemes but cannot act directly as actor and operator. Namibias private sector should use this window of opportunities.
Therefore I believe that what is required to make the marketing of Walvis Bay more effective and efficient is the formation of a marketing group focussing on all aspect of shipments via Walvis Bay, established, for example, along the lines of the Beira Corridor Group. Such a group could also offer the advantage of providing a platform for communications with shipping lines that consider serving the Port of Walvis Bay, e.g. by offering more direct sailings to and from Europe.
These are in summary the recommendations of the Ministry of Works, Transport and Communication. Let me conclude by saying that I now hope that you in your presentations during to-day will give us some feedback on these views and arguments.
Thank you very much.
Dr. Klaus Dierks M.P.
Deputy Minister for Works, Transport and Communication
Web-site of the Walvis Bay Corridor Group is: www.wbcg.com.na