Multipurpose Port Development in
Zanzibar
Preliminary Assessment of PPP Options
August, 2014
Contents
Purpose & Scope
1
Background
1
Current Situation
1
Existing Port at Malindi
1
Proposed New Port at Maruhubi
4
Projections
Projected Traffic Growth
Projected Revenue Growth
8
8
12
Options Under Consideration
16
Preliminary Conclusions
17
1. Phased Development of Multi-Purpose Port at Maruhubi Only
18
2. Development of Maruhubi Port and Separate OSB Port
19
3. Development of Combined Multi-Purpose Commercial & OSB Port at
Deepwater Location
Recommended PPP Structure
Annex 1 – Maruhubi Port Development
20
20
22
ILLUSTRATIONS
Figures
Figure 1 Current Conditions at the Port of Malindi
2
Figure 2 Proposed Layout of Phase 1 Multi-purpose Port Development at Maruhubi
6
Figure 3 Proposed Maruhubi Port Area & Phase 1 Development
6
Figure 4 High-Growth 15-Year Traffic Projections for Zanzibar
9
Figure 5 High-Growth 25-Year Traffic Projections for Zanzibar
9
Figure 6 Medium-Growth 15-Year Traffic Projections for Zanzibar
10
Figure 7 Medium-Growth 25-Year Traffic Projections for Zanzibar
10
Figure 8 Low-Growth 15-Year Traffic Projections for Zanzibar
11
II
CONTENTS
Figure 9 Low-Growth 25-Year Traffic Projections for Zanzibar
11
Figure 10 Combined High, Medium & Low-Growth Scenarios, Total Throughput (Tons), 2012-204012
Figure 11 Projected Operating Revenues, Costs & EBITDA 2015-2030, High Growth Scenario
13
Figure 12 Projected Operating Revenues, Costs & EBITDA 2015-2030, Medium Growth Scenario 14
Figure 13 Projected Operating Revenues, Costs & EBITDA 2015-2030, Low Growth Scenario
15
Figure 14 Future Port Development Sites Under Consideration
16
Figure 15 Full Rendering of Maruhubi Port Development – All Phases
22
Figure 16 Phase 1 Development – Detailed Rendering
23
Tables
Table 1 Value of Total Trade 2009-2013
3
Table 2 Maruhubi Port Phase 1 Investment Plan
4
Table 3 Comparison of Port Characteristics – Malindi & Maruhubi
5
Table 4 Present Value of Projected Revenues, Expenses & EBITDA, 15 and 25yrs – High Growth
Scenario
14
Table 5 Present Value of Projected Revenues, Expenses & EBITDA, 15 & 25yrs, Medium, LowGrowth
15
Purpose & Scope
This Preliminary Assessment of PPP Options has been developed as part of the activities
under a World Bank contract for development of a PPP Policy and Guidelines and
preliminary assessment of potential PPP projects for the Government of Zanzibar. Below we
provide details on the current state of Zanzibar’s main port, the Government of Zanzibar’s
plans for port sector development, and recommendations for PPP structures to promote those
developments.
Background
Current Situation
Due to congestion at the Port of Malindi, the Government of Zanzibar has determined that
development of a new port will be necessary in order to accommodate future growth of cargo
and passenger traffic arriving to Zanzibar. Current plans envision construction of a new
multipurpose port on Unguja Island constructed in a phased approach. The government’s
vision also includes potential construction of a separate port to service oil and gas exploration
activities in Zanzibar, as well as upgrading and/or construction of new port facilities on
Pemba Island, and re-development of the current port/harbour area to service ferries, cruise
liners and other passenger traffic. Development of the harbor area presents significant real
estate potential that, if well-developed, can bring significant value to the Government.
EXISTING PORT AT MALINDI
Located in the heart of Stone Town, the current Malindi Port is highly congested, operating at
and sometimes above capacity and is confined to a small area on the outskirts of the city,
limiting its potential to expand and creating congestion around the port area. Stone Town has
been declared a UN World Heritage site, further hindering potential development and
expansion of the existing port. Current traffic volumes at the Port of Malindi in terms of cargo
and passengers are fairly significant considering the population it serves. In 2013, the port
handled approximately 70,000 twenty foot equivalent units (TEUs) and 260,000 tons of
2
general cargo, and processed a total of 1.5 million passengers from ferries offering service
from Dar es Salaam to Stone Town.1 The figure below illustrates the congestion surrounding
the port, including the city of Stone Town as well as vessel traffic anchored at sea waiting to
offload cargo. The port at Pemba is significantly smaller, handling less than 100,000 tons of
general cargo per year.
Figure 1
Current Conditions at the Port of Malindi
Yard – Container Storage
Breakwater
Passenger Terminal Area
Office/Admin Buildings
Warehouses
Congestion – Ships
waiting to call at port
Congestion
(Dhow Harbour)
Berth 2
Berth 1
Downtown
Stone Town
CURRENT CONDITIONS AT MALINDI PORT
Source: Consultant, Based on Image from Google Earth
Approximately 90% of total cargo shipped in containers is offloaded within the port, further
congesting the port area and reducing the speed at which cargo can be offloaded and moved
in and out.2 Due to congestion, ships must currently anchor at sea and wait for the main berth
to vacate, sometimes 4-5 days, before being able to offload cargo. Since there are no shore
cranes at Malindi port, the port relies solely on ship-to-shore cranes to offload containers
which are then transported by reach stackers. Container ships calling at the port can take up
to 2 days to offload (average of between 250-400 containers per ship). The majority of
1 Information received during interviews with MoIC & ZPC - March & May, 2014
2 Interview with Zanzibar Ports Corporation
3
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
containers leaving Zanzibar are empty, given the significant difference between import and
export volumes. Currently Malindi port accommodates 1 larger CMA-CGM vessel from the
Middle East and 6 feeder vessels per week from smaller shipping lines. In terms of volume,
the majority of the goods processed through the port are imports (approximately 90%);
however export cargo has experienced steady growth over the last several years which is
expected to continue.3
The table below provides import and export value statistics for the 2009-2013 period.
Table 1
Value of Total Trade 2009-2013
('000
Tzs)
2009
% of
Total
2010
% of
Total
2011
% of
Total
2012
% of
Total
2013
% of
Total
Imports
120,882
80%
129,137
88%
164,187
73%
271,273
80%
208,052
70%
Exports
29,745
20%
17,907
12%
61,261
27%
67,391
20%
87,800
30%
Total
150,627
100%
147,044
100%
225,449
100%
338,664
100%
295,852
100%
Source: Zanzibar 2013 Economic Survey
Malindi Port Characteristics:
Over the last several years, Malindi Port has operated at or above capacity and remains
continuously congested. Water depth limits the size of vessels that can call at the port, and
limited equipment, including the absence of shore cranes, makes offloading cargo slow,
adding further congestion. The port’s key characteristics are listed below: 4
 Built: 1920’s, Refurbished 2008
 Managed by: Zanzibar Ports Corporation (100% publicly owned)
 Located: 60km North of Dar es Salaam
 Average depth surrounding port: 10m (range of 8-13 m)
 Two approach channels: English Pass - max depth 12m & South Pass – max depth 13m+
 2 Berths: 240m (depth of 7-13m) & 130m (depth of 5m)
 Maximum Vessel Size: 13,000 DWT, 200m in length
 Yard Space: 75,000 sq meters (1.75 ha)
 Storage: 2 storage warehouses, each 4,200 m2; Empty Container Storage: Bwawani – 1.75
ha
 Designed Handling Capacity: 160,000 tons general cargo, 25,000 tons liquid bulk cargo
 Shore cranes: None
3 Interview with Zanzibar Ports Corporation
4 Feasibility Study for New Zanzibar Port Project Phase 1
4
 Other Equipment: Reach stackers
 Dredging Requirements: Heavy siltation, continuous dredging required
Several sites have been identified as potential locations for construction of a new port to
replace Malindi, including the Maruhubi Port site, for which several feasibility studies have
been undertaken (most recently in September, 2013). Three additional natural deep water sites
on Unguja Island have been evaluated as part of a pre-feasibility study effort by Royal
Haskoning which assessed potential port sites at Maruhubi, as well as deep water sites at
Fumba, Mangapwani, and Bumbwini.
The Government of Zanzibar’s vision is to serve as a regional transshipment hub, cater to the
needs of the oil and gas sector as it pursues exploration off the coast of Pemba, and to act as a
processing hub for the deep sea fishing industry. Part of this vision includes the need to
relocate domestic port facilities further from Stone Town to reduce congestion and provide
space for development of commercial activities linked to the port. This requires any future
port to consider not only growth in cargo volumes for Zanzibar, but also potential growth of
transit cargo, and the needs of the oil and gas and deep sea fishing industries
(accommodation of large vessels, space for handling of project cargo and special equipment,
space to build fish processing facility, etc.). The site for the new Zanzibar port will need to
meet all of these requirements.
PROPOSED NEW PORT AT MARUHUBI
Discussions are underway and an MOU has been signed with the Chinese Harbour
Engineering Company (CHEC) for design and construction of the Maruhubi Multipurpose
Port located approximately 2km north of the existing Port of Malindi. The new port would be
developed in 2-3 phases, the first phase including development of a multi-purpose terminal
capable of handling containers, general cargo, and some bulk cargo as well as liquid bulk (oil)
imports. Under the current plans, investment for Phase I of the port development will total
approximately $230 million including a $200 million loan from China Ex-Im Bank, as well as
close to $30 million in equity provided by CHEC. It is unknown whether the contract would
be a turnkey design and construction contract or a concession contract for design,
construction, operation and maintenance of the port. The proposed investment plan and
financing terms for the port, as outlined in the Feasibility Study for Phase 1 of the Maruhubi
Port Project carried out by CHEC, are outlined in more detail in the table below:
Table 2
Maruhubi Port Phase 1 Investment Plan
Description
Amount ($US)
Construction Investment
$225.2 million
Financing Costs
$2.5 million
Working Capital
.74 million
5
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
Total Investment
$228.4 million
Repayment Period: 5 + 20 = First 5 years, payments on interest only, then
annual installments on principal & interest over 20 years
Annual Interest Rate: 1%
Hurdle Rate: 8%
Guarantee Provided by Government of Zanzibar (Ministry of Finance)
Source: Feasibility Study of New Zanzibar Port Project Phase 1
Phase 1 would include construction of one larger berth 300 meters in length at a maximum
depth of 13.5 meters to accommodate vessels of up to 50,000 dwt, as well as a smaller berth of
65m and maximum depth of 5 meters able to accommodate tugboats and other small vessels.
Phase 1 would also include container and general cargo yards of 54,000 sqm and 18,000 sqm
respectively. There is a natural approach channel leading directly to the proposed site of the
Phase 1 development, however dredging and land reclamation are needed to meet the
required depths, estimated at approximately 1.54 million cubic meters (at a cost of $24 million
or $15.56 per cubic meter, considered very high compared to costs). The project period is
estimated at 25 years, with construction making up 2.5 years and operations making up 22.5
years (from 2016-2030). Phase 1 would accommodate cargo traffic through the year 2030, and
would be built with a capacity to handle up to 200,000 TEU and 250,000 tons of cargo per year
(total of approximately 2.25 million tons p.a.). Although a concrete proposal has not been
reviewed, this analysis assumes that in the year 2030 construction of Phase 2 would be
complete and would begin operations.
The table below provides a comparison between the current Malindi port and the planned
port at Maruhubi:
Table 3
Comparison of Port Characteristics – Malindi & Maruhubi
Characteristic
Malindi Port
Proposed Maruhubi Terminal
Phase 1
Average Depth
10m (range of 8-13 m)
13.5m
Berths
2 berths, 240m (depth of 7-13m) & 130m
(depth of 5m)
2 berths, 300m (depth of 13.5m) & 65m
(depth of 5m)
Vessel Size
13,000 dwt
50,000 dwt
Yard Space
75,000 sq meters
72,000 sqm
Handling Capacity
(Tons)
160,000 tons general cargo, 25,000 tons liquid
bulk cargo
200,000 TEU, 250,000 tons general cargo
Source: Feasibility Study for New Zanzibar Port Project Phase 1
6
Below is a rendering of the Phase 1 development to be constructed by CHEC, as well as a map
showing the location of the new port area and proposed Phase 1 development in relation to
Malindi Port.
Figure 2
Proposed Layout of Phase 1 Multi-purpose Port Development at Maruhubi
Source: Feasibility Study of New Zanzibar Port Project Phase 1
Figure 3
Proposed Maruhubi Port Area & Phase 1 Development
Proposed
Phase 1
Development
Proposed
Maruhubi Port
Area
Existing Malindi Port
7
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
Source: Consultant using Image from Google Earth
As can be seen above, the proposed new port at Maruhubi would include construction of an
access road connecting with the main road leading into and out of Stone Town (Malawi Rd.).
While the proposed new terminal is further from the city than the existing port, the access
road connects with a main artery immediately surrounded by commercial and residential
buildings, meaning port traffic would compete with commuters going into and out of the city
to other parts of the island. While congestion in the downtown area would be reduced with
relocation of the port, a new center of congestion would be created at the new Maruhubi port
entrance, particularly during the construction phase with transport of construction materials,
and would move congestion from the center of Stone Town to the outskirts potentially
causing a domino effect as traffic shifts to new roads to avoid port congestion. Equally, the
terminal would be located in a highly developed area, making the acquisition of additional
land for development of a terminal to accommodate oil and gas requirements unlikely. In
addition, the Maruhubi site does not meet the depth requirements for an oil and gas port,
under the current proposal, meaning construction of a second port facility in a natural deep
water location would be required to service the oil and gas industry. Such duplication is
unlikely to be cost-effective.
The CHEC Phase 1 port development plan differs from the Government of Zanzibar’s original
plans for the phased development of the new commercial port at Maruhubi. According to the
2007 Zanzibar Transport Master Plan, the Maruhubi port development total investment cost
was projected at a total of US $200 million, $80-90 million of which would be set aside for
development of Phase 1 (approximately $102.5 million in 2014 dollars). The Phase 1
development at Maruhubi envisioned in the Transport Master Plan included a 420m berth
with a depth of 12-14m with a preference for handling vessels of up to 60,000dwt and a
capacity to handle 50,000 TEU and 150,000 tons of general cargo. The plan also included
65,000 m2 for a container yard and storage. The general size and depth of the port in the
current CHEC plans are more or less consistent with the port envisioned as part of the 2007
Transport Master Plan.
8
Projections
From the data above and interviews with various stakeholders, it is clear that Malindi Port is
no longer able to accommodate the levels of both passenger and cargo traffic currently
arriving to Zanzibar, considering projected future growth rates of containerized cargo and the
port’s designed handling capacity. Congestion surrounding the port and inadequate storage
space within the port causes continuous delays and a new multipurpose port is needed to
replace the existing cargo port facilities. To address this need, the government is considering
phased construction of a new multi-purpose commercial port at Maruhubi which would
accommodate ships up to 50,000 dwt, with a total capacity of 250,000 tons of general cargo
and 200,000 TEU through 2030.5 In order to provide a better understanding of the size and
type of facilities needed to accommodate future growth in cargo traffic in Zanzibar, a highlevel analysis of historical traffic at Malindi port was undertaken, and projections for future
traffic and revenues were developed based on historical growth trends. These results are
presented below.
PROJECTED TRAFFIC GROWTH
Taking into consideration historic cargo throughput at Malindi from 2000 – 2012 (taken from
the Feasibility Study for New Zanzibar Port Project Phase 1), 15-year and 25-year traffic
projections were developed based on high, medium, and low-growth scenarios, as shown in
Figures 4-9 below. General assumptions for traffic growth calculations include the following:

High, medium and low-growth scenarios were based on projected GDP growth for
Zanzibar following trends in GDP, tourism, and population growth respectively;6

Conversion from TEUs to tons is assumed at 10 tons/TEU (TEUx10=tonnage)
Under the high-growth scenario based on projected GDP growth, total throughput by the
year 2030 is estimated at approximately 2.6 million tons ( approximately 580,000 tons general
cargo, and 197,000 TEU) and by 2040 reaches close to 4.3 million tons (approximately 955,000
tons general cargo and 321,000 TEU). Planned capacity for the Phase 1 development project
totals approximately 2.25 million tons, meaning within the high-growth scenario the
maximum capacity of the Phase 1 development would be reached prior to the end of the
project period in 2030 (capacity would instead be reached in 2028). Figures 4 and 5 below
illustrate these high-growth scenarios:
5 Feasibility Study for New Zanzibar Port Project Phase 1
6 Taking into account historical GDP growth for Zanzibar from 2000-2013 and projected growth based on IMF
GDP growth projections for Tanzania
9
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
Figure 4
High-Growth 15-Year Traffic Projections for Zanzibar
3,000,000
Phase I Full
Capacity (2028)
2,500,000
Tons
2,000,000
1,500,000
1,000,000
500,000
2012
2015
2018
Liquid Bulk (Petroleum - Tons)
2021
2024
General Cargo (Tons)
2027
2030
Containers (Tons)
Source: Statistics from Feasibility Study of New Zanzibar Port Project Phase 1
Figure 5
High-Growth 25-Year Traffic Projections for Zanzibar
4,500,000
4,000,000
3,500,000
Phase I Full
Capacity (2028)
Tons
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
Phase I Project Period
500,000
2015
2020
Liquid Bulk (Petroleum - Tons)
2025
2030
General Cargo (Tons)
2035
2040
Containers (Tons)
Source: Statistics from Feasibility Study of New Zanzibar Port Project Phase 1
In the medium-growth scenario, based on projected GDP growth from international tourism
growth, total throughput by the year 2030 is estimated at approximately 2.09 million tons
(approximately 468,000 tons general cargo, and 158,000 TEU) and by 2040 reaches close to 3.4
million tons (approximately 757,000 tons general cargo and 254,000 TEU). These figures are
illustrated in Figures 6 and 7 below. Under the medium-growth scenario, total Phase 1
capacity is reached in the year 2032 when total throughput reaches 2.3 million tons, shown in
Figure 7 below.
10
Figure 6
Medium-Growth 15-Year Traffic Projections for Zanzibar
Source: Statistics from Feasibility Study of New Zanzibar Port Project Phase 1
Figure 7
Medium-Growth 25-Year Traffic Projections for Zanzibar
Source: Statistics from Feasibility Study of New Zanzibar Port Project Phase 1
In the low-growth scenario, based on projected GDP growth from population growth, total
throughput by the year 2030 is estimated at approximately 1.47 million tons (approximately
328,000 tons general cargo, and 110,000 TEU) and by 2040 reaches close to 1.97 million tons
(approximately 441,000 tons general cargo and 149,000 TEU). These figures are illustrated in
Figures 8 and 9 below. Under the low-growth scenario, total Phase 1 capacity is not reached
within the projected period (2015-2040).
11
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
Figure 8
Low-Growth 15-Year Traffic Projections for Zanzibar
1,600,000
1,400,000
1,200,000
Tons
1,000,000
800,000
600,000
400,000
200,000
2012
2015
Liquid Bulk (Petroleum - Tons)
2018
2021
2024
General Cargo (Tons)
2027
2030
Containers (Tons)
Source: Statistics from Feasibility Study of New Zanzibar Port Project Phase 1
Figure 9
Low-Growth 25-Year Traffic Projections for Zanzibar
2,500,000
2,000,000
Tons
1,500,000
1,000,000
Phase I Project Period
500,000
2015
2020
Liquid Bulk (Petroleum - Tons)
2025
2030
General Cargo (Tons)
2035
2040
Containers (Tons)
Source: Statistics from Feasibility Study of New Zanzibar Port Project Phase 1
Based on the above projections, traffic is projected to surpass planned capacity of the Phase 1
port development at Maruhubi in two of the three scenarios, meaning construction of Phase 2
would need to begin between 2025 and 2030 in order to meet expected demand, depending on
actual growth during the Phase 1 project period.
12
Figure 10
Combined High, Medium & Low-Growth Scenarios, Total Throughput (Tons), 2012-2040
Source: Consultant analysis based on projections using Statistics from Feasibility Study of New Zanzibar Port Project Phase 1
PROJECTED REVENUE GROWTH
While the Zanzibar Port Corporation’s full financial statements were not analyzed for this
briefing note, a simplified analysis and projection of revenues and costs was undertaken to
determine potential port revenue for the Phase 1 project period (2030) and potential revenue
for the life of the port asset (Phase 1) through 2040.
Revenues and costs were projected based on the total operating revenue and operating costs
for 2013 provided during interviews with officials at the ZPC from which the cost per unit
was calculated for general cargo, twenty foot equivalent units (TEUs), and liquid bulk.
General assumptions taken into consideration for the revenue and cost projections include:

Beginning operating costs equal to 70%7 of operating revenues from 2012-2018
(through 1st year of Phase 1 port operations), decreasing by 5% every 3 years starting
in 2019 based on assumption of more efficient, modern facilities and increased
operating efficiency under management of a private operator. Operating costs reduce
to 50% of operating revenues by the end of the project period in 2030;

Estimated per unit tariffs were calculated by multiplying total share of cargo type as
a percent of total throughput for 2012 by total revenue (2012) and dividing by cargo
type (example: [TEU (expressed as tons)/Total Tonnage x Revenue]/# of TEU). The
estimated per-unit tariffs were calculated at US $11.57 per ton for general cargo and
liquid bulk, and $115.75 per TEU;
7 Assumption based on information provided during interviews with Zanzibar Ports Corporation
13
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR

Revenue and Prices were assumed to grow at the rate of U.S. inflation, based on IMF
projections through 2019;

Present value of revenues, costs and EBITDA calculated for both the project period
(2016-2030 assuming construction begins 2016 and operations begin 2018) and for the
projected asset life (25 years, through 2040) at discount rates of 12% (Tanzania), 6%
(China) and 3% (low-rate comparison);

IRR was calculated based on investment costs for Phase 1 of US $230 million and
project period of 25 years (2016-2030);

Revenues and costs were projected based on high, medium and low-growth
scenarios using projected GDP growth based on projected GDP, number of
international tourists, and population, as described in the section on traffic analysis
above.
Under the high-growth scenario based on projected GDP growth through 2030, operating
revenues and costs are estimated to reach US $31 million (Tzs 49.6 billion) and US $15.5
million (Tzs 24.8 billion) respectively, leaving an EBITDA of US $15.5 million, as shown in
Figure 11 below.
Figure 11
Projected Operating Revenues, Costs & EBITDA 2015-2030, High Growth Scenario
35,000
30,000
'000 $USD
25,000
20,000
15,000
10,000
5,000
2012
2015
Projected Revenue ($000)
2018
2021
2024
2027
2030
Projected Operating Expenses ($000)
Projected EBITDA ($000)
Source: Consultant Analysis Based on Data from Stakeholder Interviews March, 2014
Based on the high-growth scenario presented above and using the results for operating
revenues, operating expenses and EBITDA from 2015-2040, the 15 and 25-year present values
were calculated based on the three benchmark discount rates presented above to provide an
idea of the Zanzibar Port Corporation’s (or future port operator’s) capacity to generate
operating cash flow and to finance future port development. The table below provides the
projected present values based on the high-growth scenario.
14
Table 4
Present Value of Projected Revenues, Expenses & EBITDA, 15 and 25yrs – High Growth
Scenario
SUM
SUM
15 yr.
PV
PV
PV
25 yr.
PV
PV
PV
$US ('000)
(2030)
12%
6%
3%
(2040)
12%
6%
3%
Operating Revenue
$321,455
$129,147
$195,269
$247,695
$731,242
$169,583
$318,209
$469,413
Operating Expenses
$187,265
$79,552
$117,107
$146,432
$392,159
$99,770
$178,577
$257,291
EBITDA
$134,189
$49,595
$78,162
$101,263
$339,083
$69,813
$139,632
$212,122
Source: Consultant Analysis Based on Data Received During Stakeholder Interviews, March 2014
The table above shows a 15-year present value of EBITDA of approximately US $49.6 million
at the 12% Tanzanian benchmark discount rate, and approximately US $78.2 million at the 6%
Chinese benchmark discount rate, while 25-year present value of EBITDA reaches US $69.8
million at 12% and US $139.6 million at the 6% discount rate. With a present value of EBITDA
of less than $230 million under the high-growth scenario, covering financing costs for the
Phase 1 port development project will not be possible without significant government
subvention or grant funding, even at the proposed 1% interest rate through a China Ex-Im
Bank 25-year loan. IRR was also estimated under the high-growth scenario for the 2016-2030
project period taking into consideration the estimated required investment of $230 million,
resulting in a -5.15% IRR for the Phase 1 project period.
The figures below present the projected operating revenues, operating expenses and EBITDA
for the Phase 1 Project Period under the medium and low-growth scenarios, while Table 4
below summarizes the present value of revenues, expenses and EBITDA under the same
scenarios.
Figure 12
Projected Operating Revenues, Costs & EBITDA 2015-2030, Medium Growth Scenario
Source: Consultant Analysis Based on Data from Stakeholder Interviews March, 2014
15
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
Figure 13
Projected Operating Revenues, Costs & EBITDA 2015-2030, Low Growth Scenario
20,000
'000 $USD
15,000
10,000
5,000
2012
2015
2018
2021
2024
2027
2030
Projected Revenue
Projected Operating Expenses ($000)
Projected EBITDA ($000)
Source: Consultant Analysis Based on Data from Stakeholder Interviews March, 2014
Under the medium growth scenario, total revenues reach approximately US $24.7 million in
2030, while operating expenses and EBITDA reach US $12.35 million, and under the lowgrowth scenario revenues reach US $17.3 million while operating expenses and EBITDA reach
US $8.6 million. As the table below demonstrates, under both the medium and low-growth
scenarios, present value of total EBITDA at the three benchmark rates reach a maximum of US
$85.1 million under the medium-growth scenario by the year 2030 and only US $66.7 million
under the low-growth scenario. By extending the project period through 2040, these numbers
rise to US $172.9 million and US $122.3 million under the medium and low-growth scenarios
respectively, falling short of the required US $230 million investment required under the
proposed Maruhubi Phase 1 development.
Table 5
Present Value of Projected Revenues, Expenses & EBITDA, 15 & 25yrs, Medium, Low-Growth
SUM
$US ('000)
SUM
15 yr.
PV
PV
PV
25 yr.
PV
PV
PV
(2030)
12%
6%
3%
(2040)
12%
6%
3%
M E D I U M
G R O W T H
S C E N A R I O
Operating Revenue
$270,559
$111,264
$166,315
$209,719
$595,277
$143,329
$263,771
$385,445
Operating Expenses
$158,473
$68,902
$100,300
$124,671
$320,832
$84,935
$149,028
$212,534
EBITDA
$112,087
$42,362
$66,015
$85,048
$274,445
$58,395
$114,743
$172,910
L O W
G R O W T H
S C E N A R I O
Operating Revenue
$213,016
$91,023
$133,579
$166,788
$417,620
$111,576
$195,531
$278,009
Operating Expenses
$125,924
$56,839
$81,292
$100,070
$228,226
$67,116
$112,268
$155,681
EBITDA
$96,016
$34,184
$52,287
$66,718
$189,394
$44,460
$83,263
$122,329
Source: Consultant Analysis Based on Data Received During Stakeholder Interviews, March 2014
16
Options Under Consideration
Figure 14
Future Port Development Sites Under Consideration
Bumbwini
Mangapani
Maruhubi
Fumba
a
Source: Consultant using map image from: http://mapsof.net/map/topographic-map-of-zanzibar
The 2007 Transport Master Plan and current CHEC proposal envision development of a
multipurpose commercial port at Maruhubi to potentially serve as a regional transshipment
hub to compete with the ports at Dar es Salaam, Mombasa and Djibouti for cargo destined for
East Africa. While several feasibility studies have shown the Maruhubi port site area to be
17
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
suitable for a larger commercial port, other sites may provide more preferable locations for
port development, particularly if the new port is to serve the oil and gas industry. The map
above illustrates the various port sites considered in this briefing based on sites identified in
previous port development feasibility studies for Zanzibar. While some sites were explored in
Pemba, none have been determined as suitable for positioning of a large commercial and/or
OSB port, and are not included in this report. As mentioned previously, the four sites under
consideration include Maruhubi, Bumbwini, Mangapani, and Fumba.
Based on our investigation, developing a regional transshipment hub in Zanzibar is unlikely.
Generally, regional transshipment hubs must be anchored on domestic cargo, and currently
the majority of Tanzania’s domestic cargo is handled at the Port of Dar es Salaam.
Furthermore, current and projected traffic volumes do not indicate the increase in cargo
necessary for Zanzibar to become a regional transshipment hub, particularly taking into
consideration the current role of larger transshipment hubs in the Middle East, port expansion
and modernization projects taking place at the ports of Djibouti and Mombasa, as well as the
potential development of the port at Bagomoyo on Mainland Tanzania.
Preliminary Conclusions

Developing a new commercial greenfield port in Zanzibar is compatible with the
Government’s PPP strategy;

Developing one multi-purpose port for cargo and oil and gas industry requirements
would be more efficient than developing two separate port facilities, as currently
contemplated. While development of a larger multi-purpose port to accommodate
both general cargo and oil and gas exploration could be more complicated, it would
most likely result in greater cost savings and economies of scale than development of
two separate ports;

Locating the new port in one of Unguja’s natural deep water locations will allow
larger vessels and would most likely significantly reduce the cost of capital and
maintenance dredging. The current Maruhubi proposal is not a deep water location;

The PPP formula would be financed primarily using private finance, but will require
some government funds to finance the development of basic infrastructure. This is
the case for the majorly of the greenfield port projects around the world;

Once the new port is complete, the existing port facilities
at Malindi could be
developed using PPP into a harbor and fully-dedicated passenger facility;

The current Maruhubi proposal of a large commercial port facility in close proximity
to Stone Town and existing tourist attractions will create additional congestion,
reduce opportunities to develop industry and other associated commercial activities
that might leverage off of the port, and discourage future tourist growth;

The current Maruhubi proposal is located in a heavily developed area without much
opportunity for land-side expansion. Developing a green field port at a site without
18
land limitations for future expansion is an important condition for attracting quality
port operators and industrial real estate developers;

More important than the cost to construct the new port facilities is the 40-year present
value of operating a port at a suboptimal location. Building a suboptimal facility
would not only reduce potential revenue generation, but would also generate
additional congestion, environmental and social costs, and higher operating and
logistics costs.
Based on the above conclusions, below we provide a brief analysis of the three main options
under consideration by the Government of Zanzibar for port development, based on current
plans and previous feasibility studies undertaken.
1. Phased Development of Multi-Purpose Port at Maruhubi Only
In previous sections we described the proposed plan for the phased development of a large
commercial port at Maruhubi. While the land has been allocated and several feasibility
studies conducted to determine the suitability of the Maruhubi site, we believe the Maruhubi
location is not the most ideal for port development in Zanzibar based on several factors, as
follows:

The day-to day activity of a large scale commercial port on the outskirts of Stone
Town is not compatible with the development of a high-end tourism industry;

At a maximum 13.5 meter depth, the Maruhubi port site still limits the size of vessels
that can call at the port to smaller feeder vessels (Handymax and Supramax being the
largest – up to 50,000 dwt) and does not provide the minimum depth required to
attract large Panamax and Post-Panamax ships used to transport large quantities of
containers (i.e. transshipment vessels);

Fairly significant land reclamation and dredging will be required to develop the site;

With the recent oil and gas discoveries near Pemba Island, catering to the offshore
exploration and construction industry will be critical, however the minimum depth
required for Offshore Supply Base (OSB) ports is 20 meters, while the maximum
depth at Maruhubi will be only 13.5 meters, meaning the Maruhubi port
development plan could not be expanded to cater to the oil and gas industry. Also,
the land surrounding the Maruhubi site is insufficient for the demands of the oil and
gas industry for storage and lay-down areas;

Based on the investment plan for the Phase 1 development at Maruhubi and the
projected traffic and revenues under the highest-growth scenario presented above,
the Phase 1 project is not feasible without significant government subsidization or
grant funding, greatly diminishing the possibility of attracting a world-renowned
private port operator to manage the new port;
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PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR

The Maruhubi port site is only slightly removed from the current Malindi port and
still surrounded by commercial and residential areas close to the city center meaning
congestion surrounding the new port would continue to be a problem. Expansion
beyond the port area would also be difficult and costly given the proximity to Stone
Town. The new port should have significant expansion capacity to promote the
development of related industries with very low land prices;

Although a natural entrance channel exists at the Maruhubi port site, the
surrounding areas are shallow and changes in currents could bring increased
siltation and mean higher maintenance dredging costs in the future.
2. Development of Maruhubi Port and Separate OSB Port
While development of the Maruhubi Port site has received much attention of late, it has
become clear the Government of Zanzibar is keen to develop a port capable of servicing the
offshore oil and gas industry to support exploration and future production activities. One
option under consideration is to develop a commercial port at Maruhubi and develop a
separate OSB port at one of the natural deep-water sites recently identified by Royal
Haskoning. Development of an OSB port in Zanzibar will of course depend on proven
reserves and the potential for growth in the oil and gas sector, which will dictate the
characteristics of the port including the land required for development, total capacity,
required depth and related dredging, and potential construction of a breakwater, among
others. Based on the traffic and revenue analysis above as well as our experience in the port
sector, we believe development of a separate OSB port has the potential to be less complicated
than combining with a multipurpose port, however we believe development of two separate
ports would be a suboptimal course of action for the Government of Zanzibar for the
following reasons, in addition to those mentioned under Scenario 1 above:

Based on even the highest-growth scenario for projected traffic and revenues as well
as planned investment, the Phase 1 development at Maruhubi would not be feasible
without significant government subsidization or grant funding, as mentioned above,
meaning development of two ports to handle commercial cargo and OSB separately
would be even less financially feasible, and would significantly reduce the possibility
of attracting a private port operator to manage either port;

A separate OSB port would support oil and gas exploration and production activities
over a specified period of time, with cargo volumes tapering off as oil and gas field
development advances. After a certain time the amount of cargo moving through the
OSB port would greatly diminish, leaving a port operating far below capacity and
receiving very little cargo. Repurposing the port would be difficult as commercial
activities would already be centered at Maruhubi and, as shown above, projected
traffic levels would not be enough to support two ports.
20
3. Development of Combined Multi-Purpose Commercial & OSB
Port at Deepwater Location
A third option would include development of one, multi-purpose combined commercial and
OSB port at one of the three natural deep-water sites previously identified. This option
would, of course, require further analysis of the various deep-water sites proposed under
previous studies to determine the optimal location for such a port, as well as the total
required investment based on estimated demand for port services.
Based on the analysis presented above, our experience in port development in Africa and
worldwide, and based on feasibility studies undertaken for port development in Zanzibar, we
believe this option presents the best potential outcome for the Government of Zanzibar for the
following reasons:

Although total capital investment for this larger port would most likely be higher
than required investment for Phase 1 at Maruhubi, total investment for a combined
commercial/OSB port would be far less than the combined investment for two
separate ports, meaning significant cost savings and economies of scale can be
achieved by combining the two ports;

Choosing a site further from Stone Town (Bumbwini, Mangapani, Fumba) would
provide more space for expansion, critical for meeting future traffic needs over the
next 100 years;

The sites at Bumbwini, Mangapani and Fumba offer natural deep water ports which
would not only accommodate larger container ships and vessels carrying project
cargo, but would also likely require less capital and maintenance dredging to
maintain the entrance channel and turning basin at the required depth, lowering
overall maintenance costs;

Development of a combined port would create a more attractive and profitable
business that would attract top port operators, particularly under a design, build,
operate and maintain concession contract;

A combined port in a larger area would allow for phased development of
multipurpose cargo terminals to accommodate containers and general cargo as well
as large fishing vessels on one side with an OSB terminal on the other side, and
would allow for development of free zones and processing zones around the port
area, increasing opportunities for industrial development and job creation linked to
the port.
Recommended PPP Structure
It is essential to note that port developments are important long-term investments which must
consider 30-40 year operating periods and enough space to accommodate 100 years’ worth of
growth. Careful consideration must be given to the timing and location of new port
21
PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
developments with a longer-term view that will support national development well into the
future. The Government of Zanzibar finds itself at a critical juncture where current decisions
will affect future growth and development of the island, and choosing the least-best option
could pose a serious threat to the government’s economic growth and development
objectives. Location of a port is one of the most critical elements for ensuring the port will
have the throughput and revenue-generating capacity to accommodate growth in a highly
competitive global economy. Selection of a suboptimal location would serve as a disincentive
for private operators who would be less likely to invest in a port development in Zanzibar.
Taking into consideration the traffic and revenue projections and analysis presented above,
this paper recommends consideration for development of a combined commercial and OSB
port at one of the three natural deep water locations identified above under a 30-year DesignBuild-Operate-Maintain concession contract. This option would allow the Government of
Zanzibar to attract a top quality port construction and operations company with significant
worldwide experience in both commercial and OSB port site development, and would allow
for the possibility of developing a world-class multi-purpose port that could serve as a model
for the region. This option would require significant investment on the part of the
government in basic port infrastructure; however the potential for value generation would be
greatly enhanced under such an arrangement.
22
Annex 1 – Maruhubi Port
Development
The figure below shows the full Maruhubi Port Development Plan proposed by CHEC based
on the phased approach, with Phase 1 highlighted in orange.
Figure 15
Full Rendering of Maruhubi Port Development – All Phases
Source: Feasibility Study of New Zanzibar Port Project Phase 1
Figure 16 below provides a more detailed rendering of the proposed Phase 1 port
development identifying various characteristics of the Phase 1 project including berth,
container yard, storage area, office buildings, customs inspection, and lorry parking areas,
among others.
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PRELIMINARY ASSESSMENT OF PPP OPTIONS: PORT DEVELOPMENT IN ZANZIBAR
Figure 16
Phase 1 Development – Detailed Rendering
Source: Feasibility Study of New Zanzibar Port Project Phase 1