It’s not looking good

Bolloré, CMA CGM, DP World: Will relations with African governments improve?

By Thibaud Teillard

Posted on March 15, 2021 09:10

Firefox_Screenshot_2021-03-12T12-21-11.102Z Three years after the expulsion of DP World, the container terminal in Doraleh (Djibouti) is recording exceptional results. © Vincent Fournier / Young Africa © Vincent Fournier / JA
Three years after the expulsion of DP World, the container terminal in Doraleh (Djibouti) is recording exceptional results. © Vincent Fournier / Young Africa © Vincent Fournier / JA

The success of a terminal, a key element of development for an emerging country, is the fruit of a partnership between governments and private groups. Within the last 10 to 15 years, thanks to the contribution of the latter, African ports have made spectacular progress, both in terms of infrastructure and productivity.

While most partnerships work, conflicts or frictions between governments and private groups have increased in recent years, often leading to a freeze on investments and degraded performances when they go on for a while.

Some contracts have been abruptly terminated. The most dramatic case was when DP World was ousted from Djibouti in February 2018. The official reason was for non-compliance with contractual commitments. Other contracts, which seemed fixed, were not renewed.

The most symbolic was the case surrounding Bolloré and its associate APM Terminals (a subsidiary of the Danish giant Maersk, the world’s number one container company). They were evicted from Douala in 2019 at the start of the tender for the renewal of the concession, after having managed the Bonabéri terminal for 15 years.

This tender is in a delicate state and is the subject of numerous ongoing procedures. The Port of Douala’s clients are the principal victims as they have been subjected to technical incidents, slowed speeds and congestion.

Some contracts, signed in due form, never end up being fulfilled. The Philippine group ICTSI, one of the 10 world leaders in container terminal management, was approached to manage the Lekki mega-project in Nigeria.

Embroiled in the 2014 oil crisis, the Lekki project was finally launched without ICTSI. They were replaced by the CMA CGM group as the sole operator, which was initially only a minority partner of the Philippine group.

Groups under scrutiny by NGOs and public opinion

In Port Sudan, the project announced in July 2018 by ICTSI was buried in April 2019 with the fall of Omar al-Bashir. “A good contract is a legally sound contract because what one president decides, another can undo,” says an expert from a major French port concession group.

Another example, this time in Mauritania. A concession was awarded in October 2018, at the end of President Mohamed Ould Abdel Aziz’s term of office, under a rather vague legal framework in Nouakchott to the Singaporean training facility Arise. It was then renegotiated after Mohamed Ould El-Ghazaouani’s election. Mauritania has regained some financial leeway and, in particular, Arise and its partner Meridiam have not obtained a monopoly on container handling in Nouakchott.

So, as a lawyer who has worked on African contracts asks with a touch of cynicism, “is the call for tenders nothing more than a legal cover for a political decision?”

Is this comment a bit of an exaggeration? Even though each state acts independently and can, as we saw in Djibouti in the name of the country’s best interests, depart from the rules of international law that it has itself agreed to accept in the contract (recourse to arbitration in London), the presence of major multilateral donors whose job it is to scrutinise the conformity of procedures no longer allows as much freedom as before.

The obligation of the major private groups, companies which are sometimes listed or at least subject to the scrutiny of NGOs and public opinion, to abide by the new compliance rules also limits their possibility of negotiating under the table.

Strong competition forces transparency

The amount of investment and royalties requested over the concession periods – 100, 200 or even $300m – also makes them very demanding. “The legal and political context for presenting and negotiating calls for tenders has changed over the last decade,” says an executive of a large group who, like many others in this sensitive area, prefers to remain anonymous. “The procedures have become more open in recent years because the race for the concession is itself more open.”

We are now a long way from the calls for tenders that were made 20 years ago by only one candidate. Firmly established African groups are no longer the only ones to participate in the calls for tenders, as large European and Asian groups are increasingly becoming more involved. This greater competition requires transparency, as it could otherwise lead to a possible course of recourse by the losers against the winner.

Above all, these players are now presenting themselves in consortia to limit and, in a way, share the risks among themselves. International groups can therefore take advantage of this to seek – if possible – a partnership with a local player, as evidenced by the response to the call for tenders to renew the Abidjan Ro-Ro terminal concession (Terra), which was signed on 15 January 2020.

Terra 2 is the result of a public-private partnership between the Abidjan port authority, several international logistics players – Bolloré Ports, Terminal Link (CMA CGM and China Merchants), Grimaldi and Movis – and private Ivorian partners.

Lack of knowledge of the sub-regional dimension

The international groups’ task is nevertheless complicated by the fact that each African country thinks their port is the most strategic. Governments have a local vision, in the name of their supposed national interest, and are often unaware of the overall sub-regional dimension.

Chinese financing – so generous at the beginning, so restrictive by the end – also knows how to maintain the myth. Docks are built, hubs are promised and then it is up to international operators to perform miracles in terms of traffic and know how to work with often impatient national egos.

Despite the great promises of the Silk Roads, it is clear that Chinese terminal operators – apart from China Merchants (but always in consortium with a European group) – are very discreet in Africa, whereas the builders, starting with CHEC (China Harbour & Engineering Company) are omnipresent.

The major port terminal players have this regional and global vision, which is essential when talking about investments of hundreds of millions of dollars. In the event of conflict, African states – particularly French-speaking ones – still think of port players as “national.” Bolloré and CMA CGM, for instance, are still perceived as French even though they have become true multinationals.

“These multinationals will fold whether or not the French ambassador intervenes,” says an executive of a large group. This is just as much the case for DP World, which is an important player in the United Arab Emirates (UAE) but above all a group that is there to make profits, not for geopolitical reasons.

“And this is something that African states don’t realise,” says the executive. “In Africa, there is a desire to take back control of interests deemed strategic, but I do not feel that the Europeans and Chinese think along these lines.”

The best solution? Public-private partnerships

The best contracts – those that last – remain public-private partnerships, which all the leading terminal operators prefer. In them, the private sector commits to paying royalties over the duration of the concession and to handing over the equipment at the end of the contract.

“A virtuous contract is a long-term partnership that offers a balance between the interests of the private group, which wants enough time to make a profit on its investments, and a real contribution to the territory,” says a specialist in responding to calls for tender. “In order for this to happen, African states need to further improve their procedures and be well advised.”

This is because some terminals are granted within a legal framework that is still too uncertain, with great promises that have not been kept. Despite all the reassurances from Kinshasa and DP World, the Banana Port – at the mouth of the Congo River – remains a thorny issue.

“If I had $10 to invest from my pension fund, I wouldn’t put it into this project,” says an observer of African logistics. “Sovereignist logic pushes for the construction of an alternative to Pointe-Noire via Banana, even though it is the natural route to Kinshasa. Introducing customs reciprocity between the two Congos, in order to avoid double customs clearance from Pointe-Noire, seems more urgent to me and would be much more profitable for DR Congo shippers than building a new port,” says the same interviewee.

In Egypt, CMA CGM was surprised, after holding direct discussions with the authorities over the attribution of the multipurpose terminal of Alexandria (Pier 55), to suddenly see a call for tenders to which its big competitors, including Singaporean PSA and Bolloré, responded.

CMA CGM complied and succeeded in obtaining a commitment from the authorities by putting all its cards on the table when their CEO, Rodolphe Saadé, went to Egypt on 26 January. However, everything still remains to be settled on the legal front.

Sometimes, the private group has requirements that may escape the authorities of that country’s knowledge. The same CMA CGM, via its subsidiary Terminal Link, may have won one of the most profitable calls for tenders of 2020 – the multipurpose terminal of Luanda – but it withdrew in the end. Instead, it was DP World – who came in second – which signed the contract on 25 January with the Angolan authorities.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.