663

1 INTRODUCTION

Most companies can benefit from accessing

international markets to source or produce their

goods. However, when it comes to setting up their

import supply chain, few companies are fully

prepared to take advantage of their efficiencies – a

majorhurdletosuccess.Unnecessarycostsanddelays

can diminish the init

ial value of sourcing from

international markets, which in turn, diverts focus

and resources from business growth. A number of

elementscanaffecttheperformanceofimportsupply

chains, making it important for companies to work

withapartnertohelpthemverifythat:

 Theentireimportsupplychainisoperatinginthe

smartest and most efficient manner for their

business

 Therearecontingencypla

nsandprocessesinplace

toaddresspotentialissuesorchallenges

 Stakeholders have access to the right level of

supply chain visibility throughout the import

process

 Companiesmaintaincontrolovertheiroperations

andshipmentsevenfromthousa

ndsofmilesaway

 The common goal to reduction the cost and

maximizetherevenues

The New Suez Canal influencing to Enhancing Africa

Inbound Maritime Logistics & Operations

A.Elentably

KingAbdul‐AzizUniversity,Jeddah,SaudiArabia

ABSTRACT:

Inhabit in ports is original sin associated with delays, queuing and extra time of voyage and

inhabit of ships and cargo at the port, which always occur with unpleasant consequences on Logistics and

supply chain. These often translates into

extra costs, loss of trade and disruption of trade and transport

agreements.InastudytoidentifytheconsequencesofportcongestiononLogisticsandsupplychainoperations

insomeAfricanports,thispapertrytodiscoveringthebenefitsofnewSuezcanala

ndreflectionofAfricaports

inadditionLogisticsa

reaexaminedthecommonportcongestionscenarios,theirdimensionsandthevarious

factors that trigger inhabit in the ports of Lagos, Durban, Mombasa and the catchment ports focusing with

expectationearningresultedbythenewSuezcanal.Thispapertypicallyappliedtheconceptofvariationsin

turn‐aroundtimeofshipsa

ndcargoandtheport’scapacityandrelativeefficiencylevelinordertoident

ifythe

active

factors that cause port congestion in African ports. The results provided some explanations on the

consequencesarisingfromtheseonnotableAfricanlogisticsandsupplychainnetworks.Thefindingsrevealed

that the bane of congestion in African

ports em

anates entirely from either planning, Regulation, capacity,

efficiencyora combinationofthese.InadditionthereforerecommendsthatAfricanportsshouldenhancetheir

regulatory mechanisms,

 and then to improve capacity and efficiency level in order to shoulder the ever‐

increasing challenges of port congestion in yea

rs ahead with combined and take part of New Suez Canal

advantages.

http://www.transnav.eu

the International Journal

on Marine Navigation

and Safety of Sea Transportation

Volume 11

Number 4

December 2017

DOI:10.12716/1001.11.04.13

664

The top business pressures companies are facing

include growing global operations and complexity,

the need to improve supply chain operations and

shipment accuracy, speed and timeliness, and

pressures to reduce supply chain execution costs

focusing on enhancing import supply chains can

addressallofthesepressurepoints.Thefollowingis



anin‐depthlookatthechallengesandopportunities

thatexistinthekeystagesoftheimportsupplychain,

including the solutions and new Suze canal role to

support African ports enhance their global supply

chainandlogisticsoperations

2 LOGISTICSCOMPANIESANDEMPLOYERS

LOOKSTOACHIEVETHEFOLLOWING:

Growingglobaloperations/complexity

1 Need to improve supply chainoperational speed

and/oraccuracy

2 Increased demand for accuracy and timeliness of

shipmenteventinformation

3 The business mandate to reduce supply chain

executioncosts

In this regardShipping companies must instill a

performance‐management culture in their

organizations: stating clear goals

 and closely

monitoring performance are essential for achieving

and sustaining

positive impact. Key performance

indicators (KPIs), such as adherence tothe schedule

and compliance with slow steaming, should be

establishedtopromotemoreefficientbunkeruse,and

they should be linked to departments or cross‐

departmentteams so thatthe company canimprove

accountability, ownership, and collaboration. They

should also be

 defined to exclude uncontrollable

factors,suchasregion‐specificpricevolatility,tothe

greatest extent possible. Perhaps most important,

KPIsshouldbesufficientlydetailedforthecompany

to be able to determine  what is causing

underperformance and then begin improving it. In

additiontotheavailabilityofstrategiesoverthe

long

termforthetransitiontothenewwaterway,theSuez

Canal where there were many positives resulting

fromthe expansion of theSuezCanal andsome are

linked to the economies of the fuel in operating

exploited the current decline in oil prices as well as

thebestuseto

reducemarine‐distanceshippinglines 

and the waiting times of ships may It reached the

standards of an ideal as outlined in the following

table .Dashboards can also increase operational

awareness and create value by communicating best

practices between teams on shore and at sea. For 

example, enhanced performance monitoring

and

improved communications can help minimize

variations in speed and thereby reduce bunker

consumption. Finally, industry benchmarks—

including KPIs that cover both consumption and

procurement performance—can highlight best

practices,andrevealareasneedingimprovement,for

each vessel class. Companies can use these

benchmarkstosettangiblegoalsandtoevaluatethe

successofimprovementinitiatives.

Moreover.Partnerships between ship operators

andshipowners,ports,orbunkersupplierscanplay

a key role in lowering costs. When implemented

correctly,partnershipsbetweenoperatorsandowners

canproducewinsforbothparties.Thesepartnerships

are especially valuable for container carriers that

operate time charter

vessels. Such vessels have

slightly higher bunker costs than vessels owned by

carriers.Becausethecarrierspayforbunkerinatime

charter arrangement, ship owners and their crews

typically lack incentives to curtail bunker

consumption. To address this, carriers should work

withtheownersoftimechartervesselstoapply

best

practices in fuel efficiency and to permit the

installation of consumption‐monitoring equipment

andenergy‐savingdevices

Theimpactofastrongglobaltradecomplianceon

a company’s bottom line is evident. Companies

considered best in class in maintaining compliance

errorsandshipmentsheldatcustomsataminimum,

spend less in compliance costs and have higher

productivity levels than the industry average. It is

criticalforcompaniestoaddresspotentialissuesand

challengesrelatedtoglobaltradecompliancefromthe

beginning to avoid potentially costly fines and

customs delays in their import supply chains –

improper classification and regulatory

 knowledge

gaps can pose a significant risk to the importer.

Similarly, a lack  of insight into existing preferential

trade agreements can mean missed opportunities

potentially totaling millions of dollars. Considerable

timeandmoneycanbesavedbycompaniesthattake

advantage maintained by the expansion Suze canal

(NewSuzeCanal).

3 THESTATUSOFTHEMOSTIMPORTANT

AFRICANPORTS

There is no doubt that there is a strong and close

correlation values between the flow and the flow of

goods from the sea ports and among logistics

operations, which aims eventually to the speed of

delivery of goods of various kinds

 of raw materials

andmaterial s,semi‐finishedproductsandfinaltothe

enduserofthegoodssothatitcantakeadvantageof

twobasicthings:

1 Theflowofproductionlinesandthesuccessionof

itsproducts

2 Thesavingsresultingfromthespeedoftrading

With the

fact that Transporting goods by sea

remainsthemostcommonwaytotradeglobally,but

in Africa cargo spends an abnormally long time in

portsbeforeitismovedinland,presentingaserious

obstacle to the successful integration of sub‐Saharan

economiesinworldwidetradenetworks.Theportof

Durban, however,

 has managed to buck the trend.

which titled “cargo spend weeks in sub‐Saharan

African ports”, Not only African ports in particular,

but this logo extends to most developing countries

whichanalyzedlessonsfromsixcountries,foundthe

average cargo waiting time to be 20 days and that

morethan

halfofthetimeneededtotransportcargo

fromportstohinterlandcitiesinlandlockedcountries

in sub‐Saharan Africa is wasted because of the time

cargo spend in ports. longer transport times

dramaticallyreducetradeandestimatesthateachday

in transit is worth 0.6% to 2% of the value

 of the

goods.Longtransitdelaysalsosignificantlylowerthe

665

probabilitythatacountrywillsuccessfullyexportits

goods.Africa ʹsestimatedinfrastructuredeficitof$48‐

billion a year is often singled out as the culprit for

hampering trade in and around the continent, but

reasonsforbottlenecksarefarmorecomplexandalot

morechallengingtoresolve.Long

dwelltimesarein

theinterestofcertainplayersinthesystemand that

dealingwiththeproximatecauseoftheproblem,such

as the apparent lack of berths in African ports, is

unlikelytotriggerasolution.ʺSpecifically,importers

use the ports to store their goods; in Douala

(Cameroon)

for instance, storage in the port is the

cheapestoptionforupto22days,ʺCustomsbrokers,

meanwhile, have little incentive to move the goods

because they can pass on the costs of delay to the

importers.Worsestill,whenthedomesticmarketisa

monopoly,thedownstreamproducerhasan

incentive

to keep the cargo dwell times long as a way of

deterringentry of other producers.ʺ The evidence  in

thestudyshowsthatdiscretionarybehaviorsincrease

systeminefficienciesandraisetotallogisticscosts.ʺIn

most ports in sub‐Saharan Africa, the interests of

controllingagencies, portauthorities,privateterminal

operators,logisticsoperators(freightforwarders)and

largeshipperscolludeattheexpenseofconsumers,in

additionʺ the surveys demonstrate that low logistics

skills and cash constraints explain why most

importers have no incentive to reduce cargo dwell

timeas,inmostcases,doingsowouldincreasetheir

input costs.ʺMoreover, some

 terminal operators

generate large revenues from storage, and customs

brokersdonotnecessarilyfighttoreducedwelltime

because time inefficiency is charged to the importer

andeventuallytotheconsumer.ʺ

4 THEREGIONALCAUSESPREVALENTIN

AFRICANPORTS

MajorcausesofportweaknessinAfricaare:

1 Ship berth congestion,mainly

causedbybunching

ofshipswaitingon theportentryroutesbecause

the other ships  to have occupied the available

berth designated or likely to be allocated to the

waitingtraffic.

2 Ship delays, mainly caused by delays attributable

tolapsesintheprocedureforworkonloadingand

/ or unloading

 the ship, which could result in

stoppages that could elongate the period of time

the ship had to remain in port to accomplish the

cargooperationtask.

3 Vehicle Gate traffic, mainly resulting from poor

programming of landward access to the port via 

trucks scheduled arrivals at the port gate. If

impediments or

 programming defaults  occur, it

will instantaneously send queuing signals to

trucks coming into or out of the port gate for

delivery or evacuation of cargo. This results in

portgatecongestion.

4 Vehicle motions, mainly resulting from lapses

associated with loading or unloading of vehicle

and trucks either due to lack of

 requisite

equipment or due to low efficiency at which

vehicleworkisdelivered.

5 Cargo handling, mainly emanating from

continuous stay of cargo at the storage area

beyond reasonable hours/days  or above the

maximumcapacityofthecargostackingarea.

6 Ship mooring route arisesmainlywhenthereisany

circumstantialblockadeonthe

marinesideaccess

routes to the port facility. Such blockade could

leadtoqueuing,bunchingand ultimatelyoverstay

ofshipsaroundtheportfacility.

The definition of inhabit time is the time cargo

remainsinaterminalʹsin‐transitstorageareaswhile

awaiting shipment for export or onward

transportation by

 road or rail to the hinterland as

import. Inhabit time is one indicator of a portʹs

efficiency. The higher the dwell time, the lower of

efficiency.Moreover,longerinhabittimesresultsinto

inefficienciesrelatingtoportcongestionoroverstock

andcanhaveanadverseeffectoneconomicgrowth.

In

addition to operational  reasons previously

mentionedthereareanumber ofreasonsbeyondthe

controlofportsandlogisticsareasinAfricaandvary

fromonearea toanotherandthusthelogisticsareato

anotherarea,including:

 Badweatherthatstopsshipsorcargooperations;

 Accidents that could

 suddenly damage port

equipmentorshipentryroute;

 Industrialactionthatentailsworkstoppageatthe

port, labor strike or limitation of stevedoring

services.

 Suddenincreaseorpeakintradedemand.

 Surge in international trade on certain articles or

betweencertaincountriesorregions.

 Land side

transport congestion that could slow

downtheevacuationanddeliveryofcargooutof

the Port, thereby blocking the discharge of more

cargo as storage capacity is exhausted or

overstretched.

 Harborport/routethatconnectsshipstotheport.

 Channel water of port entry or access to a

particularterminal.



 Lackofappropriateequipmentorquayterminalto

handlewithcertainshipsorservices.

 Lackofdocumentationprocess.

 Congestionofcargoonthequayapron.

 Congestionoftruckswithinportorterminal.

 Unsatisfactoryofcargoatstorageyardsandsheds.

 Insufficientalongthelandward

accessroutetothe

port.

 Scanty associated with internal mobility in port

city.

 Out of control emanating from effects of public

holidaysandworkfreedays.

5 THEMAINCAUSESOFTHEWEAKNESSOF

LOGISTICSNETWORKSPRODUCTIVITY

1 Theweaknessofcargoflowthroughtheshipping

lanesaroundthe

world(externalcauses)

2 Theweaknessoftheflowofgoodsbetweenships

andportterminals(internalcauses)

3 Overstockandtheslowflowofgoodsbetweenthe

port terminals to the final destination (Domestic

causes)

666

6 NIGERIAASAFRICANPORTSEXAMPLE

In an effort to ease congestion at the Lagos Port

Complex, Nigeria is looking intoways to encourage

shippers to use the countryʹs underutilized eastern

ports more. The country identified better use of its

easternportsasoneofthequickestwaysto

decongest

Lagos, Nigeria’s largest container gateway. Lagos is

thesecond‐largestmanufacturinghubinthecountry,

which is the continent’s largest and fastest‐growing

economy. Nigeria has currently been adopting

policiesandstrategiesthatcouldencourageshippers

to use the country’s six main eastern ports at Onne,

Calabar,Port‐Harcourt,

Warri,SapeleandKoko.

Nigeriabeingapredominantlyimportdependent

country, particular for manufactured goods and

certain raw materials is always susceptible to port

congestionanditsnegativeeffects.Forinstance,strike

threatbyclearingandforwardingagentsassociations

operatinginNigerianseaportsmaymeanmorethan

imaginedforthecountry’s

economyasafewdaysof

not moving cargoes out of the Lagos seaports can

cause the level of congestion that can create

unnecessary expenses and costs to the economy.

AnotherimplicationofportcongestioninLagosports

is the non‐accessible commercial city of Apapa in

whichthousandsof

man‐hoursarealreadybeinglost

totrafficgridlockdaily.Somuchhasbeenaboutthe

gridlock at Apapa that has seemingly defied all

solutions. Beyond the confusion on the road, the

trafficsituationisalsotobeaffectingshipsberthingat

theLagosports.Theyarereportedly queuingupfor



days,andin some cases weeks,before being ableto

berthanddischargetheircontents.Vesselsconveying

containers and other general goods were unable to

berth due to lack of space at the port to discharge

their contents. Similarly, some tanker vessels

conveyingpetrol,aviationfuel and otherliquidsare

sometimesstrandedfordaysorweeks,astheycannot

discharge their contents to a number of tank farms

located in the Apapa area. This is because tankers 

expectedtotakefuel fromthetankfarmsarestuckin

traffic.Attimes,over21vesselsusualwereawaiting

berth because of the

 congestion at the ports. A ship

berths when it comes into the port to discharge

importedmaterialsandloadexportmaterials.Inthis

regard,dischargedproductsaretakenawayfromthe

ports by trucks. Now, if the trucks can’t get in, the

imports would remain in the port, leaving no

room

forfreshimportstobedischarged.Thiswouldcause

shipsthathavealreadyberthedtowait.Iftheshipson

berth do not leave, those arriving cannot berth.

Therefore, they would keep waiting, all the while

burningfuelandhavingtopayemployeesonboard.

When they could have quickly

 discharged their

contents, picked up exports and moved on to their

next destination. The same situation applies to the

importationofliquidproductslikefuel.Whenaship

brings in fuel, there are smaller vessels that convey

this product to the tank farms. Now, if the retail

tankerscannotget

accesstothetankfarmstooffload

the products, there would not be any space for the

tank farms to accommodate new products. This is

affectingeveryonenegatively.So how do you expect to

be addressing the following shortcomings of the Nigeria

Ports under the multi-advantages resulted from the new

Suez Canal:



Figure1.

 Questions about the efficiency of cargo handling

equipment at the terminals, which results into

ships waiting to get a space to berth in order to

discharge cargo at the terminals. The waiting is

oftennecessitatedbythepresenceofothervessels

at the berths discharging cargo as well, albeit

slowly.



 Numerouspublicholidaysatcertainseasonsofthe

yearalsodisruptsportoperationstoanextendthat

queuing results into bunching of vessels either

waitingto enter or halting operations at berth or

evennon‐evacuationofcargooutoftheport.

 Persistent refusal by shipping companies to

transfertheircontainerstooff‐dockfacilitieshave

667

alsobeenidentifiedasoneofthemajorcausesof

congestionatthecontainerstorageyardsinmost

terminalsinNigerianports.

 AsaresultoftheconcessionoftheNigerianports

andterminalstoprivateoperatorsbytheNigerian

governmentownedportAuthority, thesystemof

ship allocation

 to berths was controlled by the

concessionaires,therebynegatingtheevenspread

of berth utilization, which causes congestion in

highly patronized terminals leaving less

competitive operators with idle berths. This

situationcompoundswaitingtime,increasesdelay

andadduptolossofrevenueonidleberths.

 Cumbersome ship and

cargo clearance and

documentation process has also exerted a lot of

pressureoncongestioninNigerianportsofLagos.

Thisisasafalloutofthebureaucraticandmulti‐

agency roles played on the process of ship and

cargo clearance in the ports. Delays and

subsequent congestion in this regard

 emanates

from positioning of containers  for scanning,

physicalexaminationandtheprocessofreleasefor

delivery, which sometimes takes weeks to

accomplish.

This situation can be applied to many African

ports such as Durban, Mombasa, Doula, Lagos and

others

7 THEKEYSTOSUCCESSSHIPPINGAND

AFRICANLOGISTICS:

Byfollowingthisframework,acompany

canrealize

annualsavingsof5to10percent.(SeeExhibit1and2.)



Figure2.



Figure3.

One global tanker management company

operating a large fleet, for example,  used this

frameworktoidentifyinitiativesthattheorganization

hopedwouldachieveannualsavingsonbunkercosts

ofapproximately8percent.Atop‐quartileperformer

in most dimensions of Tanker Benchmarking

Initiative, the company recognized that it needed to

optimize its end‐to‐end bunker process for even

greater performance. The leaders responsible for

bunkercostmanagementhonedtheirimplementation

skills. Members of the relevant departments became

highly engaged, supporting the initiatives and

transferring capabilities deep into the organization.

Moreover, top management closely monitored

progressthroughmonthlyperformancereviews.

 leading global container‐ship management

company also applied the framework, hoping to

realizeannualbunkercostsavingsofupto7percent.

The company was particularly interested in freeing‐

upcashintheshorttermtoimplementaturnaround

strategy. Consequently, time‐ and resource‐

consuming initiatives, such as optimizing the

fleet

andimprovingportoperations,werenotconsidered.

Instead, the company focused on shorter‐term

initiatives, such as streamlined port approaches,

accelerated hull cleaning, efficient engine operation,

and optimized trim (the distribution of load and

ballast). After an eight‐week diagnostic period,  the

companyrolledoutapilotinstagesacross

sixservice

lines, led by a cross‐functional team. The first pilots

achieved cost reductions in the range of 4 to 11

percent.

7.1 GoingbeyondSlowSteaming

Overall, shipping companies have made significant

progress in implementing reduced sailing speed,

knownas“slowsteaming,”to consume lessbunker.

Most companies

have also improved the way they

procure bunker. Yet very few players have gone

beyond those basics. To establish bunker cost

management as a clear strategic priority, companies

need to mobilize cross‐functional teams to address

costs end to end, consider all possible improvement

levers, and lock‐in savings with diligence

 and

discipline.Inourworkwithshippingcompanies,we

have identified seven tactics that foster continuous

improvementandhelpcompaniesbuildasustainable

competitiveadvantage.

7.2 Goforthequickwinsfirst

To build momentum and motivate the organization, 

companiesshouldpursueimmediateinitialsuccesses

andthencelebratethosegains

withthecompanyand

reward the employees responsible for the results.

Examples of quick wins include optimizing the

frequencyofhullcleaningtoreducewaterresistance

and improving ship‐to‐shore communication to

maximizesailingtimeandallowforslowsteaming.

7.3 Usecustomizeddecision‐supporttools

Companies should develop customized

 decision‐

support tools, which solve complex issues by using

668

the same principles that traditional planners apply

but achieve results more quickly and with greater

accuracy.Leadingtankercompanies alreadyusesuch

toolsforliftingoptimizationandtankutilization.The

lifting‐optimization tool helps a company develop a

planthatminimizesbunkercostswhileallowingthe

vessel to deliver its

 cargo on time at the designated

port. The tank‐utilization tool is used to generate a

report with specific directions regarding all bunker‐

relatedactivities,suchasthesequenceoftanksfrom

which fuel is burned, placement of new loads in

emptytanks,transfersoffuelsamongtanks,andfuel 

mixing.

7.4 Streamlineprocessesfromendtoend

Instead of focusing on specific steps,  companies

should examine the entire bunker process including

technical efficiency, voyage execution,  commercial

functions,andthelinkbetweenteamsonshoreandat

sea. Consider trim optimization, for instance.

Traditionally, shipping companies have focused on

optimizing the

 distribution of load and ballast at

departure.

7.5 Strengthenskills

Buildingstrongerskillsthroughouttheorganization, 

includingtheleadersandteamsonshoreandatsea,

will help lower costs. Skills that enhance cross‐

departmental collaboration—such as early

communicationof changes in voyage prospects—are

especially important for achieving rapid savings.

Defineclearresponsibilitiesandaccountabilities

7.6 Blueprintcleargoalsfortheorganizationandmonitor

performance

In this regard Shipping companies must instill a

performance‐management culture in their

organizations: stating clear goals and closely

monitoring performance are essential for achieving

and sustaining positive impact. Key performance

indicators (KPIs), such as adherence to the

schedule

and compliance with slow steaming, should be

establishedtopromotemoreefficientbunkeruse,and

they should be linked to departments or cross‐

departmentteams so thatthe company can improve

accountability,ownership,andcollaboration.

7.7 Createpartnerships

Partnerships between ship operators and ship

owners,ports,andcorrectlywaterchannel

orbunker

supplierscanplayakeyroleinloweringcosts.When

implemented correctly, partnerships between

operators.Ownersandcorrectlyshippingroutescan

produce wins for all parties. These partnerships are

especiallyvaluableforcontainercarriersthatoperate

timechartervesselssuchvesselshaveslightlyhigher

bunkercoststhanvessels

ownedbycarriers.Because

the carriers pay for bunker in a time charter

arrangement, ship owners and their crews typically

lackincentivestocurtailbunkerconsumption.

8 SPOTLIGHTOFADVANTAGESNEWSUZE

CANAL



Figure4.

According to reports from the Suez Canal

Authority,thetotalnumberofshipspassingthrough

the canal  increased 2 percent in 2015 to 17,483.

However,thenumberofbulkcarriers and container

ships fell 5.7 percent and 3.1 percent respectively.

Over the last decade, trades passing through the

Canalrecordedsignificant

annualincreases,withthe

exceptionof the three years between 2009 and 2011,

andincreasingbyover300milliontonsbetween2004

and 2014 when it changed from 520 to 822 million

tons.Theupwardtrendandthepressureforagreater

predictability of the transit time – an element

increasingly important for container traffic that

representsmorethan50%ofthevolumeofthemarket

served by the Canal – pushed the Egyptian

Government to realize, in a  very short time, an

investmentofconsiderableeconomicandgeopolitical

importance.

Thefocusoftheanalysisistheimpactwhichthe

expansion

 of the Suez Canal may determine on the

trafficintheMediterraneanandittakesintoaccount

the specific geographical background in the area of

the Canal and in the Sinai Peninsula and the

expansion as part of a specific path of economic

growth driven by public long term strategies.

In

particular,specialattentionisdirectedatthepossible

increase in the exchange between Mediterranean

countriesandthoseoftheGulf,inlightoftherecent

evolutionofinternationalpoliciesthatwillleadtothe

fullinclusionofIranamongstthecountriesinvolved

669

inthecommercialexchangeswithleadingcompanies

intheWesternworld.

Egyptisthecountryintheworldofasignificant

size. Moreover, the following positive reflection of

NewSuzeCanal:

The area of the new Suez Canal will be able to

competewiththemajorlogisticsregionsinthe

world

andinparticularwithNorthernEuropeancitiessuch

asRotterdamandHamburg.

Table1.Examplessaving NauticalMilesforshipping

routesbyNewSuzeCanal

_______________________________________________

FromToDistance(NM) Saving

SC  Cape Miles  %

_______________________________________________

RasTanura Constanza 4144 12094 7950  66

Lavera  4684 10783 6099  57

Rotterdam 6436 11169 4733  42

NewYork 8281 11794 3513  30

Jeddah  Piraeus  1320 11207 9887  88

Rotterdam 6337 10743

 4406  41

Tokyo  Rotterdam 11192 14507 3315  23

Singapore Rotterdam 8288 11755 3647  29

_______________________________________________

Sources:Reuters/EIA/SuezCanalAuthority



The 2015 order book provides for an increase, by 2018,

of the fleet of container ships amounting to about 7%, with

the figure rising to 72% if we consider the megaship

ranging from 18.000 to 21.000 TEUs, and 20.7% for the

fleet from 13.000 to 18.000 TEUs.

The estimates for 2018 predict a number of 83

megaships, mainly concentrated in the far Northeast of

Europe and far East-Mediterranean routes where the Great

Alliances also operate - amongst others - the 2M and the

Ocean Three which, on the Asia-Med route, holds a market

share of respectively 39% and 27%.

The potential impact on the choice of the routes by

shipping companies is evident when considering that the

opening of the new Canal led to a decrease in the transit

time from 18 to 11 hours. In particular, it is estimated that

using the Suez route, any shipping company may have an

average saving of 5-10% of total operating costs

(depending on routes and distances). For example, on the

Honk Kong-New York route, the new Canal, with its

reduction in transit time, might be a valid alternative to

Panama.

The reduction of transport costs, combined with the

increased capacity of the Canal, might have important

implications both on the hierarchy of the Mediterranean

ports and on the volume of traffic bound for the

Mediterranean which, in 2015, remained at 19% (up, if

compared to 15% in 2005).

The strengthening of the Mediterranean-Suez-Gulf

route is a strategic opportunity both for Egypt and Africa

channels especially for its Northern regions, which could

develop its natural role as a logistics platform in the heart

of the Mediterranean, thus supporting as well the Africa

economy.

9 THEIMPACTOFEGYPTʹSPORTSINTHE

WORLDSUPPLYCHAIN

Egypt has a primary role in the world supply chain thanks

to the production and consumption cycle activated by the

presence of 85 million citizens that makes Egypt the

principal country in North Africa and due to the

metropolitan area of Cairo where over 15 million

inhabitants live and which makes it the second larger

African city after Lagos. In fact, Egypt’s relevance derives

almost entirely from its geographic position, being at the

intersection of the main maritime flows between East and

West of the northern hemisphere. Furthermore, it features

some of the major African ports (Alexandria, Damietta and

Port Said) and airports (Cairo).

Despite these elements of comparative advantages,

throughout history Egypt drew little economic benefits

from logistics and transport on the routes both to and from

the African continent and on the intercontinental routes,

failing to fully exploit the Suez Canal, to implement

industrial policies and not addressing the development of

this sector. In addition, the commitment of Egypt in pur-

suing the success of the COMESA-EAC_SADC tripartite

Free Trade Area is certainly meant to help reversing this

situation, assuring a better exploitation of its geographical

potential (SRM will soon release a study in which the

potential benefit for Egypt from a stronger African trade

integration will be highlighted).

The biannual report “Connecting to compete” from the

World Bank examines in detail the strategic elements of

Egyptian transport and logistics through the Logistics and



Performance Index (LPI). Such an indicator is the result of

a collaboration between the World Bank, the main ope-

rators of logistics and scholars. The report, compiled every

two years (World Bank, 2014) has the specific purpose to

help the countries identify the strengths and weaknesses of

their port system to program their investment in a more

effective way. Actually, the study of the World Bank points

out that with the same per capita income, countries with

better logistics performance grow more, by 1% of GDP and

2% of trade.

It is generally acknowledged that an efficient logistics

chain may foster the development of trade and growth. In

fact, LPI endorse this theory showing that a better logistics

performance positively affects the expansion of trade,

export diversification, the ability to attract foreign direct

investment and economic growth.

The Logistics and Performance Index2 summarizes the

results of the countries on six complementary areas of

evaluation.

 Efficiency of the clearance process.

 Quality of trade and transport related infrastructure.

 Ease of arranging competitively priced shipments.

 Competence and quality of logistics services.

 Ability to track the hint of consignments.

 Timeliness of shipments in reaching destinations within

the scheduled or forecast delivery time

In particular, major investments were realized in Port

Said and Damietta in the Mediterranean. Port Said is the

principal Egyptian trans-shipment port located along the

Suez Canal. Within the port, which becomes operational

starting in 2004, there are several terminal operators

belonging to world leading companies in the industry of

containerized traffic, like APM Terminal, (Maersk group)

and COSCO Pacific. The port is divided into two parts,

Port Said and Port Said East, the first featuring an 800

thousand TEUs capacity, and the second with 2.7 million

TEUs. The infrastructure is spread over an area of 90

hectares with a draft ranging from -14 m to -16.5 m and it

comprises of 21 quay cranes. Trade rose from 1.62 million

TEUs in 2005 to 3.96 in 2013. The development plans of

670

the infrastructure include an expansion of up to 5.4 million

TEUs.

The development of the Suez Canal is part of an

economic development path which saw the transport,

maritime and port sector at the center of a number of

massive infrastructural and organizational investments

aimed at retrieve efficiency in worldwide trades as

witnessed by the improvements in Egypt’s position in the

World Bank rankings (up by 35 positions in the Logistics

Performance Index between 2007 and 2014) and in the

UNCTAD world rankings where Egypt in 2015 is 19th

with a value of 61.5 compared to the 67.4 of Italy and to

68.8 of Japan, it rosette three positions compared to 2010.

Between 2000 and 2014 the trend in the sector were

very positive (overall +123%) with southbound traffic

which grew more (+162%) compared to the northbound

ones (+94%). This differentiated trend confirmed also itself

in the first 6 months of 2015 compared to the same period

of 2014 showing +7.7% in southbound traffic and a slight

drop in northbound traffic (-1.2%) mostly due to a

reduction in the tonnage of crude oil (-21.7%).

About 53% of all the 2014 traffic was made up of

container ships (55% northbound and 51% southbound),

11% of these ships transported crude oil (17% northbound

and 4% southbound), 5% of the cargo was made up of

grains (0.1% northbound and 9.3% southbound).

The containerized flows influenced the evolution of

maritime transport through the Canal, in fact they globally

grew by 202% from 2000 to 2014 (although differently

with reference to the routes). As a matter of fact, north-

south containerized trade volumes grew by 187% while the

south-north ones grew by 219%, and in 2014 reached a

substantial balance (212 million tons north-south and 222

million tons south-north). This result can be explained by

looking at the operation of international trade characterized

by the phenomenon of globalization driven by the

relocation of production to countries with low labor costs,

mainly in the Asian continent. In addition, over the last few

years, the use of sacks to stow into the container goods that

previously used to be stowed as bulk or general cargo has

progressively led to the spread of containerization in a

growing number of productive chains (coffee, cocoa, seeds,

fertilizers and feed for fish). This partly explains the

contraction between 2000 and 2014 of some types of trades

passing through the Suez Canal; cement -96%, coal and

coke -61%, timber -49%.

10 INDEVELOPINGTHESUEZCANALZONEWE

HAVELISTENEDTOTHEPARTNERS

The Suez Canal Zone represents a new chapter in the

economic development of Egypt. While, the Suez Canal

Zone is governed by the General Authority for the Suez

Canal Economic Zone: an independent body with executive

powers of regulation and approval including the full

authority to oversee all areas of operation, staffing, control

over budgets, funding, development of partnerships with

developers and business facilitation services.

The Suez Canal Zone will apply a new investor friendly

business environment that will be a blueprint for future

development nationally. It will be a genuine one-stop shop

with

 all critical elements deployed. Simple declarative

investment registration systems with streamlined

investment approvals, granting of import and export

licenses as well as accelerated on-site customs inspection

procedures will be available. Similarly, secondary permits

and authorizations relating to land, building, labor, health

and safety will be addressed directly by the Suez Canal

Zone authority whose efficiency will be enhanced by

partnerships with key stakeholders including government

ministries, private sector representatives, be it developers or

investors in the zone, or affected communities and

community groups and certainly international development

partners.

The expected repercussions of the new canal on the

logistics, transportation and tourism sectors besides all

operations related to maritime flows as part of the Canal’s

development. It also highlighted the planning framework of

the new infrastructure in addition to the potential

investment opportunities and new projects that the

government intends to implement in the Suez Canal area.

The new canal will lead to a decrease in transit time from

18 to 11 hours and reduce maritime operating costs by 5-

10%. Plus considered Egypt Opens the Largest Wind

Power Station in MENA

The project includes the construction of a large seaport,

an industrial area with a capacity of 20 factories, a logistics

hub along with a residential area hosting 50,000 houses. A

fish farm and a road tunnel under the Suez Canal running

constructed

11 ADVANTAGESASLOGISTICHUB

1 Unique Geographic Position: Located at the crossroads

of international trade between Europe, the Middle East,

Africa and Asia, Egypt is positioned to become a major

global logistics hub. As a result, businesses are

increasingly seeking to base themselves in the country

as a springboard to Europe and booming regional

markets.

2 Rising Domestic Demand: A growing domestic demand

for imports and a rapid rise in export-oriented

businesses is creating strong demand for logistics and

transportation services in a market that is far from

saturated.

3 Greenfield Opportunities: Greenfield opportunities exist

in subsectors such as the road network, which is the

most, used means of transporting freight but currently

has no logistics provider with a consistent distribution

infrastructure.

4 Built-in Markets: Approximately 8% of world maritime

trade flows through the Suez Canal each year, with

many opportunities for ship/container repair and value

added Services. In addition, Egypt’s growing

import/export trade requires logistics and transportation

solutions. Built-in markets provide a broad customer

base and variety of opportunities for logistics and

transportation companies looking to set up shop in

Egypt.

5 Underdeveloped and Expanding Sector: Growing

demand is causing capacity short falls in the nation’s

logistics and transportation sector, which is currently

underdeveloped in terms of both infrastructure and

services. There are therefore, major investment

opportunities from infrastructure projects to value-

added services and the ability for investors to attain

large market share.

6 Labour Force: Egypt has a large, educated, trained and

competitively priced labour force eager to work in such

671

sectors as logistics and transportation. A government-

run industrial training program is providing hundreds of

thousands of skilled workers for the industry. These low

labour costs combined with educated, skilled labour

improve profitability year after year.

12 CONCLUSION

The Suez Canal has been an important part of the Egyptian

economy since its completion almost a century and half

ago. If properly enlarged and upgraded, it can turn the

region into a global port, and be an engine for development

and growth in Egypt for the 21st century. Nevertheless,

the mega project must be carefully planned and properly

managed and lessons must be learned from similar attempts

in other countries; otherwise, the project also risks draining

valuable resources. will remain modest performance for

African ports obsession importantly to the authorities of the

ports and to develop the necessary strategies for the

development of these ports so that the logistics sector of

advancement and access to tap ideal for operations of the

African Export and especially with the ownership of the

continent for most of the natural sources of wealth, and that

the other European countries and the United States, China,

Japan and South Korea side is looking and are deep to get

those natural resources which are considered raw materials

diverse industries and those countries most in need of

natural raw materials and then the logistics sector of Africa

by optimizing the mutual exchange with these countries in

this field, the savings that produces and resulted from a

project of the Suez Canal, which is the corridor the closest

of the African countries which are reflected pluses on the

overall savings that result on performance and economies

of ships run and shorten the Navy distances and the speed

of circulation of raw materials faster navigation and then

the speed and increase the returns to capital and encourage

the logistical expansion of African countries and then

considered the locomotive of growth for African countries,

which calls for many storage centers for African countries

move on either side of the Suez Canal and through the

economic zones of the Suez Canal plus take advantage of

the facilities offered by the Egyptian authorities

REFERENCES

[1] Ayah Aman,(2013) “UAE Replaces Qatar as Egypt’s

Partner on Suez Project,” Al-Monitor, “Egypt’s Sisi

Says Discussed Creation of Russian Industrial Hub in

Egypt as Part of Latest Suez Canal Development

Project,” CNBC Business News,

[2] Egypt Plans Extra Stimulus by Year-End, Suez Canal

Project,” Reuters, 11 November (2013),

[3] Marwan Kardoosh, (2005) “The Aqaba Special

Economic Zone, Jordan: A Case Study of Governance,”

Center for Development Studies, ZEF, Bonn, Germany,

[4] Mohamed Mahmoud, (2014) “Egypt to Develop Suez

Canal Corridor,” Al-Shorfa,

[5] T. Notteboom, (2012) “Towards a New Intermediate

Hub Region in Container Shipping? Relay and

Interlining via the Cape Route vs. the Suez

Route,” Journal of Transport Geography.

[6] “Troubled Waters (2013): Suez Canal Corridor

Development Project Problematic for Egypt,”

[7] Patrick Kingsley, (2014) “Egypt to Build New Suez

Canal,” The Guardian,

[8] Suez Canal Traffic Statistics, Brief Monthly Statistical

Report (2016),

[9] Sherine Abdel-Razek, (2014) “A New Suez Canal?” Al-

Ahram Weekly,

[10] World Bank, Trade and Transport Facilitation

Assessment (unpublished report) (Washington DC:

Author, 2015).

[11] The Management of Business Logistics: A supply

chain Perspective, Coyle,J.J, Thomason learning,

2002, ISBN: 0324007515.