TRANSPORT: INVISIBLE FORCE VISIBLE IMPACTS Mervin Chetty, Transnet Port Terminals World Bank Transportation Forum 2009 1 April 2009 0
KEY MESSAGES Africa has been and will continue to be one of the fastest growing economic regions in the world based on strong fundamentals Transport is an important enabler of Africa s growth. However, current transport and logistics system are insufficient : Maritime sector is well positioned to boost African trade quickly Land based transport will remain the challenge Combination of hardware (infrastructure) and software (policies) necessary to develop efficient transport and logistics players in Africa 1
AFTER THIRTY YEARS OF SLOW ECONOMIC GROWTH, AFRICA IS ACCELERATING 1987 1994 1995 2000 2001 2005 2005 2007 2007 SSA GDP Real US$2000bn, CAGR 5.9% 5.7% 472 500 4.9% 447 165 230 2.6% 290 359 359 3.5% 371 384 401 423 1970 1980 1990 2000 2000 2001 2002 2003 2004 2005 2006 2007 Source: UN data; WMM; McKinsey analysis 2
HOWEVER AFRICA s POSITION IN WORLD TRADE IS DETERIORATING Share of merchandise trade* Developing economies: Africa % of total world 10 9 8 7 6 5 4 3 2 Export Import 1 0 1948 60 70 80 90 2000 2007 * Exports and imports Source: UNCTAD, World Bank WDI 3
A NUMBER OF ISSUES MAKE AFRICA s TRANSPORTATION AND LOGISTICS CHALLENGING Long distances Distance in nautical miles (thsd) to New York Tokyo 5.9 7.2 7.3 4.2 International transport costs faced by African countries are almost twice as high as the world average Text High transportation unit costs Dubai Durban Dubai US$ 000 per TEU to Europe 7.2 Durban Percent of GDP 6.1 12.6 3.0 Australia Luanda World average Africa Structural challenges Aging and unreliable infrastructure Incompatibility of technologies and standards Insufficient road network (only 10% paved) No effective transit agreements * Exports and imports Source: UNCTAD, World Bank WDI 4
LANDLOCKED COUNTRIES FACE A BIGGER CHALLENGE Scope and nature of challenge The handicap of being landlocked in Africa Almost 1 country out of 3 is landlocked in Africa 26% of African territory in landlocked countries More than 200m inhabitants in Africa live in a landlocked country (or 25% of the population in Africa) 12 out of 15 African landlocked countries are classified as lowincome Potential impact Percentage of logistics cost of GDP 6 12 30 Europe Develop Landing locked countries developing countries Case Example: DRC Linking DRC with Central Africa via effective Roadlink could create upto UD$30bn in Intra African trade annually Source: Bowersox (2005) and Ojala (2005) 5
LANDLOCKED COUNTRIES SUFFER EVEN MORE THAN MARITIME COUNTRIES Landlocked countries Maritime countries Maroc Tunisia Maroc Tunisia Western Sahara Algeria Lybia Egypt Western Sahara Algeria Lybia Egypt Mauritania Mali Niger Sénégal Eritrea Burkina Faso Tchad Sudan Djibouti Guinea Bénin Somalia Côte Ghana Nigeria Central Ethiopia Liberia d'ivoire African Togo Cameroon Uganda Republic Equatorial Guinea Congo Rwanda Kenia Gabon Zaire Burundi Tanzania Angola Malawi Zambia Mozambique Namibia Zimbabwe Madagascar Botswana Swaziland Lesotho South Africa Mauritania Mali Niger Sénégal Eritrea Burkina Faso Tchad Sudan Djibouti Guinea Bénin Somalia Côte Ghana Nigeria Central Ethiopia Liberia d'ivoire African Togo Cameroon Uganda Republic Equatorial Guinea Congo Rwanda Kenia Gabon Zaire Burundi Tanzania Angola Malawi Zambia Mozambique Namibia Zimbabwe Madagascar Botswana Swaziland Lesotho South Africa Cost to export containers US$ 000/TEU 2.3 2.3 1.0 0.7 0.4 DRC Botswana South Africa Mauritius China Source: www.mapcrow.info 6
SEVERAL CHALLENGES AFFECT TRANSPORT IN AFRICA IMPERFECT MARKETS Distance (nm) and Sea Freight rates (USD/TEU) from North European hub, spring 2008 Exports rates from a North European Hub Total price (base rate+baf/caf+congestion surcharge) for FEU (in $) without THC 8,000 Luanda Angola 7,000 Lobito Angola Madagascar 6,000 Cape Verde Bissau Guinea Reunion/Mauritius Antofagasta Chile Africa 5,000 4,000 3,000 Mauretania Costa Rica Honduras Douala Mombasa Tanga Tanzania Dar Es Salaam Tanzania Iquique Chile Australia and New Zealand Far East India/Pakistan Middle East Australia/New Zealand South African ports Baltic/Iberian Peninsula South and Latin America 2,000 Far East Mediterranean 1,000 0 0 Source: Flynn Consulting 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Distance from North European hub Nautical miles 7
SUBSTANTIAL PORT CAPACITY AVAILABLE AND GROWING HOWEVER HOW WILL THIS BE FINANCED IN THE CURRENT ECONOMIC CRISES? TPT Other Current capacity Additional capacity Major Sub Saharan African ports Equatorial Guinea Gabon Luanda Congo Zaire Rwanda Burundi Uganda Malawi Kenya Tanzania Total investment in the region R53bn to reach capacity of 11.1m TEU Lamu Mombasa Dar es Saalam (HPH) Mozambique Ports Port Louis Tema Lagos Mombasa Djibouti Capacity expectations '000 TEU 550 450 950 490 510 1 000 436 564 90 540 NA 1 500 400 3 000 3 400 Angola Zambia Dar es Salaam 350 Madagascar Zimbabwe Namibia Botswana Maputo Walvis Bay Swaziland Lesotho South Africa Durban Ngqura Cape Town Port Elizabeth Tomasina Port Louis (Mauritius) Luanda Walvis Bay Dakar Tomasina Maputo 300 112 100 250 250 500 250 1 500 1 750 0 112 * Future capacity point Source: Dynamar; press search; Mauritius Shipping and Port Conference Presentation 2008; UN Comtrade Data; www.ports.co.za; DP World website 8
LOGISTICS PLAYER HAVE 3 CORE LEVERS TO RESPOND TO THIS FINANCIAL CRISIS A SHIPPING LINE EXAMPLE Structural levers Operational levers Diversification levers Example levers Typical characteristics Capacity reduction: laying up/scrapping of significant capacity Capacity acquisition: adopting a dominant cost curve position based on negotiating favorable shipyard deals Industry consolidation: pursuing mergers on major trades lanes Regulation: engaging regulators on changes to allow structural consolidation Require bilateral or collective action Operational excellence: reduce cost positions including S&OP and cash operating cost Transactional pricing: manage margins and leakages Contract/spot positiontaking: proactively renegotiate contracts to lock in long term volumes in return for short term rate cuts Network redesign: focus on niche trades and exiting unprofitable trunk corridors Potential for individual action Swing/flexible asset strategy: exiting capacity ownership, focusing on charter market e.g., sale and leaseback Proprietary asset investment: aggressively building bottleneck asset positions through vertical integration/long term deals Potential for individual action SOURCE: McKinsey 9
THOUGHT STARTERS FOR POSSIBLE SOLUTIONS Core elements of effective transport/logistics solutions Hardware: right infrastructure Sofware: Policies, regulation Players: effective logistics and Transportation companies Potential starting points Focus on selected arteries/corridors Connect Africa to main trade routes through limited nodes/hubs Feed Africa through highperforming (short sea) shipping network Build up skills and develop a culture of reliability 10
WHAT SHOULD BE THE POLICY RESPONSE FOR TRANSPORT SOLUTIONS? What we know already! Transport prices in Africa remains the highest in the World Africa will continue to grow and growth will raise the demand for transport solutions Being landlocked implies high transaction costs Lack of capital in this current depressed financial market to invest in infrastructure What should policy makers do? Foster a policy environment that enables hardware and software to be developed to have competitive transport system Gear the policy environment to ensure both public and private sector has a role to play Seize the opportunity to advance a structural reform agenda in order to boost growth The role of government should be an active one to preserve economic stability as in the case of the Asian doctrine 11
KEY MESSAGES SUMMARY Africa has been and will continue to be one of the fastest growing economic regions in the world based on strong fundamentals Transport is an important enabler of Africas growth. However current transport and logistics system are insufficient Maritime sector well positioned to boost African trade quickly Land based transport will remain the challenge Combination of hardware (infrastructure) and software (policies) necessary to develop efficient transport and logistics players in Africa 12
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SUB SAHARAN AFRICA SUFFERS FROM HIGH COSTS TO EXPORT Cost to export (US$ per container) China Mauritius 390 Least cost Global 728 South Africa 1 087 Mozambique 1 155 Madagascar 1 182 Lesotho 1 188 Tanzania 1 212 Namibia 1 539 Malawi 1 623 Swaziland 1 798 Seychelles 1 839 Angola 1 850 Zimbabwe 1 879 Zambia 2 098 Congo, Dem. Rep. 2 307 Botswana 2 328 Source: Doing Business Database; World Bank survey June 2008 15
A HUB STRATEGY COULD LOWER THE COST OF TRADE Definition Sub Saharan Africa today: Multiple gateway system Multiple mediumsize ports that serve as gateway system for the country Sub Saharan Africa in the future: Transhipment hub and large gateway feeder ports Port of a significant size that has large volumes of transhipment volume (transhipment hub) as well as gateway volume (loadcentre) and additional large ports that serve as gateway feeder Benefits in a stakeholder perspective Sub Saharan African economy Cargo owners Shipping lines Operators Source: Transnet; Flynn consulting Additional economic activity originating from the hub will induce additional employment opportunities and stimulate growth Increased national trade competitiveness (through economies of scale, scope, and density) Total yearly supply chain costs savings Improved service levels Improved time to cargo owner Increased maritime connectivity improves access to regional & global markets Reduction in number of calls Optimisation of vessel utilisation (fewer stops and increased efficiency at hub) Improved port efficiency, feasibility, and speed Focusing of investments on facilities with critical mass instead of multiplication and scattering into subscale facilities Co ordination of long term capacity planning and scale economies Additional transhipment revenues 16 16