US - Africa Infrastructure Conference

Economy

Event

18 Jun 2012
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Thank you for joining us this morning for the Supply Chain Management panel of the US Africa Infrastructure conference.

I’m Robert Tashima, the regional editor for Africa for the Oxford Business Group, an investor research firm that for nearly two decades has specialized in conducting field analyses on emerging markets. 

I’ve the honor of moderating today’s panel discussion and am delighted to find myself sharing the stage with some very accomplished individuals who represent the full spectrum of supply chains, from production to shipping to financing.

However, before introducing our speakers, I’d like to say a few words to help frame our discussion, to underline what exactly is so important about managing the circulation of products in Africa.

Infrastructure, as any investor knows, is crucial for a market’s business climate. It defines the limits of an economy’s growth potential – and nowhere is this more clear than via the impact it has on the efficiency of supply chains. 

Africa ably demonstrates this. The continent has immense productive potential, with huge consumer demand, vast natural resources and sizable scope for manufacturing. 

But crumbling roads and low capacity make the movement of goods a daunting task. Operating costs in Africa go up and productivity goes down. Just talk to traders who pay $300 more to ship a container between West African countries than to export it abroad. 

This is due in large part to poor infrastructure management.

Africa’s population is the fastest-growing of any continent – virtually doubling over the next forty years but while demands on existing infrastructure are increasing rapidly, supply is not. 

Some of the potholes in Lagos require a ladder to climb out of. In parts of Francophone West Africa, bribes can add up to $14 per 100km. Even in South Africa, which boasts some of the best transit corridors on the continent, due to congestion and inefficiency, importing a container takes three times as long as it does in the Netherlands.

In Nigeria, one of the world’s largest oil producers, electricity generation covers only a quarter of total demand. To give you a sense of the problem: the old Nigerian Electric Power Authority was known by its acronym of NEPA, which locals claimed stood for Never Expect Power Again. So that gives you an idea.

The sorts of problems – and the subsequent complications they cause for trading, shipping, warehousing and distribution – are fairly well known. But what is perhaps less well known is what countries across the continent are currently doing to address them. 

For example, private involvement in infrastructure management has increased. Privately managed toll roads are playing an increasing important role from Lagos to Johannesburg, allowing truckers – who are responsible for moving most of Africa’s goods from factory to consumer – to shorten delivery times.

By the same token, importers are able to receive shipments faster, thanks to the growing number of deep-sea ports under concession. Investments by Dubai Ports World into Dakar’s Port Autonome have helped cut processing costs to roughly that of Belgium.

Generating capacity is on the rise – there are coal plants in South Africa, dams in Cote d’Ivoire, gas in Ghana. Several countries also have begun to raise usage tariffs to ensure the financial viability of oil refineries and power plants, and incentivise IPPs.

Ultimately, African economies are ideally situated to see explosive growth. They benefit from bountiful advantages, such as demographic booms and resource wealth. 

But for investors to profit from these requires well-paved roads, reliable electricity and active maintenance schemes – and in many African countries, that is still some years away. Until that happens, firms both foreign and local will need inventive and intelligent approaches to managing their supply chains. 

Which is why we’re lucky to have with us today a panel of people who have significant expertise in doing just that, and who will be able to go into greater depth than I into some of the key strategies needed to maximise the opportunities and minimise the challenges of operating in Africa. 

 

 

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