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Transport and logistics business in Africa

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Delivered by Dr Andrew Shaw, during the 2015 annual SAAFF Congress for freight forwarders in Durban, South Africa.

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Transport and logistics business in Africa

  1. 1. Transport and Logistics Business in Africa October 2015 The South African Association of Freight Forwarders “New Frontiers” Durban 15th October 2015
  2. 2. PwC Africa’s Outlook 2 Transport & Logistics in Africa Africa – The drive for Infrastructure Africa - Trade 1 2 4 3
  3. 3. PwC Africa’s Outlook 3
  4. 4. PwC Mega Trends 4 The five megatrends are a primary driver of growth and opportunity for CP&I investment in Africa Transport and Logistics Business in Africa 4
  5. 5. Where are we today in sub-Saharan Africa? 5 SSA Globally, infrastructure spend set to grow by 10% each year – spend to reach US$180 billion per annum by 2025 from US$60 billion in 2013 Worldwide investment will reach $9trillion per annum (by 2025) Total spend between 2014 and 2025 $78 trillion Forecast annual GDP growth for sub-Saharan expected to continue at the rate of +/- 5% pa SSA population is 13% of global population 270m (2000) 940m (2013) The SSA population is forecast to nearly double to over 1.75 billion by 2040 Every $ spent on capital projects generates economic return of 5%- 25% p.a. Transport and Logistics Business in Africa
  6. 6. Where are we today in sub-Saharan Africa? 6 Africa wide, the cost of fuel for back up power was $1b in 2013 Less than 8% of Africa’s trade is with itself - between 30-60% in other regions 30% of global O&G discoveries in the last 5 years have been made in SSA Only 290m out of 940m people (31%) have access to electricity in SSA Only 10% of hydro- power potential being used in SSA Poor T&L infrastructure increases costs of goods by 60% for landlocked countries in Africa Transport and Logistics Business in Africa
  7. 7. PwC Transport & Logistics in Africa 7
  8. 8. Africa Gearing Up - 10 Countries in profile DRC Angola South Africa Mozam- bique Tanzania Kenya Egypt Algeria Nigeria Ghana Africa is the next place-to-be for doing business The lions follow the tigers: • 6 of the top ten fastest growing economies 2001- 10 were in Africa • Between 2010 and 2016 it will be another 6 • Africa is home to 1 billion people • By 2035, Africa’s labour force will be larger than China’s Growing demand offers huge potential for T&L companies Transport and Logistics Business in Africa 8
  9. 9. PwC ‘Sizing up’ the growth potential The size of the bubbles represents the size of the economy (GDP 2012) Sources: World Bank, International Monetary Fund Algeria US$ 209bn Angola US$ 115bn DRC US$ 17bn Egypt US$ 257bn Ghana US$ 40bn Kenya US$ 41bn Mozambique US$ 14bn Nigeria US$ 270bn South Africa US$ 384bn Tanzania US$ 28bn 0 20 40 60 80 100 120 140 160 180 200 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% GDP annual growth estimates for the period 2012-2017 shown as a % for each country EstimatedpopulationasatmidOctober2013(Millions) Transport and Logistics Business in Africa 9
  10. 10. PwC 10 Economies - Current state 10 Demographic & Resources Economics Business Environment Trade & Logistics Transport Infrastructure Algeria Angola DRC Egypt Ghana Kenya Mozambique Nigeria South Africa Tanzania Attractive Average Unattractive Transport and Logistics Business in Africa 10
  11. 11. PwC 5 Years forward Strong Improvement Expected Stagnation / marginal change expected 11Some Improvement Expected Demographic & Resources Economics Business Environment Trade & Logistics Transport Infrastructure Expected Growth (GDP 2012-2017) Algeria 3,6% Angola 5,7% DRC 8,6% Egypt 3,4% Ghana 5,9% Kenya 6,2% Mozambique 8,0% Nigeria 6,8% South Africa 3,0% Tanzania 7,0% Attractive Average Unattractive
  12. 12. PwC Africa – The drive for Infrastructure 12
  13. 13. Sub-Saharan Africa 13 Nearly 70-80% of infrastructure expenditure expected to be in transport and utilities sectors • Electricity production and distribution will experience substantial growth in annual spending from $15bn in 2012 to $55bn by 2025 • Transportation and communication account for a large portion of investment in most countries. • The social infrastructure, spending is expected to increase for both healthcare and educational facilities because of public health problems—notably HIV/ AIDS—and growth in the school-age population. Infrastructure spending by type 2013 Transport and Logistics Business in Africa
  14. 14. Sub-Saharan Africa 14 Robust growth in the region is likely to drive infrastructure investment • The Sub-Saharan Africa’s (SSA) infrastructure market is dominated by two major regional economies—South Africa and Nigeria. These two account for over two-thirds of infrastructure investment • The upcoming 2015 version of the “Outlook to 2025” may indicate a moderation in short term growth driven by recent political and economic shifts • Prospects in other countries remain strong as the robust growth in the region will fuel infrastructure spending Composition of Sub-Saharan Africa Infrastructure market - 2013 Transport and Logistics Business in Africa
  15. 15. Sub-Saharan Africa 15 Only Nigeria and Ethiopia have some room to accrue debt • Debt burdens are lower as a proportion of GDP in most African economies than in “advanced” economies or even middle- income countries • But with a lower tax-take relative to GDP (generally 15-20% across Africa, compared to 25% in Argentina, 35% in Brazil, and even higher in Europe), as well as a poorer credit history than richer countries, financial market perceptions of sustainable debt loads in African economies tend to be much lower Government Debt in Sub-Saharan Africa - 2013 Transport and Logistics Business in Africa
  16. 16. Assessing the global transport infrastructure market: Outlook from 2015 to 2025 16 Roads will likely remain the biggest area of investment, especially for growth such as in Africa. This is partly due to the rise in prosperity and, hence, car ownership and also the large volumes of freight now moving on Africa’s roads. Although the smallest overall spend on infrastructure Sub-Saharan Africa is the fastest growing regional infrastructure market, with a projected average increase in transport spending of over 11% per year from 2015 to 2025. Most of this growth is expected in roads and ports. Cumulative transport Infrastructure Investment to 2015 Transport and Logistics Business in Africa
  17. 17. PwC Africa - Trade 17
  18. 18. PwC Africa Trade • A notable trend is the growth in south-south trade globally up from 8% in 1990 to 24% in 2011, • Africa’s export growth of 6.1% in 2012 was the highest of any region the world . • Africa’s top exporters (2012) - Nigeria ($116 bill), SA ($87 bill), Angola ($74 bill), Algeria ($72 bill), Libya ($62 bill), • Africa’s top importers (2012) – South Africa ($124 bill), Egypt ($69 bill), Nigeria ($51 bill), Algeria ($47 bill), Morocco ($45 bill), • Africa’s agricultural exports grew by 14% between 2005 and 2011, • China increased its share of Africa exports from 3.2% in 2000 to 13% in 2011, • Trade between African states remains comparatively low, but is growing at 13.5% (2000 to 2010), 18 “Investment in improved transport, information technology and financial services allow service providers to play a bigger role in global value chain networks. [African] … firms have become increasingly reliant on efficient logistics. This includes multi- modal transport, freight and cargo handling, storage and warehousing as well as supply-chain management ” Source: AfDB, OECD, UNDP (2014) African Economic Outlook Transport and Logistics Business in Africa
  19. 19. Africa - Port Cargo Analysis Djibouti (2009) Accra, Ghana (2014) Abidjan, Ivory Coast (2012) Mombasa, Kenya (2009) Lagos, Nigeria (2012) Durban, South Africa (2014) Dakar, Senegal (2013) 8.7 7.3 3.0 20.3 10.2 7.5 6.8 11.1 12.1 12.2 19.1 0.8 Luanda, Angola (2012) Lome, Togo (2013) Pointe-Noire, Congo (2012) Dar es Salaam, Tanzania (2009) Maputo, Mozambique (2007) Beira, Mozambique (2007) Lobito, Angola (2010) Nacala, Mozambique (2007) 1.9 43.8 21.7 Cargo Traffic Volume (Tons million) Source: Port Management Association, Lloyd’s List Ports of The World, Port Authority of each port Above 15m Tons 10 to 15m Tons Below 10m Tons Transport and Logistics Business in Africa 19
  20. 20. SADC countries (Excl SA) with domestic freight volumes in excess of 20 Mill tons per annum 12% 49% DRC 12% Kenya Mozambique Tanzania Angola Zambia Uganda Zimbabwe Manufacturing Mining Agriculture Source: Transnet Long Term Planning Framework 2014 38% growth to 2043 21% growth to 2043 15% growth to 2043 24% growth to 2043 21% growth to 2043 23% growth to 2043 14% growth to 2043 16% growth to 2043 20 10 Mill Tons
  21. 21. PwC Foreign Direct Investment (FDI) into Africa 21Transport and Logistics Business in Africa • FDI into Africa increased by 64 percent to $87bn in 2014, while the number of FDI projects declined by 6 percent to 660 in 2014, • Coal, Oil & Natural Gas is by far the top FDI sector in Africa, • Manufacturing was the top business function by capital investment in FDI accounting for 33 percent • 13 percent of global FDI in 2014, was destined for Africa, • Between 2010 and 2014, FDI peaked in 2014 at $87bn. Coal, Oil & Natural Gas Real Estate Alt/Renewable Energy Chemicals Communications Building & Cons Material Metals Textiles Warehousing & Storage Food & Tobacco Other FDI by Value ($US Bill) Egypt $17.9 Angola $16.1 Nigeria $10.7 Mozambique $8.8 Morocco $4.6 Ghana $4.4 South Africa $3.8 Zambia $3 Ethiopia $2.8 Kenya $2.2 Other $12.4 Source: The Africa Investment Report 2015– An FDI Destination on the Rise, FDI Intelligence, 9% 2% 2% 2% 3% 5% 7% 8% 11% 14% 38%The Africa Investment Report 2015 indicates that: “The jump in manufacturing investment activity in a region that has long been an exporter of raw materials without much value added activity is particularly exciting” Adrienne Klasa (Editor)
  22. 22. PwC A Brief Summary of the Key Points • Infrastructure investment in Africa will outpace other regions but remains small next to investment in south east Asia, • Coal, Oil and Gas are the primary driver of investment and economic growth in Africa, • Nigeria remains the fastest growing larger economy in Africa. Other large but smaller economies such as Angola, Kenya, Ghana, Tanzania are also experiencing significant growth. Large economies such as South Africa , Egypt and Algeria are lagging behind, • The transport and logistics market is well paced to keep up with growth in most African countries but is constrained by poor infrastructure, particularly at ports and in respect of the quality of roads, • 70-80% of African infrastructure expenditure is expected to be in the transport and utilities sector, • South Africa and Nigeria dominate the investment in infrastructure in sub-saharan Africa, • Although Government debt levels in Africa are low only Nigeria and Ethiopia have some room to accrue new debt, • Africa’s export growth of 6.1% is the highest of any region in the world, • Although commodity exports continue to dominate there is evidence of significant growth in agriculture and manufacturing activity, • Africa’s growth is more and more dependent on efficient and high quality logistics services with inter- country trade growing by 13.5%, • FDI’s flows into Africa are growing substantially and are dominated by coal oil and natural gas investments, • Increasingly FDI is beginning to focus on manufacturing, metals, textiles and warehousing 22
  23. 23. PwC Thank you PwC Advisory Services No. 2 Eglin Road, Sunninghill, 2157 Private Bag x36, Johannesburg, 2000 South Africa T: +27(0) 11 797 5395 F: +27(0) 11 209 5395 M: +27(0) 82 941 6257 Andrew.Shaw@za.pwc.com Andrew Shaw Director
  24. 24. “The information contained in this publication by PwC is provided for discussion purposes only and is intended to provide the reader or his/her entity with general information of interest. The information is supplied on an “as is” basis and has not been compiled to meet the reader’s or his/her entity’s individual requirements. It is the reader’s responsibility to satisfy him or her that the content meets the individual or his/ her entity’s requirements. The information should not be regarded as professional or legal advice or the official opinion of PwC. No action should be taken on the strength of the information without obtaining professional advice. Although PwC take all reasonable steps to ensure the quality and accuracy of the information, accuracy is not guaranteed. PwC, shall not be liable for any damage, loss or liability of any nature incurred directly or indirectly by whomever and resulting from any cause in connection with the information contained herein.” © PwC Inc. [Registration number 1998/012055/21](“PwC”). All rights reserved. PwC refers to the South African member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.co.za for further details.

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