At the Africa Global Business Forum in Dubai yesterday transport and logistics companies were quick to highlight the benefits of looking to sub-Saharan Africa – the world’s last frontier market.
The backing came despite the area’s poor infrastructure and the political problems that can hurt unwary foreign investors in the region.
Geoffrey White, the chief executive of the Africa region at logistics firm Agility, is optimistic. With a rapidly growing population, and relatively strong per capita growth rates, “Africa without any doubt is a huge growth opportunity from a consumer spending point of view,” Mr White said. Agriculture – the continent has 60 per cent of the world’s unused arable land – and oil and gas, following major new resource finds in Egypt and Mozambique, are two particular bright spots, he added.
That is why Agility plans to build about 70 distribution hubs across the continent, with the first phase of projects in Côte d’Ivoire, Nigeria, Ghana and Angola set to break ground within two years.
Sultan Bin Sulayem, the chairman of the Dubai ports company DP World, said that his company had witnessed how strong economic growth had led to “rising incomes, falling poverty and … step[s] toward economic diversification”.
But shortages of infrastructure – the World Bank estimates that sub-Saharan Africa needs US$93 billion of new spending on infrastructure annually over the next 10 years – mean that doing business on the continent often means that it falls to the company to perform tasks such as building service roads and installing power capacity.
That creates an opportunity for logistics firms. But it means that trading between African nations is difficult.
“Getting two [sub-Saharan African] countries to trade with each other is difficult because of infrastructure and red tape,” Mr Bin Sulayem said.
While sub-Saharan Africa currently spends about $6.8bn per year on building roads, this figure needs to be closer to $10bn, according to the Economist Intelligence Unit which, together with DP World, produced an infrastructure report released at yesterday’s forum.
Mr White said that “currently, the reality is that it’s much simpler to base yourself in Dubai and move in and out of the countries you want to trade in than to move goods regionally”.
“Part of that is just the efficiency of [Dubai’s] logistics network. Part of it is that it’s welcoming and a good place to trade, and part of it is the access Emirates has provided to the Africa market,” he said.
“Dubai is becoming the most logical place to do business with Africa.”
Political risk remains a major concern for logistics firms. DP World is engaged in a protracted legal dispute with the government of Djibouti over claims of corruption in the awarding of a contract to build the African nation’s Doraleh port and free zone. DP World denies wrongdoing. The South African telecoms operator MTN was hit with a $5.2bn fine by Nigerian authorities after failing to comply with SIM card registration rules, while Rio Tinto saw its Simandou concession wrested from its control after a coup, awarded to rivals, and then returned back to Rio Tinto following the resumption of democratic rule.
But Mr White thinks that Agility’s projects will not attract unwanted government attention of this kind.
“Individually, each of the projects isn’t like building an oil block or opening an airport – it’s a single distribution hub. it isn’t hugely above the radar.”
Besides, in a region with such poor connectivity, latent demand for basic warehousing and trade capacity is sizeable. “In Africa, the market is so underserved [by logistics firms] that just by building the capacity the business is there,” Mr White said. “You can just absorb the natural growth that’s already there.”
abouyamourn@thenational.ae
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