PREPARED BY:

ZIAD HAMOUI, MSC PORT MGT.EXECUTIVE DIRECTOR, TARZAN ENT. LTD.

GIMPA, 31 MAR. 2009

ROAD HAULAGE IN GHANA:

current trends and challenges

Lecture Objective

Describe Road Haulage Market in Ghana

Analyze industry challenges and trends

Highlight transport-related operations

Explain diversification experience

2

Why Ghana Roads?3

Better Port and Infrastructure in Ivory Coast

More Trade in Nigeria

Ghana is the country of choice by elimination

Abidjan TemaNb. Of Berths 34 11 gen. + 2

spec.Max. Dredge 12.5m 12mQuayside Cranes

4 3

Railway Link Yes No

Tot. Merchandise Trade 2006 2007Ghana $12.4b $13.9bNigeria $80b $94b

(Source: WTO website, stat.wto.org, Aug.2008 )

Advantages of Ghanaian Roads

Less risky transport routes in region (Compare to Ivory Coast)

Less corruption at entry points (Compare to Nigeria)

Increasingly Efficient Ports, reducing shipping costs

Shipping Lines have shifted from neighboring countries

to Ghana

4

Disadvantages of Ghanaian Roads

Not well maintained road network compared to neighbors

Low Capacity, especially on the coastal main road

Bottlenecks

Reckless drivers

Disadvantages are not limiting, but could offer guidelines for

further improvement

5

Road Network Around Ghana6

Port Activity in West Africa7

Type Handling Method

Bagged Goods (Cocoa Beans, Shea Nuts, Cashew, Rice, Sugar, Cotton, Fertilizer, Cement)

Bulk Goods (Wood, Wheat, Construction Material, Mining Extracts)

Liquid Bulk (petroleum, liq. gas)

General Cargo (Cars, Live Animals, Goods)

Containerized/Liner Cargo (Standardized 20ft./40ft.)

Manual loading in std. 40’ trailer (sided/flat) or larger. Either directly on-board or on a pallet

Loaded directly using Machinery. Usually Tipper Bucket

Pumped into liquid-holding compartments on special trailer

Can use any trailer, depending on type of load

Loaded with forklift/Toplifter on flatbed trailer with hooks

8

Cargo Types and Handling

Total Merchandise Trade in Ghana9

2005 2006 2007

Exports $2,802m $3,735m $4,320m

Imports $5,755m $6,500m $7,980m

(Source: WTO website, stat.wto.org, Aug.2008 )

Total Throughput at Ghana Ports (in Tons)

10

(source: Shipping Review, Jan - Mar 2008, vol. 10, no. 1)

Transport Hubs in Ghana

Greater Accra: Tema (Main Port for Import)Accra (Major Consumer Market)

Takoradi-Sekondi Hub: Takoradi Port (Main port for Export)Gateway for Western Region

Kumasi-Accra-Takoradi Hub: Bulk of Internal transportMajor Trade NetworkConnects to rest of Ghana & Region

11

Ghanaian Transport Corridors

•Vertical:

Accra-Kumasi-Sunyani-Tamale-Bolgatanga-Navrongo-Ouagadougou

•Horizontal:

Abidjan-Takoradi-Accra-Tema-Aflao-Lome-Porto Novo-Lagos

12

Type of Road Haulage Companies

Local Companies: Registered and Operating within Ghana (Alhaji Salia, Freight Links, Atlas, Allship, Tarzan, one-man operators)

Local-Transit Companies: Registered in Ghana, Operating Within Ghana and Across Border (Global Haulage, Antrak Ghana Ltd., Gelloq, Vehrad Transport)

Foreign-Transit Companies: Operating across Ghanaian Territory from Mali, Niger, Togo, Burkina Faso

Multinationals: Branch registered in Ghana, Operating within and across Ghana (Maersk Gh. Ltd.)

13

Types of Road Haulage Operations

Regular:Transport company will actively seek customers to serve, all year long

Seasonal:Off-season, transport company (Usually cocoa haulers) will attempt to maintain minimal transport activity

One-off:Transport company agrees to move a specific consignment outside of regular transport activity

14

SWOT Analysis of the Transport Industry

STRENGTHES OPPORTUNITIESMinimum Start-up CostsReadily AvailableBroad Range of Associated Services Strong Platform for Diversification

Increasing Trade Through GhanaOil Boom-Related Increased SpendingRegulation of other Cash CropsConsolidation within Supply ChainsImplementation of IT

WEAKNESSES THREATSLow Barriers of EntryLow RegulationBarely ProfitableWork EthicsPractice in Favor of Small Businesses

Rising Overhead CostsIllegal Backlogging IndustryDouble Standards in RegulationsGlobal Recession

15

Freight Calculation16

Main Cost Factors

DieselTyresLubricantsSalariesRoad ExpensesOperating Fees (TMA/AMA, VIT, ¼ License,

Roadworthiness, Insurance, Port Entry, GPHA Operating Permit)

Spare Parts

COST INCREASES NOT MATCHED BY FREIGHT RATE INCREASES!!!

17

Challenges of the Transport Industry18

High Regulation, Low Enforcement

- Effort made to compete with regional standards- Plenty Regulations, Low Law-Enforcement- Bigger businesses are affected and controlled- Smaller Players are ignored out of Sympathy or

‘Connection’

Illegal Haulage

- Cargo Flow imbalance- Drivers are tempted to diverge due to lack of enough

backhaul (One-Way Demand)- Cost is passed on to Transport Company

Tabulated Cost Increases19

Rate Change 1

Rate Change 2

Rate Change 3 % Change

DIESEL 0.71 GHC/L 1.19 GHC/L 0.89 GHC/L 24%WELDING GAS

- 4.74 GHC/M3 5.61 GHC/M3 19%

TYRES - 230 GHC/TYRE 300 GHC/TYRE 30%ENGINE OIL - 319

GHC/DRUM335.5

GHC/DRUM5%

PORT TOLL 5.5 GHC/TRUCK

6.0 GHC/TRUCK

6.6 GHC/TRUCK 20%

PORT LICENSE

455 GHC/YEAR

500 GHC/YEAR 575 GHC/YEAR 25%

EURO FOREX RATE

1.20 $/EURO 1.50 $/EURO 1.32 $/EURO 10%

MIN. WAGE 1.60 GHC/DAY 1.90 GHC/DAY 2.25 GHC/DAY 40%GHC FOREX RATE

0.94 GHC/$US

0.99 GHC/$US 1.25 GHC/$US 33%

FREIGHT 2.7 GHC/TON 2.9 GHC/TON 3.8 GHC/TON 40%(note: rate changes apply for period between 01-Jan-2006 & 01-Jan-2009)

Effect on Transport Market20

Lower freight due to availability of substitute supply

Larger players become less competitive

Stagnant growth due to rising inflation

Road safety and goods safety decrease; risk factor

Promotion of Bad Work Ethics

Transport no Longer a Profitable Industry

Hinterland Access in West Africa21

Opportunity in the Industry22

Increasing cover of wireless communications between management and operators (Reduce lead time, improve control)

Availability of various online support services, ranging from free (Google maps & Account Management Software) to expensive (GPS Tracking, Tailor-made Comprehensive Packaged Information Systems)

Current Transport Market Ideal Transport Market

23

Desired Transition in Industry

P

Q

D

S1

E1

Q1

P1

S1

P1

P2

P

Q

D

S2

E1

Q1

E2

Q2

Emerging Oil Industry

Joint Venture; Tullow Oil Co. (UK) & Kosmos Co. Ltd. (Gh)Many Benefits to GhanaIncreased Foreign Direct InvestmentIncreased Private (expats and families) and Public (additional revenue) SpendingIncreased Import and ExportRequires Development of Transport Network

24

IMPLICATIONS ON ROAD SAFETY

More Tankers on Along the Coastal LineHigher Frequency of Tanker-Related Accidents

25

CAUSES OF TANKER-RELATED ACCIDENTS

26

Fire (Roadside, Cigarettes, lighters) near a Leaking Tanker (Caused by Improper Vehicle Maintenance)

Off-Road Skidding (Attempt to Save/Steal Fuel)

Petroleum Traces on the RoadGeneral BreakdownsDriver Carelessness (Drunk-Driving, Over-

speeding, Smoking, Lack of experience)

PREVENTION OF TANKER ACCIDENTS

27

1. VEHICLE OWNER: Regular Maintenance of Tanker Vehicle Periodic Checking of Valves for any Leakage Encourage Driver to adopt good driving practices and

stay alert on the road2. GOVERNMENT

Regular Check on Road Conditions Patrol Units Along Coastal Highways

3. GENERAL PUBLIC Private Initiative to Prevent Accidents Help Distressed Tankers/Drivers

FLEET MANAGEMENT

Maintaining Fleet in Good ConditionMaximizing Revenue, Minimizing LossesReducing ExpenditureBookkeeping: Keeping Track of Truck

Particulars and OperationMaintenance: Prevention of Disruption of

OperationsHuman Resource ManagementDealing with LossesStandardization

28

Transport Operational Diagram29

1. Fleet Management

2. Reporting to BOD

3. Managing Requests

1. Daily Operations

2. Fleet Maintenance

3. Fleet Bookkeeping

Checklist Before Dispatch

STICKERS

BRAKES

TYRE CONDITION

OIL LEVEL

LIGHTS

FUEL LEVEL

MILEAGE

30

Fleet Maintenance

Two Types of Maintenance Operations:1.Regular Maintenance: Usually on Fixed

Intervals2.Irregular Maintenance: Wear-and-Tear or

Accidents. Case-per-Case BasisRegular Maintenance

Irregular Maintenance

Wear and Tear AccidentLube Change Tyres Body workDiesel Clutch ChassisMinor Adjustment Paint & Bodywork AxlesGeneral Servicing Other Minor Parts Other Major Parts

31

Fleet Bookkeeping

VERY IMPORTANT when comparing performances or reviewing maintenance history

Based on regular input from Workshop

Tabulation of Truck Particulars and History

Done at the executive levelAssists in regular reporting

to top management; part of managerial accounting

32

Bookkeeping Data

Oil ConsumptionTruck ParticularsRenewable Fees Due Dates

MileageFuel Consumption

Fuel Efficiency Formula: 1. Fuel Consumed (l) * 100/ Mileage (km) (result in l/100km)2. Mileage (miles) / Fuel Consumed (galls) (result in mpg)

Compare Variations to Detect Possible Siphoning/Backlogging

33

Dispatch Example

GW 3456 U (Consumption Set at 50 l / 100 km)

Tema - Kumasi (Pick up Consignment) - Tema

1.Give 180l Diesel2.Write out Dispatch Form3.Hand out Travel Expenses4.Enter Mileage when Dispatched5.Compare Actual Mileage against Computed One6.Check Remaining Diesel in Tank

34

Dealing With Internal Losses

Transport Business Difficult to Monitor, Especially with Larger Fleets

Allegory of Radar - Anti Radar

Who will Police the Police?Always Expect Minor Losses as Part of ExpensesBalance Costs of Monitor Systems against

BenefitUsually Better off to Keep a Loose Watch

35

Minimizing Operational Expenses

Keep Minimum Stocks

Closely Watch Diesel Stocks

Monitor Fuel Consumption Constantly

Supervise Regular Maintenance Operations

36

Vehicle Acquisition

Two Types of Vehicle Acquisition

1. Brand New Truck2. Used Trucks

Different need for eachApproach to acquisition is different

37

Brand New Truck Acquisition

More Expensive on Short-Term

Long-Term usageRequires Solid Financial

Performance From BankNegotiation with Agent

- Recommends model- Discount?

Contract DetailsAfter-Sales Service Level

38

Used Truck Acquisition

Low Cost vs. Reliability

Price Can be Bargained

Check for Spare Parts Supply

Could be Purchased for Using as Spare Parts

39

Fleet Standardization40

Standardization: Fewer models in a fleet

Aim of Standardization: Improve Operational Efficiency

Advantages of Standardization

OPERATIONAL ADV. MANAGERIAL ADV. CORPORATE ADV.Interchangeable Parts Bookkeeping is easier Fewer SuppliersBulk Purchases Possible

Decision-Making is faster

Better Image

Lower Inventory Comparing Performance

Better Finance Options

Better Dispatch Control

Reducing Losses

41

Road Haulage Insurance42

BETTER SAFE THAN SORRY!!

Types of Haulage-Related Insurance:

1.Goods Insurance: In-Transit or Storage2.Truck Insurance: Against Accidents

Third-Party vs. Comprehensive

Insurance Brokers

Goods Insurance43

Theft and damage are likely scenariosWaiver of Responsibility from the TransporterGuarantee for Cargo Owner, at minimal

expense

Based on Percentage Cost of CargoFactored as Operational ExpenseResponsibility of cargo owner, but can be done

by transporter on behalf of cargo owner as extra service

Truck Insurance44

Responsibility of TransporterFactored as Transport Operational ExpenseMinimizes maintenance cost

1.Third-Party: Own truck not covered2.Comprehensive: Policy covers all expenses

Certified Agents can Reduce Insurance Costs for Significant Savings!

Comprehensive Cover Third Party Cover

1. Inform Insurance Company Immediately

2. Prepare Damage Report

3. Fill out Motor Claim Form

4. Keep Copies for Future Reference

1. Assess Damage2. Attempt Amicable

Dispute Resolution3. If not, Follow

Steps from Comprehensive

45

Damage-Reporting Scenario

FUTURE OF TRANSPORT INDUSTRY

Trendlines in Transport Industry1.Short-Term: Decreasing Profit Margins2.Medium-Term: Increasing Cargo Throughput3.Long-Term: High Uncertainty

Expect more consolidation within the industryEventually, Higher Demand/Lower SupplyTransport as support activity, rather than core

businessLonger Haulage When Road Network ImprovesDiversification into more profitable sectors

46

Future Road Network in West Africa47

TARZAN DIVERSIFICATION EXPERIENCE

Transport as core business is not profitable

Forecast increase in overhead expenditure (salaries and wages, diesel cost, inflation, utilities)

Diversification into trade as a consensus decision

Transport and maintenance operations can provide platform for diversification; Synergy Effect

Blue Gallery was Born!

48

Hierarchy of Operations49

Transport Company

Diversification Alternatives

Fixed Assets

Human Resources

Mobile Equipmen

tCapital

Construction Real-Estate Development Stevedoring Trade

50

Diversification Selection Criteria

Long-Term vs. Short-Term Objectives

Consensus of Shareholders

Capacity Surplus

Economic Outlook

Market Mechanics

Personal Speculation

51

BLUE GALLERY

High-End imported furniture in a modern and colorful ambiance

Marketing Concept (Branding is different from core business)

Manageability (Accounting, Operations)

Risky ventureHigh earning potential

52

Application of Synergy Effect53

‘COST ABSORBTION’ AND ‘COST ALLOCATION’ SPREADING RISK AND COST

Lower transport and cargo-handling costs at Blue Gallery, due to Tarzan’s specialization

Maintenance cost shared with Tarzan, lowering overall running costs (masonry, cleaning, truck repairs)

Woodwork and carpentry will cost less at Tarzan

Opportunities for Blue Gallery

Expanding into other Interior Design products

Adding Home Appliances and Sanitary WareRecruitment of Artisans and DesignersMutually beneficial PR with Tarzan

54

VISIT BLUE GALLERY!

Check Brochure

www.bluegallery.com.gh

Aflao Road, Opposite Shell Station

ALL ARE WELCOME!!!

55

ALL QUESTIONS ARE WELCOME

VISIT OUR WEBSITES:WWW.TARZAN.COM.GH

WWW.BLUEGALLERY.COM.GH

56

THANK YOU ALL FOR YOUR TIME