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FS - AFRICA AND SOUTH AFRICA SPECIFIC INFO - APRIL 2008
SAFMARINE IN AFRICA AND SOUTH AFRICA - AT A GLANCE
- Safmarine is widely known as the 'Africa Shipping Specialist'.
-Safmarine currently operates in over 42 countries in Africa.
-Forecasts are that global container trade will grow at around 10% and Safmarine believes much of that growth is likely to come from Asia and Africa.
-Safmarine has played a pivotal role in opening up South Africa - and Africa's - trade routes since its formation in 1946. With approximately 90% of South Africa's imports and exports moving by sea, Safmarine plays an important role in helping grow the local economy by boosting trade - and creating much-needed jobs for South Africans and Africans.
-The South African market remains a key and important component of the global Safmarine business. This is influenced by and due to a number of interlinking factors, including South Africa's strategic position on world trade routes, its importance in North / South trades, South Africa's prominent economic position in Africa and its strong economy and growing market.
-For Safmarine, South Africa is one of its largest single country markets in Safmarine - in fact South Africa accounts for approximately half of Safmarine's Africa import and export volumes.
-Shipping volumes from Asia to Africa are growing two to three times faster than volumes between Africa and the continents of Europe and North America. China, currently one of the world's fastest growing economies, is growing at an average rate of close to 10% GDP per annum and Safmarine - which provides a total of 35 shipping services between the Far East and Africa - says Africa's trade with China is "booming".
OVERVIEW - SAFMARINE IN SOUTH AFRICA
Important market - China:
• China continues to grow in importance as a supply area for Southern Africa.
• Safmarine has ramped up capacity and now have 14 'South Africa Maximum size-type vessels' dedicated to the trade between South Africa and the Far East.
• Africa is one of China's top trading partners and it is likely the strong economic and trade growth between the two continents will last for another one or two decades. This is in view of China's need for oil and raw material and Africa's need for basic product.
Infrastructure
• South African ports are limited in draft and cannot yet accommodate the new generation 'mega' vessels, with vessels in the 4000-5000teu (twenty foot equivalent container) being the largest that can safely be accommodated.
• Within South Africa, a large number of Safmarine's customers are impacted by infrastructural shortcomings, in particular with regard to the movement of containers by rail. Infrastructural shotcomings translate into additional costs in the supply chain.
• In addition, South African ports - while showing gains in productivity standards in the latter part of last year - require further investments; port infrastructure has a direct impact on South African importers and exporters.
South Africa - trade growth/movement
• Overall, container import volumes grew by 11% in '07 from '06 (Transnet figures).
• Growth in the first quarter of '08 is up 12% ytd versus last year, but there are signs that momentum is slowing. Export volumes grew 16% ytd versus last year, driven by strong commodity exports, a greater portion of which are switching to containers as the mode of transport.
Safmarine and the SA automotive sector
• Passenger car sales are reported to have dropped 17% ytd. However, several local manufacturers have robust export programmes and this is keeping import flows of CKD (parts) strong.
Infrastructural development
• Material for infrastructural development in South Africa, as well as growth in mining activity in neighbouring territories, is also supporting import growth. We anticipate a slowdown in goods aimed at the retail sector.
Export
• Looking at the South African export market (2006 to '07), Transnet figures show an export volume growth of approximately 10% for dry and reefer cargoes. With specific regard to fruit exports, Safmarine has this year instituted a call at Philadelphia in the USA which will enable SA producers to greater penetrate this very substantial market.
• It is disappointing to note that manufactured goods exports have not grown, especially against a background of a weaker Rand. A possible reason for this apparent stagnation of the manufacturing sector appears to be the difficulty many SA manufacturers have in expanding their markets as factory price inflation currently exceeds any Rand rate of exchange erosion.
Trade balance
• The South African market remains import dominant. The ratio does vary, and is reducing, but in 2007 the ratio is 1.26 based on Transnet/National Ports Authority (NPA) data. It is expected that the ratio may increase although there is a strong focus by the South African Government on the need to increase exports.
Safmarine services ex South Africa
• Safmarine offers scheduled services on all of South Africa's main trade routes. We constantly assess trading patterns and areas of growth and aim to match our vessel capacity with growth opportunities.
Fuel/bunkers
• Fuel is a major component of the total shipping cost and significant rises in bunker fuel prices have forced above average rate increases and put pressure on margins.
• Bunker prices have tripled within the last three years and bunker costs now constitute nearly half of the total vessel costs, up from 20% ten years ago.
• Safmarine has introduced a new formula for its floating BAF (Bunker Adjustment Factor); the aim with the new formula is to provide a simple, fair, and transparent BAF for our customers. In addition, it also allows Safmarine to share and recover the extraordinary costs provided by the increasing bunker prices.
• The Safmarine BAF formula is based on principles that are common in other transportation industries like airlines and parcel services. In these industries, prices and rates reflect fluctuations in fuel prices, and customers accept this as part of doing business in an industry, which is very reliant on fuel.
• Safmarine's various trades will implement the new Safmarine BAF formula separately, beginning the first quarter of 2008. The BAF calculator can be found on www.safmarine.com
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