Growing prosperity through trade

Kenya Ports AuthorityMedia Workshop

Port Management Models

Public, Private, Mixed or Other Model

First and foremost: Understanding the nature of the port

• Green or Brown Field ?

• Small local port (County traffic only), • Regional (more than one County), or • International gateway (global orientation)

• Location and historical development – why there and not somewhere else ?

• Types of cargoes handled – liquid and dry bulk, general cargo, RoRo, containers, others

Source: UNCTAD (Review of Maritime Transport 2011)

Public, Private, Mixed or Other Model

Secondly: Why Change?

• bottlenecks to efficient distribution ?– Restrictive labour practice (associated with outdated methods of cargo handling -

matching available labour to occasional work)– Centralized Government control (with slow-paced, rigid and hierarchical planning)– Limited fiscal space – Lack of finance

• Is it simple rent seeking ?

• Or White Elephants - “misinvestment” - facilities that were badly matched to traffic demand

Source: UNCTAD (Review of Maritime Transport 2011)

Type of Model

Four main categories of ports have emerged over time:

1. The public service port (Nationally or Municipal /County Owned)• Service ports have a predominantly public character and the port authority offers a

complete range of services required for its functioning. The port owns, maintains, and operates all asset (fixed and mobile), and cargo handling activities are executed by labour employed directly by the port authority.

2. The tool port• Whereby the port authority owns, develops and maintains the port infrastructure and

superstructure including cargo handling equipment . Cargo handling is usually carried out by private cargo handling firms contracted by port authority.

3. The landlord port• Which is characterized by its mixed public-private orientation. Under this model, the port

authority acts as regulatory body and as landlord, while port operations (especially cargo handling) are carried out by private companies (using their own equipment) . Typically infrastructure is leased to the private company and today, the landlord port is the dominant model in larger and medium sized ports.

Types of Model

4. The fully privatized port– In fully privatized ports (or private service ports) all land, infrastructure and

superstructure is owned by private entities – often who are self-regulating. The state generally has little involvement of public policy interest.

Everything In-between

Strengths and Weaknesses

Options Depend on Business Model

Tariff

Critical to understanding how the port tariff worksFunction Tariff Item Pays for Remarks

Marine Services

Pilotage ServicesTug ServicesMooring and Unmooring ServicesOther Services -MARPOL Provisions, Water

Vessels, Operating CostsAs aboveAs aboveServices rendered to ships

Sometimes set below full infrastructure recovery cost to attract shipping lines Subsidised by other port charges, especially wharfage)

Marine Infrastructure

Navigation DuesPort Entrance DuesDockage and Buoyage

Aids to Navigation/VTS Capital and Maintenance DredgingQuay and Port Facilities

Cargo Infrastructure

Cargo dues or Wharfage (Ad Valorem)Storage

Port Land, Roads, Rail, Utilities etc.Additional space requirements due high dwell time

Sometimes on an ad valorem basis - i.e. based on the customs declared CIF value of the cargo

Cargo Handling Services

StevedoringShore HandlingStuffing/StrippingBaggingOther

Equipment and Labour costs for loading and offloading ShipsEquipment and labour for handling cargo in yards/shedsPacking/UnpackingPackaging (Dry Bulks)

Required Steps

• Options Analysis and Strategic Preparation – Confirm affordability, value for money, form of PPP and risk sharing– Identify constraints (for Brown Fields, establish labour task force) – Establish the capacity if the private sector to deliver the project– Identify indirect costs– Undertake comparative assessments

Some Do’s and Don’ts

Dos When facing a port’s capacity shortage, envisage more optimal use of the existing capacity  Conduct a careful assessment of the way the sector operates before investing in port infrastructure: understand demand before changing supply. Inform public decision makers at highest levels (prime minister, ministries of economy and finance) on the need to implement public governance–related actions to build a broad coalition to change the equilibrium. This should include thorough analysis of the economic cost of poor system performance to the national economy. Sensitize the local population and trading communities on the importance of port clearance performance and the proper calculation of total logistics costs. Identify port performance indicators with a benchmark pegged to the most efficient shippers in the port.   

Don’ts When facing port’s capacity shortage, immediately consider constructing new facilities  

Necessarily privatize/concession a container terminal to reduce dwell time. Support measures that create new rents and reduce system transparency, such as proliferation of off-dock container yards. Consider as a given that everybody is aware that transport and port “costs” are high, and address the issue of port delays only from a monetary cost perspective. Report averages only with no distinct evaluation of good, average, and poor performance

Can be a win-win

Private Participation allows one to think-out-of-the-box