7th May 2013

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Why High Dwell Times in African Ports? 

 

Source of Information: World Bank Paper

Poverty Reduction And Economic Management Network

By Gael Rallaband

Dwell time figures have become a major commercial instrument to attract cargo and generate revenues. Port authorities and container terminal operators have increasingly strong incentives to lower the real figure. The average or mean dwell time has usually been the main target indicator for ports in Africa. This statistic is easy to compute and easy to understand. However, because high dwell times are often driven by a minority of problematic shipments, it is difficult to decrease the average/mean dwell time in the short and medium term. In Douala, for example, planners set an objective of 7 days at the end of the 1990s, but the dwell time remains over 18 days, despite real improvements for some shippers.

Cargo dwell times in African ports are unusually long—more than two weeks on average, compared to under a week in large ports in Asia, Europe, and Latin America. Excluding Durban and Mombasa, average cargo dwell time in most ports in Africa is close to 20 days (see the table below). Very long dwell times in African ports hurt the efficiency of port operations and the economy in general. A common assumption holds that the private sector (terminal operator, customs broker, owner of container depots, shipper) have an interest in reducing dwell time. However this is not always true, and is pointedly not the case in most African ports, where collusion of interests between controlling agencies, port authorities, private terminal operators, logistics operators (freight forwarders), and large shippers drives up prices for consumers.

Poor handling and operational dwell time generally account for no more than 2 days out of at least 15 days of dwell time on average. Most delays are due to transaction and storage time, resulting from controlling agencies’ performance and, more importantly, the strategies of importers and customs brokers. In Africa, importers often have strong incentives to use ports as storage areas. At the Douala port, for example, storage in the port is the cheapest option for an importer for up to 22 days (11 days beyond the container terminal’s free time). Firm surveys demonstrate that low logistics skills and cash constraints explain why most importers have no reason to reduce cargo dwell time; in most cases, it would increase their input costs. In addition, collusion of interests may reinforce rent-seeking behaviors among shippers, intermediaries, and controlling agencies. Some terminal operators earn large revenues from storage. Customs brokers do not fight to reduce dwell time because the inefficiency is charged to the importer and eventually to the consumer.

Prevailing market structure also helps explain the durability of certain patterns in cargo dwell time. Firm surveys show that companies may use long dwell times as a strategic tool to prevent competition, similar to a predatory pricing mechanism. Incumbent traders and importers, as well as customs agencies, terminal operators, and owners of warehouses benefit from long cargo dwell times (two to three weeks), which act as a strong barrier to entry for international traders and manufacturers. Delays at port also may be considered a means to sustain comfortable rent generation. Cargo dwell times in Africa show an abnormal dispersion, with evidence of discretionary behaviors that increase system inefficiencies and total logistics costs.

In Durban, two factors have helped improve dwell time: a strong, domestic private sector with interests in global trade, and a public sector willing to support it. A “penalty storage” fee has discouraged long-term storage at the port and has helped Durban maintain a dwell time of three to four days, comparable with ports in Europe and the lowest in SSA. Using Durban’s example and simulations of container movements in a port terminal, simulations suggest that a reduction of dwell time from one week to four days would more than double the capacity of the container terminal without any investment in physical extensions.

 

Table showing dwell times in days at various African ports:


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