INTRODUCTION
Shipping lines faced with numerous constraints, including erosion of tariffs, poor port productivity, congestion cost and pressures from the European Union to abolish the conference lines instituted port congestion surcharges as a way of freight rate restoration in the 1990's. This surcharge is still in existence despite improvements in the ports in some African countries, including Ghana.

 

African economies consequently bear these costs which are passed on to shippers. The author conducted a study on port congestion surcharges to determine whether the existing conditions at the port of Tema still warrant port congestion surcharges.

 

PORT CONGESTION
Recent events in international trade, coupled with the re-emergence of the Asian tigers and huge imports from China have rendered several ports congested. According to Dr. Hilling, 'even with their long histories of gradual elaboration, improvement and readily available technical expertise and funds, ports in advanced economies have not always managed to achieve the expeditious flow of cargo and turn-round of vessels that one could wish for.

 

However, port congestion in an exaggerated form has become an all too common phenomenon at the ports of some less develop countries (LDC's) and there are fears that in some places, it has changed from being epidemic and has assumed endemic proportions' (Hilling 1976).

 

Definition of Port Congestion
The term 'port congestion' is best explained when broken into two parts, a 'port' and 'congestion'. Alderton defines port as 'a town with a harbour and facilities for a ship/shore interface and customs facilities' (Alderton, 2005, p7). Stopford also defines port 'as a geographical area where ships are brought alongside land to load and discharge cargo-usually a sheltered deep water area such as a bay or river mouth' (Stopford, 1997, p29). Congestion is however defined as 'a state of overcrowding in a street or other area, making movement slow or difficult' (Encarta online dictionary)

 

Port congestion is defined by Alderton 'as insufficient port capacity to cope with traffic arriving at the port (Alderton, P. 2005, p 199). He further explains that this phenomenon is not a new problem and can occur at any port if there is a sudden upsurge in demand or hold-up in the port such as a strike.

 

For this paper, port congestion may be defined as the inadequacy of port capacity to cope with ship/cargo traffic to and from the port resulting in delays in working the vessel, handling and delivering cargoes beyond reasonable periods.

Causes of Port Congestion
In the mid-1970, the oil boom and price increases led to excessive importation of goods which led to massive port congestion. According to Dr. Hilling, 'in Nigeria, the congestion of 1975-6 has become part of maritime folklore, with delays of 120 to 180 days not uncommon, crews either taken off ships at anchorage or in desperate conditions and at a peak over 400 vessels waiting to enter port' (Hilling 1996, p257). The United Nations Commission on Trade and Development (UNCTAD) due to the severity of the congestion in the early 1970's set up a small group to analyze the situation.

 

The Baltic and International Maritime Conference (BIMCO) who were represented on the UNCTAD working group summed up the major causes of port congestion. The table below explains the causes of port congestion as summed up by BIMCO.

 

 

Measures to reduce Port Congestion
In 2004, during the U.K ports congestion, Shipping Lines and the ports industry teamed up to produce a programme of best practice which was designed to maximize throughput and avoid congestion. These included the role of shippers / consignees, port/ terminal operators, ocean carriers, logistics / road haulage providers and rail freight operators in the delivery and haulage of goods.

 

The joint initiative comprised Freight Transport Association (FTA), Chamber of Shipping, British Ports Association, UK Major Ports Group, Sea and Water, British International Freight Association (BIFA) and the Rail Freight Group. The document describes the ways in which each of the parties involved could contribute to reducing congestion. The measures were as follows:

A. Shippers/Consignees should aim to identify delivery windows at all times and communicate with all individuals involved in port operations including the handling, haulage and delivery of cargo.

 

B. The Port/ Terminal Operators should communicate information on volume forecast during peak periods, departure and arrival of vessels. They should also schedule port maintenance outside peak periods, identify and agree on communication channels and contingency plans to reduce congestion.

 

C. The liner shipping operator should aim wherever and whenever possible to communicate to ports / terminal operators and shipper/consignees the arrival and sailing schedules and keep to these schedules.

 

D. The Logistics and Road Haulage providers should aim to disseminate details of traffic forecast and demands to port terminal operators, as well as keeping those in the supply chain informed on opportunities for off peak pick -up and delivery.

The Port Management Association of Eastern & Southern Africa (PMAESA) in September 2008 recommended some measures to reduce congestion. The measures were categorized into short term and medium to long-term approaches. Under the short term measures, it was suggested that dwell time of containers should be reduced by the introduction of punitive measures to discourage shippers from using the port as a storage area.

 

The increase of capacity of Container Freight Stations (CFS) was also considered. With regards to the medium to long-term approach, the group agreed that storage capacity of the port should be increased while consideration is also made in the building of new terminals.

 

TEMA SEAPORT: Equipment and Port Efficiency
Tema seaport was commissioned in 1962 by the First President of the First Republic of Ghana Osagyefo Dr. Kwame Nkrumah who was anxious to see the rapid industrialization of Ghana (Barnes 2005). Tema city and port lie in south-eastern Ghana along the Gulf of Guinea (Atlantic Ocean). It is 18 miles (29 km) east of Accra and the bigger of the two seaports in Ghana.

 

At the time of its commissioning in 1962, Tema port was considered to be Africa's largest man-made harbour. The port serves as a traffic junction, where goods are transshipped and transit cargo destined for the hinterlands including the landlocked countries on Burkina Faso, Mali and Niger and handled (Otal 2009).

 

Tema seaport has since April 2007 been operating as a landlord port. A Landlord port, according to (Alderton, 2005) is where the state or the city owns the land and the port's sea approaches and lease out the terminals to private stevedoring firms to operate. In the landlord port, the landlord provides the infrastructure (i.e. a paved terminal with deep water access) and the tenant provides his own superstructure (i.e. cranes and cargo handling equipment).

 

Berths
The seaport of Tema has twelve multi-purpose berths located on two quays. Eight of the berths have a length of 183 metres. Berths number 1, 2, 3 and 4 have the following lengths, 299, 275,228 and 181 metres respectively. The depth of the Berths ranges from 8 metres on berth number 12 to 11.5 metres on berths number 1 and 2. There are also two specialized berths for the handling of alumina, pitch, coke and the latter for petroleum (Otal, 2009). The port access channel has a depth of 12.5 metres.

 

Equipment Inventory of Tema port
Meridian Port Services (MPS), the operators of the container terminal in Tema port have the following port equipment for their operations. Three panamax Ship to Shore (STS) gantry cranes, four Rubber Tyred gantry cranes, twelve 45 tonnes reach stackers, four 15 tonnes empty container handling equipment, thirty Terminal tractors, thirty-three terminal chassis and twenty-three utility vehicles and forklift

 

Gantry Cranes Hourly Moves
The Ship-to-shore (STS) Gantry Cranes which started operations in Tema seaport in January 2007 with hourly moves of nine containers gradually improved to eleven containers an hour by the end of the first quarter in March 2007. It took a sharp dip in April when Meridian Port Services (MPS) took over the operations of the container terminal in April 2007. In July 2007 it improved to 12 moves an hour and ended the year with an average of eleven moves an hour.

 

In 2009, there were recordings of hourly moves of each of the three gantry cranes. Two of the cranes recorded thirteen with one recording twelve container moves an hour.

 

Port Productivity Comparison
A study by (USITC 2009) in April indicated that Tema port is currently the second in Sub-Saharan Africa when it comes to port productivity using the container per hour moves as a performance indicator. This clearly goes to prove that vessels are turned around quickly in Tema port and the justification for port congestion does not really exist. The study further confirmed that the port of Tema will soon hit the thirty container moves per hour to rival some of the best ports in the world. Presently, Hong Kong port has the highest container moves of forty per hour.

 

Cargo Flows/Throughput
Cargo throughput at the Tema Seaport which was 6,219,517 metric tonnes in 2000 increased to 9,249,977mt, which represent an increase of 49%. In 2008, a total amount of 8,727,049mt was handled at the Tema port.

 

In terms of trade, import cargo was dominant with a total of 6,259, 412mt representing 72% of the total cargo throughput for 2008. Export cargo was 15%, transshipment cargo was 2% and transit cargo stood at 10%. There was however a national coastal trade between Tema seaport and Takoradi seaport which was 1%. With regards to commodity groupings, containerized cargo was dominant with 55%; dry bulk cargo was 16% while conventional cargo amounted to 15%. Liquid bulk and frozen cargo was 11% and 3 % respectively.

Transit Cargoes
The land locked countries of Burkina Faso, Mali and Niger started using the seaport of Tema during the political crises in Cote d'Ivoire in 2000 and still continues to channel their shipment through the port. In 2000, transit cargo totaling 144,973mt were handled in the port. Over a period of nine years, transit cargoes throughput have increased by about four times to 864,307mt in 2008.

 

Vessel call, Waiting Times and Average Berth Occupancy
Average waiting time of vessels in the Tema seaport in 2000 averaged 17.75 hours while berth occupancy stood at 39.72 hours. Between 2001 and 2005 the port of Tema was dredged and quay number 2 was extended.

 

This, however, increased vessel waiting time to 47.63 hours and berth occupancy to 66.66 in 2004. It further increased to 55.91 hours waiting time and 88.47 hours berth occupancy in 2007. In 2008, the average waiting time dropped to 45.01 hours and berth occupancy of 70.84 hours. Whereas cargo throughput from 2000 has seen a tremendous increase time in port has also been going up which is an indication of less productivity in the port. Between 2001 and 2005 the port was dredged and quay 2 extended to 299 metres.

Construction activities regarding the extension of the quay led to the closure of berths 1 – 5 to vessel traffic. The closure of the berths to traffic adversely affected the waiting time of vessels at the anchorage. The resultant effect was that the shipping lines diverted their vessels to the neighbouring ports of Lome, Cotonou and Cote d'Ivoire due to the long pre-berthing waiting time.

PORT CONGESTION SURCHARGE, PORT EFFICIENCY AND ITS IMPACT ON GHANA

History of Port Congestion Surcharge in Sub Saharan Africa.
According to a report on Port and Transport Challenges in West and Central Africa (SSATPP Working Paper 84, 2007), Shipping lines faced with numerous constraints in their operations in West and Central Africa (WCA), devised strategies to cope with constraints and also stop the erosion of tariffs, which decreased at the end of the 1990's.

 

The agreements between shipping companies, known generally as Conferences Lines, have had a long history in West Africa. Changes in the composition of such agreements had resulted from mergers and takeovers in the shipping line industry, including the purchase of OT Africa Line (OTAL) by Delmas, the purchase of Safmarine by Maersk Sealand and finally, the purchase of Delmas by CMA-CGM.

Again the 1974 Code of Conduct for Liner Conferences 17 and the 40-40-20 rule, West and Central Africa (WCA) fleets played a substantial role by carrying own import and exports until 1990.

In practice, this rule led to the existence of several shipping companies without ships, selling their country's share of cargo to foreign companies, without accepting any responsibility for the quality or cost of services.

 

However, containerisation growth during the period required the reconfiguration of national fleets—a challenge impossible to meet for most WCA countries. UNCTAD then recommended shipping policy reforms based on the strategy that: Liberalisation with a complex mix ensures the competitiveness of the sector. The situation then stabilized when Maersk took over Safmarine and OT Africa Line joined Delmas under the control of the Bollore Group.

 

In 2000, a group of carriers involved in the Europe-West Africa trade decided to set up a new conference, named Europe West Africa Trade Agreement (EWATA). The main objective of EWATA was to stabilize rates which were published. EWATA’s impact was due to the fact that member lines controlled an estimated 50 percent market share of the Europe-West Africa trade. Delmas and OTAL opted to remain outside the agreement, but mirrored most of the rate increases initiated by EWATA members.

 

In 2002, new shipping lines entered the Europe-West Africa trade, notably the Chilean Compañia Sud Americana de Vapores (CSAV) group which developed an innovative approach, by adding intermediate calls in West Africa on their joint service between Europe and the East Coast of South America (ECSA).

 

EWATA members and Delmas/OTAL accused the new entrants of practicing predatory pricing and fierce competition. Subsequently, the downward effect on the rates resumed until 2002. On September 1 2003, Delmas and its subsidiary OTAL joined EWATA, bringing the market share of EWATA to an estimated 70 percent to 75 percent of the total Europe West Africa trade. In November 2003, P&O Nedlloyd announced its withdrawal from the Europe West Africa trade, to focus on the growing Asia West Africa trade.

 

In August 2004, West-Afrika Linien (WAL) announced its withdrawal from the Europe-West Africa trade, quoting the inability of EWATA to increase its rates because of a strong competitive pressure from the outsiders, as the main reason for the decision.

 

Slow traffic growth and limited market entry led to excessive capacity over demand for shipping services. West and Central African ports during these times had serious problems with equipment and efficiency also dropped. Due to these port problems, shipping lines adopted port surcharges, such as congestion surcharge on ports with congestion problems. Over the years, shipping lines established tariff increases for “port congestion” and “rate restoration” within the framework of the Conference lines (SSATPP Working Paper 84, 2007).

 

The Impact of Port Congestion Surcharge
According to Dr. Hilling, Port congestion surcharges imposed on shippers rose from an average of about 10% a year in the mid-1950's to over 300% in 1974(Hilling, 1976) . In 1975 UNCTAD calculated the world bill for port delay at $1 billion and for 1976; the cost reached $5 billion if calculated to include interest tied up in vessels and the goods they carried. Presently port congestion cost incurred by shipping lines in Nigeria is N2.4 billion (US $16 million) monthly (Ifenyiwa Obi, 2009). In Australia, it has been estimated that port congestion in the next decade for delays in the coal industry would be AUS$ 7.9 billion (U.S$6.7 billion) (Batchelor, 2009).

 

These costs find their way from the port and ship-owner through to the shipper and eventually will percolate through the national economy. Port congestion surcharge is a contributing factor to universal inflation.Dr. Hilling continues that it was ironical that in some cases much of the cost is borne by the poorer developing countries which effectively carry the transport charges on both imports and exports. This must therefore be seen as a factor hindering the general economic progress of the LDC's.

 

Indeed, as a result of poor port productivity and efficiency, direct charges, such as port charges and shipping cost are high. In addition to these direct costs, shippers pay indirect logistics cost related to excessive inventory cost and dwell time, which even constitute a bigger cost. Time spent at a port is a major criterion to choose to call at a port. Port inefficiency is usually embedded in higher ship turnaround time.

 

On the basis of this, when shipping lines are faced with these constraints, they inevitably increase shipping cost by adding surcharges to the shipper. The shipper also pays higher because shipping lines in order to reduce fixed cost limit vessel sizes operating on a particular route. Sanchez empirically states that higher ship turnaround time, congestion time and dwell time induce higher shipping cost, all other things being equal (Sanchez et al 2003; cited by Harding et all 2007).Clark also states a strong correlation between port efficiency, maritime cost and trade. (Clark et al, 2004; cited by Harding et al, 2007)

 

On the assumption that all shipments in containers to the seaport of Tema attracted the port congestion surcharge and using Maersk Sealand surcharges (Maersk Sealand transports 40% of import cargo to Tema)(GPHA ,2009) as the basis for the calculation, import containers to Tema seaport in 2007, was 215,382 TEU's. Using $150.00 as the surcharge per 20'container, the total amount of surcharge paid by shippers for 2007 will amount to $32,307,300.00 (Thirty Two Million, Three Hundred and Seven Thousand, Three Hundred U.S dollars).

 

In 2008, import container units to Tema seaport were 245,499 TEU's. Using the same factor as above i.e. $150.00 per 20' container, the surcharge paid by shippers for 2008 increased to $36,824,850 (Thirty six Million, Eight Hundred and Twenty-Four thousand, Eight Hundred and Fifty U.S Dollars). This shows an increase of about 14%. All these surcharges must be paid in foreign currency irrespective of the local currency. Regrettably for shippers, the surcharges are applied per box rate irrespective of the value of the content.

 

Considering the above analysis, it is evidently clear that shippers are compelled to change local currency into United States Dollars in order to pay for the surcharges. The demand for the scarce foreign exchange brings about inflation as more local currency is needed to purchase the dollar. Another effect is that the shipper is forced to use part of the capital in the business to pay surcharges instead of expanding the capital base of the business.

 

The shipper is forced to increase prices of goods to defray the surcharges paid. The resultant effect is high prices of goods in the market and these results in unpopular governments and thus insecurity heightens. West Africa has a history of coup d'etats for the reason that prices of goods in the market escalate while consumers remain on the same salary.The cumulative effect of the payment of surcharges is so strong on the economy that doing business becomes very expensive. The new world order is such that countries with high cost of doing business are shunned by investors.

 

CONCLUSIONS
This Study has been focused on finding out whether port congestion really exist and whether the port congestion surcharges that the shipping lines have been implementing in Sub-Saharan Africa should be implemented at all as with the case of Ghana.

 

The major factors of port congestion was identified to be rapidly increasing trade, increases in ship size in relation to port facilities, the inefficiencies of the land side transport and sometimes, the climate. It was also acknowledged that port congestion adds cost which is very huge to imports and again reduces the export competitiveness of countries with port congestion problems. It was also realised that port congestion is a disincentive to the general economic development of countries.

 

Delays by shipping companies to transmit electronically; ship manifest, stowage plan, cargo list, etc for early planning by the stevedores also cause congestion. Another area that causes congestion is the use of transit warehouses in the port as permanent warehouses by shippers. This issue is usually ignored by the port authorities because some money is earned for its usage.

 

Cumbersome customs procedure was also identified to be a cause of port congestion. The study discussed port congestion surcharges, port efficiency and the impact of the surcharges on the economy extensively. It was realised that the surcharges are implemented to make up for lost time in ports when the place becomes too congested and ships wait for a longer time to berth.

 

With regards to port, it was found out that, some actions of the port merit the implementation of the surcharge as the Nigerian ports situation presently suggest. Vessels may stay for over 30 days at anchorage before berthing in some Nigerian ports. However, the amount of the surcharge would have to be discussed with the agencies involved in championing the cause of shippers (Shippers' Councils).

 

The impact of the surcharge on the Ghanaian economy was analyzed; loss of capital in terms of monies used in the payment of port congestion surcharges reduces business capital of the shippers, high prices of goods as shippers transfer their expenses on to the prices of the commodity. This analysis wasdone by using data from Maersk congestion surcharges presently being implemented The analysis revealed that a whopping amount of over $62 million was paid by shippers to shipping lines during the last two years.The study identified that port congestion is a multi-faceted issue that must be tackled on all fronts in order to overcome it.

 

Overcoming congestion must not be done only by increasing port capacity or improvement in highway infrastructure but by improvements in port operations, application of new technology and efficient use of off-dock terminals in order to create space for more cargoes.Shipping lines generally, may have the justification to implement port congestion surcharge in ports where the congestion impacts severely on their operations and subsequently profitability. However, the determination of the amounts to be charged should be done in collaboration with relevant National Agencies to ensure that there is no breach of any of the principles of fair trade practice, namely dialogue and transparency.

 

Tema port has, over the last few years, developed in terms of a deeper vessel draught (11,5metres),3 ship to shore gantry cranes, 4 rubber tyred gantry cranes, paved capacity of 77,200m2 and a storage capacity of 50,000 metric tonnes, the GCNET/GCMS clearance system, just to mention a few. The port presently is competing to be a hub port for the West Coast of Africa and therefore needs encouragement to achieve that objective.

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(This article is an excerpt of a dissertation submitted in partial fulfillment of the requirements of London Metropolitan University for the degree of Master of Science in International Trade and Transport by Mark Kojo Boafo in September, 2009.)