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Issue 7 2015 - Freight Business Journal Red tape and crumbling transport links still hamper trade


In his speech to the Ambrosetti Forum in Italy on 4 September, one-time United Nations secretary-general and Ghanaian national, Kofi Annan highlighted Africa’s infrastructure deficit as a fundamental impediment to development. Significant growth is taking place, but inadequate road and rail networks are slowing progress. Poor infrastructure, daunting bureaucracy, human resources issues and continued corruption remain significant barriers to trade. Although efforts are being


made to rectify the situation the results have yet to be seen on the ground. For example, in a recent report from the African


Development Bank the average customs transaction involved 20- 30 parties, 40 documents, 200 data points and the re-keying of 60-70% of data at least once. This is having a significant


impact on companies across the region, with delays in the supply chain leading to slower lead times and disproportionately high costs. Despite this, there is


hope that however slow,


progress is being made through the various African regional trading blocs. For example, The Economic Community of West African States (ECOWAS) recently announced plans to implement a single customs tariff regime for 2015. According to the World Bank,


deficient infrastructure has at least as large an impact on trade as corruption, crime, financial market and red tape constraints. The cost of redressing Africa’s infrastructure deficit is estimated at US$38 billion of investment per year, and a further US$37 billion per year in operations and maintenance; an overall price tag of US$75 billion, or 12% of Africa’s GDP. The World Bank puts the current funding gap at US$35 billion per year. The African Development Bank estimates that costs for transporting goods are 63% higher in Africa than in developed countries, hampering international and local business, due to poor infrastructure.


Nimble forwarder keeps one step ahead of the market


Agility is the only top ten logistics company that has its roots in emerging markets, says senior vice president global business development, Mohammed Esa. In fact, “most of our investment is there,” he told a recent press conference in London. Agility prides itself on its ability to provide specialised, tailor-made solutions and this fits in well with the needs of developing markets ,where more standardised solutions devised with Europe or North America may not be appropriate for Africa, Asia or Latin America. Whatever its problems, “absolutely a good


Africa is


prospect,” Esa told FBJ in an interview. “It’s the final logistics frontier.” Africa, he believes, “is on almost every CEO’s agenda, it’s on everybody’s map.” Eventually, Africa will


become a more ‘normal’ logistics market, he predicts, with a consumption led economy and manufactured as well as raw commodity exports - and Agility wants to be on the ground floor of that development. The forwarder is present


at all points of the compass in Africa. It has long had an involvement in Egypt, which Esa sees as a promising country provided political problems do


not re-emerge. East Africa is developing


well, with major projects to build ports and railways in Kenya and Tanzania,


for


example. Mozambique is another big focus area for Agility. In West Africa, the main


points of interest include Nigeria, Ghana and Angola. Again, there are ambitious schemes to build new deepsea ports in Nigeria and elsewhere. “We have recently opened


new offices in Nigeria, in Lagos and Port Harcourt,” Esa explains. Another new office is in


Luanda, Angola and the forwarder is also looking closely at South Africa, where it currently doesn’t have its own direct presence but has ambitions. Mozambique with its emerging oil industry is another


country ripe for


market entry. Agility wants more than just


offices, though. “We would also look to put in distribution centres. For example, we are looking at setting up an Agility Distribution Park in Ghana.” The small Anglophone


west African country is seen as a reasonably easy place to do business in, compared with


larger but much more problematic Nigeria, and could


be an excellent entry point for companies seeking to break into the region. It’s all very well having


big plans for expansion, but ambition must be tempered with the realisation that big challenges remain to be tackled – lack of infrastructure, red tape and corruption in many places. All these challenges push up costs, to the extent that goods in the shops can cost 60% more in some African countries compared with the equivalent in western Europe. Nevertheless, says Esa: think


“I the investment in


infrastructure will happen – there is more political stability than in the past. Yes, there is a funding gap and a need for more capital, but it is on the agenda. Governments know that if they are going to build up their countries, they need to address this.” Red tape is perhaps a more


intractable problem in Africa, Esa considers. “It’s more difficult; it’s systemic and those issues have been around for a long time, and they have to be addressed.” As anyone who has shipped


goods into Africa will attest, it can take anything from several days to a week before goods are finally cleared at the port or airport – often the process


///AFRICA


Photographers paint a positive picture


Agility announced the winners of its Africa 2015 Photo Competition on 14 September. The contest, the first-ever pan-Africa photo competition to focus on modern Africa, invited amateur and professional photographers to submit images that show the growth and development of Africa taking shape amid record investment, rising incomes and improving living standards. The winning images of Luanda


in Angola, wheat fields in Kenya and a child holding a cell phone were selected from more than 700 photographs submitted from 33 countries in the categories of industry, technology and cities. Prizes of US$2,000 was awarded


for each competition category to Carlos Aguiar from Angola (cities), Ahmed A Osman from Kenya (industry) and Mohsen Taha from Uganda (technology). Mohsen Taha received an additional Grand Prize of US$2,000 for his photo of a boy holding a mobile phone as the overall competition winner. The winning photographs


will be shown on CNBC Africa broadcasts and published


in


Forbes Africa and Forbes Africa Woman magazines. Agility Africa chief executive,


Geoffrey White, added: “Agility launched this competition to help showcase some of the very positive advancements in infrastructure and technology happening across Africa. As a company investing heavily in Africa’s future, we’re delighted to see how well these photographs have captured the region’s fast-paced evolution and modern spirit.”


can occupy more time than the voyage or flight from Europe. A close cousin of the red


tape problem is corruption, but Esa is optimistic that this is one African malady for which a cure is in sight. Measures such as the UK’s Foreign Corrupt Practices Act and its equivalents in the US and other countries have concentrated minds. The banning of a rival forwarder, Panalpina, from the lucrative Nigerian project market has served as a wake-up call for the rest of the industry, and companies are now much more aware of the need to be vigilant. “It is forcing change, you


can’t hide anymore,” says Esa. In the short term, Esa sees


trade growth out of Africa as being commodity-led. As from other emerging markets, this sector is increasing quickly. True, there are major concerns over the slowdown in the Chinese economy - “there’s definitely a risk there, if interest rates go up and there’s less capital around.” Esa doesn’t see other countries such as India as fully plugging the gap if China exits the scene in a big way. But we may have to get used


to it. China’s current relatively modest economic growth may be “the new normal” and it is questionable whether its


massive consumption of raw materials from Africa and huge manufactured exports was sustainable in the long term. The other big commodity


headache is the drop in the oil price. Oil dominates the overseas trade of countries such as Nigeria and many others, such as Mozambique, have been pinning their hopes on major oil and gas discoveries as a ticket to future economic prosperity. A fall in the oil price, while it may be good news in other respects, almost inevitably means a cut in government revenue and funds available for investment in many parts of Africa.


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