UNCTAD Expert Meeting on Regional Cooperation in Transit Transport, Geneva,

1. UNCTAD Expert Meeting on Regional Cooperation in Transit Transport, Geneva, Solutions for Landlocked and Transit Developing Countries 27-28 SEPTEMBER 2007–BRENDA HORNE – CEO of MCLI

2. PURPOSE OF MY PRESENTATION – INDUSTRY VIEWS AND EXPERIENCES ON LOGISTICS – NEED FOR TRANSIT CORRIDORS TO PORTS WITH CAPACITY Gateways in Southern Africa • in an environment of continuous SA economic growth • versus a backlog  in infrastructure investment and development, • Industry is faced with challenges resulting from congestion – roads; rail and ports, • with the alternative ports of Maputo and Walvis Bay in the neighboring countries creating much needed capacity • and also stimulating regional integration and growth • SADC - Initiatives

3. GATEWAYS THROUGH CORRIDORS OF SOUTHERN AFRICA

4. SDI CORRIDORS IN SOUTHERN AFRICA

5. SADC Trunk Road Network and Regional Ports

6. Uganda Congo Kenya Gabon Rwanda Democratic Republic of Congo Burundi Tanzania Mauritius Angola Malawi Mozambique Zambia Madagascar Zimbabwe Namibia Botswana Swaziland South Africa Geographical Map of SADC & East Africa Rail Lines

7. COMPARISON OF GLOBAL LOGISTIC COSTS AS A PERCENTAGE OF LANDING PRICES OF IMPORTED/EXPORTED GOODS

8. ENVIRONMENT OF CONTINIOUS ECONOMIC GROWTH

9. Economic Growth • South African business expectations for growth in key areas such as turnover, profitability, efficiencies and employment are higher than ever before. (Grant Thompson Consultants). • The South African economy grew with 5% during 2006. This is only 0, 1% lower than 2005. Maria Fassler of JP Morgan Chase reports a continuous growth over the past 33 Quarters (8,25 years) • According to the Road Freight Association approximately 1.2 billion ton cargo is moved per year (2002 statistics). If we apply the growth factor to cargo moved, per year 60 million ton more has to be moved. SOURCE SASC - 2007

10. Total cargo traffic PMAESA ports • Africa has transport corridor network of 2.06 million km, facilitating her 8.5% of the 7.11 billion tons of the global cargo traffic. This represent 0.61 billion tons, of which Road represent 96% and Rail - 4% • PMAESA ports handled 0.23 billion tons representing 38.0% share of African traffic in the global market • (PMEASA 2007)

11. SA Exports of goods & services Constant 1995 prices. Seasonally adjusted at annual rate Source – MEGA 2007 (DTI)

12. SA Imports of goods & services Constant 1995 prices.Seasonally adjusted at annual rate (Forecast) Source – MEGA 2007 (DTI)

13. South Africa Goods Transported • Nearly 7% of SA Gross National Product is spend on transport. • 80%of all freight carried in South Africa is done by road. • Transnet Freight Rail is handling approximately 14 to 16% and the balance by other means. SOURCE SASC - 2007

14. Impact of Africa-Asia Trade to Seaport infrastructure and EconomyAfricanPorts& HARBOURS CONGRESS 2007 • The Expansion and Prosperity of the Asian market has become an integral part of many African economies • Over 156 ships operate along the African-Asia trade routes per month • Over 5,080 shipping calls from Asia to Africa serve 48 Sub-Saharan ports

15. 7.9% 7.6% 6.3% 4.7% PERCENTAGE 2.9% EU US Asia Africa Overall Growth Rates of Asian Imports by OriginSource: IMF Direction of Trade

16. Trend in Africa’s Exports to Asian Economies SOURCE AFRICA PORTS & HARBOURS NPA 2007 1996 1998 2000 2004 2006 1994 2002

17. Trend in Africa’s Exports to Asian Economies SOURCE AFRICA PORTS & HARBOURS NPA 2007 2006 1994 1996 1998 2000 2004 2002 2010

18. Demand & Capacity to 2010/11 135,5 120,5 105,5 90,5 TONNAGE in Millions 75,5 60,5 45,5 30,5 06/07 07/08 08/09 09/10 10/11 @ 3.5% ann. growth @ 4.5% ann. growth @ 7% ann. Bulk cargo growth Potential missed for Africa Capacity without New Development Capacity with new Developments Africa’s Bulk Cargo Capacity Projections SOURCE AFRICA PORTS & HARBOURS NPA 2007

19. Africa-Asia is the second fast growing trade in terms export cargo volume. Westbound trade (Asia-Europe) exceeds eastbound trade (Europe-Asia) Africa-Asia Container Traffic Africa-Asia Cargo breakdown Vehicles & Machinery 17% Computer/Electronic Goods 12% Textiles 8% Rubber & Plastics 8% Footwear & Clothing 6% White Goods 5% Food 4% Toys 3% Beverages 3% Others (Coal, Iron Ore) 24% Total Africa-Asia: 2.342m (13.3%)al World: 69.925m Figures above relating to year 2003 SOURCE AFRICA PORTS & HARBOURS NPA 2007 Asian imports from Africa mainly constitute raw materials such as coal, forest products, minerals & metals etc. On the westbound route from Asia to Africa the main cargoes are consumer products such as electronic goods and clothing etc.

20. Most Container Terminals are reaching capacity limits INDUSTRY VIEW ON - SUPPLY CHAIN

21. Supply Chain General Challenges • Yesterday’s foreign manufacturer in a far away country competes today in your own forecourt, typical CHINA. • The South African supply chains are not limited to South Africa anymore. • The future of the South African industry lies in the international arena. • This creates another dilemma. You are faced with an unknown field, the challenges in the Global Supply Chain. • The challenge of Global Supply Chain Management refers to the complex integration of processes necessary to manage materials from their point of origin through manufacturing and shipment to the final consumer or beyond in the case of recycling. SOURCE SASC - 2007

22. Supply Chain Challenges (Cont.) • Global logistics is more difficult to manage than domestic logistics! • In the international arena the Supply Chain/Logistics Manager are very much reliant on more role players and service providers. • Time and place become a major factor. • Knowledge of the supply chains is now essential, however performance is crucial. • Assumptions made by managers may not be as reliable, situations are less stable, the geography is much broader and monitoring logistics processes are more complex. • A concern is the large number of trucks on our roads, whilst the obvious mode – Rail - is under utilized and ports are heavily congested What is the cause? SOURCE SASC - 2007

23. Service Provider Performance • In international logistics, there are many different participants: the buyer, the seller, the service providers and other intermediates. • The Supplier and final customer are dependent on the performance of all the service providers in the supply chain. • The performanceof one link may jeopardize the performance of the next. For an example, if a container is not delivered within the stack dates it will not be loaded and will have to wait for another opportunity. • The performance of a major port will and shall jeopardize the performance of a country, typical to the congestion presently experienced in Durban SOURCE SASC - 2007

24. Development and maintenance of infra-structure What is needed to ensure an optimized smooth operating supply chain? • A supply chain is dependant on the availability of needs related infra-structure. • The continuous monitoring and establishment of needs are essential. In South Africa this is mostly in the hands of Government. • Therefore the role of Government is now more important than ever before! • This is a two sided blade. Interaction between Government and the Industry is crucial. • If Industry does not share its needs Government can not develop infra-structure. • Government must therefore create forums during which needs and requirements can be shared. • The performance of channels should also be addressed, in a non-confrontational manner, with the aim to seek optimal solutions; • through this we can meet a common goal: Wealth to the Nation, through customer satisfaction. SOURCE SASC - 2007

25. Sharing of information • To ensure success, it is crucial that parties in the total supply chain share needs and requirements, Information is crucial. • The development of collaborative supply chains are of the essence. • Through web enabled systems all parties in the supply chain, inclusive of the most important partner, your customer, can keep track of the cargo. • Through the availability of information corrective action can be taken. • Public and private sector has to work together in corridor planning structures SOURCE SASC - 2007

26. CHALLENGES FACED BY INDUSRY – ESPECIALY REGIONAL TRANSIT

27. CHALLENGES FACED BY INDUSTRY – ESPECIALY REGIONAL TRANSIT (1) • Out dated regulations and practises by transport and custom Authorities. • High costs and complexities of transit bonds • Lack of harmonised inter state transport practises. • Slow progress in removal of non-physical barriers and legal reform • In-efficient hinterland inter-modal transport networks

28. CHALLENGES FACED BY INDUSTRY – ESPECIALY REGIONAL TRANSIT (2) • Lack of Joint One Stop Border Posts • Slow implementation of aligned documentation processes at border posts to facilitate easier movement of cargo – an African single documentation i.e. SAD500 • Slow removal of trade barrier; complexity of import duty tariff. • Serious administration constraint in most ports is linked to Customs clearance procedure. • Pre-shipment overseas inspections and other documentation process in our ports result in delayed shipment.

29. CHALLENGES FACED BY INDUSTRY – ESPECIALY REGIONAL TRANSIT (3) • Insufficient proper hinterland transportation links in respect of road and rail connectivity • Poor inter modal connections to be strengthened • Insufficient freight links between African countries – Poor roads, limited poor rail links • Lack of synergies between the African countries • Capital and human resource limitations • Lack of institutional frameworks for corridor management structures with sustainable funding

30. CHALLENGES FACED BY INDUSTRY – ESPECIALY REGIONAL TRANSIT (4) • Very high African transportation costs within the supply chain to and from the hinterland • Delays in handling of cargo due to poor efficiencies • Not sufficient excess capacity created ahead of demand • Not sufficient logistics hubs to facilitate IT, stuffing, de-stuffing and warehousing of goods • Old terminals with old technologies that do not provide high levels of efficiencies

31. CHALLENGES FACED BY INDUSTRY – ESPECIALY REGIONAL TRANSIT (5) • Slow Constructing, expanding & equipping new modern cargo berths and facilities. • Ports too shallow to accommodate larger vessels • Slow dredging and expanding of port entrance channels. • Modern Containerisation facilities & mode of transport. • Slow roll out of communication and information technology in the water front systems. • Slow development of Cruise shipping facilities. • General port congestion which adds hugely to the cost of transport and poor customer satisfaction levels

32. BACKLOG OF TRANSPORT INFRASTRUCTURE INVESTMENT AND DEVELOPEMENT IN SOUTHERN AFRICA??

33. Transport infrastructure investments in SSA with private sectorparticipation (total investments) Except for sporadic investments, transport is only picking up slowly. SOURCE WORLDBANK 4 Source: World Bank, PPI Project Database

34. Despite low WB commitments, port investments have been increasing lately, mostly funded outside of IBRD/IDA. This suggests sufficient commercial viability of port operations to attract private financing. This trend is likely to continue: • Need for additional capacity to accommodate the increasing export of natural resources (coal, minerals, oil, etc.) • Double-digit growth rates in numerous African countries are likely to spur imports SOURCE WORLDBANK 9

35. In the Global Market, 90% of the International Trade is seaborne. • Importance of Maritime Transport • To facilitate international trade and promotion of global integration. • According WTO, the world seaborne trade amounted to • 7.11 billion tones of which: SOURCE – PMEASA 2007

36. Status of Container Terminals in East & Southern Africa • The following table illustrate the rapid growth of container traffic from about 2.4m TEUs in 1997 to 4.0m TEUs in 2004, an average growth of about 10% per annum over the eight year period. SOURCE – PMEASA 2007

37. Congestion at Container TerminalsThe growth of container volumes has lead to saturation of facilities in many ports in the region. • Durban has had a congestion surcharge imposed by shipping lines since 2 years • Dar-Es-Salaam Yard saturation is affecting productivity. • Mombasa is operating more than 100% above design capacity, and shipping lines normally • threaten to impose a delay surcharge. • Mauritius had experienced problems linked to explosion of transshipment traffic • Djibouti is facing problems due to saturation of the terminal by transit containers affecting • productivity • Response to congestion • Improve efficiency when possible; • Develop additional capacity; • Private sector participation has been a • standard response to improve efficiency SOURCE – PMEASA 2007

38. Port Congestion • The origin of port congestion is complex to identify and related to among others: • The growth of container volumes has lead to saturation of facilities in many ports in the region • Clogged access way to the port and saturated inland connections, • Inadequate physical capacity and insufficient productivity, • Inadequate information technology systems, • Cumbersome and bureaucratic cargo clearing systems, • Shortage of adequate storage areas, • Inefficient inter-modal cargo flow/ network of rail & road transport, • Seasonal congestion – export commodities, • Administrative slow-downs and bottle-necks. SOURCE – PMEASA 2007

39. MPDC – PORT OF MAPUTO PORT POTENTIAL 11 TO 20 MILLION TONS

40. Regional Corridors with alternative ports -Maputo and Walvis Bay in the neighboring countries creating much needed capacity • and also stimulating regional integration and growth

41. ECONOMIC IMPACT OF THE CORRIDOR

42. THE HISTORY AND STRUCTURES OF THE MAPUTO CORRIDOR • Joint Committees under RMGs • Operate as part of the RMGs • Bilateral road transport agreements • One mode only • Perceived to be ineffective • Maputo Development Corridor • Bilateral agreement: MZ & RSA • Promote interests of Economic Rehabilitation Program in MZ; & Reconstruction & Development Program in RSA. • Integrated transport infra. development via PPPs in Witbank-Maputo Corridor • MCLI • Largely a Private Sector Initiative • Part of RSA/Mozambique/Swaziland Public Sector on Board • Is multimodal focused • Modal Work Groups merged into MFLF

43. OVERVIEW - reduce the cost of doing business – distance is cost DISTANCE IS COST – COMPARATIVE DISTANCES – ROAD AND RAILMAPUTO CORRIDOR ALL THE POTENTIAL TO BE AN ECONOMIC TRANSPORT CORRIDOR

44. IMPACT OF MDC – TO DATE > $5B - INVESTMENTS

45. Mature SDP Example: The Maputo Development Corridor MINTEK –NEPAD 2007 Port of Matola/Maputo Upgrades, PPP Coal-based Power Station 2 transmission lines to Matola completed Joburg-Maputo Highway PPP- BOT completed GAUTENG MAPUTO Joburg to Maputo Railway line: Upgrade Al smelter 500ktpa BHPB completed Liquid Fuels & Petro-chemicals: Sasol Pande-Secunda Gas line. PPP Sasol completed

46. MDC phase II: Maputo Metallurgical Complex High Cu Magnetite dumps > 300 MT • (Ti/V) Magnetite • Sep. & conc. plant • magnetite • ilmenite Magnetite (>Cu) dump upgrading plant Possible Ti/Fe From Chibuto Rail Slurry pipeline Elec transmission Gas Connector Pande Gas Pipeline Other Potential: Ilmenite smelter Ti/Fe Fertiliser plant N/P Chlor-alkali plant Na/Cl Fe pelletising plant Fe exports MMC: Iron (DRI) & Steel Plant Downstream chemicals & agriculture Railway Major Road Duvha Power Lines Pande Gas Pipeline Downstream Manufacturing MINTEK –NEPAD 2007

47. REHABILITATION OF INFRASTRUCTURE N4 -ROAD • 1997 a 30 year concession granted to TRAC • “Double” PPP (Two governments involved) • PPP’s used to contribute to infrastructure using private funding and to relieve the burden on tax-based revenues. • TRAC has obligations to: • Finance • Design • Construct • Maintain STATUS • Road from Ressano Garcia border to Maputo is new. Traveling time greatly reduced. • TRAC obliged to continuously maintain the road. • Spent R2 Billion on the road to date • Planned to spend at least another R3 Billion over next 25years • Continuous adding of lanes & resurfacing • The project has been successful in all aspects, namely : • As a constructed road • Involvement in Social Development in both RSA and Mozambique • In stimulating and being a catalyst for economic development • Volume increase of 5-7% p.a. - freight – 10%

48. BORDER POST LEBOMBO/RESSANO GARCIA • ROAD TRAFFIC ON MAPUTO CORRIDOR ON N4 - PASSENGERS • Easter 2007 > Easter 2005 +130% = 166K to 382K • December 2006 > 466K December 2006 =330K to 466K • 113,500 on the 23rd of December 2006 (56,K previous record). • Home Affairs - 80% increase in passengers since April 2005 when visas were abolished • All this via the N4 ! - 23 December 06 (from highest to lowest): Middleburg Toll Plaza  - 30 389 - Nkomazi Toll Plaza – 14 717 • ROAD TRAFFIC ON MAPUTO CORRIDOR ON N4 - FREIGHT • 1 September 2006– commercial cargo clearing hours extended to 22:00 • almost zero to 6-700K tonne pa since mid-2002. The traffic is largely SA exports. • 13 August 2007 – hours extended to midnight (18hours) • 24hr border opening is essential in order to enable road transport to complete the round-trip between JHB-Maputo within 24hrs. • LEBOMBO RESANNO GARCIA JOINT ONE STOP BORDER • 28 June 2006 - bi-lateral meeting between the Presidents of SA and Mozambique – announced commitment for “one-stop-border” • DFID works with SARS & MOZRS – SA – BCOCC • R600Million Rand • 23 May 2007 – MCLI AGM – Joint presentation of SA & Mozambique Revenue Services 3 Location One stop border post – Completed 2009 • Commercial cargo clearing – Mozambique KM4 • Passenger clearing – re-build -current border post • Rail • 18 September 2007 – Economic bi-lateral signed & confirmed • Construction to start Feb 2008 – completed 2009!

49. RAIL ON THE MAPUTO CORRIDOR • 2006 - , 1.7m tonne transit cargo from SA, ie. 4.5-5 trains per 24 hrs • line has design capacity for 9m tpa, ie. 16-18 trains per 24hrs. • CFM upgrade programme on the Moz section of the line (92kms from the border to the port) • 20 tonne axle loads and throughput of approx 13m tonne pa (2010-11). • Now excellent cooperation between CFM and Spoornet • Rehabilitation to be completed Dec 2007 • CFM rebuilds rolling stock ahead of growing demand for railway transport • from the region to the port of Maputo. • 150 wagons rehabilitated in-house • 820 will be rebuilt by a specialized foreign contractor to be selected through a public tender - US$ 30 M. • Rehabilitate more than fifty locomotives US$ 30 M

50. www.portmaputo.com