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UPDATE - Q&A - AFRICA - JONATHAN HORN - JUNE/JULY 2010
Q&A with Safmarine's Africa Region Executive, Jonathan Horn ..
What has business been like for Safmarine in the Africa region in 2010 vs 2009? Africa volumes have delivered good growth in the first 4 - 5 months of 2010 compared to the same period in 2009.
From an African perspective, rates on the South Africa based trades were the first to drop in late 2008/early 2009 as a consequence of the economic slowdown. This was followed several months later by rate reductions on the West and East Africa trades. This seems to be largely because of the closer and broader dependence of the South African economy on the developed economies of the world.
We have also seen rates lifting during the first half of 2010 - this is positive news for the industry, although rate levels are still some way below where they need to be to ensure sustainable profitability. Rates in several trades are in fact currently still below the levels they were in 2008. We certainly foresee further rate rises across almost all trades in the months ahead.
Exports:
Both East and West Africa export volumes grew in 2009, despite the recession. South African exports, however, were well down in 2009, reflective of the difficult trading conditions experienced by most of our customer base in South Africa. In the first 4 - 5 months of 2010, the largely commodity driven exports of East and West Africa have delivered double digit growth while the South African market has shown growth too, but not at the same levels.
Imports:
From an imports perspective, we experienced volume growth in 2009 in both East and West Africa. In South Africa, the situation mirrored exports where there was a contraction in volumes in line with the market. In the first 4 - 5 months of 2010, imports have continued to show some growth in West Africa and somewhat stronger growth in East and South Africa (much of this associated with spin off activities from the World Cup).
Overall, Africa remains import dominant, with imports comprising roughly two thirds of the container flows. South Africa, reflective of an economy which has higher levels of value add, reflects a more balanced situation between imports and exports.
Have you noted any interested trends relating to business with Africa?
Overall business confidence in Africa seems to be increasing and sentiment is generally positive. Africa is consuming and spending more although levels of economic growth have not yet returned to the levels experienced in 2008.
From a logistics perspective, the Africa market is becoming more competitive and more active. More providers are serving this market and increasing their footprint across the continent This is certainly positive from an African perspective as it will assist in further opening up the continent to trade an investment.
What is your view on the risks associated with doing business with Africa?
The risks of doing business in Africa are often exaggerated. Much of the time one is confronted with negative perceptions (the risks and the scams) and not about the success stories, of which there are several. There clearly is risk to be managed in conducting business on the continent, however there are many experienced service providers who can guide potential investors or traders in successfully navigating this. Africa does hold many opportunities and several companies seem to be coming to the realization that doing business in Africa is an attractive option - many of these companies at this point seem to be of Far East and West Central Asian origin.
What is Safmarine's business focus for the Africa region?
Our customers remain at the centre of what we do. Our focus throughout 2010 and beyond will continue to be on meeting their needs in a reliable and cost competitive manner.
The post 2009 recession environment is a business world which has most likely changed forever. Business processes have been re-engineered, supply chains have been consolidated, and cost and buffers have been further removed; there are different approaches to manufacturing and procurement, supplier consolidation has been a common occurrence. Shipping lines have, and must continue to, adapt to these changes. This is one of the core reasons why we highly value close, long term relationships with our customers - this enables us to have early visibility of and \ respond to, the changes they make in their business.
One of the consequences of the post-recessionary environment is that in several instances, products are going to move in both different quantities and from different locations, and there is an increased visibility requirement in the supply chain, demanding closer cooperation between shippers and shipping lines. Reliability has become more important from a service point of view; there is less room for error or lack of predictability (less supply chain or manufacturing buffer) and it is becoming increasingly important for shipping lines to keep customers proactively informed about the status of their cargo.
Safmarine has responded to these trends by changing the way we operate, allowing us to better serve our customers. Our focus has been on evolving our organisational structures to allow for quicker decision-making and more simplified business processes. An important part of this focus has been to further empower staff dealing with our customers.
Optimising our cargo mix and restoring rates to sustainable levels also is an important objective. We need a cargo mix that pays its way in terms of enabling us to invest on an ongoing basis in maintaining a professional, reliable service for our customers.
What are your expectations for the container business for the rest of 2010?
We see both Government and private investment in Africa becoming stronger as levels of confidence return to world markets and this, together with the strengthening of several African economies, is likely to result in trade volumes continuing to grow in the second half of 2010.
Can you comment on infrastructural developments in your region?
China continues to invest heavily in infrastructure projects in Africa (road, rail, energy, telecoms) and this investment will have a long term positive impact. Landslide infrastructure has been a challenge in many African countries and continued investment is important if economies are to evolve further and attract investment.
What is your key message to your customers dealing with Africa?
Africa is one of Safmarine's core regions; we have a long term commitment to this market and wish to build value for ourselves, our shareholders and our customers. We're not here to make a quick buck on the next vessel call. That is why the partnership approach to our business is so important - we want do business with customers who share our long-term view on Africa and who are prepared to see through the good and the bad times together. Doing so will result in sustainable value creation for both our businesses.
Have you introduced any new services or service enhancements in 2010?
Safmarine's shipping service profile links Africa to or from most major parts of the globe. Safmarine currently has fully containerized services linking Africa: to and from Europe; to and from North America; to and from South America; to and from the middle East/West and Central Asia; to and from the Far East as well as Intra Africa.
We also offer multi-purpose vessel services into West Africa from the US, Asia, West and Central Asia, Europe and South Africa.
This year we introduced a new service from the Far East to Kenya, the Mashariki Express, which commenced on March 2, 2010. Although it is still a very new service the feedback we are getting from our customers is a very competitive product.
We also launched a first direct, fully-containerised shipping service between the Far East, the Arabian Gulf and the Horn of Africa. Another development was the addition of the port of Sharjah in the UAE to our Gulf-to-East Africa Service.
A further enhancement has been to our '225' fully-containerised service between South African and West Africa. We have added a direct call at the port of Cotonou in Benin and reduced the sailing frequency to every 13 days (down from 16) after adding a third vessel.
Can you provide more details on the Asia-Africa trade?
Trade with the Far East in particular has significantly impacted volumes into and out of Africa - in particular, over the last several years we've seen high volumes of commodity exports from Africa to support Chinese manufacturing, as well as imports of finished goods and materials into Africa. This has benefited both Safmarine's containerized and multi-purpose trades. From a Safmarine perspective, Asia has surpassed Europe as Africa's biggest trading partner volumetrically, with in excess of 40% of our total cargo movement between Africa and Asia.
China's presence in Africa is significant, continues to grow and there is clearly a long-term commitment to trade potential between the two regions.
(See also the ASIA UPDATE provided by Grant Daly).
What is the status on vessel/container capacity to and from Africa?
Utilisation on most of our trade head hauls has been strong year to date in 2010, in particular between the Far East and Africa. From a South African perspective, capacity is under pressure to and from the Far East with vessels running at very high utilization levels.
What is Safmarine's market share in Africa and which countries are the top three countries in the Africa region?
Market share is very difficult to accurately estimate across the continent. We do however estimate our market share of the overall Africa containerised trade to be in the 12% - 15% range. Clearly there is some variation in this across the countries. Approximately 50% - 55% of Safmarine's global volumes touch the African continent. Volumetrically, the top three countries for Safmarine Africa are South Africa, Kenya and Nigeria.
ends
as at 21 June 2010
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