DP World, the world’s fourth largest port operator, won a 30-year concession to develop a $1 billion deepwater port along the Congo’s Atlantic coast, as the company forges ahead with plans to expand in Africa despite disputes to its business on the continent.
The Nasdaq-listed global ports operator will manage and develop the greenfield Port of Banana in a joint venture with the government of Democratic Repuplic of Congo, with the option of a 20-year extension, it said in an emailed statement. DP World will get a 70 per cent stake and the DRC government keeps a 30 per cent holding in the project. Construction will start this year and finish in two years.
The project will have "a major impact on the country's trade with significant cost and time savings, attracting more direct calls from larger vessels from Asia and Europe, and ultimately acting as a catalyst for the growth of the country and the region's economy," Sultan bin Sulayem, DP World's group chairman and chief executive, said.
The Congo project extends DP World’s ambitous push to expand in Africa. Congo has long sought to develop a port along its 37-kilometer coast to handle bigger vessels than those that can reach its existing shallow water ports along the Congo river.
The country's existing ports at Matadi and Boma are inland up the Congo river and are incapable of handling traffic from large cargo liners because of a lack of capacity and draught, according to a PwC study of DRC's infrastructure. As a result, it relies on transshipments of cargo from Pointe Noire in neighboring Republic of Congo. The new port will "dramatically improve" the cost and speed of trade and reduce dependency on neighbouring countries for shipments, Jose Makila, DRC Transport Minister said.
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The four-phase project will start with an initial investment of $350 million to build a 600-meter quay with a container capacity of 350,000 TEUs, or twenty-foot equivalent units, and 1.5 million tonnes of general cargo. DP World said the investment will be “dependent on market demand, industrial and logistics zone infrastructure.”
“For DP World the investment in Banana is all about the potential that Africa has for growth and the Congo in particular,” Neil Davidson, analyst at Drewry shipping consultancy, said.
“At present, Congo’s container volumes are minimal – less than 100,000 TEUs per year-– but the country has a large population, plus there are significant bulk and breakbulk cargoes.”
For DRC, the project will enhance its position in Africa and its trade connectivity to the world, Rita Guindy, director at Arqaam Capital, said. The state will gain a long-term source of income and could become a small transshipment course to transport goods to neighbouring countries as the port expands at later phases.
“It will put Congo on the map more than before,” Ms Guindy said. The planned 1.5 million tonnes of general cargo capacity will also enhance raw material trade for DRC, who is Africa’s largest copper producer and the world’s biggest source of cobalt.
The agreement with DP World is a boost of confidence to the Congolese economy battling with reforms and debt. In December, the International Monetary Fund said a deeper recession of the non-oil economy in 2017 was “hurting the most vulnerable segments of the population”.
The Washington-based lender said “the accumulation of government arrears is jeopardising private sector activity, contributing to bank liquidity shortages, and undermining social services.”
DRC government is saddled with $9.14 billion of public debt, equivalent to about 110 per cent of GDP.
Venturing into another foray in Africa is in line with DP World’s focus on emerging and developing market, but the region comes with uncertainties.
“Operating in these geographies and economies is always high risk, because they may not continue with the same conditions agreed on or discontinue operating at all, but in general it’s more rewarding than developed economies,” Ms Guindy said.
DP World has faced challenges to its African business in recent weeks. In Djibouti, DP World said it will begin arbitration procedures after the government unilateraly announced it will end its contract to run the Doraleh Container Terminal.
Earlier this month, Somalia’s lower house voted to reject a deal by Somaliland and DP World to grant a stake in the Port of Berbera to Ethiopia, aggravating the spat between the central government in Mogadishu and the country’s semi-autonomous northern region.