FROM MAGAZINE: Logistics betting Big on African transformation
Aviation - The challenges termed as nightmares are easing out for logistics operators in Africa. However, rural connectivity, non- capacity to handle large cargos, inadequate roads, rail, port, airport facilities still pose a higher degree of constrain for them.
The challenges termed as nightmares are easing out for logistics operators in Africa. However, rural connectivity, non- capacity to handle large cargos, inadequate roads, rail, port, airport facilities still pose a higher degree of constrain for them. It is challenging, but an opportunity in itself.
Renjini Liza Varghese reports
Africa has taken a kangaroo leap from the famished child image to an emerging economy in the last decade. The scene is no different for the logistics sector in the continent; it reinvented itself from humanitarian goods transportation to a carrier of oil, gas, mining and other goods to the global market. Interestingly, Africa is attracting more investments viz; direct investments, joint ventures, memorandum of understanding for long term tie-ups, technology transfers so and so forth.
It is not too long since some of the international media wrote off Africa as a hopeless continent, highlighting corruption, security concerns and lack of policy support and political will to ensure a business climate. There is a sea change from that to now a continent with high potential. In terms of technology, Africa has become the first testing grounds; the best example is the drones.
Africa is known for its natural resources such as gold, diamond, iron, bauxite, petroleum, cobalt, uranium, etc. Till recently, Africa didn’t even realise its own potential. Thanks to the technological revolution that opened the large global markets for Africa.
In the past few years, one of the major improvements Africa witnessed in the logistics industry is technologically driven workforce. The current workforce expects to have equipment in the workplace that can provide the same engagement and comfort using technology that the world peers are using. In the past few years, most of the logistics companies had upgraded their technology to be on par with the global standards. Also the majority of the logistics companies have gone global (with international affiliate) to improve their market force.
Logistics at one point was a nightmare for those who are present in mining, oil and gas, and other segments like infrastructure development. According to an industry person who spent a considerable amount of time in the African logistical industry, Gopa Kumar said “Trade facilitation has been one of the challenges in the African industry. Difficult government policies, foreign exchange, government security agencies at the borders and lack of good trans-border roads also added fire to the fuel.”
However, the advancement that happened over the years now enables people to even use the air cargo route to transport the materials.
The latest example is that of Chapman Freeborn Airchartering delivering over 200 tonnes of project cargo to Gabon for the new terminal construction. The materials were transported from Europe and India using B747-400F, B777F aircraft and a Maximus IL-76 freighter. They also use AN-124s and B747-400Fs for mining and oil and gas cargo movements.
However, the logistics operators are vocal about the challenges they face in Africa. Helle Rasmussen, Bolloré Logistics mining director, said, “The logistics challenges we face providing end to end solutions to the mining industry in Africa represent a multitude of facets. Overall, our challenges are intrinsically linked to the inadequate state of the infrastructure in the remote areas we operate in on majority of our mining projects.
The infrastructure issues we face whilst developing mining projects are of different character and can be divided into short and long term challenges; In the short term, the main issues are generally the road conditions, poor bridge qualification, in certain cases a complete lack of site accessibility. The more profound issues in terms of infrastructure are closely tied to the respective countries development and financing of ambitious infrastructural projects or expansion of existing infrastructures (roads, ports and airports).”
There are a different set of challenges for various segments of the logistics sector. Lyndee du Toit, MD, Air Charter Service, South Africa, highlighted the policy issues by saying, “Unlike the other parts of the world, Africa does not have an open skies policy which makes urgent flights difficult, if not impossible in some instances. Each country differs with the time frame required to process permits. Infrastructure and lack of equipment also limits the airports or aircraft we can utilise for each shipment.
Limited equipment at an airfield can severely disrupt an operation. For example, a main deck loader breaking down in the middle of loading when there is the only one available. I have had situations where the airport ran out of fuel or one situation where nobody was manning the tower. These are not very common, but illustrate how many things can affect an event.”
Graham Witton, managing director, Antonov Airlines, UK, added, “Actually it is challenging to bring the AN-124 into Africa. There are many locations in Africa with minimal ground support services and the ease of on load and offload (with the loading ramps and internal crane system). High costs through royalty payments, various taxes levied, and unstable fuel supplies are challenging.
Infrastructure is a key determinant to the growth of any Continent or country. According to the Ernst & Young’s Attractiveness Program Africa 2017 “China-sourced FDI into Africa increased dramatically in 2016 with a 106 percent jump in projects. China emerges as the largest jobs creator in Africa. China’s exports to Africa stood at $82.9b while imports from the continent were valued at $54.3b. Since 2005, China has invested in 293 FDI projects in Africa, totalling an investment outlay of $66.4b and creating 130,750 jobs.”
The need of the hour is to improve the infrastructure to stimulate the growth of Africa. Pierre van der Stichele, Chapman Freeborn’s Group Cargo operations director, pointed out the need for improvement in infrastructure particularly the road network. He said, “Road networks in particular need improvement.”
It is true that there are dedicated efforts from the governments to improve the connectivity in the African region. This includes road, rail, air and port facilities. There are investments from the government side as well as from foreign countries, especially from China. Chapman Freeborn representative was quick to point out a major transformation, “One of the key developments we’ve seen in recent years is the overseas investment in infrastructure – particularly from China.”
The latest in the segment is the announcement by the Gauteng Roads and Transport to invest a total of R6.8 (South African Rand) billions in roads and public transport infrastructure. Of which R1.9 billion will go in for transport infrastructure, R2.3 billion for transport operations, R314 million for transport regulation, R1.8 billion for Gautrain and R321 million for administration. The main aim is to improve road infrastructure through the construction of new roads and improve maintenance of existing roads.
It is not all; the African countries are mulling over a single air transport market launch by January 2018
A single air transport market is one of the goals of African Union's Agenda 2063, aiming to connect Africa through aviation and other transport infrastructure to achieve integration and boost intra-Africa trade.
The railways in Africa have seen major projects coming on-stream. One of the biggest in the list was the commissioning of the $4b electric rail line between Addis Ababa and Djibouti.
Port infrastructure in Africa is yet to develop to its fullest. According to some of the published reports Africa accounts for only 3 percent of the global trade that consists mainly of oil, gas, minerals and agri-produce. Ports lacked in quality of harbours, quays, cranage, and storage systems, etc. While investments are flowing into the development of Ports and its allied connectivity, there are companies entering into creating storage facilities near the Port. Like for oil storage, LNG storage, keeping minerals, warehouse facilities.
Moving forward, the logistics industry is looking for a) an ease in the enforcement of regulatory compliance b) The Governments of different Africa Countries needs to come together and look at areas they can soften their trans- border trade policies to meet their counterparts standard of trading and demands c) better deployment of government security agencies at the borders and right trans-border roads.
As the World Economic Forum noted in its 2016 report, “The conversation about Africa is shifting from one of “deficits” and “gaps” to one about opportunities, prospects, ventures and creativity.” Indeed there is tremendous potential in Africa and logistics segment will take the lead to improve infrastructure development of the continent as a silent supporter of moving materials.