Doing Business in Africa: March 2013

Friday, March 29, 2013

The Time it Takes

Today's blog is for those who import or export to Africa, especially West Africa and should be of specific interest to companies in the relocation and international moving business.

Time and again we come upon situations where an assignee expresses dismay at the time it takes to get a shipment through customs. This dismay then translates into a poor service evaluation and a perception that we are not doing our job.

My company is undertaking a complete review of local conditions, as they impact import and export, in an effort to help our clients set their customers expectations realistically when shipping to or from Africa. This is a large undertaking and will take some time to complete.

In the meantime, the statistics below are taken from a paper published by the World Bank (WB) and the International Finance Corporation (IFC) on the topic of doing business with the Economic Community of West African States (ECOWAS).

(http://www.doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Profiles/Regional/DB2012/DB12-Economic-Community-West-African-States.pdf )

ECOWAS has annual exports of almost $146 billion and exports of $115 billion (2011).
Annual growth from 2010 was 35.6% for exports and 34.3% for Imports.
The ten year average growth was 17.2% for exports and 16.6% for imports.

Obviously, this is a growing economic group and is focused on facilitating growth. The Transport and Telecommunication Directorate defines its programs as:

Develop Common Transport and Telecommunications policies, laws and regulations;

Develop an extensive network of all weather highways within the Community;

Formulate programmes for the improvement and integration of railway networks;

Formulate programmes for the improvement of coastal shipping services and inter state inland waterways and for the harmonization of maritime transport policies and services;

Promote the development of regional air transport services and implement air transport safety and security programmes;

Encourage the establishment and promotion of joint ventures and the participation of the private sector in the areas of Transport and Telecommunications.

(From the ECOWAS web site at www.comm.ecowas.int/dept/stand.php?id=f_f1_brief&lang=en)

Therefore, the following statistics, also from the WB/IFC paper, make for somewhat depressing reading.

Documents needed to export (number)

Worst = 10 (Burkina Faso)* Best = 5 (Cape Verde) Region Average is 7 World best = 2 (France)

Time to export (days)

Worst = 59 (Niger) Best = 11 (Senegal) Region average is 27 World best = 5 (Hong Kong)

Cost to export (US$ per Container)

Worst = 3545 (Niger) Best = 831 (Gambia, The) Region Average is 1508 world best = 450 (Malaysia)

NOTE: This is NOT the shipping cost but simply the cost to process the export.

Documents needed to import (number)

Worst = 10 (Burkina Faso)* Best = 5 (Cape Verde)* Region Average is 8 World best = 2 (France)

Time to import (days)

Worst = 64 (Niger) Best = 14 (Senegal)* Region Average is 30 World best = 4 (Singapore)

Cost to import (US$ per container)

Worst = 4030 (Burkina Faso) Best = 885 (Gambia, The) Region Average is 1896 World best = 435 (Malaysia)

In some areas there is certainly improvement but there is yet a long way to go. Below is a sample listing, from the WB/IFC paper, of steps taken by some member countries to improve the import and export processes.

DB Year
DB2010 Liberia

The trade process was expedited by creating a one-stop shop
bringing together various ministries and agencies, and
streamlining the inspection regime.

DB2010 Mali

Implementation of an electronic data interchange (EDI)
system, improvements in the terminals used by Malian
traders, and streamlining of required documentation have
reduced trade times.

DB2010 Senegal

Processes at the container terminal were improved,
shortening the time required to move containers from the
port of Dakar. Trade has also been facilitated by
improvements to the computerized customs system (GAINDE)
and the expansion of the number of agencies included in the
network.

DB2010 Sierra Leone

Despite successful efforts to reduce the time to trade in Sierra
Leone, some fees were increased, making trading across
borders more costly.

DB2009 Benin

The export process was sped up by two days by improving
port infrastructure.

DB2009 Liberia

Trade was reformed by reducing fees for customs clearance
and port and terminal handling.

DB2009 Mali

Trade was sped up by implementing an electronic data
interchange system and risk-based inspections and improving
border cooperation.

DB2009 Nigeria

Upgrades to the facilities at Apapa port in Lagos sped the
import and export process.

DB2009 Senegal

The top reformer globally in easing trade, Senegal introduced
a single window for customs clearance, cutting document
requirements in half. It also set up an electronic data
interchange system, implemented risk-based inspections,
extended the operating hours of customs, and improved port
and road infrastructure.

DB2008 Ghana

Operational changes at the Port Authority permitted to
reduce importation time.

You can see that Ghana, a country I have already referenced as 'ahead of the curve', was the first to implement changes. Senegal, if not listed as 'best' in the lists above, is second or third best in days to import or export. Of course, there is a cost for this, so they rank just below the Region Average in both categories.

As we await further improvements, perhaps this piece will assist you to set your clients' expectations at levels appropriate to their destination.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Wednesday, March 20, 2013

Africa's Economic Prospects

The map below comes courtesy of Business Insider
http://www.businessinsider.com/map-chinese-investments-in-africa-2012-8
by way of The Big Picture - http://www.ritholtz.com/blog/

It shows the scope of Chinese investment, both territorial and sectorial, across the sub-Saharan portion of the continent. Now consider that it shows projects underway since 2010, and you will get a sense of how large a footprint China is leaving on the continent.

(As an aside, you will also see that infrastructure in the form of road, rail and hydroelectric projects are well represented. Airport construction and modernization is less well funded but the one that surprises me most is that port construction is well down the list. As a first hand observer, I believe lack of adequate port facilities will be the single largest barrier to the fulfillment of Africa's potential and I will examine what other projects are underway in future blogs.)

Comments like the one below, from a news item on the web site of the Chinese Embassy in Ghana, and relating to a road project completed a few years ago, mirrors many others that show investment by the Chinese Government being used to pay Chinese companies to undertake projects.

"The Chinese government granted Ghana 180 million yuan (22.5 million U.S. dollars) interest-free loan for the highway rehabilitation and expansion project, undertaken by China Railway Wuju Group Corporation."

Projects funded by the government and contracted to Chinese firms expand Chinese employment, open new markets for materials and product and boost the GDP.

So, is it already too late to invest in Africa, both to provide much needed infrastructure and, by doing so, also boost the US economy?

In October of last year, Alain Taieb, Chairman of Mobilitas and the AGS Group, addressed the International Association of Movers and stated that the group currently has significant operations on three continents but, if he could only be in one of them, he would choose Africa. He said that he would make this choice because Africa is the future. He is not alone in this regard.

According to an article in the New York Times of August 9, 2012.

"The growth rate for the continent has crept up, rivaling Asia’s overall growth at the height of the “tiger economy” era of the 1990s, and it could reach 7 percent by 2015, according to the United Nations Development Program. And it is not just oil. Some of the top performers, like Rwanda, Ethiopia and Zambia, have not a drop of the stuff.

As the World Bank concluded in a recent report, “Africa could be on the brink of an economic takeoff, much like China was 30 years ago, and India 20 years ago.”

China is the biggest, but by no means the only, country making big bets in Africa, and not simply on extracting mineral resources. Indian telecom companies, Brazilian construction firms and other players in the developing world’s rising economies are betting on Africa.

“There is this newfangled, unprecedented interest in Africa,” said Chris Landsberg, a foreign affairs analyst at the University of Johannesburg. “Every single important country — whether China, France, Britain, India, Brazil, Turkey, you name it — they are all queuing up.”

American officials are quick to say that there is no fundamental competition between the United States and China in Africa: the continent has a nearly bottomless need for investment that no one country could fill."

An article by Professor Calestous Juma, published by the Belfer Center of Harvard University on Feb 15, of this year, quotes "Deepening Regional Integration" and "Shifting Trade Relations" as two of the three key forces driving African economic growth. I will expand on both in future blogs.

In the meantime, Professor Juma's full article may be read at:
http://www.technologyandpolicy.org/2013/02/15/africas-economic-growth-prospects/

It is well worth reading.

TW

Friday, March 8, 2013

Infrastructure Challenges

I want to take a break from writing of China's activities in Africa in order to give some indications of the infrastructure challenges that are the basis for much of China's involvement on the continent.

Congestion at the port of Mombasa in Kenya is the result of a number of these challenges coming together to create the worst of bottlenecks, as I observed first hand during a recent visit.

Mombasa has long been the poster child for port congestion, with vessels sitting for weeks waiting for a berth. The Kenya Port Authority (KPA) developed a plan to ease congestion by establishing Container Freight Stations (CFSs) within a 10 km perimeter of the port itself. The idea was (and is) to move containers quickly from the berths to the CFSs, where they would await clearance and transport to inland destinations. The photo below shows one of the CFSs (the blue and orange area in the right center) and the transports hauling containers in and out. One can see that the traffic volume is quite heavy.

The establishment of the CFSs has reduced the waiting time for a berth dramatically - from up to 2 weeks to a few days. However, all that has really occurred is that the containers now wait in the CFSs instead of at the port. There has been no improvement in clearance and delivery efficiency. There are three reasons for this.

1. The CFSs are privately operated and a primary source of income is storage fees. So there is no incentive to get containers on the road quickly.

2. The road from Mombasa to Nairobi (the primary inland destination) and on to Uganda is in poor shape. Much of it is two lane mountain highway where truck traffic makes driving a private car quite an adventure, causing one of my companions to remark "I have not come here to die!". Repairs and new construction are underway but, as with most highway projects, are causing more problems while in progress. There is also a shortage of available transports, which will remain a challenge even after the new road is completed.

3. There is another option for moving containers inland. A rail line exists between Mombasa and an Inland Container Depot outside Nairobi. However, the depot sits almost empty because the rail line is woefully inadequate. It is narrow gauge, (built in 1902), has only a single line and the engines are only capable of hauling up to 30 containers. Parts for such old equipment is also difficult to come by so breakdowns are frequent. The end result is that less than 7% of container traffic travels by rail.

According to some sources, there is little momentum toward upgrading the railway. Most funding would come from transport taxes, and trucking companies are unwilling to pay for something that will erode their business. (The fact that there are not enough trucks to handle the current volume anyway seems to be academic to the discussion.)

Economic development in the region (the countries of Kenya, Uganda, Tanzania, Rwanda and Burundi are cooperating as the East African Community) may be the spur that drives infrastructure development forward. Vast reserves of natural resources in the region and a growing domestic market will attract additional outside investment, including more from China. The road improvement project will facilitate development of recent oil and natural gas finds in the Kenya/Uganda border region. Then, perhaps, we can look forward to replacement of the current rail line with a standard gauge model.

Another project, named LAPSSET (Lamu Port and Southern Sudan-Ethiopia Transport), aims to develop Lamu as a sister port to Mombasa, with rail, road and pipeline links to South Sudan and Ethiopia. It is an ambitious plan and has just been implemented after many years on the drawing board. It is an encouraging sign that change is coming.

More information can be found on the Kenya Vision 2030 website at http://www.vision2030.go.ke/index.php/pillars/project/macro_enablers/181

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Saturday, March 2, 2013

China in Africa #2

I have had a lot of response to the last blog about China in Africa. It seems that many are somewhat surprised at how much China is involved in infrastructure development across the continent.

In the next series, be prepared to be even more astonished.

For a start, the graph below, courtesy of the US Government Accountability Office, shows imports and exports to/from Africa by the US and China. On the import side, China has marched from importing less than 20% of the US volume in 2001 to almost matching us in 2011. They now import far more ore, minerals and metals from Africa than does the US.

Exports to Africa show an even more staggering trend. China sends to Africa more machinery and transportation equipment than our total exports. From barely over a billion dollars in 2001, their volume has risen to over 20 billion in the course of ten years.

If this is not impressive enough, consider that, according to World Bank, China accounts for about 3% of equipment supply in Africa but 31% of the total value of civil works on the continent. So it is reasonable to suppose that the bulk of the above 'machinery and transportation equipment' portion of the chart is geared toward infrastructure projects managed by Chinese companies.

Should your boat remain un-rocked by that statistic, mull over this one. The same World Bank report shows that France is the next biggest winner in civil works projects in Africa with 12% and no other nation, including the USA, has more than 5%.

Is the glass half empty or half full? Are we so far behind that we cannot catch up or is there so much potential that we will wake up and start to view Africa in a different light, thus opening up the opportunities that China has already seen and enjoyed? More on that topic later. In the meantime, in coming blogs, I will provide more insight into China's activities in Africa.