A year after the armed conflict between Israel and Hamas broke out, which spread across the Middle East like wildfire, is not showing any sign of settling down. Fears of an all-out war still linger around the region after Jerusalem expanded its strikes and incursions into Lebanon and Syria in 2024, followed by Iran launching its air strikes on Israel.
However, the one industry that suffered the most from the crisis has been global merchant shipping. Both the Suez Canal and the Red Sea have become collaterals here. Egypt lost around $7 billion in revenues from the Suez Canal in 2024. The loss has been more than 60% of the canal’s revenues in 2024 compared with 2023.
Yemen-based Houthi fighters have carried out nearly 100 attacks on ships crossing the Red Sea in what they describe as solidarity actions with Palestinians. In response, shipping firms have diverted vessels from the Suez Canal to longer routes around Africa, disrupting global trade by delaying deliveries and sending costs higher.
The attacks by the Houthis have caused a significant shift in global trade. Ships using the Asia-Europe and Asia-Atlantic trade routes have been forced to avoid the Suez Canal and the Bab El-Mandeb strait, leading them to divert their shipping routes around Africa’s Cape of Good Hope. This change has had a devastating impact on Egypt, which relies heavily on the Suez Canal as a key source of foreign currency.
Is Africa missing the bus?
Diversions of the global shipping through the Cape of Good Hope route was what African ports needed to play a bigger role in the transportation industry. The rerouting has seen ships travel longer distances, adding an average of 14 days for a vessel to sail from China to Europe. These additional 11,000 nautical miles have disrupted global trade and added operational costs for merchant vessel liners.
Estimates show that each diversion adds approximately $1 million 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,” told Bilal Bassiouni, Head of Risk Forecasting at South Africa-based Pangea-Risk, while interacting with the World Finance.
“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,” he added.
Data reveals that over the six-month period to May 2024, maritime trade through the Cape of Good Hope route surged by a staggering 125%. The number of container ships and LNG tankers using the route went up by 260% and 180% respectively. Other major African ports also witnessed increased traffic, including Mombasa in Kenya, Dar es Salaam in Tanzania and Beira in Mozambique.
George VanDyck, Lecturer at the Plymouth Business School, University of Plymouth, however, added that African ports were caught off guard by the sudden traffic surge. Blame poor infrastructure and operational bottlenecks, which have made it impossible for the continent to capitalise on the opportunities presented by the crisis, particularly restocking and bunkering.
Many ports are struggling with outdated equipment, insufficient storage facilities and a shortage of skilled workers. Moreover, inadequate investment in expansions and development has resulted in inefficiencies that are slowing down operations, contributing to long wait times and congestion.
The ports which are facing problems in Africa are exacerbated by corruption, bureaucratic delays, and inconsistent regulatory frameworks. Additionally, high logistics costs and limited connectivity between ports and inland transport networks contribute to inefficiencies. To make matters worse, the lack of deep-water facilities means that most ports on the continent cannot accommodate larger vessels.
Massive shipping congestion
The ports of Durban and Cape Town have become the poster boys of Africa’s deeply rooted infrastructural and operational inadequacies. A sharp increase in traffic by 328% 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% of traffic, was the worst impacted. At one point, about 80 vessels were reportedly 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 Vrey, Professor Emeritus in the Faculty of Military Science at Stellenbosch University, South Africa, while identifying that one critical area in which African ports have failed to rise to the occasion is on bunkering services.
The increased sailing distances have led to a surge in demand for bunkering services. Ports such as Port Louis, Walvis Bay, and Maputo have attempted to position themselves as refuelling hubs. However, they have encountered challenges in managing larger volumes, which have been exacerbated by fuel supply shortages and inadequate refuelling facilities.
Durban, the largest bunkering hub in South Africa, was expected to reap maximum benefits from the bunkering boom. Despite making progress in expanding capacity, limited investments in advanced infrastructure and services have denied the port a competitive edge. Elements like storms, severe winds and high waves have further worsened the situation.
Another big setback arrived for the African shipping industry in 2024 when a deal between South Africa’s state-owned logistics company, Transnet, and a company owned by Filipino billionaire Enrique Razon to expand and run Durban container port was put on hold. The decision in the Durban High Court was taken in October in response to an application after AP Moller-Maersk (APM Terminals) challenged the awarding of the deal to ICTSI, the Filipino port operator.
The likelihood of an all-out war in the Middle East may force the global merchant shipping industry to be dependent on African ports for an indefinite period. The continent has the chance to tap future windfalls.
However, the continent needs to 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 cooperation and provide incentives for private sector involvement. A fiasco like the one involving Transnet must not be repeated.
Infrastructure: Another mess
Africa also needs to focus on enhancing the integration of ports with railways and road networks, which is critical in guaranteeing better connectivity between ports and inland markets. However, budgetary constraints and competing national interests force most governments to decide against mobilising the required resources.
South Africa alone requires a mind-boggling $9.2 billion to address the infrastructure woes plaguing its ports and rail network. Namibia, which has made significant offshore oil discoveries, needs $2 billion to expand port infrastructures.
Even though the continent has seen the capacity of its ports grow significantly over the years, a 2024 report from the Africa Finance Corporation said that these expansions, upgrades and investments have not led to better inland logistics and supply chains.
Since 2005, African ports have received an estimated $15 billion in investments, allowing them to accommodate larger ships and offload more cargo for transportation across the continent.
According to the African Development Bank, port development led to increased traffic. Between 2011 and 2021, containers passing through African ports increased by nearly 50%, from 24.5 million to 35.8 million.
However, Africa Finance Corporation’s 2024 report claims that the “state of Africa’s Infrastructure,” the increased capacity has yet to lead to an efficient logistical supply chain across the continent. As per the analysts, African governments have neglected road and railway networks, which are unevenly distributed, of poor quality and underused, which limits their usefulness.
In the words of Gabriel Sounouvou, a specialist in logistics and supply chain management based in Guinea, “bad roads make it hard to do business in Africa, especially outside coastal areas.” The road corridors are not suitable for truck movements.
Jonas Aryee, head of Maritime Economics and International Trade Modules at Plymouth University in England, said human factors also make it difficult to transport goods across Africa.
“Some countries are still not opening up, and they’re protecting their local industries from those of their fellow African countries. You will find several roadblocks — from police, from customs, from gendarmes — in many countries when goods are going through. And it’s made the cost of doing business in Africa so high,” Aryee said.
The Africa Finance Corporation further showed that the continent has 680,000 kilometres of paved roads, just 10% of the total found in India, which has a similar population but one-tenth the land area.
The experts noted that the roads connecting African countries have remained in bad shape because the governments have not formed a joint team to invest in, build and manage highways that could improve the free flow of goods and people.
Floating loans
African governments are also failing to raise massive resources, thereby being forced to bring on board global operators not only to invest but also to take over the running and management of ports with the sole objective of improving efficiency.
Francois Vrey, Professor Emeritus in the Faculty of Military Science at Stellenbosch University, South Africa, 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 such irrational investments. While the government committed $367 million to build the first three berths that were commissioned in 2021, the port that was expected to become a transhipment hub is today largely a white elephant. Since its commissioning, less than 70 vessels have called at the facility.
Investments in port infrastructure are essential for Africa to compete effectively on a global scale. This is particularly important, as the World Bank’s Container Port Performance Index (CPPI) for 2023 shows that none of Africa’s ports are ranked among the top 100 in the world.
The Port of Berbera in Somaliland is the highest-ranked African port, coming in at position 103 globally. While improving infrastructure is crucial, Africa must also enhance maritime security to make its ports more appealing. There is still much work to be done for the continent’s ports, but addressing these issues could position them at the forefront of global maritime trade.