Could 2017 be the year that Africa’s logistics and infrastructure takes off? While the US, UK and European economies are affected by uncertainty – Brexit, elections in France, the Netherlands and Germany, the uncertainty that Trump is creating – growth in Africa could provide a glimmer of hope. And where there is growth, there is demand for investment in logistics.
At first glance, prospects in Africa do not appear too promising. The two main sub-Saharan economies – South Africa and Nigeria – had a poor 2016 and the IMF expects growth of only 0.6% in both next year. But look away from those countries and the picture improves. Kenya and Ghana are forging ahead, investing in infrastructure and building a middle class that will drive consumption and economic growth over the long term. Plans for an African Tripartite Free-Trade Area (TFTA) − encompassing 26 economies from the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and Southern African Development Community (SADC) − should get underway in 2017. We have been here before. The African economic miracle has been just around the corner for decades. To move away from dependency on natural resources and build sustainable growth, governments across the continent need to make it easier for its citizens to trade. That will require massive and sustained investment in logistics, which is currently one of the biggest factors holding back economic growth. In East Africa, transit costs are some of the highest in the world, with the World Bank estimating that logistics costs account for 40% of consumer prices there. It takes nearly double the time to ship containers from Mombasa in Kenya to Kigali in Rwanda than it does to move the same container from Shanghai to Mombasa.
With these challenges come big opportunities for logistics service providers. The 2016 Agility Emerging Markets Logistics Index singles out South Africa, Nigeria, Kenya and Ghana as the most promising logistics markets in sub-Saharan Africa.
And it is in Ghana that logistics services providers Van den Bosch and MTG have opened a tank cleaning station – in the port of Tema, to be exact. This station, the first in West Africa to be fitted out to Western European standards, opened in November last year. “A growing number of companies are choosing to ship their liquids to Africa as bulk freight instead of small packaging,” said Paul van de Vorle, a member of the team of directors at Van den Bosch. The tank cleaning station will support those companies looking to make that move and link inbound and outbound transport flows.
Something as simple as opening a tank cleaning station can open up new possibilities, such as creating a better balance between inbound and outbound cargo flows and reducing transport of empty containers. The station also creates the possibility of transporting liquid bulk to landlocked countries such as Burkina Faso and Niger.
This is not Van den Bosch’s first move into Africa. Last year the company began cooperation with Portside, which acts as the appointed agent for the Ghanaian market and signed a joint venture with Aspen International that opened up a new site in Cape Town.
And it is not the only company looking to get in early as businesses look for improved logistics in Africa. Brenntag, a chemical distribution company, has signed an agreement acquiring Warren Chem, a chemicals distributor focusing on the pharma and food industries in South Africa. Chicago-based Seko Logistics, global provider of supply chain solutions, has opened offices in Uganda and Ethiopia. Ethiopian Airlines Cargo Terminal, which is currently under construction, has reached 82 per cent completion and it is scheduled to be in operation by April 2017. The terminal will have capacity for 1.2 million tonnes of cargo including facilities for perishable goods, which highlights the increasing importance of improving facilities for improving cold-chain services as well, as countries move to higher levels of food processing.
These businesses aren’t investing in logistics in Africa out of charity – there is no Bob Geldof on a stage somewhere urging cash for investment. These are well planned, properly costed and pragmatic business decisions – the first companies in on the ground can expect to make a big return on their investments as the continent’s economy grows.
After a tricky 2016 that delivered more bad news than good, it is nice to start the New Year with a more optimistic tone. Let’s hope it continues!