How Corruption Cripples Business at Africa's Seaports

Samuel Adebisi, a clearing agent at Lagos Port in Nigeria, one of Africa's busiest ports, says it is challenging to clear goods without paying a bribe to the customs officials.

"Officials mount several illegal toll points where they extort money before any truck can move in or out of the port," he told DW. In addition, the roads that enter the port are another nightmare for the clearing agents, and trucks are known to queue for weeks on the bad road that leads to the port.

"They [customs officials] keep collecting charges without even fixing the road at the port to the extent that containers sometimes fall off trucks," Adebisi added. Apart from extorting money from the agents, there are frequent cases of missing goods or parts of imported motor vehicles.

Mayowa Adeola, a resident of Lagos, told DW that there's hardly anyone who imports anything into Nigeria without items being stolen.

"I have an Audi Q7 (2010) model at the port, whose bumper and grill have been stolen, these things happen very often, and I think it is because no one presses charges against the customs officials," Adeola said.

For fear of scrutiny, many port authorities keep their losses under tight guard and only release profit figures, which is a small fraction of the losses accrued. Moreover, in many cases, the websites of port authorities have not been updated with information on losses in real-time. 

Inflated revenues

Customs officials at Lagos Port, said the port generated revenue of $1.2 billion (€1,23 billion) in the first quarter of 2022.

But a joint report by the Maritime Anti-Corruption Network (MACN), a global sea trade and shipping group, and the Lagos Chamber of Commerce and Industry said that Nigeria loses $7 billion annually to corruption and inefficiency, according to Nigeria's daily The Vanguard and Business Week.

The profit and loss statements that summarize the revenues, costs and expenses accrued are hardly shared in the public domain.

Separately, in the 2020/2021 report, MACN identified Nigeria as one of the most challenging countries to do business in. The organization said corrupt demands posed a significant risk to member companies that faced extortion, harassment, and threats of violence.

Moreover, regulations and procedures in ports were lacking in detail and consistency, giving authorities broad discretionary powers, the report said.

However, MACN said a helpdesk and an anonymous reporting system for distressed vessels had helped curb corruption demands. Since the helpdesk launch, over 460 pre-notification arrivals have been processed through the system.

The situation at the Lagos Port paints a larger picture of the systemic problems in Nigeria.

Ghana's push for better services

At Ghana's busiest ports of Tema and Takoradi, importers and shipping companies are at the forefront to ensure customs officials don't ask for bribes to let goods go through and clear cargo in time.

The two ports receive approximately 1,650 vessels yearly, including tankers, cargo, and cruise ships. Despite recent improvements in infrastructure at the ports, Edward Akrong, the president of the Ghana Institute of Freight Forwarders, said there are still bureaucratic tendencies, especially in processing the necessary documents to clear goods.

"If I make a declaration today and pay the duties, that means that I should walk out later in the day with my goods, but that is not always the case," Akrong said. He added that depending on the kind of goods one brings into the country. The law requires that I obtain "all the necessary permits from the standards authorities like the FDA [Food and drugs authority] or the EPA [Environmental Protection Agency]. That is where the issues are because it comes with costs and time."

Ghana's ports contribute significant revenue to government coffers, and 70% of the country's business is conducted at ports. However, despite the high volumes of goods handled at the ports, high tariffs frustrate business growth.

Sampson Asaki Awingobet, the executive secretary to the Importers and Exporters Association of Ghana, told DW that his group is one of the biggest clients of the ports. Still, the government needs to revise the high charges imposed on importers and exporters.

China helped expand East Africa's largest port, Mombasa Port, an important logistic hub in the region

East coast woes

Mombasa Port in Kenya, under the Kenya Ports Authority (KPA), serves as the gateway to countries in the East African region and some in the Horn of Africa, like Ethiopia and Somalia.

However, despite undergoing modernization and expansion in the last 10 years – Mombasa Port has been dogged by corruption and poor management. Traders complain of syndicated corruption from the top administration to the lower officials.

Charles Nganga, an importer of used vehicles, told DW that corrupt dealings at KPA have grossly affected business. Nganga said port officials give traders a few days to clear their goods.

"Once your shipment arrives at the port, you are given only four days to clear it. Beyond the four days, you will be charged $100 per day, which will be added to the total amount of import duties," Nganga said.

In addition, Gilbert Langat, the Chief Executive Officer of the Kenya Shippers Council, says that corruption at KPA also involves other players within the private sector who import counterfeit products.

"Corruption is not about the port officials or the KRA (Kenya Revenue Authority) officials. Corruption is two-way, and there must be two players for it to happen. As shippers and owners of the cargo, what is our role? "We are the ones that order this cargo; why are we bringing in counterfeits and substandard goods?"

In an interview with DW, Sandra Sequeira from the Department of International Development at the London School of Economics (LSE) justified Langat's claims and said there are two types of common corruption forms at seaport; Collusive and coercive corruption.

During her research, investigating and tackling corruption in African ports, Sequeira says, bribes at Africa's seaports take two forms. "Collusive corruption where both parties benefited from an illicit deal, such as paying to evade tax, and coercive bribery or extortion, which only benefited the corrupt official."

Sequeira added that "It is challenging to stop collusive corruption because firms pay customs officials to have their goods cleared quickly or even jump the queue."

South Africa's power outages

In South Africa, ports are hampering economic growth for various reasons. For instance, domestic load-shedding and flooding in KwaZulu-Natal caused exports at the Port of Durban to fall by a third during April and May compared with the same period last year.

According to a World Bank Container Port Performance Index (CPPI) for 2021, South African ports are beset with operational inefficiencies. For example, at the start of this year, cargo ships entering Cape Town had to wait up to two weeks to berth before customs, and offloading could commence.

The index, which rates the performance of ports worldwide, showed Durban, Cape Town, and Ngqura were in the bottom ten ports out of the 370 ports in the world. The CPPI used two approaches to grade port performances – Administrative and Statistical.

While the former was the aggregate of the general performance of the port, the latter involved factors such as the availability and quality of the infrastructure, the layout of the port, the expertise of the employees, and the berth.

Importers always attribute the delay in clearing their goods to unscrupulous officials at the various seaports. However, there are other factors as well. For example, ships may spend additional time in a port after the departure from a berth, and they may dwell within a port's limits for reasons that include bunkering, repairs, or simply waiting in safe areas if unable to berth on earliest arrival at the next port.

LSE's Sequeira said that corruption can have far-reaching effects on the economy and even affect the effectiveness or success of trade policy in Southern Africa.

"I found evidence that trade volumes did not go up as expected even when a country reduced tariff levels on several products. And my research documented that one of the key reasons might have been that firms were not paying tariffs because of corruption."

"So when they change tariffs through these trade liberalization schemes, it had a minimal impact on firms' ability to import and export more. So this has big implications for how we think about the effects of all these trade deals and trade liberalization schemes in the developing world," Sequeira added.

Going online to curb graft

According to the researcher, the situation at Maputo Port in Mozambique changed after she presented her findings to government officials. "The significant corruption that I found in the port of Maputo accelerated a movement towards having online interactions between firm representatives and port officials. So what this did was to cut back on face-to-face interactions and make it harder for these two players to engage in bribery deals," Sequeira told DW.

Sequeira's research showed that in the most extreme case, a firm would be willing to pay three times as much as the bribe to travel 'the long way round' to use the non-corrupt port in Durban. "These firms were willing to pay a premium to avoid bribe payments' uncertainty.

As well as a loss of revenue for the port, this loss of trade also meant that Mozambique missed out on the broader benefits that come from imported goods, such as technology, and their potential to help encourage economic growth and development."

Firms that experienced collusive forms of bribery were more likely to use the corrupt port because it reduced their costs, but this corruption was associated with the equivalent of a five percentage point loss of tariff revenues for the government.

However, at the moment, firms operating from the Port of Maputo now have less incentive in Mozambique to pay a bribe to try to evade a tariff, as tariffs are much lower than before.

"The evidence that we have is that the bribe paid is relatively small and a gain for the firm. For example, if you want to jump the queue or be the first in line to enter the port. So while this can increase costs for the firm, it's mostly a transfer from the private sector [firm] to a public official. So there isn't much of a revenue loss for the government in these instances," Sequeira emphasized.

There is great potential for many ports across Africa if digital systems are introduced and not tampered with. "Ports Authorities should think of fighting corruption as a kind of moving the goalposts and should always be kept on toes."

Isaac Kaledzi in Accra, Sam Olukoya in Lagos, Evelyne Kpadeh in Monrovia, and Andrew Wasike in Nairobi contributed to this report

Edited by: Chrispin Mwakideu