The Middle East is on tenterhooks. A year after the breakout of the Israeli-Hamas war, the hostilities in the region are spreading fast. There are fears of an all-out war after Israel expanded its strikes and incursions into Lebanon and Syria and then Iran launched its first air strikes on Israel.
When the crisis broke out on October 7, 2023, the world held its breath hoping it would last for only a few months. However, the emerging reality is sending new waves of chills particularly down the spine of the global merchant shipping industry. So far, the industry has suffered unprecedented collateral damages, the primary of which is disruption to voyages in the Red Sea, one of the world’s most pivotal maritime straits.
For a year, Iranian-backed Houthi rebels in Yemen have been directing missile and drone attacks on commercial ships in the Red Sea, a critical conduit for 30 percent of the world’s container traffic valued at over $1trn. Over 80 vessels have been targeted, two of which were sunk by the attacks while four seafarers have succumbed. One vessel has also been seized. A US-led coalition has prevented more casualties by intercepting the missiles and drones while many have also failed to hit their targets.
The Houthis’ attacks have brought about a fundamental shift in global trade. Ships across all segments on the Asia-Europe and Asia-Atlantic trade lanes have been forced to avoid the Suez Canal and Bab El-Mandeb straits, diverting the shipping trajectory around Africa’s Cape of Good Hope. The impact for Egypt, which largely depends on the Suez Canal as a major source of foreign currency, has been devastating. In 2023 the canal had generated a record $9.4bn in revenue but over the past eight months, revenues have plunged by 60 percent, or more than $6bn.
Playing a bigger role
The Middle East crisis has come across like a blessing in disguise for African ports. To many, diversions through the Cape of Good Hope route was just what ports in the continent needed to play a bigger role in the global merchant shipping industry. The rerouting has seen ships travel longer distances, adding on average 14 days for a vessel sailing from China to Europe. The additional 11,000 nautical miles has not only disrupted global trade but has added operational costs for liners.
Africa must be conscious of the risk of overinvestments to avoid creating white elephants in the pursuit of short-term gains
Estimates show that each diversion adds approximately $1m in fuel costs, with more going towards insurance premiums and security measures. “The risks in the Red Sea are not short-term; they are now ingrained in shipping logistics forcing long-term adjustments,” says Bilal Bassiouni, Head of Risk Forecasting at South Africa-based Pangea-Risk. For African ports, especially those that are strategically located on the maritime route around the Cape of Good Hope, the Red Sea diversions should have presented an opportunity for a boom from offering restocking and bunkering services. Durban, Cape Town and Gqeberha in South Africa, Toamasina in Madagascar, Port Louis in Mauritius, Maputo in Mozambique and Walvis Bay in Namibia are among ports that have the potential to seize the moment.
Data show that over the six-month period to May, maritime trade through the Cape of Good Hope route had surged by a staggering 125 percent. The number of container ships and LNG tankers using the route was up by 260 percent and 180 percent respectively. Though not directly on the traditional shipping lanes connecting Asia with Europe, other major ports in Africa have also witnessed increased traffic. These include Mombasa in Kenya, Dar es Salaam in Tanzania and Beira in Mozambique.
“The Red Sea crisis is shining a light on the potential of African ports. It’s sparking crucial conversations about port development and modernisation,” observes George VanDyck, Lecturer at the Plymouth Business School, University of Plymouth. He adds that overall, African ports were caught off guard by the sudden surge in traffic.
For ports in the continent, myriad infrastructure and operational bottlenecks have made it impossible to capitalise on the opportunities presented by the crisis, particularly restocking and bunkering. Evidently, many ports struggle with outdated equipment, insufficient storage facilities and a shortage of skilled workers. Moreover, inadequate investment in expansions and development has resulted in inefficiencies that slow down operations, contributing to long wait times and congestion.
The malady facing ports in Africa is worsened by corruption, bureaucratic delays and inconsistent regulatory frameworks. Additionally, the high logistics costs and limited interconnectivity between ports and inland transport networks add layers of inefficiencies. As if that were not bad enough, lack of deep-water facilities means a majority of ports in the continent cannot accommodate larger vessels.
Unprecedented congestion
At the onset of the Red Sea attacks, the ports of Durban and Cape Town were prime examples of Africa’s deeply rooted infrastructural inadequacies and operational inefficiencies. A sharp increase in traffic by 328 percent over the period from December 2023 to March 2024 ignited unprecedented congestion at the two facilities, literally bringing operations to a standstill. Durban, South Africa’s biggest container seaport that handles approximately 60 percent of traffic, was the worst impacted. At one point, about 80 vessels were forced to wait offshore for weeks as the logjam crisis paralysed operations.
“South African ports seemingly lost their credibility in extending support services to vessels diverting through the Cape of Good Hope,” says Francois Vreÿ, Professor Emeritus in the Faculty of Military Science at Stellenbosch University, South Africa. He adds that one critical area in which African ports have failed to rise to the occasion is on bunkering services.
Evidently, the increased sailing distance has given rise to a surge in demand for bunkering services. Ports like Port Louis, Walvis Bay and Maputo have tried to strategically position themselves as refuelling hubs. However, they have faced challenges in handling larger volumes, a situation compounded by shortages of fuel supplies and lack of proper refuelling facilities.
Durban, which historically stands as the largest bunkering hub in Southern Africa, was expected to reap maximum benefits from the bunkering boom. Granted, the port has made progress in expanding capacity. However, limited investments in advanced infrastructure and services have denied the port a competitive edge. Bad weather conditions characterised by storms, severe winds and high waves have worsened the situation.
“Although African ports along the Cape of Good Hope are increasingly seen as refuelling stops, they have not emerged as major bunkering hubs primarily due to operational deficiencies,” reckons Bassiouni. He adds that the logistical weaknesses have meant that the potential benefits of increased shipping traffic have been diluted across the continent.
Undoubtedly, the Red Sea attacks have presented Africa with a critical window to reassess maritime and logistic capabilities. In fact, the likelihood of an all-out war in the Middle East means the global merchant shipping industry is beginning to realise that it could be dependent on African ports for an indefinite period of time. Having largely missed the boat in the first ‘wave,’ the continent has the chance to tap future windfalls. “The opportunity lies in positioning African ports as essential shipping hubs in the global supply chain,” notes VanDyck.
For this to happen, African countries must prioritise investment in expanding port infrastructures, improving logistics networks and upgrading equipment to handle larger volumes of traffic. Besides, governments must improve the regulatory frameworks, strengthen regional co-operation and provide incentives for private sector involvement. Moreover, focusing on enhancing the integration of ports with railways and road networks is critical in guaranteeing better connectivity between ports and inland markets. The ripple effect is maximising economic benefits from increased global trade.
Granted, investing in port infrastructures is a pain the continent must be willing to bear. However, budgetary constraints and competing national interests mean that most governments cannot mobilise the required resources. South Africa, for instance, reckons that it requires a mindboggling $9.2bn to address the infrastructure woes plaguing its ports and rail network. Namibia, which has made significant offshore oil discoveries, needs $2bn to expand port infrastructures.
Floating loans
Inability to raise the massive resources is forcing governments to bring on board global operators not only to invest but also take over the running and management of ports with the sole objective of improving efficiency. Dubai-based DP World and Indian conglomerate Adani are among operators battling for port concessions in the continent. DP World, for instance, has committed to invest $3bn in the medium term on new port infrastructures across the continent.
Vreÿ contends that while port infrastructure investments are critical, Africa must be conscious of the risk of overinvestments to avoid creating white elephants in the pursuit of short-term gains. Kenya’s Lamu port offers a classic example of irrational port investment. While the government committed $367m to build the first three berths that were commissioned in 2021, the port that was expected to become a transshipment hub is today largely a white elephant. Since its commissioning, less than 70 vessels have called at the facility. “Focus should be on long-term and strategic investments that align with global shipping needs,” he notes.
By all accounts, port infrastructure investments form the cornerstone of Africa’s ability to compete on the global scale. This is more critical considering in the World Bank’s Container Port Performance Index (CPPI) 2023, none of the continent’s ports rank among the top 100. Somaliland’s Port of Berbera, Africa’s best performing, ranks at position 103 on the global scale.
While infrastructure remains critical, Africa must also reinforce maritime security to make ports more attractive. There is a long journey ahead for the continent’s ports, but addressing these factors could propel them to the forefront of global maritime trade.
