The poor design of Mombasa and Dar es Salaam ports is limiting their capacity to handle of cargo capacity, resulting in delays and inefficiencies.
An analysis of port development in sub-Saharan Africa, conducted by PricewaterhouseCoopers' titled, 'Strengthening Africa's gateways to trade', shows that Dar es Salaam and Mombasa port volumes exceed their actual throughput capacities.
"For the East African ports this is a factor that implies considerable delay especially during busy periods and means that significant capacity would have to be added to the ports to meet future demand," the PwC said.
Within the region, Djibouti has the highest installed capacity of 1.8 million twenty-foot equivalent units (TEUs) annually, but only manages less than a million in volumes. Mombasa has an installed capacity of 500,000 TEUs but handles more than one million.
Dar on the other hand has an installed capacity to handle 450,000 TEUs annually but currently does 750,000 TEUs annually showing the capacity constraint in the region's' two largest ports' infrastructure.
The three countries have in the last three years been upgrading their port facilities.
"There has been a lag in port investment, with port expansion and expenditure on port assets often not keeping pace with trade growth.
Together with poor operational performance this creates a bottleneck to economic growth, increasing logistics costs, reducing reliability and making African countries less globally competitive," states the report.
"Kenya and Tanzania have stepped up investment in expanding and upgrading the two main ports in the region to ensure they play critical role in economic development since sea ports are gateways for 80 per cent of merchandise trade by volume and 70 per cent by value globally.
The two East African Community member states, which are competing to be the region's transportation and trade hub, have cumulatively invested about $1 billion to expand and upgrade Mombasa and Dar es Salaam ports in recent years.
The Kenya government has committed resources in expanding the port and building related infrastructure such as the standard gauge railway to ensure the facility accommodates a throughput of 2.5 million TEUs by 2020.
The port is central to the Kenyan economy because 40 per cent of the country's revenue comes from import and export duties.
"Efficient port operations in Mombasa and Dar es Salaam are critical to increased throughput and evacuation of cargo.
"Developments in multimodal operations and master planning of the ports to keep up to date with increasing throughput, which in turn fuels economic growth are critical to efficiency," said Kuria Muchiru, a partner in charge of government and public sector at PricewaterhouseCoopers Kenya.
Mr Muchiru added that in the long run East Africa is expected to a be a major transshipment hub on the East Coast of Africa, which will reduce freight costs and contribute to the Belt and Road initiative.
Catalysts for growth
The report comes just days after Africa achievement a milestone with the signing of the African Continental Free Trade Area that creates a huge market.
It contends that investment in ports and related infrastructure to advance trade and promote overall economic development and growth is vital.
This is because a 25 per cent improvement in port performance could increase gross domestic product by two per cent, something that demonstrates the close relationship between port effectiveness and trade competitiveness.
Considering that port demand volume is expected to grow by six to eight times by 2040, sub-Saharan Africa must invest in ports and related facilities like rails and roads to make them become catalysts for growth.
This is a matter of urgency considering that many countries remain dependent on port infrastructures built before the 1960s that offer no more than seven metres depth yet today larger deep draught vessels require a depth of 10 metres or more.
According to the report, sub-Saharan Africa can achieve significant gains by investing in ports because efficient gateways have the ability to reduce the price of imported goods and increase the value of exports.
Notably, improving port performance by 25 per cent could reduce the price of imported goods by $3.2 billion annually and add $2.6 billion to the value of exports.
This would add at least $510 million per annum to GDP growth, a 2 per cent increase in GDP. Currently, it is estimated that high transport costs add 75 per cent to the price of goods in the continent.
"It is imperative to note that high port logistics costs, poor reliability and low economies of scale in trade volumes have a negative impact on trade growth in Africa meaning the continent can save an estimated $2.2 billion annually in logistics costs if the average throughput at the major ports is doubled.
"This is because the unit cost of transferring cargo through a port rapidly reduces as the volume of traffic increases," the PwC said.
The report shows an estimated 14.5 million containers are handled at sub-Saharan ports each year, with East Africa accounting for 18 per cent of the containers.
In terms of actual freight handled, 10 ports handle more than 500,000 TEUs per year and only two of these handle more than a million per year.
Investing in port facilities is critical considering the dwell time in African ports, that is the amount of time from when a container is offloaded until it leaves a port, is up to four times longer than in Asia.
Moreover, more than 50 per cent of total land transport time from port to hinterland cities in landlocked countries is spent in ports.