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UPDATE/OUTLOOK - AFRICA - JONATHAN HORN - OCTOBER 2009
- Africa's economic growth in 2010 is likely to remain ahead of the global average and companies should be developing the opportunities presented by this sizeable, under-developed market. "Doing business in Africa does present a different set of challenges, but the rewards are there, provided you take the time to understand the market, have a long-term commitment and a very clear idea of what you want to achieve. In my view, the continent should be pulling out all the stops to encourage investment, with a particular emphasis on job creation, by improving tax and labour regimes and quality levels, amongst others. The reality is that there are emerging economies across other continents competing for the same investment, and as Africans, we need to instill confidence and ensure the investment package we present is the most attractive."
- Safmarine is expecting increased demand for vessel space on all services to Africa as cargo volumes, both in and out of Africa, start to pick up. "There is, however, still a degree of uncertainty as to when the recovery signs emerging will gain substantial momentum and it is likely to take some time for cargo volume growth levels to return to the highs experienced in the years up to mid 2008.
- "The current global economic crisis has been significant and its impact widely felt. This has led to a dramatic change in consumer behaviour and consumer confidence; the purchasing and consumption patterns (which drive commodity demand, a key component of current Africa trade) of the future are likely to be very different to those of the past. Although demand for space has improved, we foresee no significant change to the available capacity picture in the near term. "An increase in capacity will only be justified by sustainable demand at freight rates which justify additional deployment."
- Examples of deploying capacity in line with customer demand through the economic crisis - and which support the Safmarine approach of growing its business in tandem with that of its customers - are Safmarine's introduction of a new fully-containerised service (225 Service) which provides a quick, direct link between South Africa and the West African markets of Ivory Coast, Nigeria and Ghana and the Safari 3 service which links the Far East, Indian Ocean Islands and Mozambique (Maputo). "Safmarine introduced the 225 service - which forms part of Safmarine's Intra-Africa trade - and the Safari 3 service mid year as a reflection of our confidence in the long-term potential of the Africa trade."
- While Safmarine has experienced modest growth in the Intra-Africa, West and East Africa trades, the general picture for the South African trades has not been as rosy. "2009 to date has been a very tough year for South African importers and exporters. Volumes have been down to the order of 20% on 2008 levels and we're hoping to see an improved picture in 2010. We've already seen demand for space firming and an increase in cargo volumes, in and out of South Africa in what has traditionally been our peak period, which is an encouraging sign."
- Another area starting to show signs of improvement is that of freight rates. "Freight rates, across all of our African trades are very, in fact unsustainably, low and have been for most of 2009. We are confident, however, that the situation will improve in the balance of 2009 and into 2010 as demand strengthens and GRIs (general rate increases) are accepted by the market. Freight rates that generate a reasonable return on investment on deployed assets are key to ensuring that we are able to continue providing the reliable, first-class shipping service our customers expect from Safmarine."
ends
as at 1 October 2009
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