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Issue 7 2015 - Freight Business Journal


///AFRICA The final frontier


Long seen as the preserve of specialists, Africa’s two billion people and huge natural resources are now too large to ignore. But the logistics challenges remain formidable.


Nigeria’s new president needs to deliver


Nigeria may have a new leader in President Buhari – and one, moreover, who has been elected on an anti-corruption platform – but it does not yet have a fully functioning government. Appointing a new cabinet


in


Nigeria is always a painfully protracted process and Buhari is no exception – the latest news from the capital, Abuja, is that the first batch of new ministers were sworn in by the end of September but that the process will not be completed for quite a while yet, and even the first batch of appointees are likely to take up their appointments a full five months aſter the presidential victory. The new president’s argument


for this slow rate of progress is that he is rooting out the massive corruption that has gripped the economy and politics since the 1960s but investors and Nigerians themselves are getting restless. The immediate problem for


the Nigerian economy is the sharp fall in the oil price. This could, arguably, be seen as a good thing in the long term, if it


encourages diversification


away from the oil and gas sector in favour of activities such as agriculture and manufacturing. This though will be of little comfort to any Nigerians who face being thrown out of work over the next few months. Moreover,


while successive


governments have announced schemes to develop various sectors over the years, none of them has so far succeeded. In fact, production on once staple commodities such as palm oil and ground nuts – and for which the Nigerian climate is supremely suited – have actually fallen sharply over the past few years and the country is a net importer of many foodstuffs. In fact, although Nigeria is


portrayed as a one-product economy, it is actually a very diverse economy with energy production accounting for only 10-11% or so of total GDP. According to African Economic Outlook, Nigeria’s growth of 6.3% in 2014 came mainly from non-oil sectors “showing that the economy is diversifying”. Nevertheless, it is best known as a significant, though by no means dominant energy producer, accounting for something under 3% of


total


world oil supply in volume terms – although the grades of oil it produces are highly sought aſter by refiners and blenders. The oil industry plays a


dominant role in Nigeria’s international trade, accounting for a major share of exports while equipment and material to keep the oil and gas fields running also dominate imports. In fact, a large part of the


Nigerian economy is never picked up by official economic statistics at all. A mind-boggling variety of small enterprises line any Nigerian thoroughfare – in some cases spilling out onto the carriageway itself – and cash in hand or even barter is the preferred medium of these traders. The other big issue that the


incoming government will need to tackle is the shockingly poor state of much of Nigeria’s infrastructure. Speaking at a summit organised by Agility in Davos, Switzerland in January, Adewale Tinubu, chief executive of African energy firm Oando, said that a third of the gas that Nigeria produces is ‘flared’ (burned off), adding needlessly to global warming when it could supply half of Africa’s energy needs – simply because of a lack of infrastructure. What should be major trunk highways, for example the main


the port is another cratered wreck, though at the time of writing repairs were in hand. Intels and other local have incidentally


companies


invested around $5 million of their own funds in repairing some of the region’s main public highways.


Niche Markets


road between Onne and Port Harcourt, frequently degenerate into moonscapes of three foot deep potholes. Accidents are frequent,


especially to trucks – in some cases because the roads simply give way beneath them. Flatbed trailers – most likely bodged together from two shorter ones by the country’s ever- resourceful blacksmiths - oſten snap in half under the weight of the containers they are carrying. Some of


the trucks, many


carrying the boxes of world- renowned shipping lines, look as if they’d been involved in serious head-on collisions and would have gone to a scrapyard decades


ago in almost any


other part of the world but are somehow coaxed into life for yet another daily battle with Nigeria’s cratered roads. Even in large cities, a whole


day with mains power and not having to turn on the generator is a noteworthy event. Retailing is underdeveloped,


at least in terms of big, shiny supermarkets, although almost every product people could conceivably want is available in African markets. The growth of


e-commerce could be a


significant boost, perhaps bypassing the deficiencies in the current retail system, Nestle chief executive Paul Bulcke told Agility’s Davos gathering. And very little money, if any,


seems to filter down to housing for the poorest segment of the population, 60% of whom reportedly have to live on a US dollar a day, or less. Western-owned companies


have addressed Nigeria’s many societal and infrastructure problems by creating what are in effect gated industrial communities with strict controls on who is allowed in or out. At Onne, in the troubled Delta region – where rebel activities such as kidnapping of expatriate workers has been a major issue, though some sources say it is now much reduced – Intels has ironically has some of the best facilities on the planet,


along


with a massive supplier park for the oil and gas industry. The site includes port facilities for offshore vessels, logistics centres and is also the site of the West Africa Container Terminal (WACT) one of the most modern box ports in the region. Accommodation, restaurants and all other amenities are provided on site, so expatriate workers need only venture into Nigeria proper when they drive from and to the airport at the beginning and end of their stints in Nigeria. Meanwhile, the old port from


which Port Harcourt takes its name keeps working, possibly almost through sheer force of will on the part of its operators. The access road to and from


We make no apology for dwelling on Nigeria in this round-up of economic prospects for West Africa as a whole, because the story of the region is largely that of this economic powerhouse. With a population estimated at 187 million and growing, around one in five Africans – never mind West Africans – is Nigerian. It is set to become the world’s fiſth most populous country in about five years time. Nevertheless, there some useful and interesting niche markets in the region. West Africa as a whole achieved relatively high growth of 6% in 2014 despite the Ebola virus outbreak says African Economic Outlook, and this trend seems set to continue in 2015 and 2016 in 2015 and 2016


respectively, according


to African Development Bank figures it quotes. One effect of the Ebola crisis –


apart from its effect on tourism, a big money-earner for one or two countries in the region – has been its effect on regional cross- border trade. Burkina Faso, Côte d’Ivoire, Gambia and Senegal have been particularly hard-hit. As far as the African continent


as a whole is concerned, African Economic Outlook (AEO) says that domestic demand has continued to boost growth in many countries, taking up the slack leſt by flagging export markets. So far African economies have been relatively resilient to the sharp fall of international commodity


prices, with production oſten increasing despite lower prices. But if commodity prices remain low or decline further – which they could well do, given the problems in the Chinese economy - “growth in resource- rich countries might slow down.” Even so, “there are some positive effects, however, as lower oil prices ease inflation, increase real incomes and strengthen export markets.” Many African countries have


also improved their investment climate, which should enhance long-term growth prospects – indeed, “Benin, Côte d’Ivoire, the Democratic Republic of the Congo (DRC), Senegal and Togo are even in the top ten countries worldwide with the most reforms making it easier to do business,” AEO says. Prospects in East Africa are, if


anything, even more promising than in the west of the continent, according to the latest World Bank figures.


This region is


estimated to have grown by an impressive 7.1% in 2014 and while it is expected to be pegged back to around 5.6% this year, it will recover to around 6.7% in 2016.


While the largest country,


Kenya, has shown the slowest growth, large infrastructure projects are expected to boost growth to around 6-7% this year, while prospects are equally good if not better in Tanzania and Uganda – the latter doubtless helped


by its emerging oil


industry. Overall growth in sub-Saharan


Africa has however been pulled down by a slowdown in South Africa, contributing to a fairly meagre 2.7% estimated growth in 2014, recovering only marginally to an estimated 3.1% in 2015 and 3.5% predicted in 2016. Again, AEO lays the blame on soſter commodity prices.


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