LOGISTICS: Turning Red Tape into Green Lights in Africa
Recent Western Cape Business News
African growth presents a wealth of opportunities for companies looking to expand in the region – but they need logistics and CEP partners with “local” expertise.
It’s not surprising that sub-Saharan Africa is tipped to be the world’s biggest region of economic growth for the next 20 years – the continent is already out-performing other continents, in the midst of a global recession. The discovery of oil and gas reserves in both West and East Africa, added to the continent’s already huge mineral resource reserves, is fuelling the massive industrial scramble, which in turn is creating a burgeoning middle class and a boom in consumptive demand. In 2012, only 101 of the world’s 220 countries achieved economic growth rates of 3.4% or higher. Of those 101, 35 were in sub-Saharan Africa – eight of which boasted growth of 8% or more. In 2014, according to the United Nations Department of Economic and Social Affairs, African economies should see average growth of 4.7%, compared to 1.5% in Western Europe or Japan, and 2.5% in the USA. South Africa can expect growth of 2.7% at best – so for South African companies, the rest of the continent presents a lucrative opportunity.
In many ways however, Africa is still “the Dark Continent”. Originally, the colonial nickname referred to vast areas of territory unexplored by Westerners. In the post-colonial era, it became cynical shorthand for an area plagued by war, poor governance, high levels of corruption and low levels of democracy. But in the past 15 years, sub-Saharan Africa has seen a major turnaround – the continent’s current healthy growth levels are partly the result of increasing levels of democratisation, decreasing levels of corruption, the restoration and expansion of once-decaying infrastructures, and increasing access to electrification, safe water and education, and partly as a result of the region’s natural riches. But each country presents its own challenges – often influenced by the identity of its former colonial masters, and how well those countries have integrated into global trade since independence – in areas like law, customs tariffs and levels of infrastructure. To penetrate and operate productively in these markets, businesses need delivery partners with local knowledge in each area.
Local footprint and distribution essential
With eCommerce in Africa expected to grow by as much as 40% annually (according to a 2014 survey by yStats.com) – coupled with Africa’s exponential growth in internet connectivity via cellphone – and industries from mining to manufacturing turning to specialist logistics and Express Parcel partners to enable them to service customers in the region, as well as to manage what have traditionally been high supply-chain costs, the Courier and Express Parcel (CEP) sector is ideally placed to benefit from this growth. To compete, though, CEPs need two vital competencies: international footprint, and strong existing in-country distribution networks. Benchmark research on the CEP industry conducted by independent research analysts TerraNova in 2013 highlighted two different approaches to achieving these competencies.
In terms of CEP usage, SA-based multinational SkyNet was named as a leading company. Large multinationals typically rely on their own extensive international networks, with offices in most of Africa’s capital cities. They then sub-contract to various local CEP companies to supplement its own last-mile delivery capability. SkyNet has opted instead to find the top CEP outfit in each new country it enters, and convert it to a SkyNet franchise – allowing it greater oversight and control throughout the delivery process, with real-time visibility through its iSkyNet software. SkyNet currently operates this way in the 19 most important sub Saharan African countries with subcontracted agents in the remaining territories. They believe that the visibility, commitment and local knowledge that comes with local ownership, in a tightly controlled international network gives them competitive advantage. They are aggressively expanding this footprint, adding several countries every year. Businesses looking for opportunities in Africa need to consider both international footprint and in-country distribution know-how when evaluating possible CEP partners. The Dark Continent is becoming a land of opportunity, but savvy explorers still know the value of local guides.
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