Africa Opens its Doors to the World
A diverse continent with more than 50 different countries, Africa is blessed with vast natural resources - offshore oil and gas reserves, precious metals and diamonds, iron ore, cocoa, timber and more. That wealth of resources, coupled with an increasingly skilled workforce, key trade hubs and growing import markets, has enabled the continent to claim a strategic position on the world stage. And yet, it still holds a multitude of untapped opportunities for the global shipping industry.
Africa’s business and economic landscape
Africa represents an important market for local and international trade. It is home to six of the world’s 10 fastest growing economies, and the World Bank forecasts growth of 3.2 percent for 2018, up from 2.4 percent last year. That growth is now attracting increasing attention from foreign investors.
To encourage further growth and development, a string of measures have been introduced to develop the continent’s maritime industry, not least the African Union’s 2050 Africa’s Integrated Maritime strategy, which seeks to address Africa’s maritime challenges and ensure continued sustainable development and international competitiveness.
Many of the challenges of Africa are persistent and require careful navigation supported by an in-depth and clear understanding of local conditions. Companies who can successfully combine such local know-how with global expertise and skill can both profit from its emerging markets and help maximize their potential.
Ports and logistics infrastructure play a defining role in any region’s economic and trade development. This applies especially in Africa, whose sheer geographical size and diversity presents a huge opportunity.
In terms of infrastructure development, Africa is lagging behind other emerging economies, and that is widely viewed as an obstacle to further growth. It creates a range of challenges, including increased cargo clearance times, dated equipment and cargo theft. According to the African Development Bank, the continent would require approximately $112 billion per year over the next decade to address its infrastructure gap.
A recently published report on port development in Africa by PwC highlighted that Africa must take advantage of the economic potential of its ports if it is to realize its growth ambitions. Port effectiveness works in parallel with trade competitiveness. The report noted that a 25 percent improvement in port performance could increase Africa’s GDP by two percent. Further, PwC estimated that $2.2 billion in logistics costs could be saved annually if the average throughput at the major African ports doubled.
Investment to maximize the effectiveness and efficiency of ports is vital, and steps are already being taken in the right direction. Djibouti has earmarked $650 million towards modernizing its port infrastructure, and in Ghana, $1.5 billion is being spent to enhance annual handling capacity at Tema port.
Transition and transformation
To fully unleash its untapped potential, Africa needs established shipping players with the local knowledge and global reach to deliver high quality, reliable and cost-efficient service to the shipping and port sector. It also demands a full, unequivocal embrace of continent’s challenges and tremendous expertise to see past abiding capacity and speed issues. For established companies, the good news is that the continent is likely to be radically transformed in coming years. Africa is opening its doors to the world.
As its ports and logistics sectors undergo a transformative period, Africa is facing an economic transition hitherto unrealized by the world at large. Global companies with local knowledge will be well-placed to take advantage of the new opportunities that the market will present. Truly successful enterprises will be those that work hard to cement themselves and understand Africa’s local markets with the same fervor that they understand macroeconomic global trade.