Determinants of a regional port-centric logistics hub: The case of East Africa

Abstract

Demand for port capacity in East Africa is rising rapidly, and possibilities for expansion in the existing ports are limited. Studies indicate that, by 2016, a new port north of Dar es Salaam (Tanzania) should be operational, serving, as a regional hub, the needs of the total (captive and non-captive) hinterland of East African ports. The objective of this article is to assess the economic potential, in terms of logistics costs of alternative hub-port locations. To that effect we first describe the flow of goods in the Nairobi – Durban port range and the landlocked countries; the available inland transport options; and the related transport costs and quality of service aspects. The inland and maritime transport costs are investigated and compared next, for the import-export routings of 18 different trade combinations between six landlocked countries (Uganda, Rwanda, Burundi, DRC Great Lakes/Copper Belt, Zambia and Malawi) and five ports (Mombasa, Dar es Salaam, Durban, Beira and Nacala). The article estimates the parameters of a multinomial logit model by comparing the differences in logistics costs of routings via Dar es Salaam and other ports. A port demand function is derived as a result. The article concludes that, in view of its distance from the arterial maritime container trade routes, the new port could only function as a regional lower-tier hub and distribution centre for the trade of Tanzania and Kenya, and of landlocked countries ranging from Uganda in the north to Zambia in the south. At present, this role is mostly played by ports in the Middle East, whereas East African ports serve merely as transit points.