Maputo Corridor Logistics Initiative

Leading the way to economic growth

The Maputo Corridor Logistics Initiative (MCLI) has spent the past 10 years campaigning for positive change along a vital transport corridor connecting Johannesburg in South Africa to Maputo in Mozambique. The battle has been hard-fought, but, as the MCLI redoubles its efforts to improve border post efficiency and to strike up a public-private partnership with government, its ambitious plans for the corridor are starting to take shape.

Running through the highly industrialised regions of Mpumalanga, Gauteng and Limpopo, the Maputo Development Corridor (MDC) connects these productive landlocked provinces to each other; different regions; the sea; and the international market. It comprises road, rail, border posts, port and terminal facilities, making it an economic pipeline and an essential transport corridor for all manner of passenger, from mineworker to tourist. The number of businesses and people wanting to use the corridor is growing at a rapid rate as Africa’s economy expands. Unfortunately, the result is a situation where demand for infrastructure and streamlined processes outstrips supply.

This imbalance has been a persisting problem for businesses using the MDC and in 2004 eight parties with an interest in the corridor – from infrastructure investors to service providers – came together to try to solve it. They formed the Maputo Corridor Logistics Initiative (MCLI): a non-profit organisation designed to represent to government the requirements for sustained investment in the corridor.

Three-pronged approach

Chief executive Barbara Mommen says the formation of the MCLI was driven by a number of issues, including:

Negative perceptions about Port Maputo

No container lines calling at the Port

Lack of rail service

Limited border operating hours

Congestion and delays

No institutional framework on the corridor

Inappropriate cargo restrictions

Inefficient border posts

The organisation decided a “three-pronged approach” was required.

“Number one looked at marketing the corridor, which is what the infrastructure investors were keen on – making people aware of what investment had been made in infrastructure,” says Mommen. “Second, providing a platform for engagement between the public and private sector on bottlenecks to the movement of cargo on the corridor. Third, creating a mechanism for resolving crises or problems on the corridor.”

Around 75 per cent of the MCLI’s budget comes from its founding companies; the other 25 per cent comes from 170 general members from all variety of sectors, including anyone with an interest in doing business on the corridor. The foundation companies are:

Mozambique Ports & Railways Company (CFM)

Department of Transport (DoT)

DP World Maputo

FPT (Moçambique) Lda

Kudumbra Investments

Manganese Metal Company (MMC)

Maputo Port Development Company (MPDC)

Swaziland Railway (SR)

Matola Coal Terminal (TCM)

Transnet Freight Rail (TFR)

Trans Africa Concessions (TRAC)

Trans Africa Logistics (TAL)

The basic aim for all of these companies is to simplify the movement of freight from any point to the port, enabling the development of economies of scale and an efficient, reduced-cost logistics corridor.

Inefficient border posts

A large part of MCLI’s mission is to break down the barriers currently delaying and preventing the movement of freight along the corridor. Mommen says the largest barrier is the inefficiency of immigration processing at the border posts, which generally only operate for 18 hours a day.

“Maputo port operates for 24 hours on 365 days of the year, but our border posts are only operational for 24 hours over peak periods such as the festive season, when there’s a lot of holiday traffic going through,” she explains.

“We’ve had the most awful, awful festive season as far as efficiency through the border posts is concerned. We’re hearing about tourists waiting 16 hours to cross the border and it’s just completely unacceptable. There are cargos, tourists, business travellers and mine workers crossing here and if you get a delay in the passenger processing, it has this domino effect.”

Another barrier to transit through the border posts, according to Mommen, is the lack of a one-stop operation for cargo and/or business travel. “It may seem ambitious, but we really need a situation similar to the Canadian and American border posts where it’s like a toll gate – you put in your passport and they manage levels of risk through different lanes,” she adds.

“We sing the song to the point of complete boredom, because we’ve been saying this for 10 years – we need a 24-hour, one-stop border post operation.”

All talk no action

Six years ago, a 24-hour, one-stop operation seemed more within reach. The SA and Mozambique heads of state agreed to such an operation in 2007 and in 2008 were close to spending just shy of R2 billion on a modern one-stop facility. When the global financial crisis hit, the governments said they would have to phase it in gradually.

“Six years later, we still don’t see any evidence of that, but it has to happen if we’re going to see continued growth, particularly in time-cost efficiencies,” remarks Mommen. “We can’t get away from the fact the border posts were built in the 1940s and 50s for 8,000 travellers a day, whereas now you’re looking at 150,000 people a day. Not only because the services aren’t working, but also because the capacity of the infrastructure is not there.”

Unfortunately, the mountainous terrain underneath the border posts means any expansion will be expensive. Customs processing has been improved by replacing manual systems with sophisticated electronic processing. “[This] has made a huge difference, but, in a way, the benefits accrued by the electronic systems improvements are negated by the fact the border post operation doesn’t have a 24-hour position – and that needs significant input from both the South African and Mozambican governments,” says Mommen.

“The costs incurred by delays at the border posts have a huge impact on the efficiency of our corridor. Our competition – specifically bulk cargo out of Richard’s Bay Port and container and bulk cargo out of Durban – don’t have border posts, so we have to make ours so efficient that it’s a seamless process. We can’t do that without significant cooperation from our public sector partners.”

Cargo appeal

The MCLI’s calls for improvements to the Maputo Corridor border posts operation may have fallen on deaf ears, but in other areas its lobbying has successfully changed the law. One example is how it convinced the authorities to relax the requirements for different types of cargo passing through the corridor.

“The legislation previously was very draconian, in a way; having been drafted in the early 1990s, it was dated and had never really been amended to fit the situation,” says Mommen. “This meant all transit cargo and bonds and guarantees applied in a blanket fashion, whether it was high, medium or low-risk cargo.”

The MCLI was encouraged to take action against this legislation by one particularly aggravating case, in which the large size of a very-low-risk consignment caused it to have “inappropriately high bonds and guarantees” raised on it. “It was completely low risk; it couldn’t be stolen and you couldn’t put anything inside it,” explains Mommen. “But that consignment sat in the port for more than three weeks. The cost of that delay to the cargo owner was unspeakable.”

Fortunately, the MCLI and its port partners lobbied successfully to change the law and amendments to the transit legislation were published last year. The MCLI’s next aim is to increase the potential for cargo flow in both directions through the port, reducing the passage of empty ships and thus the costs to companies.

Extending its reach

The MCLI is a private sector lobby and advocacy organisation, but it believes forming closer ties to the public sector could grow its influence and help it achieve more. It is working towards becoming an institutional public-private partnership with the South African, Swaziland and Mozambique governments.

“It’s not an easy option, but we believe it is probably the only option available to us if we are to create a situation where we can develop a working partnership with the governments that can deliver results,” Mommen explains. “It’s not a common thing in Africa so it’s quite an intricate process, but we believe that in the next year or two we will make significant progress towards putting that public-private partnership together.”

While the MCLI already has good relationships and strong influence with the relevant governments, it seeks to transform these connections into legal agreements that lay out each of the parties’ responsibilities and secure government funding to sustain the organisation.

“Our donors have funded us for 10 years and it’s getting a bit tough on them; the load needs to be shared and we strongly believe we need to bring the governments in on that,” says Mommen. “Because really, [the governments] are the beneficiaries – as much as the private sector benefits, the public sector benefits.”

The organisation is also keen to increase its efficacy by opening a research division, so that it may enhance its understanding of the logistical costs for every type of cargo and every type of transport. Mommen says this would help the MCLI plan strategically for future development and to focus its energy where most needed.

The evolving port

Part of the challenge in improving conditions on the MDC comes back to how people perceive Maputo port. The port has a “colourful” history, Mommen admits, including a civil war in the early 1990s. After the war, with rail and road links into the port destroyed, the port fell into disrepair.

“Civil wars have a most devastating effect – not only on the people of the country, but on perceptions of the country’s ability to deliver any kind of service,” Mommen remarks.

A lifeline came in 2002 when a private sector consortium received a 15-year concession to rehabilitate the port, with an initial investment of around US$70 million. The concession gave 51 per cent of the port to the private sector, while the government retained a 49 per cent shareholding. Mommen claims this rare arrangement has been “key to the success” of the port’s rehabilitation, in allowing the private sector to attract infrastructural investment and to negotiate on port services.

The initial investment went into clearing wrecks from the port, upgrading the quaysides, reviving the rail and restarting port operations. The MCLI has continued to drive such improvements and, in 2010, the concession was extended until 2033. Mommen says this shows that government is confident in the ability of the private sector concession to deliver on the new master plan to invest $1.2 billion in the port over the next 20 years.

“[Given its history,] many presumed that the port was a disorganised mess,” says Mommen. “So as the MCLI it’s our job to show people what the port really looks like now, what services it offers, what it is doing, what are the plans for investment and what the port can do for them.”

Route to improvement

When it comes to showing people that the port has improved, the MCLI has plenty of proof. Tonnages through the port exceeded all expectations to reach 15 million tonnes at the end of 2012. “Even during the economic downturn over 2008 and 2009, we didn’t see any drop off in cargo, only increase,” Mommen remarks. “This says a lot for the region’s ability to deliver.”

Demand for using the port currently outpaces its growth and certain terminals are at full capacity, awaiting further investment to expand. While not ideal, Mommen sees this as proof of the “buoyancy” of the region’s economy. In this and other regards, much more money could be made and growth achieved at the port and along the MDC if not for the space and regulatory restrictions in place causing delays, incurring costs, preventing expansion and deterring business partners.

Mommen says the biggest barrier to business along the MDC now is its lack of a 24-hour, one-stop operation at the border posts, which is why the MCLI will be lobbying “very strongly and aggressively” for this cause in 2013.

“What our public sector partners need to understand is that once you lose a logistics chain, getting it back is very difficult, because it’s a hugely expensive exercise for organisations to move a logistics chain out of one port to another,” Mommen explains. “It involves so many stakeholders and role players – and so much investment of time and money – that if you lose the logistics chain due to public sector inefficiency, essentially the whole region loses.

“Once you have a very well-functioning transport corridor, however, you have spin-off of all kinds,” she argues. “Studies show that investment in the MDC has had huge benefit for property values in towns on the corridor. And obviously, the ability you create for people to move along the corridor easily means you’ve then got a whole range of economic activities happening along it that could not happen if you didn’t have that capacity.”

The MCLI believes the governments along the MDC have two choices only: ignore the corridor’s weaknesses and the whole region loses; or fix them and the whole region wins. Mommen and the rest of the MCLI will be doing all they can to ensure those in power choose the latter path. “Maximising the corridor’s capacity and efficiency is crucial,” she adds. “It really is our raison d’être.”

www.mcli.co.za

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