I have followed with keen interest recent happenings in the maritime industry with regards to issues concerning the MPS-GPHA concession agreement that granted the rights of the development and operation of the terminal 3 at the Tema port.
The idea of port expansion itself isnot a bad idea. Development in the maritime industry makes it imperative on ports to expand and innovate. In the competitive industry of maritime transport, local ports’ authorities are required to anticipate and plan ahead for changes in technology regarding shipping operations among others. The Ghana Ports and Harbours Authority is the statutory authority responsible for building, planning, developing, managing, maintenance, operation and control of ports in Ghana. The authority came out with the GPHA masterplan for the expansion and upgrading of both the Tema and Takoradi ports in order to position Ghana as the leading trading and logistics hub of the West Africa sub-region.
The need for a new automated terminal that improved on the efficiency of operations and the capacity of facilities to handle increased trade volumes at the harbor had become imperative. Global trends towards increased automation, competition from rival regional ports like Abidjan, and the growth in trade as a result of increased importation meant the Ghanaian port authority could not afford any longer to dither on the issue of the port expansion.
Subsequently, the Board and Management of the Ghana Ports and Harbours Authority (GPHA) took the decision to construct a new terminal at the Tema harbor in 2015. The original plan by the GPHA was to subject the port expansion project to a competitive tendering process. Two projects, comprising, the construction of the terminal and the operation of the terminal once completed, were duly advertised. As testament to the economic viability of the project and GPHA’s own strong performance in the industry, about 56 entities expressed varying degrees of interest in the construction of the terminal after this initial advertisement.
Out of this number, 20 were shortlisted. Additional 15 bids were received for the operation of the terminal three once completed. The huge financial outlay required for the successful execution of such a project meant the GPHA had to do a thorough job in the final selection of the entities involved in the bidding. It is important to note that the Meridian Port Services (MPS), a consortium formed in 2003 consisting of Meridian Port Holdings (MPH) and GPHA did not submit any bid for any of the two projects at this stage.
However, midway through the tendering process for the operation of the terminal, the erstwhile NDC government issued a presidential fiat halting the entire process.
This action of the then government ruthlessly hampered the capacity of the GPHA to competitively negotiate in the interest of Ghanaians. It undermined any intuitive of the management of the GPHA in getting a good deal to safeguard the economic benefits arising from the deal.
The action of the then government in granting the exclusive rights for both the construction and operation of the new terminal three to MPS, even when they had not expressed any interest at the bidding phase set the stage for a badly negotiated jaundiced contract that was inimical to the economic interest of the GPHA, local companies involved in container handling operations at the port and indeed the millions of Ghanaians and generations yet unborn.
The World Bank in the late 1990s engaged the government of Ghana and various stakeholders about the need for privatization in the certain aspects of port operations to ensure efficiency at the ports to facilitate trade. Indeed, such a move had become necessary because of the poor performance of Ghanaian ports at the time. It was believed this was impeding growth in trade and subsequently development. The process continued into the early 2000s such that by 2005 the first phase of the dedicated container terminal being the construction of pavements, rail markings and installation of ship to shore gantries and rubber tyred gantries were completed by the GPHA.
The Meridian Ports Services Ltd. was formed in a BOT joint venture arrangement in 2004 to take over the running of the container terminal with the Bollore and APM Groups owning 70% and the Port authority owning the remaining 30%. Privatization of some major port services like stevedoring and shore handling were also introduced.
“All the cocoa sheds located at the western side of the port [of Tema] were pulled down and the adjacent vehicle car park was relocated to a privately owned and managed off dock facility to make way for the second phase of the container terminal. That period marked an increase in private sector participation in port operations and activities. Within the same period the port developed a marine complex and docking bay for its own tugboats in order to free general berths for commercial vessels. In 2007 the second phase of the container terminal being the construction of a 140,000sqm container stacking area, reefer complexes and mechanical work shops were completed. At the same time, the Golden Jubilee Terminal which covered a 140,000sqm land area was completed. This off dock devanning area was aimed at decongesting the port and taking away all [container freight station] CFS activities from the main port.
By 2008 the port had exceeded its 500,000 TEU target expected for 2010 and thus began to work towards the developments stated in its master plan for the future. 75% of stevedoring services were privatized with the Port Authority handling 25%. There was similar expansion in private ancillary port services; off dock terminal activities, warehouses, bunkering and ship chandlery services amongst others.” (Source: GPHA website)
Ship-turn-around time, which measures the time a ship enters a port to the time it leaves had reduced considerably to 3.7 days by 2010, though that figure was still on the high side by best industrial standards. Time ships spent at anchorage before berthing had reduced to 2.25 days by 2016. Container traffic had increased from 555009 TEUs in 2008 to 956374 TEUs in 2017. Vessel calls (number of vessels calling at the ports) averaged 1568 between the periods 2008 and 2017, reaching an all-time high value of 1787 in 2010. By every measure of performance indicator, the indices showed a port that was on the rise and getting more profitable. What therefore could account for the sort of deal that was subsequently signed between the GPHA and the MPS for the terminal 3 projects? And what are its ramifications for the maritime industry?
The ultimate objective of every company, whether publicly or privately owned, is to make profits for its shareholders. It is therefore inconceivable that GPHA, a wholly state-owned enterprise that was churning out profits and paying dividends to government could be brought on its knees by the signing of such an obnoxious contract at the behest of the then government. It even becomes mind-boggling when one factor in the associated labour redundancy that this project is expected to bring to the industry.
The GPHA alone, estimate that about 1400 employees would have to be laid off by 2020 when the new terminal starts operations in order for its to survive financially. While technology and automation is inevitability in every facet of the maritime industry, it would be very naïve on the part of the Ghanaian authorities to allow for unbridled automation considering the high levels of unemployment in the country. Since the operations of the new container terminal three will be a semi-automated one, there will not be substantial job creation to absorb the huge job losses for GPHA and other affected companies. Any programme of accelerated automation in the maritime industry of Ghana must be carefully planned out and rolled out over a number of years. This would involve retraining of staff to acquire other skills whilst giving companies like GPHA the space to reduce its labour force significantly over a period of time.
The new project is also estimated to cause GPHA to lose over $70 million in container-related business alone. It has been suggested that the GPHA could diversify and control the other forms of cargo operations involving dry-bulk, liquid-bulk, and Ro-Ro (cars) vessels. However, looking at the growing trend towards containerization in the maritime logistics space, it would be a pipe-dream for the GPHA to hedge its future on such a proposal.
It is therefore welcoming to learn of the news that the President of the land has taken a keen interest in the matter by meeting with union leaders of the GPHA. This is a step in the right direction as it departs from the practice under the erstwhile regime where an issue as important as granting of the exclusive rights for the terminal three project without the involvement of GPHA management or staff. I would urge the government in looking at resolving this problem to not succumb to any action of any group that would not inure to the benefits of the hardworking staff of GPHA and other local companies in the container-related business chain.
The new terminal three project is indeed a good project and I therefore do not support the call for the abrogation of the entire contract. It is however in the interest of both parties to re-negotiate in good faith the exclusivity rights in the contracts. The government does not need to go far.
The report of the government’s own committee tasked by the Economic Management Team (EMT) to look at the concessionary agreement offers an important step forward. It would be naïve for anyone to contemplate on counting on the goodwill of the MPS group to protect the economic interest of GPHA or Ghana without reviewing some of the exclusivity clauses in the Deed of Amendment. The government must as a matter of urgency insist on the review of Clause 3.7 of the Deed of Amendment (DoA) which state among other things “During the term, the concessionaire shall have the exclusive right to provide services to any Eligible Vessel entering the operational area”, where Eligible Vessel in the DoA is defined as “any vessel which is (i) a full container vessel or (ii) a vessel which is carrying two hundred (200) TEUs or more”. The committee recommended the revision of the figure from 200 TEUs to 800 TEUs. This is imperative to ensure the economic survival of GPHA. GPHA expended $60 million to construct the Terminal 2 in 2003, and GPHA must be therefore be permitted to operate the container business in Terminal 2 with minimum legal and operational limitations to save it from imminent economic collapse.
If the management or the government of Ghana seeks to turn the Tema Port into a fully landlord port, then such an initiative must be gradually introduced to minimize the economic impact of such a policy change on labour and indeed businesses in the industrial city of Tema.
Another approach that should be explored is the idea of labour transfer similar to the one that pertained with the initial concession agreement of 2004 or the concession agreement between the Millennium Challenge Authority and the Electricity Company of Ghana (ECG). This would ensure labour harmony in the industrial front and also minimize the economic impact of the project. The extension of the number of years under the concession agreement can also be explored as an incentive to get the project partner MPS to renegotiate the exclusivity clauses.
Though, I am confident of the government’s ability to ensure the best interest of Ghana is protected. I would implore on politicians to desist from unnecessary interference from the day to day administration of parastatals like the GPHA. It is needless to point out that, all this brouhaha would have been avoided if the competitive tendering process initiated by the GPHA in 2015 had been allowed to successfully pick out the best partner for both projects.
Source: Nameless Reader