Ports and transport: the ‘new normal’ in a COVID-19 environment

Introduction

Global trade has come under severe pressure as the COVID-19 pandemic continues to disrupt economic activity around the world. Many shipping liners have cut capacity drastically, with a notable rise in the number of cancelled departures worldwide. As of early June, 39% of ports reported that the number of container vessel calls fell by 5 - 25% compared to a normal situation, according to the IAPH-WPSP Port Economic Impact Barometer Report. Not surprisingly, the cruise/passenger market remains the most affected by the COVID-19 pandemic, with about 62% of ports indicating that passenger vessel calls are down by more than 50% and in many cases, down by 90% or more. However, many ports are now heading towards increased activity as economies reopen (or partially reopen) and lockdown procedures ease. The pandemic has also impacted inland transport. Border checks, virus test requirements for truck drivers and disruptions in terminal operations can negatively affect trucking operations in and out of port areas and to inland areas and cross-border landlocked markets. In East Africa, the volume of vessel calls remains relatively stable but delays have worsened as a result of the pandemic. A recent webinar hosted by the French Chamber of Commerce Kenya included several senior representatives from the East African shipping industry. They relayed first-hand experiences with the sanitary and health measures taken by ports and border authorities. Whilst necessary and admirable, these measures have led to delivery delays of 7 - 15 days and consequently, higher demand for warehousing. Preventative measures to stop the spread of the virus are important but also difficult to implement on the ground. Nonetheless, these measures constitute the ‘new normal’ for the ports, shipping and inland transport industries and there are a number of strategies that they can implement to adapt and evolve in this environment. Strategies for managing the ‘new normal’ In the short term, ports and the transport industry are prioritising the safety of their employees. Most have put in place the requisite emergency response procedures to remain open for business. Thereafter, they can focus on sustainability such as by improving efficiency, upgrading technology, expanding inland logistics, rethinking their pricing and considering high-value transactions.

Improve operational efficiency Ports and transporters need to focus on reducing costs, improving productivity and asset utilisation and streamlining and automating processes. In doing so, they may need to revise their budgets and capital allocation. Over the last decade, many ports have invested in physical infrastructure as a key component of national economic diversification programmes. The port of Mombasa’s Kipevu Container Terminal will have a total capacity of 1.5 million twenty-foot equivalent units (TEUs) after completion of all three phases, planned for 2023. The port of Lamu’s three new berths is envisioned to have an annual handling capacity of 1.2 million TEU. Tanzania’s National Port Master Plan is set to increase cargo-handling capacity from 15 million tons to 25 million tons before 2024, and to allow the port to serve larger vessels. The development of a new port at Mbegani-Bagamoyo has been proposed under a public-private partnership (PPP) scheme to cope with the growing cargo traffic. Accordingly, port operators need to focus on improving efficiency according to metrics like asset utlisation, revenue per ship, unit profit from cargo handled and return on invested capital. Similarly, shippers and transporters should prepare for the increase in volume from these investments and take advantage of opportunities to realise efficiencies and reduce costs.

In Kenya, for example, the Kenya Ports Authority’s vision is to be a world-class port of choice. It’s Strategic Plan 2018-2022 outlines the following strategic objectives:

• Improve port services;
• Improve customer satisfaction,
• Sustain business growth;
• Improve labor productivity; and
• Enhance risk management and environmental sustainability.

For the above objectives to be met it will be important for KPA and other ports in the region to work in close collaboration with key stakeholders including shipping lines, revenue authorities, statutory standards bodies and logistic organisations including railway companies.