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PwC report identifies importance of ports to economic growth

By: Maclean Kwofi
The PwC report on ports has highlighted the importance of ports to economic growth.
The PwC report on ports has highlighted the importance of ports to economic growth.

Countries within sub-Saharan Africa (SSA) have been asked to accelerate their market access and trade both across the region and with the rest of the world.

This is to help stimulate economic growth, diversify their economies, reduce the inflationary effects of weak transport and logistics infrastructure, become globally competitive, create jobs and reduce poverty, a new PricewaterhouseCoopers (PwC) report on African Ports Report has identified.

“Ports are gateways for 80 per cent of global merchandise trade by volume and 70 per cent by value. As an emerging market region endowed with vast natural resources and a young and growing population, SSA must accelerate its market access and trade both across the region,” a Director with PwC, Dr Andrew Shaw said at a breakfast meeting in Accra.

Sharing findings of the report, he observed that the transport and logistics industry was the backbone of an economy.

“Freight logistics is regarded econom

Internationally, he said logistics costs as a percentage of total production costs have steadily declined over the last decade, despite supply chains being more complex and having greater flexibility to customer needs than ever.

According to him, in developing countries and specifically in Africa, logistics costs remain high as a percentage of total production costs and limit economic growth opportunities.

He explained that high transport costs added 75 per cent to the price of African goods. Most African countries either have inadequately-developed ports, too few ports or no port facilities in key areas.

“Considering that port demand volume is expected to grow by six to eight times by 2040, the challenge is significant.”

He said without adequate infrastructure, Africa runs the risk of sacrificing about two per cent of Gross Domestic Product (GDP) growth per annum.

Access to port
He stressed that access to port and related infrastructure and operations to cope with current demand and future growth to reduce cost and improve overall freight logistics efficiency and reliability were fundamental to the region’s future success.

The director said in addition to appreciating the importance of port and landside transport connections for the efficient operations and productivity of ports, it was also essential to understand the link between port efficiency and landside transport accessibility with economic growth.

“Given the important enabling role of transport infrastructure in economic development, ports infrastructure should be one of the top political priorities in SSA, as it can unlock economic growth and competitiveness.

Economies of scale in accommodating larger ships and the accompanying stevedoring efficiency could further enhance the appeal of certain ports as premier freight import and export gateways to Africa.”

Dr Shaw indicated that special attention would ,therefore, have to be given to ensuring a feedback loop between port efficiency, regional integration and the infrastructure capacity analysis in undertaking the market analysis.

“It should, however, be acknowledged that good logistics infrastructure is unable to compensate for poor operating, management and processes within ports.”

In many instances, he said advanced infrastructure required even greater levels of process and management support to fully utilise new infrastructure and equipment efficiencies.

He noted that the report focused not only on port infrastructure, but other important components such as operations and efficiency which was being recognised as an integral part of port infrastructure investment.

Foreign direct investment
Dr Shaw observed that based on PwC’s own analysis and the World Investment Report 2017, global foreign direct investment (FDI) inflows declined by two per cent overall in 2016 to US$1.7 trillion, down from US$1.8 trillion in 2015.

Flows to developed economies increased by five per cent to US$1 trillion and FDI in developing economies experienced a decline of 14 per cent to US$646 billion.

Africa’s share of global FDI decreased marginally from 3.5 per cent to 3.4 per cent.

Port investment in SSA is severely affected by international investment patterns. PwC’s analysis found that weak commodity prices have held back FDI in SSA, with flows to Africa continuing to decline in 2016, though by a moderate three per cent to US$59 billion.

FDI in SSA’s largest economies of Nigeria and South Africa remained well below past averages, although it is expected to increase moderately in 2017. — GB