DECISION ON BERTH 8 OF TPA AS PART OF TICTS CONCESSION EXTENSION ______________ The following are important observations The Decision: 1. PSRC has been informed that Berth 8 should be transferred to TICTS, the Container Terminal operator with immediate effect, together with the inland dry depot at Ubungo and that the term of the lease should be extended for a further 15 years. PSRC has been instructed to implement this decision. 2. It is presumed that Berth 8 means the quay, its apron and the area behind Berth 8 currently being used by TICTS; Issues at Hand: 3. At the moment Berth 8 is the only one with the capacity for handling larger vessels currently calling at the General Cargo Terminal. To remove it from TPA means TICTS will have in its custody all the berths capable of handling large vessels at the Dar es Salaam port; 4. The gantry cranes used by TICTS currently to load and offload containers do not extend to Berth 8. Therefore there is no infrastructure for container handling at Berth 8. The decision is not clear who will invest in creating that infrastructure since the investment obligations of TICTS in the current Lease Agreement are limited to superstructure and do not extend to basic infrastructure; 5. The grain crane is located on Berth 8 together with other grain handling and storage infrastructure. The decision means TPA has to invest either to construct another grain handling facility elsewhere or move the existing facilities to berth 7 after substantial modifications; 6. The decision to give Berth 8 to TICTS means TPA must start immediately to invest heavily in the dredging and deepening of the berths 5 and 6, and modifications to berth 7 otherwise the General Cargo will collapse altogether; 7. An arrangement needs to be made with TICTS that bulk vessels can continue to berth at Berth 8 and use the grain crane until such time as the modifications to berth 7 and the deepening of berths 5, 6 and 7 have been completed; 8. The current contract gives TICTS exclusivity for handling Cellular Vessels (i.e. vessels carrying containers only). The port and maritime business is heading towards wholesale container and containerization. It is not clear in the decision whether the exclusivity will continue or will be dropped. There is need to allow the General Cargo Terminal and all other terminals to be allowed to handle cellular vessels as an alternative to the container terminal. Consideration for Berth 8 and Extension: 9. The current lease should be renegotiated so that the Government receives some compensation/consideration for the transfer of Berth 8 and the dry depot and the extended period of the lease. Possible areas for negotiation include: a. Removal of exclusivity for fully cellular vessels with immediate effect (currently for the duration of the lease period of ten years); b.Increase in the fixed annual lease rental payment (currently US$ 3,680,000) with an annual inflationary indexation adjustment (currently not applicable); c. Increase in the throughput fee (currently US$ 13 per TEU); d. Performance targets currently container moves per crane per hour set at 20 for years 2 to 4 and 25 for years 5 to 10; e. Maximum tariffs of various services currently reduced by 3% annual for the first five years of the lease for transit traffic only i.e. not for local traffic; f. Responsibility of TICTS for investment in both Berth 8 and contribution to investments in Berths 5, 6 and 7 resulting from this decision; g. Level of local shareholding in TICTS (currently at 30%) This could be increased up to 49%; h. Temporary access to Berth 8 for grain carrying vessels until modifications to berths 5, 6 and 7 are completed (note that the rail gantry for unloading container does not extend to berth 8 at the moment so TICTS cant use berth 8 yet and probably doesnt need to for a couple of years). 10. It would be advisable to obtain technical assistance (say from the transaction advisers for the General Cargo Terminal, RMG) to determine the levels of fixed annual rental payment and the throughput fee. The fixed annual rental could be the source of funding for the deepening of the Berths 5, 6 and 7. 11. I think this extension without examining the Big Picture of its implications on Tanzanias overall trade and maritime competitiveness may be premature. Credit to the person who sent me this!