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The Loadstar Podcast X DP World: Africa's Logistics Boom · The Loadstar

• 0:00
  Speaker A: Hello and welcome to the Lodestar podcast in collaboration with DP World. In this episode, we are going to be exploring Africa's changing role in the world of trade and logistics. And to help me understand this, I am going to be joined by DP World's CEO of Sub Saharan Africa, Mohammed Okuji. Africa is currently undergoing a major period of growth and Mohammed explains all the reasons for this, plus the key to unlocking the continent's further potential. We chat about key projects for DP World, including what role infrastructure plays in growth, plus the challenges that Mohammed has identified and why this is stalling intra African trade when compared with a trade like intra Europe. Finally, Mohamed shares his vision for the future and the implications for the African trade picture once Suez transits finally reoccur en masse and if the China US Trade war finds an amicable conclusion. I'm sure you're eager to get into the episode and wondering what I'm still doing giving you the introduction. So let's jump straight into. Hello, Mohammed. Thank you so much for joining me today on the Lodestar podcast. It's great to have you here.
• 1:06
  Speaker B: Hello, Charlotte. It's great to be with you.
• 1:08
  Speaker A: I'm really looking forward to our discussion today and we have a lot to get into. But I will give you an easy question to kick off the episode. Can you please introduce yourself, your role at DP World and what that role entails.
• 1:19
  Speaker B: I'm Mohammed akuji. I'm the CEO in MD for DP World, Sub Saharan Africa. I look after the 48 countries that make up Sub Saharan Africa. And yeah, looking forward to the conversation.
• 1:32
  Speaker A: I'm not quite sure how you keep on top of 48 markets. That's quite a lot to manage. And your role is, I mean, especially in the last few years, a very dynamic one because there are so many constant changes to the supply chain environment. And a lot of these changes are having a huge impact on the trade picture in Africa in particular. I think it would be very useful to set the scene a bit before we get into the details and into DP World's involvement. So could you please kind of give me an overview of Africa's current role in the global supply chain and the change that this region has seen over the last ten years or so.
• 2:05
  Speaker B: Thank you. Yeah, look, Africa only represents about 3% of global trade and it represents, I think, less than 15% of intra Africa trade, which is quite low relative to the size of the continent. You know, it's a massive landmass. It has a Billion plus people rich in resources and commodities. So to only represent 3% of global trade is too low. Right. And one of the biggest challenges in Africa is obviously the efficiency of the supply chain and the cost of supply chain. It takes longer and it costs more money to get product into and out of Africa. And that's one of the pain points that we as DP world are looking to remove through our investments and our role in the supply chain. I see Africa has changed a lot in the last few years. And I think it's because people have identified the potential of the African continent in terms of its role from a global trade perspective. The consumer market potential in Africa is massive. It's a young population as well. So lots of companies are looking at setting up manufacturing in Africa in certain markets. And yeah, I also think what's happening globally with the trade wars, people have realized that Africa has a bigger role to play in terms of global trade because of the size of the opportunity.
• 3:35
  Speaker A: Yeah, I mean, it really does sound like quite an exciting time to be part of this market. And there has been a lot of growth in this region. But I'm curious to know what you think is behind this growth and making the region such a great place to invest. Because it's been really interesting for us as journalists to monitor the fallout of the trade war, as you mentioned, and especially how these major export markets like China are finding new consumer markets after U.S. imports have been on the decline. And I've got it in front of me here in the Container trade statistics TEU data for September. It showed that far east to sub Saharan Africa trade volumes were up 35.2% from the year before. And in July, this was actually 48.2% higher year on year. So I mean, to me, I'm quite new to logistics, but it seems like this boost in volumes is a direct consequence of the trade war. I'm sure there's more to it than that. So, I mean, why do you think Africa is increasingly being seen as a critical player in global trade?
• 4:33
  Speaker B: Look, I think there's a lot of infrastructure development and investment happening on the continent and that's also driving, you know, some of that because there's a lot of new projects in Africa in mining, in agriculture, that that's happening. But I think the point around global trade wars is a good one. And I think it is something that is impacting on volume because these are future markets. If you look at a market like Nigeria, it will be the third highest population in the world over the next 10, 15 years. So there is a first mover advantage in any market. And I guess people are recognizing that Africa's role in global trade infrastructure is improving a lot on the continent and consumers are getting wealthier through economic growth, infrastructure, job creation and the market potential is massive. And then when you overlay the point you raised about, you know, trade wars and tariffs and the impact that has on trade between say, China and America, you know, then the Chinese manufacturers will target new markets, so will other Asian countries, so will other European countries. I also think that, you know, the, the Red Sea issues have also impacted on how trade flows. So lots of trade lanes that used to go directly into Europe from the far east through the Red Sea, that has now moved around the Cape of Good Hope and that has created more container volume opportunities for the continent, where key parts of West Africa and East Africa have become hubs now because the normal route through the Red Sea is not any more viable. But the issue is there when this.
• 6:21
  Speaker A: Region is going through this hugely fast paced period of transformation and growth. As you mentioned, there's a lot of moving parts as the Red Sea, the trade war, there's trade agreements, and I assume there has to be some pretty efficient catching up to do in terms of getting the infrastructure up to the level it needs to be to facilitate this new stream of cargo. So firstly, what role does logistics infrastructure play in enabling this inclusive economic growth across Africa? And also, what is the process like of keeping this in line with the needs of the growing volumes?
• 6:52
  Speaker B: Yeah, so there's a massive role to play in supply chain efficiency and cost. So it's something we measure in our business all the time. If you look at the cost of logistics of a product in Africa, it can be up to 40, 50% of the value of a product, which is 5, 6 times higher than the global average. And then the time it takes product to get into Africa, like our truck turnaround times on certain corridors, in terms of taking product from a port inland and back, can be up to 60 days. And it's largely due to a lack of infrastructure and inefficient customs processes. And because Africa is made up of a number of countries, it's not digitally integrated. So when trucks move through borders, they have to repeat customs processes manually from one country to the next. It's not integrated. So with better infrastructure, the ports, you reduce the waiting times at the port, you make sure the cargo is more efficiently, you know, coming out of the terminal onto the land side. If the road infrastructure is not great and the rail infrastructure is not great, it will take a lot longer for the product to get where it needs to get to. So with the improving road and rail connectivity and there is big investment happening on both fronts and on the port side, you create a much more efficient supply chain. And then if you have more customs integration between countries on the continent, plus you enable that with digital technology, you can cut those waiting times at the ports and at border posts significantly. And in that lies the opportunity. Because if you can just reduce the cost of logistics and the time by 10%, the massive impact that has on economic growth and the impact it has on job creation and the benefits the country would get is massive. If you look at Tanzania, for example, it's a good example. Prior to us getting the concession, waiting times at the terminal was 30, 35 days for ships and there was a surcharge for every container coming into Dar es Salaam of $1,000 of container within a 12 month period. We removed the waiting times and the surcharge got removed. And that put $600 billion back into the Tanzanian economy, which can then be used for other economic initiatives rather than just wastage. So I think as infrastructure improves, as we digitally integrate, as we become more borderless, if that's the right word, waiting times will drop, cost will come down and that will just have a multiplier effect on economic growth and job creation.
• 9:36
  Speaker A: And in Tanzania, since DP World's involvement in Dar es Salaam port, as you mentioned, waiting times have dropped dramatically, which obviously has great. But do you have any plans to sustain that level of efficiency over the next 10, 20 years if volumes keep growing?
• 9:51
  Speaker B: Yeah. So we have an investment program over the next three to five years in Dar es Salaam where we investing in, for example, conveyor belts to remove bulk cargo from ships rather than trucks coming into the terminal and manually loading them. That will create yard capacity and allow for more throughput. We are investing in back of port capabilities as well in some of the markets, so that you remove some of the bottlenecks at the terminal and take it outside the port. Because a lot of congestion happen inside the terminal when you don't have the right infrastructure outside the port. So yes, we've done well over the last couple of years since we've been in Dar es Salaam, but we have a investment program of around 150, $200 million that will take it to the next level. So yeah, we quite excited about the opportunity through that investment.
• 10:48
  Speaker A: And obviously recently the country was going through a lot of disruption. There was a period of Civil unrest that we saw. And I'm just wondering, had this impacted your operations there? And also, did this highlight the importance that ports and logistics infrastructure play in times of difficulty?
• 11:04
  Speaker B: Yeah, look, I mean, these things happen and you know, in that particular case, the safety of the people come first. So we did have some supply chain disruptions through that, but it was fortunately short lived and the impact that it's had on the country and on our business has been limited. But yeah, it does absolutely show how important logistics and port infrastructure is in terms of it continuing. Right. And when you have these disruptions, it does impact on the flow of product, which has a knock on effect on the economy.
• 11:39
  Speaker A: And Dar es Salaam is over on the east coast of Africa. But a lot of Africa's growth this year in particular has been on the west coast. MSC in April introduced a large capacity injection on its AFL service from Asia to West Africa. And actually this was the first time that these ultra large container vessels of I think it's 24,000 TEU had been deployed on this service because the ports previously just did not have the infrastructure. So I'm just wondering how you see East Africa's development and role in global trade compared with West Africa.
• 12:11
  Speaker B: Yeah, it is as important, right, Because East Africa is very well connected to markets in the Middle east, markets like India, also Asian markets. So we are busy with a big board development or expansion in all our East Africa terminals. So in Maputu, we are investing about $200 million in deepening the birth because we'd like Maputo to be a hub for that part of Africa into Zimbabwe, into South Africa and into also Zambia. And why we're deepening the birth and lengthening is to allow for bigger vessels to come into a market like Mozambique. We spoke about Padara Salamo as well. Yes, it is a deep enough berth, but through what we're doing there, in terms of making the port more efficient, it will allow for more cargo to come through there. So, you know, we have a hub in Berbera that's a key gateway into Ethiopia. It's a deep terminal that can take as big a vessels as those that are going into other parts of East Africa. And it also has a free zone. So we are investing not only in our West African terminals for capacity for bigger vessels also on the eastern side.
• 13:27
  Speaker A: And with these huge investments, I imagine there has to be a bit of a balance in ensuring that, especially I guess in a developing region, that trade growth is inclusive and still benefits local economies rather than just on a global scale. So how does DP World, when undertaking huge projects like this, make sure that everyone, like local communities, businesses, government, can all share in the benefits? Do you have any examples of maybe how improved logistics infrastructure has directly benefited local communities or SMEs?
• 13:59
  Speaker B: Yeah. So obviously with the improvement in infrastructure and more efficient logistics, you make it cheaper for the people. Right. And that flows through directly into the economy. We employ a lot of local people in our terminals and create jobs. We also, you know, through our investments in free zones, it doesn't only facilitate trade, but it does allow for localizing of the supply chain, which means there's more job creation, you develop industries. So our expansions in port and related infrastructure will create industries. Right, through localized production, localizing, processing, doing more value added services in country. Because one of Africa's biggest challenges is that lots of finished goods get imported into Africa and then raw material gets exported out. So there's not a lot of industrial growth. But part of what we are doing as DP World is to localize the supply chain, create jobs, allow local industries to be created and thrive, which then will benefit local industry. But beyond that, we also have a number of sustainability and development programs around healthcare. We run a lot of healthcare projects across the continent. We do a number of education projects as part of our investment into Africa. So it goes beyond just our business. And I think one of the good things about our purpose and vision as an organization, it is aligned directly to our business. If we invest and we do our job well, it will enable trade flow, which will result in job creation and cheaper products and, you know, better consumption for African markets.
• 15:53
  Speaker A: Definitely. I mean, one, one thing that is particularly important for inclusive growth is the digital side of things. We've spoken a lot about the physical infrastructure, but obviously the digital side of trade is becoming increasingly important and in developing economies especially can be one of the main barriers. So what are you doing there?
• 16:12
  Speaker B: So we have port community systems, custom systems that are all digitally enabled, and we use them in terminals like Jebel Ali in our flagships, and we'd like to roll those out as well into emerging markets like Africa. And not only does it create efficiency, but also has a massive impact on security of a country because now you have full visibility of what is coming into the country. So in addition to more effective and efficient revenue collection, security risk is a big thing when containers are coming into and out of your country and you don't know what's in it. So through the technologies we have, we're able to give visibility as well as provide more Opportunities for countries to know what is being imported and what is being exported so that the revenue collection can be more effective, but also security.
• 17:04
  Speaker A: Also with this kind of inclusive growth, something that is important is that all of the countries within Africa are kind of on board together. And you mentioned a bit about cross border trade, but what are the hinterland connections currently like in comparison with the port infrastructure? Is road and rail up to scratch, do you think?
• 17:23
  Speaker B: So majority of product moves on road in Africa once it gets into the hinterland. The rail infrastructure is still relatively underdeveloped and it needs investment, but that's happening. So there is big investments happening on Kiril corridors in Southern Africa, East Africa and West Africa. And as those investments in infrastructure improves, it will enable rail to become quite an important part of the hinterland transport system. So we do need combination of road and rail. I think for me the biggest pain point today is we have too much road. And secondly, the waiting times at borders in the hinterland are too long. And that just because as I said, lots of manual customs processes and then repetitive. So if you cross the border from one to the other, you do the same thing over and over. Now if it was digitally enabled, you could just do it once or you could even do pre clearance when it comes into the port. You could actually pre clear the product, you know, into the hinterland if it was all digitally connected and integrated. So that would definitely help. And obviously as part of the Africa Free Trade Agreement, digital customs is a very important or digitizing the customs processes in the intra land is a big initiative and we are certainly trying to support that as an organization.
• 18:44
  Speaker A: And how can these gaps be addressed? Is this purely an investment issue?
• 18:49
  Speaker B: No, I think it's a combination of investment in road and rail infrastructure. It's an investment in dry ports to create hubs in the hinterland that can connect with the sea. Digital technology to make customs more effective and efficient. You know, so if you look at the EU as a trading zone, it's very efficient, right? That's why if you look at intra Europe trade, It's I think 50% plus. If we look at intra Asian trade, it's 50% plus. But intra Africa trade is like 12 or 13% of our total trade. Now that's too low. And it's because of the fact that we don't have the same efficiency from a customs and border control, which is one aspect of it. But the other aspects around we're talking about around rail infrastructure, road infrastructure and as I say dry ports and creating these consolidation hubs all contribute. So we are also looking at that. So we not only look at port infrastructure and back of port, we are actually also looking at dry port developments to facilitate that. We have a dry port in Rwanda that plays a very important role in getting product into that part of the world, like the eastern drc, because that is land linked. Right. So you have to have the right infrastructure there to create consolidation hubs so that you can do storage there, you can use that as a trade hub so you can manage your supply chain more effectively. We're looking at the dry port development also in southern Africa in a place called Kamatipur, which will be linked into Maputu and serves as the northern corridor in South Africa. So it goes beyond just the port infrastructure and the back of port. In Africa's case, these investments in dry ports are important to create these points of consolidation as well as then free zones, which I spoke to earlier on in terms of creating the value added localization, or you call it inclusive growth opportunities in terms of Africa doing some form of adding fishiation to the product processing and localizing the supply chain.
• 21:03
  Speaker A: And how receptive are these regions to receiving private investment? What's the relationship like between public and private investment?
• 21:11
  Speaker B: Look, public private partnerships has been the model that has worked well in Africa and it has improved a lot, I would say. I mean, if you look at all our investments in Africa, it does require collaboration with the public sector and local governments and they are very receptive to getting foreign investment and foreign investment that has got capability and expertise. So yeah, I think it's gaining more and more momentum.
• 21:39
  Speaker A: Well, I mean, you've given us such a detailed overview of where Africa currently stands in global trade and there's so much more to discuss across all the different countries in Africa. I feel like we could talk about this for hours, but we do have to wrap up at some point. I just want to look to the future a little bit. Obviously we've mentioned a few big factors that have contributed to Africa's growth over the last few years. There's the Red Sea crisis, which has forced vessels to reroute around the Cape of Good Hope and we've got this trade war. But say in the next few months the Red Sea crisis completely settles and ships begin going back through the Suez Canal. And the US and China, they work out their differences and tariffs are completely settled. Do you think Africa will continue to see this level of growth? Is it kind of set up on that trajectory now?
• 22:26
  Speaker B: Absolutely. I think despite the, you know, recent global events around trade and Security concerns in areas like the Red Sea. I think despite that, you know, Africa has got, as I said, massive potential in terms of its just consumer market. So prior to all of these issues, we've seen companies taking Africa on in terms of a future growth market. So I think the fundamentals of Africa, beyond the current trends has got massive potential. And it's a, as I say, it's a continent with more than a billion young people. It's got all the natural resources and it's got good growth. So I don't think that if those issues get changed or resolved that the story of Africa changes.
• 23:14
  Speaker A: Well, it looks like you're going to have a very, very busy job. So what is your vision for DP World's contribution to Africa's logistics ecosystem in the next 5, 10 years? Are there any specific opportunities you've identified?
• 23:26
  Speaker B: Yeah, so, you know, we're investing over the next three, four years, $3 billion. Right. In related infrastructure. We developing a new port in Dayan, we building a new port in Banana, the drc, we upgrading, as I said, our terminals in Mozambique and Dar es Salaam. And beyond that, we're also investing into hinterland logistics, like dry ports. So, no, we are investing aggressively in, you know, logistics and port infrastructure. And I think it's a simple calculation. If you just look at the inefficiency in the supply chain and you look at the cost of logistics Africa offers for our industry, probably the single biggest opportunity globally. Because our purpose and vision, as I said, is to reduce the time and to reduce the cost. And as a logistics port player, if you get that right, through investment in better port infrastructure and related logistics, the compounding effect of that on our business and the economies that we operate in will be massive and we'll be a beneficiary of that. So, yeah, we've invested $3 billion in the last three years in, in Africa port infrastructure and related logistics. And we're seeing some of the benefits of that already. But yeah, there's a long path to go and we have a clear strategy on where we'd like to invest in. We are investing West Africa, East Africa in the hinterland. And we've got quite an established base already on the continent. You know, we input 31,000 people in Africa and we have operations, as I said, that cover all 48 markets in some shape or form, either through an ocean network or through a local distribution business or through a port. I think the big opportunity we have now is about how do we integrate all of that where we can offer an end to end offering for anybody looking to enter Africa or export out of Africa.
• 25:22
  Speaker A: Well, it sounds like you've got your work cut out for you, but certainly a very, very exciting time to be part of this market. Mohammed, thank you so much for joining me on Lodestar podcast today. It's been wonderful to speak to you.
• 25:33
  Speaker B: Thank you very much.
• 25:39
  Speaker A: So there we have it. That was the Lodestar podcast in collaboration with DP World exploring Africa's trade and logistics. I feel like I learned a lot from Mohammed and as I said in the episode, I feel like there is so much more to explore there. So perhaps it's one that we will have to revisit. I'm certainly looking forward to monitoring Africa's growing role over the next few years. It sounds like there are a lot of opportunities there. If you enjoyed this episode, please like share, subscribe all of that good stuff and look out for more podcasts coming from the Lone Star. Thank you very much.