Anticompetitive collusion is silently choking Africa's ports

Anticompetitive collusion is silently choking Africa's ports

Why the wait? The World Bank investigates Sub-Saharan port turnover. Photo: <a href=”http://www.flickr.com/photos/vithassan/284900957/sizes/m/in/photostream/">Vít Hassan (Flickr)</a>.
Why the wait? The World Bank investigates Sub-Saharan port turnover. Photo: Vít Hassan (Flickr).

A new study by the World Bank has found a complex answer to a simple question: why does cargo spend weeks in Sub-Saharan ports?

The aptly titled study, explains how the average cargo dwell time in most Sub-Saharan African ports is around 20 days, five times the average of most other international ports.

Previous efforts to decrease this time have failed to solve the problem. Improving infrastructure and transferring port operations to private sector operators has done little to shorten the time cargo spends in African ports. In fact, poor handling and operational dwell time only account for about two additional days.

The answer, the study claims, is not a lack of infrastructure, but a lack of incentive.

It turns out that reducing dwell time is not necessarily in everyone’s best interest. The private sector that controls the ports benefit from longer rent payments and often collude with customs officials to extend the cargo’s stay in their docks. Shippers, too, have surprisingly little incentive to quickly move their goods. In some places, storage in the port is the cheapest option for up to 22 days.

Not only that, shippers can actually directly benefit from cargo lag. Through a system of collusion with port companies, importers have been able to create barriers for other competitors to enter the market. The port companies give preferential treatment to certain shippers, protecting them from competition that would undercut them with promises of faster shipping. In turn, the shippers keep their cargo in the docks for longer or have little incentive to move them. The system creates a status quo where the increased cost of slow shipping is assumed by manufacturers and thus included in the final price of the product. By doing so, the price increase is passed on to the customer, not the shipper.

The entire process also deters investment and increased competition from entering the slow, corrupt and inefficient system in the first place.

However, if incentives are the problem, perhaps they can also be the solution. The report suggests a number of “possible policy recommendations” that would create a contractual, incentivized system for efficient shipping instead of the opposite. This includes creating individual performance markers for the most efficient shippers and port operators, reducing price incentives from rent-seeking port operators and having contractual agreements between customs brokers and customs officials before the cargo is even shipped.

The solution to improving Sub-Saharan port efficiency is not easy. Improved infrastructure and foreign investment have made Africa the continent with fastest growing economy in the world but tackling inefficiency, collusion and increasing competition will be major tests if the continent hopes to sustain its current growth.

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