Logistical Challenges in Africa

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1 AON NABC Commodity Trade Network Meeting Rotterdam, June 5, 2014 Logistical Challenges in Africa Presentation by Jean-Pierre Vanhooff Africa Marine Surveys (Overseas) cvba

2 Overview of Presentation 1. Commodity Trade = huge topic => selection of commodities to / from Africa 2. Africa = huge continent => restrictions on the subject 3. Proposed discussion: a) Economical position of Africa in a nutshell b) Self-sustainability of Africa? c) Commodity imports required? d) Commodity exports possible? e) Present logistics situation f) Investments in logistics

3 1. Commodity Trade to / from Africa Soft commodities: 1. Import a. Rice & Wheat b. Sugar c. Vegetable oil d. Frozen fish / frozen meet e. Vegetables (potatoes / onions) 2. Export a. Cocoa b. Shea nuts c. Coffee d. Fresh fruit (bananas / pineapples / mango etc.) e. Fresh fish and fresh roses

4 1. Commodity Trade to / from Africa Hard commodities: 1. Import a. Energy equipment: i. on-/off-shore drilling equipment ii. Power stations equipment (transformers, substations...) b. Construction equipment (bulldozers, cranes...) c. Construction materials (cement / construction iron / (float)glass...) d. Refined oil products e. Trucks & cars f. Electrical & electronic equipment g. Project cargoes (e.g. Heineken brewery equipment)

5 1. Commodity Trade to / from Africa Hard commodities: 2. Export a. Oil and gas b. Ores & Minerals (bauxite, iron, copper, gold, diamonds...) c. Fertilizers d. Logs and timber e. Cotton

6 2. Africa = huge continent Impossible to generalise for ALL African Ports : Africa = 54 countries & 1 billion people! individual situation for each port & each country to be assessed Logistics situation of only few ports will be assessed, in a. South Africa b. East Africa c. West Africa d. North Africa See 3.e. below

7 3.a. Economical Position of Africa 1. Exports related revenue (mostly from Hard Commodities export) should be huge & countries should be financially wealthy! 2. However, in reality: 1. EVERYTHING needs to be imported and paid in Hard Currency 2. Large part of the revenue from exports is not arriving in the Federal Reserve of the countries => budget deficit! 3. Little to no investments in public sector (logistics / housing / health / education) 4. All investments are done by Private Groups (or at best Public Private Partnerships)

8 3.b. Self-sustainability of Africa? 1. Soft Commodities The soil and climate allow for 2 or 3 crops per year. In principle (as per 2003 Maputo Declaration on Agriculture & Food Security) African States committed to strive to be self-sustainable for domestic food production within 5 years, by: investing in domestic agriculture programs: Modernisation of farming equipment Use of fertilizers / pesticides / irrigation Better harvesting & milling processes = better quality of end product (equal to imported Western / Eastern quality) Increasing import dues on imported foodstuffs

9 3.b. Self-sustainability of Africa? HOWEVER, this goal has not yet, and will not soon, be achieved due to: Political inconsequence / theft: money (often received!) NOT invested in the agriculture projects for which it was designed Political instability: no genuine incentive for long term foreign investments by private farmers / groups: nationalised / confiscated (e.g. Zimbabwe: from net exporter of maize and vegetables, became net importer) Corruption: huge import levies on food-stuffs which do not all find their way to the Federal Reserve facilitation fees paid by (foreign) importers Politicians prefer to continue to import foodstuffs => Huge dependence on IMPORT of soft commodities

10 3.b. Self-sustainability of Africa? 2. Hard Commodities In principle African States should be TOTALLY independent from the West (and the East!): Enough crude oil and gas => enough energy Enough ores and minerals => steel mills could be operated => heavy and light industry should be possible locally HOWEVER, No investments in refineries => only limited oil refineries => they export their crude and re-import the refined products = expensive! No investments in heavy industry => the ores & minerals are exported to smelters abroad: (local smelters nationalised = bankrupt) => they export their ores and reimport the milled steel = expensive! Political instability: no genuine incentive for long term investments by private groups: nationalised / confiscated => Huge dependence on IMPORT of hard commodities

11 3.c. Commodity imports required? Both Soft and Hard commodities will still need to be imported into Africa for at least the next 20 years

12 3.d. Commodity exports possible? 1. Soft commodities Facts: Populations in West & Far East growing + use of food for bio-fuels => more need for food Populations in Far East get richer => more food & more luxury products (e.g. Chocolate) Conclusion: With correct political climate, agriculture in Africa could not only be made self-sustainable, but netexporter of staple food (maize, rice, wheat) luxury products (cocoa, coffee, fresh fish and roses...) will continue to be exported

13 3.d. Commodity exports possible? 2. Hard commodities Facts: Economic growth in Far East => more need for energy & raw materials Conclusion: Investors from China and India are investing massively in buying mines, energy production sites & timber in Africa for export to Far East.

14 Conclusion so far: there will be for the coming years an increase in both imported (mostly soft) commodities and in exported (mostly hard) commodities to and from Africa. What about the logistics situation in Africa?

15 a. Impossible to generalise for ALL African Ports : Africa = 54 countries & 1 billion people! individual situation for each port & each country to be assessed Only capita selecta of few ports in a. South Africa b. East Africa c. West Africa d. North Africa

16 South Africa - Republic of South Africa Main Ports: Durban, East London, Port Elisabeth, Capetown : - very good port and logistics infrastructure. - International Shipping groups operating dedicated terminals Railroads: fairly well organised by Spoornet Roads: well maintained Security: relatively safe, although cases of high-jacking of full trucks with copper and other ores originating from DRC & Zimbabwe

17 South Africa - Zimbabwe Main Ports: none: landlocked - very poor logistics infrastructure: old warehouses - International Logistics Groups cannot operate Railroads: poorly maintained railroads and old rolling stock => derailments/ damage to cargo Roads: poorly maintained, and regular shortage of petrol Security: fairly poor, with lots of corruption & cases of high-jacking of full trucks with copper and other ores going to South Africa for shipment

18 South Africa - Mozambique Main Ports: Maputo, Beira, Nacala: - relatively good port and logistics infrastructure. - International Shipping & Logistics groups operating terminals - Development plans for inland waterways in the North Railroads: fairly well organised by CFM, but limited hinterland connections. Roads: well maintained Security: relatively safe

19 South Africa - Angola Main Ports: Luanda, Lobito, Namibe & Soyo: - Old port and logistics infrastructure. - Huge congestion in Luanda port : - Delays in delivery of goods - Containers lost in stack - International Shipping groups starting investing / operating dedicated terminals, but still long way to go Railroads: almost inexistent Roads: some roads OK, but e.g. in Luanda port area needs improving Security: relatively safe

20 East Africa - Tanzania Main Port: Dar-es-Salaam - Old port and logistics infrastructure, slow handling - International Shipping groups starting investing but still long way to go Railroads: 2 systems: -TRC : connecting Tanzania with Uganda, Kenya, Burundi & Rwanda, BUT in need of major repairs - TAZARO: connecting Dar es Salaam with Zambia, but down, due to competition from South African Railways linking Durban & Port Elisabeth to Zambia Roads: in rather poor condition and not all paved Security: relatively safe

21 East Africa - Kenya Main Ports: Mombasa - Old port and logistics infrastructure, not suitable for Post Panamax vessels - NEW deepwater port development Project for Lamu Port (start 2011) which will link with all neighbouring countries - International Shipping groups starting investing / operating dedicated terminals, but still long way to go Railroads: single track from Mombasa via Nairobi to Ugandan border: in poor condition Roads: extensive network, but most roads in deplorable condition Security: relatively unsafe, especially with new famine!

22 West Africa - Democratic Republic Congo Main Ports: Matadi, Boma: - Old port and logistics infrastructure. - International Shipping groups starting investing / operating dedicated terminals, but still long way to go Railroads: in poor condition. Only between Matadi and Kinshasa +/- operational. In urgent need of improvement Roads: some roads OK but most roads bad Security: relatively safe in the ports

23 West Africa - Congo Main Ports: Pointe Noire: - Old port and logistics infrastructure. - International Shipping groups starting investing / operating dedicated terminals, but still long way to go Railroads: main line from Pointe Noire to Brazzaville Roads: some roads OK Security: relatively safe

24 West Africa - Cameroon Main Ports: Douala - Old port and logistics infrastructure. - International Shipping groups starting investing / operating dedicated terminals, but still long way to go Railroads: mainly between Douala and Yaoundé in poor condition (many derailments) but being privatized Roads: only main roads paved & +/- OK Security: relatively safe

25 West Africa - Cameroon

29 West Africa - Nigeria Main Ports: Lagos, Port Harcourt, Warri, Onne: - Old port and logistics infrastructure. - International Shipping groups starting investing / operating dedicated terminals Railroads: in poor condition and only limited distance covered: still same as 100 years ago! Investments planned. Roads: some roads OK, but in Lagos heavily congested Condition of trucks: bad to very bad Security: relatively unsafe, especially Delta Area

30 West Africa - Nigeria

31 West Africa - Ghana Main Ports: Tema, Takoradi - Old port and logistics infrastructure. - International Shipping groups starting investing / operating dedicated terminals, but still long way to go Railroads: almost inexistent Roads: most roads OK Security: safe

32 West Africa - Ivory Coast Main Ports: Abidjan, San Pedro - Old port and logistics infrastructure. - International Shipping groups starting investing / operating dedicated terminals, but still long way to go Railroads: almost inexistent Roads: some roads OK, Security: volatile, but at present again relatively safe

33 West Africa - Sierra Leone Main Port: Freetown - Old port and logistics infrastructure. - Container berths privatised in 2011 (Bolloré Group) - Breakbulk berths: still operated by Sierra Leone Port Authority Railroads: inexistant Roads: some roads OK, but towards hinterland bad, especially in rainy season Security: safe inside port and relatively safe outside port.

34 West Africa - Guinée Conakry Main Port: Conakry - Old port and logistics infrastructure. - International Shipping groups (e.g. SDV/Bolloré) starting investing / operating dedicated terminals & warehouses, but still long way to go Railroads: only used for carrying ores to Conakry Roads: some roads OK, but towards hinterland bad, especially in rainy season Condition of trucks: bad to very bad Security: relatively unsafe IN and OUTSIDE port with lots of theft / pilferage (regularly attempts for military coups)

35 West Africa - Guinée Conakry

36 West Africa - Senegal Main Ports: Dakar - Improving port and logistics infrastructure. - International Shipping groups starting investing / operating dedicated terminals, Railroads: main line linking Dakar with Mali Roads: most roads OK Security: relatively safe

37 West Africa - Senegal Train to Mali

38 West Africa - Senegal Storage of bags of rice in the open under tarpaulins

39 North Africa - Egypt Main Ports: Alexandria, Abukir, Damietta, Port Said (Med) // Suez, Sokhna (Red Sea): - Good infrastructure. - Government invested in infrastructure, roads inside the ports, new terminals, warehouses and weigh scales, especially Sokhna Port. - Private groups now also investing in new berths, storage areas for general cargo and (reefer) containers, silos for grains Railroads: only used between the ports and the Dekheilla steel mills Roads: inside ports are OK, outside in moderate condition & unsafe Security: inside ports: high, outside unsafe, especially today with tense political situation

40 3.f. Investments in logistics 1. All major (container) shipping lines are increasing their capacity to Africa Maersk & CMA CGM krijgen tweederde marktaandeel op de route tussen Azië en West Afrika (NT19/03/2014) Delmas versterkt lijndiensten tussen Azië en West Afrika (NT19/02/2014) CMA CGM heeft eerste stap ggezet in plannen om alle wereldwijde diensten te verbinden met West Afrika (NT30/01/2014) Deutsche Afrika-Linien heeft zijn vaargebied uitgebreid met Marokko, Tunesïe, Algerije en Turkije (NT28/01/2014) OPDR open eigen kantoor in Marokko (NT14/01/2014) Hartmann start in februari lijndienst tussen Noord Europa, Gabon, Congo en Angola (NT13/12/2013)

41 3.f. Investments in logistics 1. All major (container) shipping lines are increasing their capacity to Africa Delmas voert grondige herschikking van zijn aanbod tussen Europa en West Afrika door om grotere schepen te kunnen inzetten (NT29/11/2013) Messina start eerste lijndienst tussen Antwerpen en West Afrika (NT28/11/2013) MSC start eigen dienst naar Somalië (11/07/2013) Europese containerexport naar Afrika duidelijk in de lift: rederijen willen grotere schepen inzetten, maar nog niet alle Afrikaanse havens zijn daar nu klaar voor (NT20/11/2013)

42 3.f. Investments in logistics 2. Various international terminal groups are investing in new fixed or mobile port infrastructure (DP World, AP Möller, MSC, Delmas,) 3. Various international stevedoring and warehousing groups invest in new port warehouses (e.g. Bolloré Africa Logistics, Nectar, Vigan)

43 3.f. Investments in logistics

44 3.f. Investments in logistics Picture produced by courtesy of Nectar Group Ltd

45 3.f. Investments in logistics 4. Various foreign private (steel) groups are investing in railroads and port facilities to load their own commodities faster (e.g. ArcelorMittal) 5. HOWEVER, little efforts by local governments to improve the hinterland connections

46 Conclusion 1. Larger commodity flows expected to and from Africa 2. Logistics services until and at port of discharge improving 3. Hinterland connections remain problematic 4. Lack of skilled technicians and repair facilities => in case of mechanical damage this often results in Constructive Total Loss of equipment / project cargo + considerable delay!

47 AON - NABC Thank you Africa Marine Surveys (Overseas) cvba

- Moshe Motlohi, Head of Strategy, Transnet Port Terminals

TRANSNET PORT TERMINALS Complimentary port system as part of the Southern Africa port partnering projects Opportunities for working with ports and terminals in Africa - Moshe Motlohi, Head of Strategy,