Top geopolitical trends and risks 2024
June 2024 TFG & Pangea-Risk Monthly Briefing
This research and analysis is provided by PANGEA-RISK and distributed in partnership with Trade Finance Global.
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Maritime Insight: Red Sea trade diversions drive fresh investment in African ports
Houthi attacks in the Western Indian Ocean and the Red Sea have significantly escalated, leading to major disruptions in maritime traffic and global trade routes. Since November 2023, over 150 attacks have been reported, prompting stakeholders to seek alternative routes around the African continent. This shift has increased demand for services at African ports, revealing infrastructural deficiencies and creating new opportunities.
Ports in Mauritius, Madagascar, and Mozambique have strategically benefited from their locations, while South African ports struggle with outdated infrastructure and poor management. South African ports such as Durban, Port Elizabeth, and Cape Town have seen a 53% surge in maritime activity over three months, transforming them into key logistical hubs.
However, infrastructural deficiencies, including outdated equipment and lack of financial investment, have resulted in significant congestion and delays. Durban’s Pier 2 terminal has faced severe berthing delays, with backlogs escalating to crisis levels, leaving 79 vessels and over 61,000 containers at outer anchorage for weeks.
The diversion of global shipping from the Red Sea and Suez Canal has increased demand for bunkering and restocking services at African ports. This shift has exposed the inability of many African harbours to handle the increased freight volume, causing congestion and delays. Average wait times at these ports now extend beyond the global average of three days to as many as six days or more.
Djibouti, heavily reliant on its ports for revenue, has been significantly affected by the decline in shipping through the Bab Al Mandeb Strait and the Suez Canal. Despite substantial investments in port infrastructure, continuous attacks have threatened its strategic advancements. Major international shipping lines, such as Maersk, have taken precautionary measures, including avoiding bookings to Djibouti’s ports.
Elsewhere, African ports in Sudan, Eritrea, and Somaliland face challenges from reduced vessel availability, higher freight costs, and increased insurance premiums. This has adversely affected their maritime trade, reversing previous decisions to remove high-risk designations for areas like Kenya. As a result, five major carriers have withdrawn their vessels from operating in Somali and Kenyan territorial waters.
While the increased demand has highlighted the unpreparedness of African ports, it has also drawn global investors’ attention. Countries such as Tanzania, Kenya, Mozambique, and South Africa are at the forefront of port development, driven by both domestic initiatives and foreign investments. For instance, DP World plans to invest $3 billion in new port and logistics infrastructure in Africa over the next three to five years.
Mozambique’s ports have attracted substantial investments, with the port of Beira undergoing significant infrastructural improvements over the past 25 years. South Africa’s Transnet has entered a 25-year joint venture with International Container Terminal Services Inc. (ICTSI) to manage Durban’s container terminal, aiming to resolve longstanding congestion and inefficiencies.
The future of Africa’s ports sector will depend on various factors, including the extent of Houthi military operations, the capacity of African countries to advance their port infrastructure, and the international community’s response. Despite current challenges, African countries have the potential to become new hubs for global shipping, provided they can modernise and expand their port facilities.
Enhanced collaboration between African governments and international operators could improve the competitiveness of African ports, repositioning them on the global stage and providing vital logistical support to international shipping routes.
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