Abrie de Swardt Imperial Logistics Growing New Markets Cross Border

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Future Fuel Distribution Strategies for Southern Africa, 2 & 3 November 2011, Southern Sun O. R. Tambo International, Gauteng

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Abrie de Swardt Imperial Logistics Growing New Markets Cross Border

  1. 1. “Growing New Markets Cross Border” Future Fuel Distribution Strategies Johannesburg, South Africa November 3, 2011 Abrie de Swardt Marketing Director IMPERIAL Logistics
  2. 2. Table of Content An African Storm Introduction The Big Picture, Neighbouring Hot Spots, Possible Growth Scenarios Strategic Planning Required Closing Thoughts 2
  3. 3. Table of Content An African Storm Introduction The Big Picture, Neighbouring Hot Spots, Possible Growth Scenarios Strategic Planning Required Closing Thoughts 3
  4. 4. Introduction Logistics is not just a cost centre … • “Logistics represents a strategic, competitive advantage for our company” • The value of logistics operations in organisations / countries can sometimes only be truly understood or measured when in fact it goes wrong rather than functioning normally From a financial perspective, improved logistics operations result in … • increased profitability and shareholder value … • … as well as growth in revenue and market share … • … but a true measure of the value of your logistics can be measured in terms of customer satisfaction 4
  5. 5. Introduction A competitive network of global logistics is the backbone of International Trade Recent World Bank Report states … • “Improving logistics performance has become an important policy objective in recent years because logistics have a major impact on economic activity” • “The importance of efficient logistics for trade and growth is now widely acknowledged ... better logistics performance is strongly associated with trade expansion, export diversification, ability to attract foreign direct investment and economic growth” 5
  6. 6. Introduction However, the performance is strongly associated with country specific factors such as trade procedures, transport and telecommunications infrastructure and the domestic market for support services Logistics performance depends on the reliability and predictability of the supply chain Factors impacting logistics performance are: • Infrastructure – IT / physical infrastructure (ports, pipelines, rail & roads) • Efficient border management and the coordination of agencies involved in border clearance • Transport regulation • Skills 6
  7. 7. Table of Content An African Storm Introduction The Big Picture, Neighbouring Hot Spots, Possible Growth Scenarios Strategic Planning Required Closing Thoughts 7
  8. 8. Transport Volumes Shifting to Emerging Markets Important sales and supply markets evolve in which emerging and least developed countries play a major role However, current business practices such as international sourcing and quick turnaround times challenge this by extending transportation distances and minimising lead times in the supply chain 8
  9. 9. Africa Consumer Market Growing ... Economy (1)Africa expanded overall at a CAGR of 9.6% to 1.4 trillion USD between 2005-09 9.6% 1359 942 11.3% CAGR 5.4% 560 10.4% 358 365 290 310 11.9% 14.7% 209 51 46 80 33 SA CA NA WA EA Total Africa 2005 2009 Data Source – GDP Value Added in Africa 2005-09 in Bln USD United Nation All African regions, except Southern region, are growing at a double digit growth rate 9
  10. 10. Africa Consumer Market Growing ... Economy (2)Most of the Southern and Central parts of African countries grew > 10% per annum between 2005-09 14.9% 35.1 20.2 3.0% 16.0% 14% 11.5% 12.7 11.0 11.0 15.0% 10.3% 9.1% 10.3% 6.6% 9.8 9.9 9.0 8.1 8.2 8.7 7.1 6.7 7.0 5.8 5.8 6.1 3.8% -0.5% 5.2% 4.6 3.9 2.6 3.3 3.2 1.2 1.5 2.1 2.4 Angola Botswana Congo DRC Lesotho Madagascar Malawi Mauritius Mozambique Namibia Swaziland Zambia Zimbabwe 2005 2009 Data Source – GDP Value Added in Selected African Countries in South and Centre 2005-09 in Bln USD United Nation South African economy grew at a CAGR of 4% per annum only during the same period to 257 bln USD in 2009 10
  11. 11. Africa Consumer Market Growing ... Retail (1)African consumer trade market expanded to 184 bln USD over the last five years at a CAGR of 10.8% 10.8% 184 122 12.3% CAGR 4.8% 68 14.2% 48 48 40 43 14.0% 28 17.2% 7 12 4 6 SA CA NA WA EA Total Africa 2005 2009 Data Source – Retail Value Added in Africa 2005-09 in Bln USD United NationAgain, All African regions, except Southern Region, are growing at a double digit growth rate...! 11
  12. 12. Africa Consumer Market Growing ... Retail (2)South Africa retail market expanded only by 2.5% to 34 bln USD in 2009 from 30 bln USD in 2005 15.6% 3.69 10.9% 2.29 2.07 13.4% 10.6% 1.87 8.4% 13.0% 1.58 1.50 1.52 1.44 5.6% 1.13 1.18 1.06 11.9% 13.4% 11.1% 1.08 0.88 0.95 0.84 0.67 0.70 2.9% 2.4% 0.43 4.4% 0.51 0.46 0.25 0.24 0.26 0.24 0.13 0.11 Angola Botswana Congo DRC Lesotho Madagascar Malawi Mauritius Mozambique Namibia Swaziland Zambia Zimbabwe 2005 2009 Data Source – Construction Added in Africa 2005-09 in Bln USD United NationWhereas, Southern and Central markets are growing more than 10% per annum 12
  13. 13. Africa Consumer Market Growing ... ManufacturingManufacturing growth is not aligned with the customer demand growth in Africa ...! 6.3% 137.95 108.07 12.2% -0.1% CAGR 61.83 48.02 47.77 6.4% 39.04 10.0% 11.4% 19.21 14.98 3.17 3.87 5.97 2.16 SA CA NA WA EA Total Africa 2005 2009 Data Source – United Nation Manufacturing Value Added in Africa 2005-09 in Bln USD Manufacturing competitiveness has been on a decline in southern Africa ...! 13
  14. 14. Africa Consumer Market Growing ... Summary Population: 161 mln Southern Africa Economy Size: 362 bln USD GDP Growth (Mauritius Angola Botswana Lesotho Madagascar Malawi Mozambique Namibia South Africa Swaziland Zambia Retail Trade Value Add: 48 bln USD 4-5% Zimbabwe ) Retail Trade Per Capita: 298 USD Share of Manufacturing: 13.4% Population: 139 mln Central Africa Economy Size: 51 bln USD (Burundi Central African Republic Chad Congo Democratic Republic of the Congo Rwanda Retail Trade: 7.5 bln USD 5-6% Uganda ) Retail Per Capita: 53 USD Share of Manufacturing: 6% Population: 177 mlnUnited NationData Source – Eastern Africa Economy Size: 79 bln USD (Djibouti Eritrea Ethiopia Kenya Seychelles Somalia Retail Trade: 11.6 bln USD 11-12% Tanzania) GDP Per Capita: 65 USD Share of Manufacturing: 7.5% West Africa Population: 322 mln (Benin Burkina Faso Cote dIvoire Cameroon Cape Verde Economy Size: 300 bln USD Comoros Equatorial Guinea Gabon Gambia Ghana Guinea Retail Trade: 47 bln USD Guinea-Bissau Mali Mauritania Niger Nigeria Sao Tome 8-9% and Principe Senegal Sierra Leone Togo ) GDP Per Capita: 145 USD Share of Manufacturing: 5.7% Population: 202 mln North Africa Economy Size: 559 bln USD Algeria Egypt Libyan Arab Jamahiriya Morocco Sudan Retail Trade: 61.8 bln USD Tunisia 8-9% Retail Trade Per Capita: 306 USD Share of Manufacturing: 11% Source: United Nation Data Base and Analysis by Volition 14
  15. 15. Africa Consumer Market Growing ... Summary (2) African consumer retail & wholesale trade would reach to 400 bln USD market in 2020; if it is able to keep the current growth rate of 8-10% p.a. However, South African retail market will continue to grow less than the average growth rate in Africa. Hence the Industry future growth will come through by expanding its market network into Africa. Logistics and Supply Chain excellence should be the key differentiator given the location and cultural advantage to South African Industry. 15
  16. 16. Table of Content An African Storm Introduction The Big Picture, Neighbouring Hot Spots, Possible Growth Scenarios Strategic Planning Required Closing Thoughts 16
  17. 17. “The best way to predict the future is to invent it”— Alan Kay, noted computer scientist 17
  18. 18. Africa ... Avoid / Ignore it at your peril! Shouldn’t underestimate the opportunity and potential Africa needing to become more competitive. To do this focus must be placed on: • Investment in infrastructure – Ports, Railways and Roads – Cross border corridor development – Combined commitment by all African governments • Reducing the cost of logistics – Movement of imported cargo to the African destination ports – Create balanced two directional volume flows 18
  19. 19. Industry Challenge ... Competition from AsiaSouth Africa‘s trade with the SADC grew only at a CAGR of 4.5% (2005-09) and our share has come down to 30% in 2009 from 40% in 2005 ...! 4.5% 8.63 7.23 52% 3.27 35% 16% 2.22 43% 1.71 1.47 9% 26% 29% 9% 10.7% 0.93 0.97 0.78 0.62 0.68 0.68 0.68 0.35 0.31 0.24 0.45 0.63 0.40 0.60 South Africa China Portugal USA India UK Brazil UAE France Japan 2005 2009 Data Source – Leading Export Partners to in SADC 2005-09 in Bln USD United Nation South Africa has been losing market share to India & China, whose export volume to Africa is growing more than 40-50% per year ...! 19
  20. 20. Logistics Challenge ... High Cost to TransportThe challenges, such as high cost of export, customs delays and infrastructure bottlenecks will continue to exist ...! 3818 3505 3280 3010 2664 China and India1850 1680 1713 1686 1754 1531 1100 Landlocked 1055 Landlocked Countries Countries 500 USD / TEU Data Source – United Nation 20
  21. 21. Logistics Challenge ... Intermodal LogisticsNetwork Intermodal concept is not well developed along the North-South corridor given the fact that it covers more than half of the continent’s population and economy Hence, high cost of transportation on Road and a longer lead time on the surface than sea given the cross border delays • However, port delays / bottlenecks remain a major challenge The developed / developing corridors lack a consolidated logistics park at the key nodes of the network The high investment risk and a lack of critical volume have put off South African Companies / LSPs to set up a Pan African or SADC network 21
  22. 22. Key Strategic Transportation & Logistics Issues Globalisation Industry Consolidation Liberalisation and privatisation Financing transport infrastructure Sustainability IT in the supply chain 22
  23. 23. Key Strategic Transportation & Logistics IssuesGlobalisation What are the key drivers of growth in transportation and logistics? • GDP Growth (Growth) • Population Density (Growth) Important sales and supply markets evolve in which emerging and least developed countries play a major role New transport corridors will emerge, especially between Asia and Africa, Asia and South America as well as intra-Asia 23
  24. 24. Transport Volumes Shift to Emerging Markets“LSPs will need to take an active part in the design of new transportcorridors, develop adequate structures and pricing systems and createlogistics clusters”Decisions where to set up production sites will increasingly be influenced bytransport costs 24
  25. 25. Key Strategic Transportation & Logistics IssuesIndustry consolidation In the coming years, the transportation & logistics industry in emerging markets will grow tremendously with continued entrance of multinational LSPs This will be followed by a period of fierce competition followed by consolidation 25
  26. 26. Customised Logistics Business Models are aNecessity for Success in Upcoming Markets Multinational LSPs will operate actively in domestic markets of emerging countries, not only in international transport • Consolidation of the logistics market will be the logical consequence LSPs entering emerging markets should adapt company structures and their operations to local peculiarities. 26
  27. 27. Key Strategic Transportation & Logistics IssuesLiberalisation & Privatisation Worldwide, liberalisation and deregulation of T&L markets are in progress or foreseen In the emerging markets, the degree and pace of privatisation of state-owned transportation and logistics organisations will strongly differ amongst countries 27
  28. 28. Key Strategic Transportation & Logistics Issues Liberalisation & PrivatisationIMF and World Bank set up requirements forstructural adjustmentsEmerging markets in different stages on this‘journey’Governments will maintain oversightfunctionality rather than being active marketplayers • New market structures and processes will be established and market dynamics will significantly change with more active private players 28
  29. 29. Key Strategic Transportation & Logistics IssuesFinancing Transport InfrastructureMassive investments in transport infrastructure will not be sufficient to close all infrastructural bottlenecks by 2030$41,000 bn $ 1,000 bn 29
  30. 30. Infrastructure ... Success stories! 30
  31. 31. Infrastructure ... Success stories! 31
  32. 32. Infrastructure ... Success stories! 32
  33. 33. Infrastructure ... Success stories! 33
  34. 34. Infrastructure ... Success stories! 34
  35. 35. Infrastructure ... Success stories! 35
  36. 36. Key Strategic Transportation & Logistics Issues Financing Transport InfrastructureA drop in the ocean ─ Investments into transport infrastructure are insufficient Where will the UK, Germany and other UK spend industrialised countries stand in 20 years US$12bn regarding their logistics performance? (annually over the next four years) Do LSPs from industrialised countries like Germany spend UK or Germany successfully capitalise on US$17bn the apparent opportunities in emerging (annually over the past two years) countries? China spend US$350bn (annually over the past four years) 36
  37. 37. Key Strategic Transportation & Logistics IssuesFinancing Transport Infrastructure Public or private? — Despite strong financial pressures, governments cannot completely shift transport infrastructure investments to the private sector 37
  38. 38. Key Strategic Transportation & Logistics IssuesFinancing Transport Infrastructure Global private project finance debt market in infrastructure accounted for US$139.2bn in 2009 (thereof T&L represents the 3rd largest sector with 17%) Private investments can help TI operators and governments to raise Global PPP deals in value of total debt and equity invested Source: Dealogic Project Wave capital for transport infrastructure projects, but are no panacea Applicability depends on the individual financing case and the approach taken 38
  39. 39. Key Strategic Transportation & Logistics IssuesSustainability Reducing transport emissions will be a greater challenge for transport companies than the supply of energy 39
  40. 40. Key Strategic Transportation & Logistics IssuesSustainability Oil prices will not rise in the order of magnitude necessary to threaten conventional transport • Some operators have introduced “green logistics products” (CO₂ neutral transport) 13 % Costs related to the carbon footprint of CO2 emissions worldwide of logistics processes will be allocated from transportation to the causer LSPs will need to track, document and disclose their caused CO₂ emissions in the future. 40
  41. 41. Key Strategic Transportation & Logistics IssuesSustainability Costs related to the carbon footprint of logistics processes will be allocated to the causer 41
  42. 42. External costs will be allocated to the causer andfactored into the prices of products Global costs of mitigating climate change are estimated at around US$600bn – 1,500bn annually • The T&L industry contributes through environmental taxes, tolls and (soon) emission trading LSPs may need to document all types of emissions, such as noise and nitrogen oxide, and the use of resources. 42
  43. 43. Key Strategic Transportation & Logistics IssuesIT in the Supply Chain ICT has been promoted as a means to enhance logistics competitiveness It is one of the few factors which has been proved to have the capability of increasing logistics competence and decreasing its costs simultaneously 43
  44. 44. Key Strategic Transportation & Logistics IssuesIT in the Supply Chain IT integration accelerates the flow of information between all players in the supply chain Route planning IT connects almost every activity in logistics, e.g. transportation, RFID Tracking &Tracing warehousing, order processing, GPS material management, etc. Barcode Development of digital systems offers high personalisation and WMS EDI corporate tailoring which become key elements of logistics services in the future 44
  45. 45. Table of Content An African Storm Introduction The Big Picture, Neighbouring Hot Spots, Possible Growth Scenarios Strategic Planning Required Closing Thoughts 45
  46. 46. An African Storm ... Next Generation Solutions The need to compete motivates the use of next generation solutions in the field of transportation, logistics and the supply chain in general These incorporate the following … • Integrated intermodal and value added logistics capabilities • Twinned Inland Ports and Logistics Gateways providing the same levels of operating efficiency and security • Dedicated Land Corridors, creating smart and secure transportation networks • A Framework of Standards used to secure and facilitate Global Trade (WCO, DHS, AEO) • Advanced Telecommunications Networks, providing a cost competitive broadband infrastructure with convergent applications • The Extended Global Supply Chain, incorporating product development, commercialization order taking and fulfillment functions • Overarching Programs, which seek to gain the greatest synergy between individual ventures 46
  47. 47. What’s Making Supply Chain Life More Challenging? Rapidly-Changing • Global Economic Conditions • Supply Chain Needs and Requirements Need to Continually Re-Evaluate Global Sourcing and Marketing Strategies Conclusions: • No Such Thing as a “Globally-Optimum” Supply Chain Solution • Renewed Priorities on Flexibility, Adaptability, and Changeability • Critical Need for Supply Chain Innovation 47
  48. 48. THANK YOU

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