Transport and logistics business in Africa

Transport and Logistics Business in Africa

October 2015

The South African Association of Freight Forwarders

“New Frontiers”

Durban

15th October 2015

PwC

Africa’s Outlook

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Transport & Logistics in Africa

Africa – The drive for

Infrastructure

Africa - Trade

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2

4

3

PwC

Africa’s Outlook

3

PwC

Mega Trends

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The five megatrends are a primary driver of growth and opportunity for CP&I investment in Africa


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Where are we today in sub-Saharan Africa?

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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.


Where are we today in sub-Saharan Africa?

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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 discoveriesin 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


PwC

Transport & Logistics in Africa

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Africa Gearing Up - 10 Countries in profile

DRC

Angola

South Africa

Mozam-bique

Tanzania

Kenya

EgyptAlgeria

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

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

AlgeriaUS$ 209bn

AngolaUS$ 115bn

DRCUS$ 17bn

EgyptUS$ 257bn

GhanaUS$ 40bn

KenyaUS$ 41bn

MozambiqueUS$ 14bn

NigeriaUS$ 270bn

South AfricaUS$ 384bn

TanzaniaUS$ 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

Esti

mate

d p

op

ula

tio

n a

s a

t m

id O

cto

ber

2013 (

Millio

ns)


PwC

10 Economies - Current state

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Demographic& Resources

Economics BusinessEnvironment

Trade & Logistics

Transport Infrastructure

Algeria

Angola

DRC

Egypt

Ghana

Kenya

Mozambique

Nigeria

South Africa

Tanzania

�� Attractive Average Unattractive

��

��

��

��

��

��

��

��

��

��

��

��

��

��

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��

��

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PwC

5 Years forward

�� Strong Improvement Expected

Stagnation / marginal change expected 11Some Improvement Expected ��

Demographic& Resources

Economics BusinessEnvironment

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

��

��

��

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��

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PwC

Africa – The drive for

Infrastructure

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Sub-Saharan Africa

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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


Sub-Saharan Africa

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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


Sub-Saharan Africa

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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


Assessing the global transport infrastructuremarket: Outlook from 2015 to 2025

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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 intransport 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


PwC

Africa - Trade

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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),

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“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


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


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

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 GasReal Estate

Alt/Renewable EnergyChemicals

Communications

Building & Cons MaterialMetals

Textiles

Warehousing & StorageFood & Tobacco

Other

FDI by Value ($US Bill)Egypt $17.9Angola $16.1Nigeria $10.7Mozambique $8.8Morocco $4.6Ghana $4.4South Africa $3.8Zambia $3Ethiopia $2.8Kenya $2.2Other $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)

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

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PwC

Thank you

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Transport and logistics business in Africa

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