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18.05.2007 General News

Port of Tema - Towards a landlord Port status

By .

Introduction

Privatisation has increasingly become a fashionable concept throughout the global port community since the mid 1980s, although it has been known for many years. The momentum has increased largely as a result of the emergence and subsequent expansion and contractions in the globalisation process of the world economy, which have a number of far-reaching consequences. These include the advent of capital intensive cargo handling equipment and the introduction of export led growth policies. GLOBALISATION: COPE WITH IT OR GET MARGINALISED!!

Africa should, like all the other regions of the world, face the globalisation challenge. Africa will definitely have to break the tradition of interventionist and protectionist economic policies, and open up to the rest of the world in order to take advantage of the growing direct investments, which characterise the current global economic evolution.

For the above reasons among others, the Ghana Government initiated moves aimed at privatising certain activities in our seaports so as to enable the Port Authority assume the landlord status under the Gateway Programme.

Port privatisation

Defining Port Privatisation is both a difficult and complex task. Privatisation is not a single doctrine. In reality, it represents a shift away from government providing port services and port facilities to private sector participation. In trying to explain one must consider issues like; type of port ownership, the role of port authorities, the relationship between the public and private sectors.

Port Privatisation can also be said to be the process of restructuring the Port Authority, thereby giving an enlarged role to the Private Sector in the management and operation of port facilities, based on the assumption that better operational performance can be enhanced through private sector participation.

Advantages of privatisation

One commonly stated opinion is that ports only privatise in order to obtain open market finance and favourable terms. However, other beliefs include the need to promote efficiency and competition, to make a contribution to government coffers and to gain managerial expertise from foreign involvement.

North American and West European Ports, for example, have long had a tradition of acting as landlords, with their operations under the control of the private sector, which had organised and conducted a variety of services in a superior, effective and beneficial manner.

Generally, privatisation generates several benefits including the following:

* Increased efficiency and consequently, lower port costs.

* Sharing of investment to relieve the financial burden on government.

* Expanding trade i.e. helping trade growth.

* Transfer of technology in the form of equipment and management systems.

* Management expertise.

* Increased terminal profitability and port revenue.

* Increased competition.

In all these, what is apparent is that, numerous governments throughout the world are still reluctant to hand Ports completely over to the Private Sector. Indeed, in many such countries, a partnership between state (Port Authorities) and the private terminal operators is what exists.

The Downside of privatisation

One cannot run away from the fact that although most of the inherent benefits of genuine port privatisation schemes are tangible, it also carries some deficiencies or threats. This inevitably leads to severe opposition to the process from the very parties whose support is necessary for privatisation to succeed.

Opposition to privatisation stems from the fear of the following:

* A reduction in employment, is that these state-owned enterprises are often created in order to provide employment, and therefore larger than the required number of people are employed. So to these employees, privatisation automatically means that there will be many job losses.

* A loss of control is that, foreigners may well take over, leaving employees at their mercy.

* Difficulties in operator selection.

* Difficulties Coordinating public and private investments, and the potential for unfair competition or preferential treatment.

Landlord port of Tema

To speed up the development of the Port of Tema, the government introduced a port privatisation policy through the gateway programme and this has provided direction over the last seven years. There are several elements to the privatisation policy.

* Existing port assets are being leased with the aim of promoting the construction of additional facilities at the port.

* 75% of stevedoring activities have been privatised to nine private operators to introduce competition, with Ghana Ports and Harbours Authority (GPHA) controlling only 25%.

* The management and operations of the new container terminal in the Port has been concessioned to a private consortium.

* Shore handling of general cargo has been privatised.

* Licenses have been given to five shipping lines and port operators to operate their own off-dock terminals to handle their containers.

To make the privatisation package attractive, a number of financial incentives are being promoted in the port sector. These include a reduction in import duties on construction plant and equipment and tax concessions on port projects financing. When the Landlord Port bill is passed, Port of Tema will concentrate on providing the infrastructure (e.g. quays and terminal paving), whilst the superstructures (e.g. Cranes, warehouses etc) would be owned by private companies. This type of landlord arrangement is common throughout the world. In Europe, for example, the

Rotterdam Port Authority leases port infrastructure to major private companies, which in turn provide the necessary terminal superstructure.

The mission and functions of the Port would fundamentally change to the following:

* Landlord and performance monitoring.

* Policy-making, planning and coordinating Port development.

* Traffic control, regulatory and surveillance.

* Marketing, Public relations and promotion.

Privatisation of stevedoring

Nine private operators have been licensed to carry out stevedoring operations in the Port of Tema. They are; Atlantic Port Services Limited, Speedline Stevedoring Company Limited, Carl Tiedemann Stevedore Company, Golden Gate Services Limited, Dashwood Shipping Agencies Limited, Odart Stevedoring Company, Fountain View Stevedore Company, Advanced Stevedoring and Gemini Stevedoring.

The Stevedoring Companies currently provide cargo handling services. Formally they were handling containerised and general cargo including vehicles. With the commencement of operations of the Container Terminal Consortium known as Meridian Port Services (MPS) on 31st March 2007, the other stevedoring companies now operate in other parts of the port excluding the MPS concession area on Quay II.

The significant advantage of privatising 75% of the Stevedoring activities at Port of Tema is that it had increased the total stock of cargo handling equipment in the Port.

Privatisation of container terminal

A port that is able to attract high transshipment traffic, benefits twice through revenue from both the mother vessels and the smaller feeder vessels. But to be a transshipment port comes at a cost; huge investment in infrastructure, IT, Human Resource and Management expertise.

It must however also be emphasised that even when the above investments are made the key success factor is the ability of the Port to attract a critical mass of container traffic. In view of the above, GPHA in its decision to develop Port of Tema into a modern container Port to improve quality of service, reduce costs and thereby attract transshipment cargo, had to consider including the shipping lines who are the carriers of the trade by inviting them as partners in the investment. Being a purely container business, lines with container interest and indeed big players in Africa's container business, AP Moller-Maersk and Bollore become the obvious target.

Meridian Port Services (MPS) is made up of GPHA, Maersk, and the Bollore group. The shareholder value is 30% for the Government of the Republic of Ghana/GPHA and 70% for Meridian Port Holdings Limited, which is in turn a joint venture with Maersk and the Bollore group.

MPS has been granted a concession to operate the container terminal on Quay II (berths 1 & 2) for 20 years during which an annual lease fee as well as a royalty of 25% of gross stevedoring revenue and 10% of gross shore-handing revenue will be paid to GPHA.

The MPS terminal is being operated as a common user facility and vessels will continue to be berthed on a first come first served basis. The superstructure investment by MPS is $35.0m. The infrastructure investment by MPS is $54.0m. GPHA has also invested in extending and modernising Quay 2 and has purchased and installed four Rubber Tyred Container Gantry Cranes and three Ship to Shore Cranes.

The completed terminal will be a modern container facility with the following Terminal data:

* 575 meters continuous quay at 12.5 meters depth

* 25.5 hectares terminal back-up area leased from GPHA

* 4 ZPMC Panamax gantry cranes (STS) (3 commissioned May 2005, 1 delivery 2009)

* 8 ZPMC Rubber Tyred Gantry cranes (RTG) (4 commissioned May 2005, 4 delivery 2009)

* 12 Reach-Stackers, 45 tonnes

* 4 Empty-handlers, 15 tonnes

* 40 terminal tractors (30 delivery mid-2007, 10 delivery 2009)

* 45 terminal chassis (33 delivery mid-2007, 12 delivery 2009)

* 24 Utility vehicles and fork-lift trucks

* 8-lane gate complex

* Office and ancillary buildings

* Workshops

* 336 reefer plugs (expandable to 496)

* Up to 500 local employees

Challenges of the port of Tema as a landlord

The privatisation process comes with challenges that have to be contended with. The most significant which is labour related is dealt with in this article. With the coming into being of the private Stevedoring Companies some job losses occurred. In the case of the container consortium marginal job losses may occur. The reduction in port labour remains one of the most contentious components of the Port"s strategy to increase Private Sector Participation. During the licencing of the Stevedoring Companies between 2001 and 2002, the port applied a strategy of voluntary and mandatory retirements.

The good news is that most of these redundant employees after receiving their redundancy packages from GPHA, were employed by the Private Stevedores. The Ghana Dock Labour Company (GDLC) was then formed to serve as a docklabour pool to cater for the needs of GPHA and the other private companies. Currently, the docklabour employment rate by the various organisations stands as follows;

* GPHA - 48%

* Carl Tiedemann Stevedoring Company /Safebond Company limited – 26%

* Ghana Association of Stevedoring Companies (GASCO) – 18%

* Off-Dock Terminal Operators – 8%

Considering the operation of MPS, minimal job losses of permanent staff is envisaged from the Stevedoirng Companies. MPS has stated that they would be employing 500 permanent staff and the option is open to employees from these Stevedoring Companies who are qualified and will wish to work with MPS. As a matter of fact, GPHA employees were given the first consideration.

As far as casual staff of GDLC is concerned, they still belong to the pool and will be hired as and when there are vessels to handle in the Port.

Conclusion

This article highlighted a number of issues with regard to changing institutional arrangements in the context of our seaports. Whilst privatisation had significant benefits, it is no nirvana. It is equally obvious that there is a strong school of thought that argues for considerable caution before considering whether or not to privatise.

The key conclusion from this paper is that Port of Tema is moving towards becoming a landlord Port. The private sector now has a major role in the provision of stevedoring services and shore handling (Port Operations and Services) whilst the Port Authority retains a central role in Port planning, regulation, development and investment.

All these are being done to boost the efficiency and productivity of our Port Services in order to make Port of Tema the true gateway to the Sub-region.

By Esther Gyebi-Donkor (Mrs)

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