AN INVESTIGATION OF PORTS THAT SERVE LAND-LOCKED MALAWI WITH REGARD TO REDUCTION OF COSTS AND SUPPLY CHAIN OBSTACLES

FRANK GLADWELL CHIRWA

Submitted in partial fulfilment of the requirements of the award of a Master of Science Degree in Supply Chain Management

FACULTY OF WELLBEING AND SOCIAL SCIENCES

(University of Bolton, Off Campus Division)

The University of Bolton

April 2015

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ABSTRACT

Malawi as a Land locked country face numerous of challenges in its supply chain

networks for both imports and exports due to a number of obstacles ranging from long

distances to the open sea, third-country transit regulations, poor road networks, high

inland haulage costs, fragile currency, fragile external relations with neighboring

countries, unreliable port infrastructures and capacities. This renders Malawian products

uncompetitive on the world market compared with countries with direct access to the

open seas. Over the years has continuously sought to find and develop the most direct

and cost effective route to the open seas that can substantially reduce the overall cost

of bring goods to Malawi considering that 55% of the total cost of the import charge

constitutes the inland haulage cost.

The continual search for viable options and alternatives led to the birth of this

investigation to review the current port options used by Malawi, potential sea ports that

could be used and also the proposed world inland port in Nsanje district on the Shire-

Zambezi waterways, which can be harnessed and developed into viable options with

regard to reducing the overall importation and exportation costs. It is also envisaged

that the results of the investigation will add value to existing knowledge on the various

challenges affecting efficient trade logistics in Malawi and ultimately form the basis for

policy makers to embark on projects designed to reduce importation and exportation

costs and elimination of supply chain obstacles from an informed position.

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Table of ContentsABSTRACT................................................................................................................................................2

ACKNOWLEDGEMENTS........................................................................................................................4

LIST OF ABBREVIATIONS.....................................................................................................................5

LIST OF FIGURES...................................................................................................................................6

INTRODUCTION AND BACKGROUND................................................................................................7

Malawi’s Exports...................................................................................................................................9

Malawi’s Imports.................................................................................................................................10

Inland Haulage Issues........................................................................................................................12

Non-Tariff Barriers..............................................................................................................................20

The Problem Statement.....................................................................................................................21

RESEARCH OBJECTIVES...................................................................................................................23

Aim of the Study..................................................................................................................................23

LITERATURE REVIEW.........................................................................................................................25

Nsanje World Inland Port (Shire-Zambezi Waterway)...................................................................31

Beira Port - Mozambique...................................................................................................................35

Nacala Port – Mozambique...............................................................................................................39

Quelimane Port - Mozambique.........................................................................................................41

Dar Es Salaam Port - Tanzania........................................................................................................43

Durban Port – South Africa................................................................................................................46

Coega Port – South Africa.................................................................................................................48

RESEARCH METHODOLOGY.............................................................................................................50

Scope of the Study.............................................................................................................................52

Limitations of the Study......................................................................................................................53

Research Design................................................................................................................................55

Data Collection....................................................................................................................................56

Data Analysis.......................................................................................................................................57

SURVEY FINDINGS..............................................................................................................................68

Respondents Attributes......................................................................................................................68

User Perception of the ports in use..................................................................................................68

Reduction of cost of importation and exportation...........................................................................70

Development of Nsanje Inland Port (Shire-Zambezi Waterway)..................................................70

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User perception of Quelimane Port in Mozambique......................................................................71

Overall best option for Malawi...........................................................................................................72

Critical Supply Chain Obstacles........................................................................................................72

CONCLUSION AND RECOMMENDATIONS.....................................................................................74

REFERENCES........................................................................................................................................76

APPENDICES.........................................................................................................................................83

Data Collection Questionnaire..........................................................................................................83

Trade Deficit Statistics.......................................................................................................................92

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ACKNOWLEDGEMENTS

I sincerely thank my supervisors Mr. Owen Jones and Mr. Peter Chiligo, who supervised

and guided me through this journey. Words cannot express my appreciation for their

invaluable help, patience, and support. These two distinguished gentlemen have

opened my eyes to the academic world.

Many thanks go to Mr. Alex Chanza and Dr. Ida Mbendera for their guidance during the

research proposal processes. Their unwavering and untiring support cannot go

unnoticed.

I would finally want to thank my family, wife Rhoda and daughters Thelma and

Theodora for enduring long periods without my attention in the heat of putting up this

dissertation. Your understanding and patience is bearing fruits today. Above all, glory to

God for being with me throughout this journey.

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LIST OF ABBREVIATIONS

ADB - African Development Bank

AIM - Agência de Informação de Moçambique

ATPC - Africa Trade Policy Centre

BTI - Bertelsmann Stiftung

CFM - Caminhos de Ferro de Moçambique

COMESA - Common Market for Eastern and Southern Africa

CYN - Chinese Yen

EAC - East African Community

EU - European Union

GDP - Gross Domestic Product

IMF - International Monetary Fund

KPI - Key Performance Indicators

LLDC - Landlocked and Least Developed Country

MITC – Malawi Investment and Trade Centre

MK – Malawi Kwacha

MRA - Malawi Revenue Authority

MSC - Mediterranean Shipping Company

NSO – National Statistics Office

NTB - Non-Tariff Barrier

ONC - On carriage

SADC - Southern African Development Community

TMSA - TradeMark South Africa

UNCTAD -United Nations Conference on Trade and Development

UNECA – United Nations Economic Commission for Africa

USD - United States Dollar

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LIST OF FIGURES

Figure 1 – Map of Eastern Africa Figure 2 - Nsanje World Inland port Figure 3 - Beira Port Figure 4 - Bay of Nacala Port Figure 5 - Quelimane Port Figure 6 – Port of Dar es Salaam Figure 7 – Durban Port Figure 8 – Coega Port

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INTRODUCTION AND BACKGROUND

Landlocked Malawi is a southern African country of approximately 13.1 million people

according to the last population and housing census conducted in 2008 (NSO, 2008). It

is also one of the least developed countries in the world. Malawi’s real GDP growth is

estimated to have been 5% in 2013 and is projected to accelerate to 6.1% and 6.2% in

2014 and 2015 respectively, driven by tobacco exports and continued growth in the key

sectors of agriculture, manufacturing and service (ADB, 2013). Malawi is a largely

importing than exporting country; the manufacturing industry is very small and limited to

production for domestic use. The industry in Malawi is concentrated in the urban centres

of Blantyre, the commercial capital and Lilongwe, the capital city and imports almost all

raw materials. The mining industry is also in its very infancy stages, with one uranium

mine in the northern part of Malawi. Currently Globe Metals of Australia is conducting

mining feasibility studies and testing Niobium samples at Kanyika in Mzimba District

which could yet be another revenue stream for the Malawi Government. The

government of Malawi has also recently granted oil exploration licenses to a few oil

exploration companies from the United Kingdom and the Middle East to prospect for oil

in the Lake Malawi. Due to its landlocked status, Malawi uses ports in Tanzania,

Mozambique, Namibia and South Africa for its imports and exports. However the

distances, port, road and rail infrastructure, transit and customs regulations, the overall

cost of importation or exportation is too high and renders the Malawi market unattractive

to investors. Most import commodities are containerized. United Nations Armenia

(2014), states that international merchandise trade for landlocked countries depends on

transit through other countries. This transit dependence, often coupled with

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cumbersome border-crossing procedures and inadequate transit transport

infrastructure, substantially increases transport and trade transaction costs, erodes their

competitive edge, discourages investors, reduces economic growth and subsequently

limits their capacity to promote sustainable development.

Malawi’s Exports

As highlighted, the major exports out of Malawi are tobacco, sugar, cotton, tea and

coffee. Other exports include timber, pulses, apparel, mineral sands, fresh fish and

groundnuts. More recently Malawi has been exporting uranium yellow cake grade 7 but

recently mining of uranium has stopped due to fall in world prices. The Malawi National

Export Strategy Volume 1, 2013- 2018 states that in 2010 Malawi imported US$2.3

billion worth of goods and services (43 per cent of GDP), but only exported US$1.2

billion1 (22 per cent of GDP). This is a reflection of a big trade deficit and no doubt

Malawi needs to expand its export base to balance the import versus export statistics

and to leverage the economy (see annex 2 – trade statistics with the United States for

2015, 2014 and 2013). The overall external trade indicates imports have accelerated

more than the growing exports. During the period under review, total merchandize

exports registered an increase estimated at 41.3 per cent. According to MITC (2011),

the total export value in 2012 was MK296.5 billion, while in 2011 exports recorded

MK209.4 billion. In 2012, Malawi imported merchandize goods worth MK661.5 billion

compared to MK345.3 billion in 2011. Trade balance gap worsened from MK135.5

billion in 2011 to Mk365.2 in 2012.Tobacco cotton and tea is mostly exported via port of

Beira whilst sugar is exported via Nacala. Of course Illovo, the sugar producer in

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Malawi, takes advantage of the fact that CEAR (Central East African Railways) have to

reposition back to the Port of Nacala, empty container wagons, to explain their

preference for Nacala Port for their exports hence are able to move sugar containers

from Malawi to Nacala Port at discounted rates. Under normal circumstances, the empty

container wagons have to be repositioned back to the Port of Nacala with no cargoes

due to the seasonal nature of Malawi’s exports but also generally low export volumes.

Malawi’s Imports

Most of the imports into Malawi are raw materials for the manufacturing industry, fuel

and petroleum products, medicines, chemical fertilizers, new and used vehicles,

foodstuffs and other commodities. Most of these import cargoes are containerized and

are imported into Malawi via Mozambique, Tanzania and South African ports.

Containerization of cargo ensures security, efficient loading and unloading, efficient

space utilization, eliminates unnecessary need for warehousing, ability to stack cargoes

that would not be otherwise stacked in a break-bulk environment. Almost 65% of all

imports are in form of containerized cargo and the balance is break-bulk cargo and

liquid fuels. However the challenge becomes the cost on inland haulages from the ports

to landlocked Malawi. Brasca (2012) lends weight to the foregoing that containerization

is especially useful for companies that move products in varying weight categories.

Heavy and light freight can be shipped together to utilize all available container

capacity, resulting in increased resource utilization, and fewer containers required to

move the same volume of goods. Imports into Malawi are faced with long distances

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characterized by poor road and rail infrastructure from the ports of discharges and this

has a direct impact on the final delivery cost.

Malawi celebrated 50 years of independence on 6th July 2014 but has for the past 50

years depended on the ports of Dar es Salaam in Tanzania, Beira and Nacala in

Mozambique, Durban in South Africa for both imports and exports. More recently Port

Quelimane in Mozambique is being rehabilitated and could yet provide another

interesting prospect for Malawi. In terms of overall distance calculation, Mozambican

ports provide the shortest access to the sea however at some point due to the 16-year

Mozambican civil war; Malawi had no option but to use long and commercially

untenable routes to Durban in South Africa through Zambia and Zimbabwe but also to

Dar es Salaam on the northern corridor. This became a serious economic challenge for

Malawi with regard to importation of essential commodities such as chemical fertilizer,

fuel and medicines. For the record, current inland haulage costs from Durban to

Lilongwe is around $9000 per 40’ container, from Beira to Lilongwe is around $4000 per

40’, from Nacala to Blantyre is around $3900 per 40’ container and from Dar es Salaam

to Lilongwe is around $6500 per 40’ container. These costs are evidently very

prohibitive and counter-productive to the economy adding to the fact that most of these

imports will also be subjected to customs duties and taxes and after value addition,

manufacturers will add some mark up to sustain operations and business. This renders

Malawi produced goods to be very expensive on the market compared to similar

products in neighbouring markets. Due to the inland geographical locations of Lilongwe

and Blantyre, importers will either opt for Nacala or Beira despite each of these ports

having advantages and limitations and usage of these ports presents various supply

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chain obstacles at continuous intervals. According to UNECA (2009) transit times on

African transport corridors are unduly long due to a number of reasons, including

unclear and sometimes conflicting rules and regulations, inefficient service providers,

roadblocks, as well as cumbersome administrative and customs procedures.

Inland Haulage Issues

United Nations Economic and Social Council (2002) suggests that the situation for land-

locked countries is almost always aggravated when being landlocked coincides with

other factors such as remoteness from major markets, tropical climates, considerable

distance from the coast, poor infrastructure, or an inadequate policy, legal or

institutional environment. When cargoes have been discharged at the preferred ports of

either in Beira, Nacala or Dar es Salaam, the cargo has to be moved to inland locations

either by truck or rail. This is the single greatest challenge in the importation and

exportation cycle considering the costs and logistics involved. The Malawi road

transport system is not well organized and the few road hauliers available are foreign

owned hence most of the imports and exports are moved by foreign owned trucking

companies. This essentially means Malawi cannot control the cost of inland haulage of

its own imports and exports. This situation can also create room for price collusion and

growth of cartels amongst the transporters to Malawi’s disadvantage.

Over the years, Malawi has been continuously sought to explore the most cost effective

and direct route to access the open sea in order to reduce the overall cost of importation

and corresponding trade logistics obstacles. Faced with the challenges as outlined,

Malawi decided in 2010 to construct an Inland port in Nsanje District on the banks of the

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Shire River to connect to the Indian Ocean via the Zambezi River in Mozambique. The

thinking behind the project was that cargo vessels could be sailing all the way to the

Malawi Inland Port hence eliminating the need for inland haulages by trucks from the

third party country ports. Whilst this was a novel idea, it was forced through without a

proper feasibility study, the available facts were largely based on historical data

regarding vessels that used to ferry molasses from Nsanje to the coast (The Maritime

Aid Agency, 1997). Around the time, maximum tonnages loaded on the barges were

limited to 200 metric tonnes per barge basically representing close to 10 TEUS (twenty-

foot-container equivalent), quite low volumes compared to increased levels of

importation in modern times. However a number of issues that arose at the material

time i.e. absence of a feasibility study, obscure port throughput, channel capacity,

environmental concerns, incrementing of total import transit time, unascertained port

demand versus ability to repay the investment, different levels of interest by the

concerned countries and lack financial commitments by stakeholders, banks and donors

prevented the Nsanje Inland Waterway project from becoming a reality. In pushing for

the realization and local support for the project, the government of Malawi went into

overdrive and gave the public very questionable information i.e. that by opening up the

inland port, the cost of importing would go down by 60%. This was misleading

especially where there was no feasibility study of any kind to determine a number of

parameters that would have ensured commercial viability of the project. There are so

many factors that shape up the final cost of importation and exportation. Any port is of

economic significance if it is able to attract direct calls from port of loadings however for

this to happen a number of issues come into play e.g. volume of business, channel size

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and depth. Otherwise the port was going to be a feeder along the existing supply chain

options i.e. barges would still be required to load cargoes from Beira, Quelimane and

Nacala for offloading in Nsanje before on-carriage to the industrial centres. With this

mode of operation, there is the increased handling cost at both ports in Mozambique

and Malawi and this would have not been attractive to the importing and exporting

industry. Malawi needs a viable and long lasting solution that effectively lowers the

inland haulage cost but also eliminates unnecessary trade logistics obstacles. Below is

a breakdown of the various costs/charges that form the shipping cost that is paid by the

importer in Malawi;

• Sea freight (Amount payable to shipping line for moving goods from point A to B)

• Bunker Contribution (Additional charge levied on the shippers to compensate for

fluctuations in the price of the ship's fuel)

• Carrier Security Fee (Surcharge for Armed Security for combating Piracy)

• Terminal Handling Fee (Amount charged at each port including loading,

transshipment and discharge ports for handling of containers from one vessel to the

quayside and onto another vessel – also known as stevedoring costs)

• Wharfage (Charge payable to port operator)

• Security Scanning Fee (Electronic Security Scanning of Containers at

Beira/Nacala)

• On-carriage (Amount paid for inland haulage leg e.g. Beira to Blantyre or Nacala

to Lilongwe)

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Sea freight forms a very small fraction of the whole shipping costs. For example, current

costs of a 40 foot container from Chiwan in China via Beira to Lilongwe will cost an

importer;

• Sea freight - $400.00

• Bunker Contribution - $1200.00

• On-carriage - $4171.00

• Pre-Carriage - $165.00

• Terminal Handling Charges at Port of Discharge - $175.00

• Terminal handling Charge at Port of Origin – CYN 1100.00 (Chinese Yen)

• Add local costs for clearing, storage at final destination – Approximately $200

The World Bank (2004) concluded in its assessment that the volume of trade for Malawi

is small and Malawi is not generating enough traffic by itself to justify its own gateways.

For instance petroleum imports do not fill a tanker, tea exports hardly fill an ordinary

cargo and the container traffic of Malawi is only a fraction of the capacity of the port of

Beira. Inland haulage issues into Malawi is also greatly affected by an ageing fleet,

trucks are capital intensive and with the conditions of the roads in the region most

trucking companies prefer used trucks from the United States. These old trucks have

problems of constant breakdowns, high fuel consumption and high maintenance costs

due to old age. Most of the truck operators are reluctant to invest in modern fleets due

to poor condition of the road networks in the region.

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Figure 1 – Map of Eastern Africa (Port of Beira Profile Directory)

As figure 1 shows, the shortest distances to Malawi are in Mozambican ports (Beira,

Quelimane and Nacala), of these three ports, it will be noted that Quelimane Port

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provides the shortest distance hence the need to investigate why this cannot be

harnessed into a port of choice for Malawi.

Major trading partners with Malawi include the Far East countries of China, Malaysia,

Singapore Thailand, India, Pakistan and japan, the European Union bloc, United States

of America, Canada and Brazil and of course South Africa on the local continent. Most

of these commodities are containerized in Malawi but sometimes due to issues of

container equipment imbalance and fumigation requirements, sometimes the cargoes

are moved break-bulk for containerization either in Mozambique or South Africa. A

number of international shipping lines operate in Malawi offering services from world

destinations via the ports of Beira, Nacala, Dar es Salaam and Durban and on-carriage

from these destinations except Port of Nacala is by road. Inland haulage cost

constitutes a big percentage of the overall importation cost whilst rail option should be

naturally cheaper, the available rail option via Nacala is on the contrary not, the rail tariff

is benchmarked against road and is very inefficient due to rail capacity constraints,

shortage of container carrying wagons, port infrastructure and management issues, as a

result the Port of Nacala is constantly with congestion and delays. The delays are so

excessive and detrimental to cargoes with short-shelf life e.g. food items and this

presents serious supply chain obstacles. Some businesses have failed to fulfil delivery

contractual agreements due to delays experienced in Nacala Port. The situation is even

worse during the rainy season when most of the rail sections are submerged in water

and renders the whole rail line impassable or leads to frequent train and wagon

derailments.

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Although some rehabilitation has taken place, the line is in need of more extensive

rehabilitation in certain sections (particularly Cuamba to Entre Lagos) and the

expansion of the line into Zambia (Mchinji to Chipata) is required to provide a

comprehensive railway network. Nacala lies on the northern coast of Mozambique and

is the deepest natural port and a natural harbor on the east coast of Africa.

On the other hand the Port of Beira is not a natural deep sea port as it is situated on the

mouth of a river channel and as a result is faced with siltation problems which require

dredging at constant intervals to maintain water levels required for berthing of vessels

into the port. Dredging is a very expensive operation and each time the port is being

dredged, a surcharge is levied on all containers loading or discharging at the port to

cover for the costs of the dredging exercise.

Inland haulage from Beira Port to Malawi is by road, and it is quite efficient compared to

the rail option from Nacala Port however the drawback is the high cost charged by

transporters. Of course there is the Sena rail link from Beira which goes to Moatize, the

coal mining town in Tete province. This rail link can be connected to the Malawi link

from Nsanje District and provide alternative to the costly road haulage option. The huge

inland haulages costs should stimulate Malawi to find shortest, cost effective and most

direct route to the sea.

Depending on route and volumes, shipping lines may offer direct service or offer feeder

service to a particular port. For example, Mediterranean Shipping Company operates

five feeder vessels every fortnight from Durban, calling ports of Maputo, Beira,

Quelimane, Nacala, Dar es Salaam and Mombasa whilst other shipping lines like

MAERSK and CMA CGM are able to offer direct services from Far East into Beira and

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Nacala. The feeder service usually involves a combination of series of transshipment

ports up until the final port of discharge. Such arrangements are subject to change

depending on vessel size, requirement to reduce transit times, demand and volumes.

All containers discharged in Mozambican ports to inland destinations are subjected to

transit clearance by the Mozambican Customs. This procedure entails that shipping

lines and forwarding agents submit copies of shipping documents to customs and place

the transit cargoes under customs transit bond to ensure that cargoes declared as

transit do not evade duty and find their way into the Mozambican market. This

procedure is not very efficient and documentation can be processed from within 3 days

of cargo discharging up to 15 days, this therefore leads to delays and eventual port

storage charges. These and other numerous non-tariff barriers in the ports leads to high

port dwell time and congestion. On average cargo takes 17 to 20 days inside port

before being moved to transit final destinations. Cornelder, the port operator of Beira

Port, offer port users 12 days free to clear and remove cargoes from the port storage,

whilst 12 days might sound reasonable, sometimes this is rendered useless by the

delays in processing transit clearance inside customs and cargoes are subjected to port

storage of $18 per 20 foot container and $36 per 40 foot container at the expiry of the

allowable free period up until cargo is removed from port storage yard. Supply chain

performance is affected due to huge transit time from port of loading to the port of

discharge through to the final destination mainly caused due to unnecessary delays at

port of discharge. The problem is so grave when cargoes involved are short-shelf life

type of commodities e.g. foodstuffs. Certainly for transit cargoes, it would have been

ideal to allow pre-clearance of cargoes before the actual vessel discharge however this

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is not allowed and increases the cargo dwell time at the ports leading to port storage

charges. Security of cargo in transit is another big challenge for both Tanzania and

Mozambique, cases of cargo thefts have been reported on both routes.

From the foregoing, it is evident that Malawi needs to find means to lower the costs of

on-carriage for its cargoes in order to become attractive on the international markets.

Non-Tariff Barriers

Non-Tariff Barriers (NTBs) refer to non-tariff related trade restrictions resulting from

prohibitions, conditions or specific requirements that make importation and exportation

of goods difficult or expensive. COMESA, EAC and SADC have, in the past, developed

different mechanisms to identify report and monitor elimination of Non-Tariff Barriers

and resolve disputes. These mechanisms have, to a great extent, identified all the

common NTBs encountered in the region and the frequency at which they occur and

has attempted to facilitate resolution of the same through resolution at the Council of

Ministers level and other consultative processes (TMSA 2014). Whilst tariff and charges

are attributed to the high costs of Malawi’s imports and exports, several other non-tariff

barriers come into play. These include delays in port or customs procedures, where

cargoes are subjected to heavy storage charges which are added to the above charges

and borne by consignee at final destination. These are regular and constant problems

faced by Malawi importers and exporters. Sometimes customs in Mozambique will

decide to perform customs escort and a levy of $200 per container is charged, this

again adds up the very many other non-tariff barriers that makes cost of importing or

exporting very uncompetitive. When the trucks and rail reach the borders, there is an

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endless array of paperwork and procedures to be followed usually leading to truck

detention of up to 3 days, the truck operators resort to charging truck detention fees at

the expiry of 48 hours, these costs are all for the consignee to bear. Sometimes the

Malawi Bureau of Standards will insist to examine certain goods right at the border

before consignment is allowed to cross into Malawi, this procedure again costs a lot of

time to conclude. These are non-tariff barriers and supply chain obstacles that need

solutions for the smooth and efficient supply chain performance. Based on the

foregoing, the researcher saw the need for a thorough investigative and comparative

study that looks at all the current options available to Malawi and how these can be

harnessed to the economic advantage of Malawi with regard to overall reduction of

importation but also removal and elimination of supply chain obstacles.

The Problem Statement

As highlighted in the introduction and background, Malawi is faced with huge inland

haulage costs for its imports and exports coupled with various supply chain operational

obstacles. Although being landlocked is a challenge, it is not destiny. There are practical

solutions to many of the problems faced by landlocked countries ranging across

comprehensive approaches to transit corridors, overall regional integration efforts, legal

and regulatory reforms, institutional and administrative overhauls, specific international

protection mechanisms and including an in-depth analysis of each landlocked country’s

foreign trade composition and its adequacy with regard to transport constraints (United

Nations Economic and Social Council 2002). Whilst attempts have been there to

establish Malawi’s own inland port to counter increased delivery costs and supply chain

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obstacles, the process has been marred by several challenges including absence of

feasibility study, lack of interest from neighboring Mozambique and lack of commitment

from financial donors. This has effectively put brakes to Malawi’s desire to open up an

inland port and counter the various challenges. Development of an own inland port in

itself does not resolve the myriad problems affecting importation and exportation

challenges of Malawi. The proposed inland waterway solution in the absence of

feasibility study portrays a vague picture of the commercial viability of the waterway

against financial resources required to put the waterway at optimum use. Existing ports,

currently being used by landlocked Malawi, have different challenges but some could be

redeveloped and optimized to militate against the increased inland haulage costs, huge

delays, high transit times, customs inefficiencies and inconsistencies, poor road and rail

infrastructures. For example, cargoes will have been delayed at transshipment port in

Durban, at Beira port due to transit clearances and on arrival at the Malawi border

posts, MRA (Malawi Revenue Authority) and Malawi Bureau of Standards will also insist

to perform physical inspections of the cargoes; this again leads to delays of sometimes

up to 2 or 3 days.

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RESEARCH OBJECTIVES

The subject under investigation is a critical topic for Malawi considering the various

challenges being faced but also the various efforts being done by Government to

counter the problems. The problems are cross-cutting in that various sectors of the

Malawi economy are directly. The objectives of this investigation are as detailed below;

a) To assess user perception and knowledge of the ports being used by landlocked

Malawi.

b) To assess the efficiency parameters (i.e. Port infrastructure, equipment, tariffs,

transit cargo legislation, customs procedures, transit times, on-carriage costs, port

throughput/capacity, channel size and type of vessels calling, natural restrictions) of

from the various current ports

c) To assess impact of distance on inland haulage costs to final destinations in

Malawi.

d) To provide recommendations on viable port options with quantifiable data and

measurable targets that may be harnessed and developed as first port of choice by

landlocked Malawi.

Aim of the Study

This study seeks to investigate critical factors that should provide a basis for meaningful

research and development of the shortest and most efficient route and access to the

open sea with regard to reduction of overall costs of importation and supply chain

obstacles. This investigation will contribute to available and existing literature because it

includes data on new ports e.g. Quelimane and Coega ports, previously not

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documented with regard to Malawi imports and exports. The study also highlights critical

issues with regard to the proposed developments of Malawi’s own inland port in direct

relation to Malawi’s wish of reducing final cost of importation and also supplies chain

obstacles.

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LITERATURE REVIEW

This Literature reviews draws from wide ranging sources of secondary data. The United

Nations has drawn up a lot of comprehensive statistics and reports on trade and

landlocked countries which provides a lot of insight to some of the issues under

research. Similarly a lot of academics and scholars have done extensive research on

matters relating to landlocked countries and their corresponding challenges to access

the seas. According to the United Nations Information Service (2015), landlocked

developing countries (LLDCs) lack territorial access to the sea which means they can

face significant challenges in trade, transport and infrastructure amongst other areas.

Ocean ports are a central and necessary component in facilitating trade. Yet, there is

only limited comprehensive information available on the efficiency of ports, much less

evidence of the effect of port efficiency on trade (Blonigen and Wilson 2006). This is

very true in the sense that water transport is the cheapest and most reliable due to the

fact only water connects almost all the continents in the world. Secondly the capacities

of cargo carried by water transport far exceeds those that can be transported by rail, air

and road hence by economies of scale, water transport becomes very cost effective and

every country needs so form of access to water transport. A port is the interface

between intercontinental transport and a place in the hinterland being considered for

production, assembly, or final distribution. Port capability and efficiency can greatly

influence the decision for locating a plant or distribution center, and often determine

whether a local producer can compete globally or regionally with other producers (World

Bank 2007). The foregoing provides basis for Malawi to continually seek viable port

options that can make its imports to compete globally. For example tobacco is grown in

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Malawi, Zambia, Tanzania, Zimbabwe and even South Africa but whilst Tanzania,

Mozambique and South Africa have got their own sea ports, they have to compete for

the same market in America, Europe and Asia with the landlocked countries of Malawi,

Zambia and Zimbabwe. Dunne (2015) states that recognizing the economic

interdependence between landlocked countries and their neighbors is clearly important

and the solutions to the landlocked countries’ problems are pretty obvious. They include

improving the security environment, the countries’ own infrastructure (including inland),

neighbors’ policies, coastal access, other transport access and rural development. This

is a perfect example in the Malawi’s quest for own inland port, where among other

things, diplomatic relations between Malawi and Mozambique has been key in

preventing successful launch of the inland waterway project. Lahiri and Masjidi (2012)

suggests that diversification of the transit options to several neighbors of the landlocked

economies could potentially reduce the monopoly power of any single coastal neighbor.

Whilst the theory sounds correct that is dependent on the geographical setup where

other potential ports and coastal neighbors are viably present. In the Malawian context

that remains a challenge as the viable options only lie within Mozambican territory since

the other available options are Tanzania and South Africa. Snow et al. (2003) suggests

that landlocked countries are completely dependent on their transit neighbors’

infrastructure for access to international markets. Where a landlocked country only has

access to routes of poor quality, the cost of overland trade is significantly higher than

they would otherwise be. Hence, the cost of trade of a landlocked country is heavily

determined by the infrastructure levels, and, indirectly, by the level of development of its

transit neighbors. Malawi has the highest freight cost in the southern African sub-region

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despite having manageable distances to the nearest ports in Mozambique but due the

poor quality infrastructure at Nacala or Beira ports, the poor road network from Inchope

to Beira in Manica province, from Moatize to Mussacama in Tete province contribute to

increased delivery cost for cargoes to Malawi. Landlocked developing countries

(LLDCs) face particular challenges that limit their potential gains from trade, and restrict

their resources for investing in development. The lack of access to the sea means it is

far more expensive to import essential items and export goods. It is estimated that the

basic trade costs of LLDCs are nearly twice those of neighboring countries with

coastlines (Kurz and Chandra Acharya 2014). The foregoing is practically true, most

small scale Malawian traders travel to Tanzania and South Africa to buy merchandize

for resale in Malawi due to the fact that they are able to make good profits. Arvis et al,

(2010) states that transport costs account for only part of the real cost of being

landlocked. They do not factor in transit delays and unpredictability, which are critical

parameters in international trade. UNCTAD Secretariat (2013) adds that the many

obstacles faced by landlocked countries’ trade transiting through other territories are

commonly known. They range from long distances to inadequate transport services and

infrastructure, and inefficient institutional and operational transit frameworks.

Whilst landlocked countries’ problems are often generalized, some landlocked countries

are better off than some others. Of course countries like Swaziland and Lesotho

completely surrounded by South Africa benefit from highly efficient South African ports,

customs, rail and road systems. Landlocked Botswana is economically advanced than

most countries with coastal lines and international ports mainly due to a vibrant diamond

mining industry in Botswana. According to a UNCTAD report (2013), there are 44

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landlocked countries in the world, of which 31 are classified as LLDCs: 15 in Africa, 10

in Asia, 2 in Latin America and 4 in Central and Eastern Europe. Landlocked countries

do not have direct access to the sea and have to use third party country to access the

sea ports. Due to a number of issues including politics, regulatory red tape landlocked

countries are sometimes forced to use long distances to access the open seas when

alternative short alternative options are available. This creates a whole host of supply

chain challenges and obstacles.

Faye et al (2004) adds weight to the foregoing that landlocked countries not only face

the challenge of distance, but also the challenges that result from a dependence on

passage through a sovereign transit country, one through which trade from a landlocked

country must pass in order to access international shipping markets. Free passage in a

sovereign transit country is wholly dependent on good neighborliness. Similar

sentiments are echoed in the ATPC briefing (2010), that the lack of territorial access to

the sea, remoteness and isolation from world markets and high transit costs continue to

impose serious constraints on the overall socio-economic development of landlocked

developing countries.

In the mid-term review of the World Bank (2008) the Almaty Ministerial Conference in

2003 gathered to address specific problems to land locked developing countries where

a number of important resolutions were adopted including ;

Secure access to and from the sea by all means of transport according to

applicable rules of international law.

Reduce costs and improve services so as to increase the competitiveness of

their exports.

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Reduce the delivered costs of imports.

Address problems of delays and uncertainties in trade routes.

Develop adequate national networks; reduce loss, damage, and deterioration en

route.

Open the way for export expansion

It is quite evident that the highlighted and adopted resolutions are indeed the common

challenges faced by land locked countries. In the Malawian case, being an agro-based

economy mainly producing tobacco, sugar, cotton and tea, products which are exported

to United States and Europe, easy and cost-effective access to the open sea is a non-

negotiable requirement.

On the other hand, due to unattractiveness of the landlocked countries there exists little

or no competition on the available infrastructure to try and push costs down. Point in

case is the current scenario in Malawi, where only one rail operator enjoys monopoly of

the rail route and the trend has been that the rail operator usually pegs their tariffs

based on the road tariffs. Very recently Mota Engil, a Portuguese engineering firm has

drawn up a concept to build and operate a dry port at Liwonde in Malawi, to consolidate

all exports via Port Nacala, in its presentation to the Malawi transport ministry, Mota

Engil believes that the dry port logistical center will be able to reduce transit times by 19

days on exports and 14 days on imports and this will translate to an almost 50% cost

saving on the importer/exporter. Whilst this theory is yet to be tested, it is one of the

moves to try and bring about competition in the supply chain market by competing with

existing corridor options i.e. the Northern Corridor, Mtwara corridor but also the

proposed Nsanje Inland Port. Of course the concentration of logistics at a single hub

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brings along multiple challenges of cargo handling i.e. initially all cargoes being handled

and loaded from Lilongwe or Blantyre will have to be road hauled to Liwonde for

fumigation, containerization and subsequent movement to Nacala.

According to Matenje (2008), the Malawi Government is vigorously pursuing a multi

modal inland transport system to improve road, rail, air and inland water transportation

with a view to facilitating internal trade as well as import and export trade. Of course in

reality the air option is very expensive and not readily available for certain commodities.

Development of multi-modal transport systems for a land-locked country should

however consider a number of factors e.g. feasibility of the option, capacity or

throughput, return on investment, environmental concerns, political will, cost efficiency

and available financing.

It is quite interesting to note that chapter 7 of the African Maritime Transport Charter

(1994) obliges partner transit states for landlocked countries to grant facilities and

benefits to landlocked States and to apply nondiscriminatory administrative, fiscal, and

Customs measures. They agree to coordinate their policies of acquisition and uses of

land, river, air and maritime transport, and ports. They are encouraged to enter into

bilateral and multilateral conventions on transit and to ratify those in force. Whilst this is

the case, we have a very recent case of Mozambique dragging its feet on Malawi’s

intention to open up Nsanje World inland port on the shire/Zambezi river due to a

number of reasons. This begs the question, how can continental bodies’ effectively

police the implementation of charters and other agreements?

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Nsanje World Inland Port (Shire-Zambezi Waterway)

Figure 2 - Nsanje World Inland port

Nsanje is the southernmost district of Malawi entirely surrounded by Mozambique. It the

exit point of the Shire River which is the major outlet of Lake Malawi and flows into the

Zambezi River all the way to the Indian Ocean at Chinde port in Mozambique. Malawi

has pushed so hard for the development of Nsanje inland port as a means of opening

up to the world but most importantly reducing costs of importation and exportation. This

development has been met with a lot of challenges both internal and external. There

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has been limited development of roads and inland waterways to improve landlocked

countries challenges and in the case of river transport; the absence of navigable rivers

into the hinterland limits the use of such a mode of transport (ADB 2010). Without

entering into any formal agreements with neighboring Mozambique, Malawi went ahead

to construct the first phase of the proposed Nsanje port and commissioned a trial barge

to run from Chinde Port in Mozambique to Nsanje. This was thwarted and blocked by

the Mozambican governments who have resisted any attempt to commercialize sailing

in the Zambezi River without an environmental feasibility study. According to a blogger,

Jones (2010) Nsanje was indeed a port – Port Herald – for many years subsequently,

right up to the late 1960s. The problem is that both rivers are difficult to navigate (the

marshy Shire bit is only possible in a canoe now, it has silted up to badly, and the

Zambezi is extremely shallow in places). Not only that, but the Malawian government

has managed to upset Mozambique, who rightly point out that they’re not obliged to let

traffic use their river, and anyway there are no good technical, financial, or

environmental studies to support the viability of the project.. According to Robinson &

Wakeford (2013), Malawi has already spent millions of Kwacha on the construction of

the Nsanje World Inland Port, but the lack of a comprehensive feasibility study and

concerns raised by the Mozambican government have delayed the project indefinitely.

They further state that the future of the project will depend on the outcome of the

feasibility study and whether the Mozambican government – a critical partner in the

endeavor - can be convinced of its viability. This is a major setback to the whole

programme and a major sticking point. Contrary to common knowledge of lack of a

feasibility study, the Malawi government has continually courted investors for the

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project. Mehler et al (2011), reports that there have been reported tensions between the

Malawi and Mozambique government over the proposed use of Zambezi river with

Mozambique rejecting the proposals on environmental grounds due to the fact that

extensive dredging would have too much impact on the river flows and a danger of

pollution. AIM Reports (2010) conveys the anger of the Mozambican President with

regard to Malawi sending a trial barge on the Zambezi River inside Mozambique without

following proper protocols and agreements. Diplomatic tempers flared again in 2011

when a barge destined for the inauguration of the Nsanje Port in Malawi was

impounded by the Mozambican authorities (Lalbahadur 2013). The issue of diplomatic

relations has been a crucial factor in the delays regarding the opening of the Nsanje

inland port. Landlocked countries must ensure to have good bilateral and diplomatic

relations with transit countries. According to BTI (2012), Malawi continues to enjoy good

relations with its neighbors, including Tanzania to the north, Zambia to the west and

Mozambique to the east and south. However, in 2010, relations with Mozambique were

negatively affected by the Malawi government’s decision to proceed with the launch of

the Nsanje inland port (which opens up Malawi’s access to Mozambique’s Indian Ocean

coastline through the Shire-Zambezi waterway) without the necessary approval by

Mozambique’s government, which insisted on a comprehensive environment impact

assessment. Similar sentiments are also echoed by the IMF (2012) that the Nsanje

World Inland Port was embarked upon without technical, economic and environmental

feasibility study. Malawi cannot afford to wait hence has to consider other appropriate

avenues. According to the Epoch Times (2012) delays by the government of Malawi in

completing the Nsanje World Inland Port is becoming the focus of increasing

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resentment from local people promised jobs and development. The Malawi civil society

during the famous 20 July 2011 mass demonstrations in Malawi, raised in their petition

to Malawi Government a concern on how the contract to construct Nsanje Inland port

was awarded to a company with close links to the then President (civil society, 2011).

Whatever the angle it seems Malawi needs the full support of the Mozambican

government in order for the project to fully realize it’s potential. Until that is achieved,

the Malawi Government needs to start considering other existing options and see what

contextual value such options can bring to the desired goal of bringing down costs.

Beira port in Mozambique is accessible only road from Malawi but has potential to

connect via rail on the southernmost tip of Malawi on the sena railway line. Since

Malawi has a fully developed rail link to Nsanje district, it would require constructing a

few kilometers of rail to connect to the sena line and enjoy preferential and low rail rates

for cargoes coming in via Beira. In case the Nsanje project was successfully

implemented, an envisaged major drawback would the channel depth which at the

moment varies greatly from one stage to another. Secondly increased agricultural

activity along the banks of the Shire and Zambezi Rivers has significantly contributed to

massive siltation leading to floods altering of navigable river channels. In the event that

commercial sailing, the channel would require regular dredging to maintain water levels.

Environmentalists argue that dredging has ability to disturb the marine ecosystem. It is

also not known at this stage, which section of the importing and exporting community in

Malawi would opt for Nsanje port due to its apparent limitations in vessel capacity that

would ply along the route. Currently, there is an approximately 150meter quayside with

no gantries at the Nsanje port.

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Beira Port – Mozambique

Figure 3 - Beira Port

Beira port is a concession operated by Cornelder de Mozambique, a joint-venture

between the Dutch company Cornelder (70%) and CFM (30%). The lease agreement,

effective since October 1998, has duration of 25 years, and Cornelder agreed to invest

US$ 15 million during the first five years (CFM, date unknown). Beira port is about 20km

from the sea on the Macuti channel and channel deepening is necessary if it is to attract

deep sea vessels and in particular to accommodate the deep-drafted bulk carriers

required for the export of bulk minerals (Harding, 2009). This problem is quite evident

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during low tides when vessels cannot berth alongside the port due to low water levels.

This is very critical as it delays vessel berths by sometimes over one week. Beira port is

approximately 900km from Malawian cities of Blantyre and Lilongwe. On-carriage from

Beira to Malawi is only by road and currently this is the most preferred option since

transit times is only 3 days despite this, the road condition is bad especially from

Inchope to Beira. Due to the fact the only option is road, the cost from Beira is very high

unlike from port of Nacala. The transporters usually blame the high inland haulage costs

on ever increasing cost of wear and tear due to poor road conditions, truck delays at

border crossing affecting truck turnaround times, fuel cost and the distance. Currently

Beira port is the most highly used and preferred port by Malawian importers and

exporters, this of course is largely thanks to the inefficiencies of Nacala in terms of

inadequate container carrying wagons, unstable rail network and port congestion. Beira

port biggest problem is the average port dwell time due to customs transit clearances

regulations and procedures. Secondary major constraint in most African ports is that

Container handling falls below international standards in most ports. Even when

container gantry cranes are available, the number of container moves per crane hour is

usually 10 to 20, compared with 25 to 30 moves in the world ports (Foster and Briceño-

Garmendia 2010). This is also emphasized by Murithi et al (2012) that dwell times for

both ports (thus Beira and Nacala) are exceedingly high, with annual average for 2011

of 18.25 days for Beira Port and 26 days for Nacala Port. This is at a time when the

dwell time at Durban Container Terminal is under four days and well below the

international benchmark of less than seven days. In addition to port terminals

concessionaires shortfalls, other important contributing factors to high dwell times in

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Beira and Nacala include a significant number of empty boxes kept inside the port by

several shipping lines, as well as use of marine terminals for confiscated containers by

customs authorities. Usually the free time allowed by Beira port authority is not sufficient

and cargoes are usually levied port storage charges which add on to the increasing

costs. According to Murithi et al, (2012) Beira and Nacala Ports do not offer favorable

productivity and efficiency advantages compared to other ports in Eastern and Southern

Africa. When benchmarked against several standard Key Performance Indicators (KPIs)

affecting port operations, including delivery, storage, transfer; and loading and

discharging cargo, as was done in this assessment, both ports exhibit remarkable

inefficiencies and low productivity. Another setback affecting Mozambique port users is

that full pre-clearance is not allowed by customs. These are very serious supply chain

operational problems and have a direct consequence on the overall costings especially

for transit cargoes to landlocked countries. Slow port operations leads to port

congestion and the port operators impose charges to shipping lines, which in turn

impose congestion surcharges to their clients. Port storage charges in Beira are the

single most punitive non-tariff barrier in Mozambican ports, especially as delays are

usually created inside customs when transit clearing cargoes either due to unstable

computer network systems or outright corruption. Cornelder, the port operator in Beira

has continuously sought to address these and other problems by among other things

deployed and commissioned 2 (two) additional gantry cranes in 2013 to increase port

operational capacity bring the total number of gantry cranes to 4 (four), 20 reach

stackers, 3 empty container handlers, 33 terminal trucks and 40 trailers. At the moment

Beira port boasts of 350,000m2 of well illuminated container yard capable of handling

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400,000 TEUs per year, it has 144 reefer container points and a dedicated a dangerous

goods storage area. Cargo stacks opens 2 days before vessel estimated time of

berthing and closes the actual day of vessel actual berthing. Beira is currently served by

various shipping lines with both direct calls and through feeder service from South

Africa ports of Durban and Coega. Frequencies of calls of some shipping lines are;

Mediterranean Shipping Company – 7 days

Maersk/OACL – 7 days

PIL – 10 Days

CMA CGM/Delmas – 10days

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Nacala Port – Mozambique

Figure 4 - Bay of Nacala Port

The Port of Nacala is currently ranked third in terms of cargo handling and container

handling among Maputo, Beira and Nacala, principal commercial ports of Mozambique

(Japan International Cooperation Agency 2013).Time and again Beira port faces a

number of problems which forces the Malawian importers and exporters to opt for

Nacala Port. Nacala is a natural seaport and is deep unlike Beira which requires

dredging time and again. With an average depth in the inner bay of 40 meters and more

than 200 meters depth in the outer bay, there are no restrictions on any vessel calling at

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Nacala (SDV, undated). Port of Nacala has a container terminal storage of 2000TEU

capacity, 26 reefer container plugs and 8 warehouses covering 21000 m2. There is no

shore crane in Nacala and this effectively means ships have to use ships gear to offload

containers which is a very tedious task and operations drastically slowing down

operations (LBH South Africa 2015). Generally equipment and infrastructure is in state

of disrepair. The natural advantages of Nacala Port are almost squared off by poor

infrastructure. On-carriage from Nacala is only serviced by rail which is hampered by its

own share of challenges. According to USAID (2010), the railway freight logistics are

constrained by a myriad of interrelated problems, among which are: the physical

condition of the track; the lack of rolling stock and equipment; and sub-optimal train

operations. These constraints result in a downward spiral of low traffic volumes caused

traffic diversion, as in the case of Malawi’s transit traffic of due to low service level, lack

of service, low speeds, long transit times, low productivity, poor locomotive and wagon

availability and utilization. Further to the foregoing, the USAID (2010) report states that

users of the Nacala Corridor, which includes freight forwarders, clearing and shipping

agents, major shippers, etc., have not been sufficiently organized as a stakeholder

group to leverage their inherent power to address logistics constraints in the corridors.

With few exceptions, corridor users have often adopted a “go it alone approach”,

whereby issues of mutual interests e.g., port inefficiencies, terminal handling charges,

scanning and containers fees, unreliable rail services or high road freight rates, etc.

have not been generally addressed as a group with common interest. These challenges

again do not do Malawi any favor in as far as trying to make imports cheaper and

exports competitive.

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For the Beira and Nacala review, either option presents serious supply chain obstacles

and being the main two current options for Malawi, Beira and Nacala, have huge

logistical challenges that requires pragmatic approach to streamline and provide

effective operations that benefits the hinterland countries.

Quelimane Port – Mozambique

Figure 5 - Quelimane Port

On the other hand Quelimane Port (see figure 1) presents the shortest distance of all

ports in Mozambique with regard to major towns in Malawi. At only 306km to Malawi’s

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commercial city of Blantyre, Quelimane presents an exciting prospect worth

investigating and developing as it would drastically reduce transit times but also on-

carriage cost Quelimane Port was largely abandoned during the Mozambican civil war

but recently a number of shipping lines have started calling Quelimane port which is

north of Beira and South of Nacala. Quelimane is the administrative capital of the

Zambezia Province and the province's largest city, and stands 25 km from the mouth of

the Rio dos Bons Sinais (Delmas, 2013). The major drawback at the moment is the

absence of no direct road network from Quelimane to Malawi. Quelimane is connected

by asphalt road to Caia and the south of the country. From Quelimane north and west a

good partly new asphalt road runs as far as Mocuba. From Mocuba north to Nampula

(350 kms) and Nacala (+190 kms) the road is a good asphalt road that has been

recently resurfaced. From Mocuba west to the border with Malawi at Milange/Mulange

(180 kms) there is an unpaved road that during the wet season is generally unpassable

but is very good during the dry season. Quelimane is connected to the Zambezi River

by means of an inland waterway (Koopmann, 2013). Quelimane Port has 800 TEUs

container yard capacities, just like Nacala port, ships have to use own gear for

discharge and load operations which drastically reduces operational efficiency. There

are also 18 reefer plugs for reefer containers. Quelimane Port is also a concession

managed by Cornelder de Mozambique. Maybe unlike the proposed Nsanje world

inland port, Malawi can stand to benefit from Quelimane port by entering into bilateral

agreements with Mozambique and developing the road network to Quelimane from

Muloza Border in Mulanje, with a distance of approximately 180km, transit times could

be drastically reduced to almost less than 8 hours as compared to 3 days from Beira

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and 7 days from Nacala. If fully developed, Quelimane port could present a real solution

in reducing the on-carriage cost of importing cargo plus fact that Quelimane is an

established port with shipping lines already calling the port, in other words, it will less

costly to opt for Quelimane since amenities are present unlike Nsanje where everything

has to start from scratch. Apart from the road network issues, Mozambican government

has so much interest to improve the capacity of Quelimane Port so that it can also be

used for oil and coal exports. The major drawback for Quelimane is the siltation which

reduces the depths required for vessels to berth and just like Port of Beira; it requires

constant dredging which is a fairly expensive operation.

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Dar Es Salaam Port – Tanzania

Figure 6 – Port of Dar es Salaam

Dar es salaam in the capital city of the united Republic of Tanzania. Tanzania shares a

common border with Malawi in the Northern part but also along the shores of Lake

Malawi (known as Lake Nyasa in Tanzania). Dar es Salaam port is an important port

serving the Tanzanian hinterland but also landlocked Malawi, Uganda, Rwanda, Zambia

and Burundi. Other major ports of Tanzania are Tanga and Mtwara, however most

cargoes for Malawi discharge at Dar es Salaam. Most used vehicles are discharged in

Dar es Salaam from RORO (roll-on roll-off) vessels. A total of 18 shipping lines call the

Port of Dar es Salaam. Port of Dar es salaam offers 15 free days from vessel discharge

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completion for transit full container loads there after storage charges apply at $40/20’

container and $80/40’ container. The Port of Dar es salaam is equipped with 5 ship to

shore gantry cranes, 32 container spreaders, 52 tractors, 77 trailers, 16 front loaders,

16 forklifts 3 mobile cranes and 1 reach stacker. The port operates 24 hours and also

requires dredging of the entry channel. Dar es Salaam port is approximately 1,800km

from Lilongwe and close to 2,100km to Blantyre. These are very long distances and

explain the very high on-carriage cost of up to $6500 per 40’ container to Lilongwe.

Most of the truck operators in Tanzania are not willing to haul Malawi cargoes as they

are return loads to Dar es Salaam, so the Malawi route is deemed not competitive. The

other major problem associated with Dar es Salaam port is congestion. According to

Japan International Cooperation Agency (2009) Tanzanian Ports Authority is making

efforts to expand container handling capacity through various measures to address the

prevailing congestion at Dar es Salaam Port’s container terminal. Though a traditional

approach, TPA has secured additional space for container operations capable of

handling 8,000 TEUs, by moving automotive vehicle cargo outside of the port area. The

JICA report states that apart from the congestion at the port, transit cargoes to inland

countries suffer from unnecessary delays at the border posts due to unnecessary

customs procedures. This is a serious supply chain obstacle especially that truck

companies will charge truck detention fees for idle trucks and short-shelf life cargos

suffer from unnecessary delays. Ntibarekerwa (2010) states that Dar es Salaam Port is

also faced with long container dwell times reaching 25 days in August of 2008. So it will

be noted that critical supply chain challenges affecting Dar es Salaam port include

congestion, long container dwell times, unnecessary delays at border posts and long

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distances to the transit countries effectively contributing to high on-carriage costs.

However the challenges aside Dar es Salaam remains an important port to Malawi, this

particularly evident during the civil war in Mozambique when Malawi had to opt for

longer routes to access either Durban or Dar es salaam. While Malawi relies heavily on

Tanzania and Mozambique ports, it should ensure that diplomatic relations with these

countries are cordial at all times, very recently Malawi has been loggerheads with

Tanzania over the sharing of boundaries along the Lake Malawi similarly Malawi had a

diplomatic spat with Mozambique over the Nsanje Inland Port development. These

issues have negative consequences on trade and supply chain operations.

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Durban Port – South Africa

Figure 7 – Durban Port

Durban is one of the major cities of South Africa and has one of the biggest and busiest

ports in Africa. The critical location of Durban on the North South Freight Corridor, an

important route for transit traffic bound for Zambia, Zimbabwe, Malawi and a connection

going as far north as Dar es -Salaam, puts it on the spot light and its performance is

extremely vital for countries along the corridor (Kgare et al, 2011). Durban is also a

major transshipment port for several shipping lines operating feeder services to

Mozambique, Tanzania, Kenya and Madagascar. Transshipment usually concerns

gateways that are able to combine feeder services and hinterland access or "pure"

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transshipment hubs that are almost entirely focusing on feeder (linking deep-sea and

short sea services) or relay (linking different deep-sea services) functions (Rodrigue et

al, 2013). Durban Port compared to most African ports is one of the most efficient due to

decreased cargo dwell time. Kgare et al (2011) says the foregoing is a result of public

sector players such as customs, the port authority, putting pressure to change the

behavior of the private sector port users to better comply and reduce cargo dwell time.

In this regard, prohibitive charges for storage, coupled with strict enforcement, and the

possibility to pre-clear with Customs with advantages attached to it and service level

agreements binding both parties are critical tools for the reduction of cargo dwell time.

Durban Port despite its long distance to Malawi remains an important port up until

today. Again during the Mozambique civil strife, Malawi had no option but to take the

longer route via Zambia and Zimbabwe for its exports and imports. However with peace

and stability returning to Mozambique, Malawi quickly repositioned and started using the

Mozambican Ports. Currently some commodities from Malawi e.g. Tobacco is still

moved break-bulk to for containerization and shipping in Durban whatever economies

are benefitted by doing this are yet to be explained considering proximity of Beira and

Nacala which are relatively cheaper.. The drawback with Durban port to Malawian

importers remains the huge distances and corresponding huge on-carriage charges.

Most of the literature available on issues affecting landlocked countries suggests a

common theme of high trading costs, inefficient logistics, poor infrastructure and other

similar challenges. However few of the literature suggests how the challenges can be

overcome with internal administrative governance, domestic removal of non-tariff

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barriers, upgrade of road and rail infrastructure, legal, diplomatic and international

instruments.

Coega Port – South Africa

Figure 8 – Coega Port, South Africa

Coega Port is also known Port of Ngqura, a deep-water port located on the east coast

of South Africa, 20 kilometres north east of Port Elizabeth and midway between Durban

and Cape Town. It is very new port officially opened on 16th March 2012; the port

boasts of very efficient world class port equipment and has capacity to handle

1,200,000 TEUS. Containers handled include imports and exports from across the

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globe as well as trans-shipment cargoes serving primarily East and West coast traffic as

well as inter-line traffic from South America to Asia. Sometimes due to congestion the

port is used as transshipment port for feeder vessels into Maputo, Beira, Quelimane,

Nacala, Dar es Salaam and Mombasa ports. Just like Durban, the challenge for

Malawian exporters and importers is the long distance translating into high inland

haulage costs (Transnet National Ports Authority 2014).

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RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. In it we study

the various steps that are generally adopted by a researcher in studying his research

problem along with the logic behind them (Kothari 2004). Any research should have a

philosophy whether positivism, realism, interpretivism, objectivism, subjectivism and

pragmatism and the research should always ensure that precise and flawless

procedures are applied to generate solutions to a research problem. The set of

measures to undertake or perform the research procedures should be valid and reliable

at the same should seek to establish the results naturally without bias. The researcher

deployed a mixed method approach to the investigation i.e. both quantitative and

qualitative approached were used in the study. A questionnaire was deployed to mainly

the shipping industry e.g. customs, freight forwarding and clearing, shipping lines,

importers and exporters, the government, the academia to have as much diverse views

as possible. The investigation also used much on secondary data sources in form of

reports, websites, dissertations, journals and conference reports to add valuable

information for review. This study is motivated by the desire to investigate efficiency

parameters of the various ports that are currently being used by landlocked Malawi with

a view to identify the most cost efficient and most direct access to the open sea in order

to reduce the overall cost of importation and exportation but also eliminating supply

chain obstacles along the way. These obstacles range from regulatory red tape, long

distances, huge transit times, unnecessary long documentation requirements and

political influences. As highlighted, the study has adopted a combined qualitative and

51 | P a g e

quantitative approach, so this is basically a mixed method approach considering that

each method has its own strengths and shortfalls. Scholars and researchers have

highlighted the fundamental advantages of mixed method approach in that it provides

depth to the research. By mixing both quantitative and qualitative research and data, the

researcher gains in breadth and depth of understanding and corroboration, while

offsetting the weaknesses inherent to using each approach by itself (FoodRisc

Resource Centre 2015). Most mixed-methodology research begins with a qualitative

observation of an event or phenomenon. Qualitative study offers the opportunity to

provide subtle details that outline a problem. The research then uses a quantitative tool,

like a survey, to validate or invalidate observations made during the qualitative phase

(Mossy 2015). Malina et al (2010), writes that positivism searches for empirical truths.

Positivism is not about confronting “things themselves”, because direct observation of a

phenomenon is subjective and hence not reliable. Likewise, a phenomenologically

based methodology also does not create an immediate interpretation of phenomena to

the level of concepts, theories or statements of fact. Tashakkori and Teddlie (2010)

suggests that a fundamental assumption about mixed methods research in the social,

behavioral, and health sciences is that it might potentially provide a better (broader,

more credible) understanding of the phenomena under investigation than a

dichotomous qualitative/quantitative approach. Johnson-Burke (2014) adds that

fundamental principle of mixed research: advises researchers to thoughtfully and

strategically mix or combine qualitative and quantitative research methods, approaches,

procedures, concepts, and other paradigm characteristics in a way that produces an

52 | P a g e

overall design with multiple (divergent and convergent) and complementary strengths

(broadly viewed) and non-overlapping weaknesses.

A questionnaire (See annex 1) was developed to facilitate uniform data gathering to

ensure consistency. The researcher also used a lot of secondary data sources in form

of journals, corporate reports, newsletters, websites and conference papers. The

importance of the journals is that most of them have been reviewed by renowned

scholars who have done extensive research in similar fields and their theories have

been adopted by so many students and researchers. The questionnaire had been

structured to be deployed within the supply chain and logistics industry in Malawi. This

includes the tobacco exporters association of Malawi, the freight forwarding industry,

direct importers and exporters, the academia this is generally to get a feel from the

frequent users of the various ports and their expectations. The study targeted a

minimum sample size of 100 respondents which is quite representative considering the

nature of the industry involved however only 60 (sixty) questionnaire were distributed.

Scope of the Study

This study investigates the factors that the various ports being used by landlocked

Malawi presents in terms of efficiency and supply chain obstacles with a view to finding

solutions to reduce costs. The study looks at distances from the ports vis-à-vis inland

haulage costs, port infrastructure and equipment, custom procedures, road and rail

networks, port capacity, political and environmental issues. The investigation is also

looking at the proposed own inland port in Nsanje District and how the surrounding

issues affecting its continued development might impact on the shipping industry. This

53 | P a g e

therefore necessitated analysis of the individual ports to determine the efficiency and

obstacles as defined in the objectives. Whilst the research is looking at ports within the

reach of Malawi, it is drawing from wide ranging sources of literature including reports

from world international ports so as to draw parallels and lessons.

Limitations of the Study

Some of the ports under investigation have very little published material and data and it

was a big problem to generate reliable information for such ports. This was a problem

especially with Nsanje Inland and Quelimane ports; apparently these are relatively new

ports i.e. Quelimane Port despite being constructed in 1953, its use was stopped during

the Mozambique civil war up until very recently when the Mozambican government

started rehabilitating the port so that it can be used for coal exports. With Nsanje Port

the available literature is very old dating back to the times when barges with molasses

used to sail down the channel, so there is a general absence of technical data. However

the author based the minimum requirements for port channels and container carrying

vessel capacities to determine challenges that would be encountered with the Shire

Zambezi waterway in case of approval.

Other serious limitations included the problem of generating feedback from Government

respondents, most of who apparently couldn’t voice out diverging views from the current

government policy especially on Nsanje inland waterway. It seems the issue is highly

political in Malawi hence government employees especially from the Ministry of

Transport were not interested to put their personal views forward. Of course the

researcher understood the public service respondents since it has become evident that

54 | P a g e

the Nsanje project was a political pet project of the then President because since his

death in office, Nsanje Inland port has rarely featured in current government agenda.

Public servants in Malawi avoid as much as possible to seen to voice opposition with

government policy and be seen to align with opposing voices, this was however a

missed opportunity since government input into the survey could have added a different

dimension to the results. To counter this problem, though it yielded little results, the

researcher instead opted for questionnaires which did not oblige respondents to

mention their names. Very few respondents could also understand technical issues of

channel capacity limitations and port infrastructure issues and in view of this, the

researcher gathered as much secondary data as possible to compare as much

available written information as possible for the various port options. The other

challenge in conducting this investigation was time constraints i.e. to balance work

commitments and gathering of research material proved an obstacle. Secondly due to

the nature of the study and the industry in Malawi, the sample size selection was an

issue. The researcher decided to target 100 people to be served with questionnaires but

the number proved too ambitious, hence only managed to distribute the 60

questionnaires, the response rate was very low i.e. received 26 copies of completed

questionnaires. Some of the questionnaires were handed out in hard copies and other

respondents asked to be emailed the questionnaires. All the questionnaires that were

received from the respondents were completed accurately and were valid for data

analysis.

55 | P a g e

Research Design

The function of a research design is to ensure that the evidence obtained enables us to

answer the initial question as unambiguously as possible (Vaus 2001). Similarly with

this research, the design was to probe for similar data and parameters regarding the

various ports under review to provide a basis for comparison i.e. average dwell time,

port equipment, distance, capacity and storage but also to gauge public perception as a

valuable component of the research. Sometimes government will want to convince and

push through its strategy to the public on certain policies and projects when the public

has a different perspective and priority hence the idea to engage user perception. The

research design refers to the overall strategy that you choose to integrate the different

components of the study in a coherent and logical way, thereby, ensuring you will

effectively address the research problem; it constitutes the blueprint for the collection,

measurement, and analysis of data. The research problem determines the type of

design you should use, not the other way around (Kirshenblatt-Gimblett 2006).

This investigation was initially planned to be a qualitative study however in the course of

collecting data, it was noted that the research will be deficient if it does not incorporate

views from the industry through a structured questionnaire, so this necessitated a

modification and change in approach to a mixed method i.e. exploratory and descriptive

approaches. Mixed methods research is a research design with philosophical

assumptions as well as methods of inquiry. As a methodology, it involves philosophical

assumptions that guide the direction of the collection and analysis and the mixture of

qualitative and quantitative approaches in many phases of the research process. As a

method, it focuses on collecting, analyzing, and mixing both quantitative and qualitative

56 | P a g e

data in a single study or series of studies. Its central premise is that the use of

quantitative and qualitative approaches, in combination, provides a better understanding

of research problems than either approach alone (Creswell & Plano Clark, 2007). The

researcher developed a check point of the parameters to be tested for each of the ports

under review, the list was eventually converted into a questionnaire to gauge and test

the views and opinion of the respondents. The questionnaire was also structured in a

way to provide an opportunity to the respondents to give in their own words their views,

suggestions and understanding of certain relevant issues regarding the ports and

supply chain performance. The original plan was to involve a huge number of

respondents but in the actual research this proved untenable.

Data Collection

The researcher collected data through selection of secondary data sources but also

through a detailed questionnaire (see attached annex 1). The questionnaire was sent to

various selected respondents in hard copy format and through email. The sample size

was 100 (one hundred) but only sixty questionnaires were deployed but only 26

responded to the questionnaires and sent them back to the researcher. The researcher

dedicated two weeks to deploy and collect the finished questionnaires but this again

was not met due to a number of respondents having other commitments so this created

a delay in data collection and eventual data analysis. The type of data influences the

data collection methods i.e. questionnaires will assist a researcher to gather uniform

data. Questionnaires also facilitate elimination of researcher bias in that all respondents

give feedback on the same set of research questions which is not quite possible with

57 | P a g e

interviews or focus group discussions. Of course one setback with questionnaires is that

they cannot be used with illiterate people. Data collection needs to be systematic

otherwise wrong procedure can lead to inconsistent and invalid survey results.

Data Analysis

Data Analysis is the process of systematically applying statistical and/or logical

techniques to describe and illustrate, condense and recap, and evaluate data [online].

This being a mixed method approach, the researcher analyzed the qualitative data by

identifying and isolating common themes and patterns and organizing them into

coherent categories. This is always a very complex exercise that demands reading and

re-reading of the available data. The quantitative data was generated by the survey

questionnaire and the data collected was analyzed using SPSS version 16.0 mainly due

to its user-friendliness and simplicity.

Below are the results of the data analysis

58 | P a g e

0-3

year

s

4-7

year

s

8-10

yea

rs

11 a

nd a

bove

0-3

year

s

4-7

year

s

8-10

yea

rs

11 a

nd a

bove

0-3

year

s

4-7

year

s

8-10

yea

rs

11 a

nd a

bove

0-3

year

s

4-7

year

s

8-10

yea

rs

11 a

nd a

bove

0-3

year

s

4-7

year

s

8-10

yea

rs

11 a

nd a

bove

Basic Count(%) 1(3.85)

Intermediate Count(%) 1(3.85) 1(3.85)

Proficient Count(%) 1(3.85)2(7.70)2(7.70) 3(11.55) 1(3.85) 4(15.40) 1(3.85) 1(3.85) 1(3.85)

Expert Count(%) 3(11.55) 2(7.70) 1(3.85) 1(3.85)

Total Count(%) 1(3.85)2(7.70)2(7.70) 6(23.10) 1(3.85) 4(15.40) 4(15.40) 3(11.55) 1(3.85) 1(3.85) 1(3.85)

Basic Count(%) 1(3.85) 1(3.85) 1(3.85)

Intermediate Count(%) 1(3.85)2(7.70)1(3.85) 2(7.70) 2(7.70) 1(3.85) 1(3.85)

Proficient Count(%) 1(3.85) 2(7.70) 1(3.85) 1(3.85) 1(3.85) 1(3.85) 1(3.85)

Expert Count(%) 2(7.70) 1(3.85) 1(3.85) 1(3.85)

Total Count(%) 1(3.85)2(7.70)2(7.70) 6(23.10) 1(3.85) 4(15.40) 4(15.40) 3(11.55) 1(3.85) 1(3.85) 1(3.85)

Basic Count(%) 2(7.70) 1(3.85) 1(3.85) 1(3.85)

Intermediate Count(%) 1(3.85)

Proficient Count(%) 1(3.85) 2(7.70) 1(3.85) 3(11.55) 1(3.85) 1(3.85) 1(3.85)

Expert Count(%) 2(7.70)2(7.70) 2(7.70) 2(7.70) 1(3.85) 1(3.85)

Total Count(%) 1(3.85)2(7.70)2(7.70) 6(23.10) 1(3.85) 4(15.40) 3(11.55) 3(11.55) 1(3.85) 1(3.85) 1(3.85)

Basic Count(%) 1(3.85) 1(3.85) 1(3.85)

Intermediate Count(%) 1(3.85) 3(11.55) 1(3.85)

Proficient Count(%) 1(3.85) 3(11.55) 1(3.85) 1(3.85) 2(7.70) 1(3.85)

Expert Count(%) 2(7.70)1(3.85) 2(7.70) 2(7.70) 1(3.85) 1(3.85)

Total Count(%) 1(3.85)2(7.70)2(7.70) 6(23.10) 1(3.85) 4(15.40) 4(15.40) 3(11.55) 1(3.85) 1(3.85) 1(3.85)

Respondent Summary Logistics and Supply

ChainClearing and Freight

Forwarding

Knowledge of Imports and Exports

Knowledge of Port Operations

Knowledge of port current used by Malawi

Knowledge of port in countries surrounding Malawi

Imports/Exporting Academic Shipping Line

Respondent knowledge bout shipping

   Frequenc

y%

Knowledge of Imports and Exports Logistics

Basic 1 3.8Intermediate 2 7.7

Proficient 16 61.5

Expert 7 26.9

Knowledge of port operations

Basic 3 11.5

Intermediate 10 38.

5

Proficient 8 30.8

Expert 5 19.2

Knowledge of port currently used by Malawi

Basic 5 19.2

Intermediate 1 3.8

Proficient 10 38.5

Expert 10 38.5

59 | P a g e

Knowledge of ports in countries surrounding Malawi

Basic 3 11.5

Intermediate 5 19.

2

Proficient 9 34.6

Expert 9 34.6

Total Cases 26 100

Basi

c

Inte

rmed

iate

Profi

cien

t

Expe

rt

Basi

c

Inte

rmed

iate

Profi

cien

t

Expe

rt

Basi

c

Inte

rmed

iate

Profi

cien

t

Expe

rt

Basi

c

Inte

rmed

iate

Profi

cien

t

Expe

rt

Case

s

Knowledge of Imports and Exports Logistics

Knowledge of port op-erations

Knowledge of port cur-rently used by Malawi

Knowledge of ports in coutries surrounding

Malawi

Total

0.0

20.0

40.0

60.0

80.0

100.0

120.0

3.8 7.7

61.5

26.911.5

38.530.8

19.2 19.23.8

38.5 38.5

11.519.2

34.6 34.6

100.0

Respondent 's know ledge about shipping

Most efficient port that serves Malawi N %Beira 22 84.6Nacala 1 3.8Durban 3 11.5Total 26 100.0

Key factors for the port efficiency (Responses)

N=26Beira

NacalaDurban

Good port infrastructure and equipment 11   3Short transit time and favorable regulations 8   Good customer service delivery 4   1Shorter distance to inland destinations 13   Lower cost of inland haulage 10 1 Availability of both rail and road 1  

60 | P a g e

Vessel capacity calling port 4   2Port channel depth 1   High security 2   1

85%

4% 12%

Most Efficient Port that serves Malawi

Beira Nacala Durban

Crucial issues regarding port choice

N=26 Responses%

Port infrastructure and equipment15 57.

7

Transit time and regulations10 38.

5

Customer service delivery9 34.

6

Distance to inland destination7 26.

9

Cost of inland haulage17 65.

4

Availability of both rail and road3 11.

5

Vessel capacity calling port7 26.

9Port channel depth 1 3.8

Security8 30.

8

61 | P a g e

Port infra

structu

re an

d equipmen

t

Transit

time and re

gulati

ons

Customer

servic

e deli

very

Distance

to inlan

d destinati

on

Cost of in

land hau

lage

Availab

ility o

f both ra

il and ro

ad

Vessel c

apaci

ty cal

ling p

ort

Port chan

nel dep

th

Security

02468

1012141618

Crucial issues regarding port choiceRe

spon

ses

For Malawi to reduce cost of Importation/Exportation

N=26 Responses %

Develop and construct own inland port18 69.

2Explore and develop Quelimane port 2 7.7

Improve capacity of Nacala corridor13 50.

0Improve capacity of Northern corridor via Dar es Salaam

5 19.2

Build rail connection to Beira port8 30.

8

Improve the road network to Beira5 19.

2

62 | P a g e

Critical supply chain obstacles

N=26 Reponses %

Long distances 8 30.8High haulage costs 19 73.1Port storage charges 6 23.1Customs red tapes 5 19.2Corruption 2 7.7Inadequate climate control equipment 2 7.7Dependency on third-party country ports 15 57.7Unstable economy 5 19.2High handling costs 3 11.5Fragile foreign relations with neighboring countries 4 15.4

User perception of ports

Very good Good Bad

Worse

No rating

Dar es Salaam 2 20 4 Nacala 3 12 9 2 Beira 12 10 4 Durban 11 12 1 2Coega 12 14

Very good Good Bad

Worse

No rating

Dar es Salaam 7.7 76.9 15.4 0.0 0.0Nacala 11.5 46.2 34.6 7.7 0.0Beira 46.2 38.5 15.4 0.0 0.0Durban 42.3 46.2 3.8 0.0 7.7Coega 0.0 46.2 0.0 0.0 53.8

63 | P a g e

Very good Good Bad Worse No rating0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

User perception of ports

Dar es SalaamNacalaBeiraDurbanCoega

Port Major reasons

Dar es salaamPort handles a lot goods due to its good infrastructure, however high transportation costs to Malawi

Nacala Efficient communication, however too much congestion

BeiraFaster delivery of cargo to Malawi, efficient communication, good port infrastructure, however costs are still high

DurbanEfficient in transshipment of cargo to Beira or Nacala, Good port infrastructure, good road network, however very high transportation costs

CoegaUsed in transshipment of cargo to Beira or Nacala, however Malawi rarely use this port

Perception on the proposed Nsanje World inland port

N %

Worth pursuing and developing21 80.8

Not worth pursuing 4 15.4

Not sure 1 3.8

Total (N)26 100.0

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Worth pursuing and developing

Not worth pursuing Not sure Total (N)0.0

10.020.030.040.050.060.070.080.090.0

100.080.8

15.43.8

100.0

Perception on Nsanje World Inland Port

Critical reasons to develop Nsanje port

N=21 Responses

%

Reduction of Import costs 15 71.4

National Pride 6 28.6Reduce over dependency on third-party country ports 12 57.1

Control over own imports/exports 8 38.1

Job creation 9 42.9

Geographically well positioned 2 9.5

Opening up to the international markets 5 23.8

Reduction of distance to open sea 8 38.1

65 | P a g e

15

6

12

8 9

25

8

Critical reasons to develop Nsanje port

Potential challenges facing Nsanje Inland port

N=26 Responses

%

Unknown port user demand 3 11.5

Potential for diplomatic rift with neighboring Mozambique 8 30.8

Lack of feasibility study 18 69.2

Channel capacity restrictions 8 30.8

Inconsistent water levels 9 34.6

Environmental concerns 5 19.2Distance from Nsanje to Major cities does not help reducing costs 4 15.4

Lack of Interest from financing partners 5 19.2

Drain on financial resources 1 3.8

Not sure 2 7.7

Perception of Quelimane port in Mozambique

  N %

Worth exploring and developing 10 38.5

Not worth exploring 9 34.6

Not sure 7 26.9

Total (N) 26 100.0

66 | P a g e

Worth exploring and developing

Not worth exploring

Not sure Total (N)0.0

10.020.030.040.050.060.070.080.090.0

100.0

Perception of Quelimane Port in Mozambique

Reasons to Develop Quelimane port

N=10 Responses

%

Shortest possible distance to the open sea 7 70

Already has developed port 2 20

Has interest from neighboring countries 1 10

Don’t know anything on Quelimane port 1 10

Shortest possible distance to the

open sea

Already has de-veloped port

Has interest from neighboring coun-

tries

Don’t know any-thing on Quelimane

port

0

1

2

3

4

5

6

7

8

Reasons to develop port Quelimane

67 | P a g e

Reasons not to develop Quelimane port

N=9 Responses

%

Just develop our own port with the same resources 4 44.4

Will not create jobs for Malawi 3 33.3

Improve existing port already in use 4 44.4

Don’t know much about Quelimane port 2 22.2

The best option for Malawi

N=26 Responses

%

Explore and develop new options 17 65.4

Rehabilitate existing options 10 38.5

Improve relations with neighboring countries 5 19.2

Reduce logistical red tapes 4 15.4

68 | P a g e

SURVEY FINDINGS

As highlighted, the objectives of this research were to assess user perception and

knowledge of the ports being used by landlocked Malawi, assess the efficiency

parameters of from the various current ports, assess impact of distance on inland

haulage costs to final destinations in Malawi and to provide recommendations on viable

port options with quantifiable data and measurable targets that may be harnessed and

developed as first port of choice by landlocked Malawi. Of course it is important to

mention that sometimes despite having knowledge of the various problems associated

with certain ports, the users have no choice due to the lack of other viable options and

have to make do with existing options.

Respondents Attributes

From the analysis, most of the respondents have adequate and considerable

experience in shipping, clearing and forwarding, supply chain and logistics hence have

a good understanding of the subject matter. 26.9% of the respondents are experts in the

field of shipping and supply chain whilst 61.5% of the respondents are proficient in

shipping and logistics. 38.5% reported to have expert knowledge on the ports currently

being used by Malawi and 34.6% reported to have expert knowledge on ports in

countries surrounding Malawi. This therefore provides an assurance of thought-through

responses provided by the respondents.

69 | P a g e

User Perception of the ports in use

With regard to user perception, 84.6% respondents selected Beira port as the most

efficient port mainly due to good port infrastructure, short transit time and distance to

inland destinations. Other issues which respondents felt Beira port is better than other

ports were vessel capacity calling port, good customer service and high security. 11.5%

of the respondents chose Durban port especially with regard to efficient transshipment

of containers from Durban into Nacala and Beira. Nacala port scored 3.8% in terms of

user perception and preference.

With regard to port choice, 17 responses out of 26 representing 65.4% reported that the

primary factor for choice of port is cost of inland haulage, 15 responses out 26

representing 57.7% reported that port infrastructure and equipment were the

determining factor for port choice, 10 responses out of 26 representing 38.5% reported

that transit time and favourable regulations are key determinants for port selection. 9 out

of 26 respondents representing 34.6% felt customer service delivery is critical when it

comes to choice of port, 8 out of 26 representing 30.8% opted for security as a key

factor, 7 out of 26 respondents representing 26.9% opted for port capacity in terms of

handling vessels, another 7 out 26 representing 26.9% chose distance to inland

destinations as a key factor in determining port selection for their imports or exports as it

has a direct impact on inland haulage cost. Beira was cited for efficient communication,

faster delivery of cargoes besides huge on-carriage costs to Malawi, Nacala was cited

for efficient communication but too much congestion as the drawback, Dar es Salaam

was cited for good infrastructure but too congested and huge on-carriage cost due to

the distances involved. Durban port was cited a s efficient in transshipping cargo, good

70 | P a g e

road network but huge on-carriage costs to malawi was a major dissuading factor for

Malawi imports and exports and Coega Port was cited for efficient transshipment of

cargoes but rarely used by Malawi imports and exports. The user perception test simply

is an indicator of preference but also due traditional usage of the port, most of the users

have not had the opportunity to test in practical sense all available options and come up

with an informed decision. Sometimes the port preference is dictated by consignees

hence shippers have to simply follow. Fear of the unknown also prevents most users

from trying new options.

Reduction of cost of importation and exportation

With regard to proposals for Malawi to reduce of cost of importation and exportation, 18

responses out of 26 representing 69.2% support the development and construction of

Malawi’s own inland port, 13 responses out of 26 representing 50% favour the

upgrading and improvement of the existing rail link between Nacala and Malawi, 8 out

26 respondents representing 30.8% propose the connecting the Malawi rail link to the

existing Sena rail link which goes to Beira port to provide competition with road traffic. 5

out of 26 respondents representing 19.2% support the idea of improving the road

infrastructure to Beira Port whilst a similar number of 5 out of 26 support the idea of

improving the northern corridor to Dar es Salaam Port.

Development of Nsanje Inland Port (Shire-Zambezi Waterway)

21 respondents representing 80.8% support the proposal for Malawi to construct its own

inland waterway port in Nsanje, 4 respondents representing 15.4% reported that the

71 | P a g e

Inland waterway project was not worth pursuing, whilst 1 respondent representing 3.8%

was not sure about either way.

15 respondents, thus 71.4% reported that Nsanje Port should be developed to reduce

import costs, 12 respondents, thus 57.1% think that Nsanje Port should be developed to

reduce over dependency of ports in other countries, 9 respondents representing 42.9%

favoured the Nsanje Port project as it will lead to job creation in Malawi. 8 responses,

thus 38.1% think by developing Nsanje Port, Malawi will effectively reduce distance to

the open sea and consequently costs. Another 8 respondents reported that Malawi will

have control over its imports and exports if it develops its own inland port. 6

respondents representing 28.6% reported that Nsanje Port should be developed for

national pride. Most respondents have shown preference for construction of own port

largely based on thinking that own port is the solution to the myriad operational

problems being encountered, very few have seriously considered the technicalities

involved in opening up of own port and viability of the same. This is largely due to the

information that was provided by the Malawi government at the time it was launching

the Nsanje Inland waterway project that the development was going to save 60% of

inland haulage costs. The information however was vague on capacity of vessels that

would sail in the waterway considering the geographical challenges, the haulage

mechanism s from Nsanje to the commercial centres of Blantyre and Lilongwe at

distances of 160km and 460km respectively. Certainly handling costs due to multiple

transshipments is another issue that was not being considered by respondents in opting

for development of own inland port and the issue of economic viability where Malawi

seasonal imports and exports do not necessarily warrant operation of own port So the

72 | P a g e

feedback from the respondents might be inconclusive and misleading if read in the

context provided.

With regard to potential challenges that could hinder development of Nsanje Waterway

Project, 18 respondents representing 69.2% acknowledge that lack of feasibility study

could derail the whole project, 9 respondents representing 34.6% reported that

inconsistent water levels in the Shire-Zambezi river channels would make the project

not viable, 8 respondents representing 30.8% have doubts over the river channel

capacity with regard to handling commercial cargo vessel channel and water depth

requirements, another 8 respondents representing 30.8% of the sample size fear that

the diplomatic rift between Malawi and Mozambique over Malawi’s insistence to open

the waterway could key to blocking development of the waterway project., 5

respondents representing 19.2% reported that environmental concerns to the Shire-

Zambezi waterway with regard to ecosystem and catchment area benefits from the

water sources would be a stumbling block to realization of the project.

User perception of Quelimane Port in Mozambique

10 respondents representing 38.5% of the sample size reported that it was worth

exploring and developing Quelimane Port corridor, 9 respondents representing 34.6%

reported that Quelimane port was not worth exploring, 7 respondents representing

26.9% were not sure of either option. 7 respondents felt that Quelimane Port provides

the shortest possible distance from Malawi to the open sea hence need for serious

exploration, 2 respondents representing 20% favoured development and exploration of

Quelimane Port corridor due to the fact that it is already a developed port. On the other

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hand 4 respondents representing 44.4% think there is no reason for developing

Quelimane Port corridor rather Malawi should just develop its own inland port, 3

respondents representing 33.3% thinks Quelimane should not be explored because it

will not create jobs for Malawians, another 4 representing 44.4% thin the solution lies in

developing existing options. Most respondents indicated not to have adequate

knowledge on this port, since Malawi is rarely using this port due to the absence of a

road network from Quelimane to Muloza Border in Malawi. This option presents an

exciting opportunity for Malawi as it is only 300km from the commercial city of Blantyre

and economically contributes to lowering transit times and inland haulage costs if an

agreement could be reached with Mozambique, which also has considerable interest in

upgrading this port.

Overall best option for Malawi

In this regard, 17 respondents suggests that Malawi should consider exploration of new

options to complement the existing options, 10 respondents think that Malawi should

rehabilitate the rail and road networks to improve performance of existing options, 5

respondents representing 19.2% thinks that the solution to the challenges lies in Malawi

normalizing its diplomatic relations with neighbouring countries especially Mozambique

and Tanzania so that bilateral agreements aimed at easing the various supply chain

obstacles may be drawn and agreed upon. 4 respondents representing 15.4% reported

that Malawi should work to remove the various logistical red tapes by government

agencies at the border posts e.g. Customs and Malawi Bureau of Standards.

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Critical Supply Chain Obstacles

19 respondents representing 73.1% reported that the biggest obstacle to Malawi’s

supply chain operation is huge inland haulage costs, 15 respondents representing

57.7% cited dependency of third party country ports as a major obstacle, 8 respondents

representing 30.8% cited long distances from the ports to Malawi’s inland destinations

as critical obstacles, 6 respondents representing 23.1% cited the problem of port

storages levied in the ports of discharge as single most critical obstacle to supply chain,

5 respondents representing 19.2% cited customs procedures as being hindrances to

efficient supply chain performance, another 5 respondents cited malawi unstable

economy as the most critical obstacle, other obstacles were high handling costs at

11.5%, fragile diplomatic relations with neighbouring countries at 15.4%.

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CONCLUSION AND RECOMMENDATIONS

From the foregoing, high inland haulage costs and long distances are the major

challenges affecting supply chain operations and performance in Malawi. Basically this

confirms one of the research objectives in finding impact of distance on cost. Whilst

most Malawians are in favour of developing an own inland port to counter the problem

of distance and hug on-carriage costs, it is evident that the fears of challenges that will

derail realization of an own inland port are real and founded especially with the absence

of a feasibility study and at most cooperation of neighbouring Mozambique through

which most of the waterway crisscrosses to the Indian ocean. A number of respondents

agree to explore the possibility of connecting to Quelimane port on the basis of short

distances provided. Whilst the existing developed ports do not offer any reduced on-

carriage or inland haulage costs, the only real short distances to Malawi are offered by

Nsanje Waterway project and Quelimane Port. A second feasible option is to connect

the Malawi rail link to the Sena rail link which connects to Beira port as this will provide

direct competition to road haulage and facilitate bringing down of costs. Dar es Salaam,

Durban and Coega may not in any way offer any incentives for reduced costs due to the

long distances involved. Malawi’s lifeline is Mozambique and should ensure that

diplomatic relations are restored to its best so that Malawi should benefit from all the

suggested options of either developing the waterway or developing a road network to

the existing Port of Quelimane. The Malawi government should conduct a feasibility

study on the viability of Quelimane Port corridor and compare with viability of Nsanje

Inland waterway so as to embark on a meaningful cost reduction exercise and initiative

void of political connotations. Due to the distances offered by Quelimane, transit times

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and inland haulage costs will be considerable reduced and could become a gateway for

Malawi.

The existing Nacala railway link should also be rehabilitated to increase its capacity

especially during the rainy season so as to complement the existing other options.

The Ministry of Trade and Finance in Malawi should also seriously review the non-tariff

barriers at the various border entry points especially Mwanza and Dedza border posts

to eliminate unnecessary delays which results in fines and penalties. At the same time

these two line Ministries should engage their Mozambican counterparts to review and

ease some challenges faced by Malawi imports and exports e.g. port storages but also

to reduce the amount of time taken to process transit clearance documents in

Mozambican customs.

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APPENDICES

Data Collection Questionnaire

MSc Supply Chain Management - Data Collection Questionnaire

Dissertation Project – A Comparative Study on the sea ports that serve landlocked Malawi including Nsanje Inland Port with regard to cost reduction and elimination of supply chain obstacles

Research Student: Frank G. Chirwa

Supervisor (s): Owen Jones – University of Bolton

Peter Chiligo – Malawi Institute of Management

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Section A

Respondent Professional Background

1. Importing/Exporting2. Academic3. Clearing and Freight Forwarding4. Customs5. Port Operations6. Shipping Line 7. Trade and Policy8. Logistics and Supply Chain

Other profession, please specify in the space provided.

1. No of Years in the Profession1. 0 – 32. 4 – 73. 8 – 104. 11 and above

2. Knowledge of Import and Export Logistics1. Basic2. Intermediate3. Proficient4. Expert

3. Knowledge of Port Operations1. Basic2. Intermediate3. Proficient4. Expert

4. Knowledge of ports being currently used by Malawi1. Basic2. Intermediate3. Proficient4. Expert

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5. Knowledge of all ports in the countries surrounding Malawi1. Basic2. Intermediate3. Proficient4. Expert

Section B

6. Which is the most efficient port that serves Malawi?1. Beira2. Nacala3. Dar es Salaam4. Durban5. Coega6. No port is efficient

B. What are the key factors that make this port most efficient?

1. Good port infrastructure and equipment2. Shorter transit time and favorable regulations3. Good customer Service Delivery4. Shorter distance to inland destinations5. Lower cost of Inland haulage6. Availability of both rail and road7. Vessel capacity calling port8. Port Channel depth9. High security

Please add any additional information in the space provided

7. Of the below issues, which are most crucial, with regard to port choice?1. Port infrastructure and equipment2. Transit time and regulations3. Customer Service Delivery4. Distance to inland destinations5. Cost of Inland haulage6. Availability of both rail and road

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7. Vessel capacity calling port8. Port Channel depth9. Security

Please add any additional information in the space provided

8. If Malawi has to reduce cost of importation/exportation, it has to;1. Develop and construct own inland port2. Explore and develop Quelimane Port3. Improve capacity of Nacala Corridor4. Improve capacity of Northern Corridor via Dar es Salaam5. Build rail connection to Beira Port6. Improve the road network to Beira7. Move cargo by truck from Durban and Coega

Please add any additional information in the space provided

9. Critical Supply Chain obstacles1. Long Distances2. High haulage costs3. Port storage charges4. Customs red tapes5. Corruption6. Inadequate climate control equipment (Short-shelf cargoes)7. Dependency on third-party country ports8. Unstable economy9. High handling costs10. Fragile foreign relations with neighboring countries

Please add any additional information in the space provided

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Section C

10. User Perception of Dar es Salaam Port1. Very Good2. Good3. Bad4. Worse5. No rating

Please add any additional information in the space provided

11. User Perception of Nacala Port1. Very Good2. Good3. Bad4. Worse5. No Rating

Please add any additional information in the space provided

12. User Perception of Beira Port1. Very Good2. Good3. Bad4. Worse5. No Rating

Add any additional information in the space provided

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13. User Perception of Durban Port1. Very Good2. Good3. Bad4. Worse5. No rating

Please include any additional information in the space provided

14. User Perception of Coega Port1. Very Good2. Good3. Bad4. Worse5. No rating

Please include any additional information in the space provided

Section D

15. Perception of the proposed Nsanje World Inland Port1. Worth pursuing and developing2. Not worth pursuing (should be abandoned)______Skip to 173. Not sure

Please add any additional information in the space provided

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16. Critical reasons to develop Nsanje Inland Port1. Reduction of import costs2. National pride3. Reduced over-dependency on third-party country ports4. Control over own imports/exports5. Job creation6. Geographically well positioned7. Opening up to the international markets8. Reduction of distances to open sea9. Not sure

Please include any additional information in the space provided

17. Potential Challenges facing Nsanje Inland Port1. Unknown port user demand2. Potential for diplomatic rift with neighboring Mozambique3. Lack of feasibility study4. Channel capacity restrictions5. Inconsistent water levels6. Environmental concerns7. Distance from Nsanje to Major cities does not help reducing costs8. Lack of interest from financing partners9. Drain on financial resources10. Not sure

Please include any additional information in the space provided

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18. Perception of Port Quelimane in Mozambique1. Worth exploring and developing____________Skip to 202. Not worth exploring3. Not sure

Please include any additional information in the space provided

19. Reasons not to develop Port Quelimane1. Just develop our own port with the same resources2. Will not create jobs for Malawi3. Improve existing ports already in use4. Don’t know much about Quelimane Port

Please include any additional information in the space provided

20. Reasons to develop Port Quelimane1. Shortest possible distance to the open sea2. Already has developed port3. Has interest from neighboring Mozambique4. Don’t know anything on Quelimane Port

Please include any additional information in the space provided

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21. What is the best option for Malawi?1. Explore and develop new options2. Rehabilitate existing options3. Improve relations with neighboring countries4. Reduce logistical red tapes5. Just live with status quo

Please include any additional information in the space provided

22. Any General additional information

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Trade Deficit StatisticsAnnex 2 – Trade Deficit (courtesy of https://www.census.gov/foreign-trade/balance/c7970.html)

2015: U.S. trade in goods with Malawi

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding.

Month Exports Imports Balance

January 2015 2.3 4.9 -2.6

February 2015 1.2 1.5 -0.4

TOTAL 2015 3.4 6.5 -3.0

2014: U.S. trade in goods with Malawi

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding.

Month Exports Imports Balance

January 2014 2.6 4.5 -1.9

February 2014 18.9 2.8 16.1

March 2014 3.2 4.7 -1.4

April 2014 4.0 5.9 -2.0

May 2014 1.7 5.1 -3.5

June 2014 1.8 3.5 -1.6

July 2014 5.0 2.1 2.8

August 2014 5.7 4.1 1.6

September 2014 1.1 5.8 -4.7

October 2014 2.5 17.4 -14.9

November 2014 1.3 5.1 -3.8

December 2014 2.8 5.8 -3.1

TOTAL 2014 50.6 66.8 -16.1

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2013: U.S. trade in goods with Malawi

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding.

Month Exports Imports Balance

January 2013 2.3 4.0 -1.7

February 2013 3.0 4.5 -1.5

March 2013 1.7 3.7 -2.1

April 2013 1.8 7.0 -5.2

May 2013 4.0 4.4 -0.4

June 2013 13.9 4.7 9.2

July 2013 3.8 3.8 -0.0

August 2013 7.8 6.6 1.3

September 2013 3.7 2.7 0.9

October 2013 6.3 9.4 -3.1

November 2013 3.8 15.2 -11.4

December 2013 2.4 7.1 -4.7

TOTAL 2013 54.5 73.1 -18.6

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