Logistics Solutions for New Territories – A Growth Plan for Africa

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Presentation about growth opportunities in Africa delivered by Ingo Brauckmann at LogiCon 2013 in Amsterdam.

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Logistics Solutions for New Territories – A Growth Plan for Africa

  1. 1. Name of Department and/or Name of PresenterLogistics Solutions for New Territories –A Growth Plan for AfricaIngo BrauckmannAmsterdam, Feb 6, 2013
  2. 2. What Do You Think When You Hear the Word “Africa”? 10% …Source: EMNID research 2010, 1002 participants > 14 yrs in GermanyGrow Africa – DHL | February 2013 DHL | Page 2
  3. 3. What Do You Think When You Hear the Word “Africa”?and 47% … think about hunger …Grow Africa – DHL | February 2013 DHL | Page 3
  4. 4. In Fact It Is a Continent Full of Contradictions … vs.Grow Africa – DHL | February 2013 DHL | Page 4
  5. 5. Why Is Africa in Focus?With largely positive economic and business indicators, Africa iscurrently experiencing growth similar to BRIC a few years ago Emerging Economies Fast-growing Consumer Markets • Africa‟s collective GDP will grow from • Africa‟s population will double, from one to USD 1.6tn in 2008 to USD 2.6tn in 20201) two billion, over the next 40 years • Between 2011 and 2015, 7 of the 10 fastest- • In 2020, Africa‟s consumer spending will growing economies will be African2) reach USD 1.4tn – Annual GDP growth of 7–8% – Almost twice as much as RU today, with (incl. TZ, GH, NG) USD 876mn in 2011 – Bigger than RU growth of 4%3) • By 2030 over 40% of the total population will live in a citySource: MRSC, McKinsey “Lions on the move” 2011, Ernst and Young “Africa Attractiveness Survey” 2011;1) Real GDP 2011: IN = USD 2.0tn, BR and IT = USD 2.4tn, UK = USD 2.6tn, FR = USD 2.8tn; 2) ET, MZ, TZ, CG, GH, ZA, NG; 3) CAGR 2011–2015Grow Africa – DHL | February 2013 DHL | Page 5
  6. 6. Why Is Africa in Focus?The business environment is truly changing Changing Business Environment Summary Emerging Economies Fast-growing Consumer Markets • A generation ago, the BRIC accounted for 1% Changing Business Environment of African trade – Today they make up 20%, and by 2030 the rate is expected to be 50% • Intra-African trade increased from 6% to 13% of the total volume • There are 20 African companies with revenues It is Africa’s time over USD 3bnSource: MRSC, McKinsey “Lions on the move” 2011, Ernst and Young “Africa Attractiveness Survey” 2011Grow Africa – DHL | February 2013 DHL | Page 6
  7. 7. Why Do Business in Africa?Companies mainly move operations to Africa for access to resources • Western countries and CN have high demand for abundant natural resources in Africa 10% global oil reserves 40% global gold reserves 80–90% global chrome and platinum metal groups • Access to African resources has increased since recent liberalizations • Political instability remains a threat to growing business in countries (e.g. recent terrorism in NG) Likelihood in short and medium termSource: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street JournalGrow Africa – DHL | February 2013 DHL | Page 7
  8. 8. Why Do Business in Africa?Companies also move to Africa for the growing domestic demand • Household consumption expenditure as high as 70% • Emergence of sizeable middle class: 128mn households with income >USD 5,0001) in 2020 vs. USD 85mn in 2008 – rivals the middle class in CN and IN • This middle class is keen on consuming more (incl. food, beverages, consumer durables, mobile phones, etc.) and gaining access to property Likelihood in short and medium termSource: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street Journal; 1) $PPP 2005Grow Africa – DHL | February 2013 DHL | Page 8
  9. 9. Why Do Business in Africa?Contrary to West-2-East moves, it’s NOT for lower production costs • Workforce is large and cheap, property inexpensive; however Labor is relatively unskilled Poor infrastructure limits manufacturers‟ ability to produce locally for export Difficult access to power supply reduces competitiveness (e.g. in KE) • Manufacturing in Africa is interesting For bulk/heavy products meant for domestic market If required by regulators for domestic sales (e.g. drugs) Likelihood in short and medium termSource: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street JournalGrow Africa – DHL | February 2013 DHL | Page 9
  10. 10. Views on Growth Potential in AfricaConclusions of the ‘Grow Africa’ project Growth in Africa is sizable and sustainable Customers (Western Multinationals) are focusing on Africa Competitive landscape provides room to grow Risk relatively high in Africa; however, mitigation possible Logistics companies need to seize the growth opportunity It’s time to Grow AfricaSource: Inhouse ConsultingGrow Africa – DHL | February 2013 DHL | Page 10
  11. 11. Typical Customer Maturity Path of Western PlayersLack of knowledge is hindering global players entering African marketsTest Enter Expand Global companies Commencing in just Supply chains of both start a footprint in one or perhaps a few types of players Africa by leveraging countries (often become increasingly existing distributors. South Africa). complex.Source: Inhouse Consulting, Expert interviewsGrow Africa – DHL | February 2013 DHL | Page 11
  12. 12. DHL Supply Chain & DHL Global ForwardingCurrent Footprint • 8 countries • 5,503 Employees • 146 operational locations • 591,700m2 warehousing • Fleet of over 1,100 vehicles • Regional offices: Dubai & Nairobi • MEA Head Office: Johannesburg • 54 countries • 1,500 employees • 58 terminals • 6 highly secured locations DGF DSC DGF & DSCGrow Africa – DHL | February 2013 DHL | Page 12
  13. 13. Capturing Growth Opportunities in AfricaGrowth directly linked to a willingness to take risks Risk-Reward Curve The Way Forward – Alternatives Capturing growth in Africa relies on a company‟s Choose between „the status quo‟ and different willingness to invest – hence take risks. levels of investment Continue • Secure existing business 1 As-Is • Continue with existing development activities • Invest in additional sales/ Support Risk 1 2 3 2 business development Sales Push resources • Build up local expertise Invest in • Speculatively invest in 3 Capacity infrastructure e.g. multi-user warehousing • And/or acquire local players PotentialGrow Africa – DHL | February 2013 DHL | Page 13
  14. 14. How Can We Grow the Business Footprint in Africa Together?DHL Supply Chain should continue to position its knowledge ofAfrica and act as advisor to customers wishing to enter the marketAction Consider Focus – Priorities sectors and sub-sectors Where to “place our chips” – given limited with high and sustainable growth, as well as financial and human resources – to harvest relevant logistical needs most growth? Target – Continue identification of global Which customers do we believe will enter players entering/growing in Africa and select and successfully expand in Africa, ready to few customers DSC should “bet” on grow together with us? Advise – Continue to leverage DHL local How and when should we engage with expertise of business practices in Africa to customers to influence their decision to enter/ help customers with limited local experience expand in Africa? Invest – Further build up capabilities to meet How can we make sure that we are capable requirements of customers expanding; leverage to capture growth opportunities when they possibilities for cross-selling in other countries arise?Source: Inhouse ConsultingGrow Africa – DHL | February 2013 DHL | Page 14
  15. 15. Lessons & Key MessagesA unique opportunity • Africa demonstrates obvious potential • The time to act is NOW • Opportunity to build a collaborative infrastructure from scratch – Retail and Consumer business divisions (e.g. Carrefour)Grow Africa – DHL | February 2013 DHL | Page 15

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