Why African freight rates are high – Ghana Shippers’ Authority

Taking a long and hard look at the operations of African ports, the Ghana Shippers’ Authority (GSA) has concluded that these facilities contend with high freight rates caused by a number of factors.
The GSA listed these to include that:
• High charges and congestion in many African ports are passed on to shipper in the freight rate;
• Most African ports not able to host the largest ships that offer the most competitive freight rates;
• Lack of economies of scale and competition in many African countries;
• Trade Imbalance: an import surplus for containerised cargo, whilst exports comprise mostly of bulk goods for both the inward and outward bound; and
• African ports are often difficult to access from the hinterland due to a lack of transport infrastructure.

This diagnosis was made by the Head, Shipper Services Department, GSA, Naa Densua Aryeetey, in a paper, Negotiating Freights and the Cost of Shipping in Africa – The Ghanaian Experience, at the 4th African Women in Shipping Conference held in Lagos last month.
Tracing the origin of the GSA, Aryeetey said that the international shipping industry has, since 1876, seen the shipping lines or companies being organised in a cartel-like fashion known as Conferences.
These Conferences, according to Aryeetey, engage in setting tariffs; imposing surcharges, CAF, BAF, etc.; manipulating capacity to enhance freight; imposing general rate increases; and implementing rate restoration, etc.
Aryeetey stated: “In 1955, the first Shippers Organisation, the British Shippers’ Council, was established to represent the interest of shippers to balance the domineering force of the shipping lines in the market.
“Ghana Shippers’ Authority (GSA) was established in 1974 to represent the interest of shippers in Ghana in the global market.”

The Head, Shipper Services Department, GSA, listed major changes in the shipping industry in Ghana to include: liberalised terminal operations (off-dock terminals), proliferation of freight consolidators (even in the local markets), numerous custom house agents (quite a number unqualified), fewer shipping lines controlling major share of market (mergers, consortia, alliances, etc.), and shipping lines establishing own local agencies in Ghana.
Others are: proliferation of charges by shipping agents, freight consolidators, custom house agents, etc., lack of binding service standards by shipping service providers, lack of adequate and advanced shipment information for pre-clearance and clearance processes, and break down of negotiation mechanism between the GSA and some service providers, particularly the shipping agents.
On costs to the shipper, Aryeetey noted that studies reveal that in 2010 shippers in Ghana paid in excess of US$45 million in demurrage charges, over GHC20 million (US$13.3 million) in rent charges and over GHC90 million (US$60 million) in administrative charges.
“Africa has continued to suffer from high freight rates because of certain factors and these factors need to be addressed, our ports need to be competitive, there is also the need for Africa to develop its transport infrastructure, and begin to improve coastal shipping to encourage intra regional trade thereby reducing the cost of freight and shipping services for the benefit of shippers”, she stated.