Africa Rising
Helping continent's Sub-Saharan region reach its potential through world trade and development.
By Chris Dupin
U.S. trade with Sub-Sahara Africa has increased sharply this decade, with imports quadrupling since 2001 to more than $86 billion in 2008 and exports doubling in the same period to $18.6 billion.
Last year U.S. exports to Africa rose 29.2 percent over 2007 and imports were up 27.8 percent.
Globally, the World Trade Organization said last year African exports increased 29 percent to $561 billion, and imports rose 27 percent to $466 billion. The increases reflect basic commodity and mineral exports, but also a surge in imported consumer goods, said Hans-Ole Madsen, vice president for business development at APM Terminals in the Africa, Middle East and India region.
'Trade is a critical platform for Africa's economic growth,' said Secretary of State Hillary Clinton in an August speech in Nairobi, Kenya. 'Today, Africa accounts for 2 percent of global trade. If Sub-Saharan Africa were to increase that share by only 1 percent, it would generate additional export revenues each year greater than the total amount of annual assistance that Africa currently receives.'
Trade with the United States has been bolstered by the African Growth and Opportunity Act (AGOA), a 2000 law that allows about 40 Sub-Saharan Africa nations to export qualifying goods to the United States without import duties.
But in the past year Africa has taken a hit from the global economic crisis. A June report from the United Nations Economic Commission for Africa warned: 'eight years of economic growth in Africa could be entirely consumed by the current global downturn.' It forecast that 'following half a decade of above 5 percent economic growth the continent can expect only 2.8 percent in 2009, less than half the 5.7 percent expected before the crisis.'
How severe or long lasting an impact that will have on trade and shipping volumes is not yet clear.
'The most striking impact of the crisis has been the reduction in export revenues. Prices of minerals and oil have stumbled and consequently it has reduced revenue for African countries, especially from oil, but also copper and agricultural items as well,' said Dominique Lafont, executive vice president for Africa at Bollor' Africa Logistics.
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| Hillary Clinton U.S. Secretary of State |
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| 'Trade is a critical platform for Africa's economic growth.' | |
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An arm of a French conglomerate involved in everything from broadcasting to the manufacture of batteries and capacitors, Bollor' Africa Logistics has operated in Africa for 50 years and employs nearly 20,000 people in 41 countries. With 6,000 trucks, 64 million square feet of warehouse space, and operations in eight ports, it said it has the largest stevedoring and logistics network on the continent. In the United States, Bollor' is represented by its sister company SDV International Logistics.
Besides reduced export revenues, Lafont said, 'the second impact has been the reduction of foreign investment. Some projects have been cancelled, other projects have been postponed, and also competition over current projects has reduced. And the most developed country on the continent, South Africa, has also slowed down.'
The global recession has not had as much impact on import volumes in lesser-developed countries. 'Demand is largely for basic products and less vulnerable to the crisis,' he explained.
Maersk Line said its first half volumes on Africa routes fell 14 percent. Volumes at affiliate Safmarine were flat. (Safmarine has some activity on east/west routes, but Africa-related activities are by far the majority of its business.)
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| Stephen Hayes president, Corporate Council on Africa |
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| 'Once you take energy out of the equation, even South Africa is a larger investor in the West of Africa than the U.S.' | |
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'Between us and our big brother, we probably have 40-45 percent of the West African market,' said John Boudreau, president of Safmarine Inc., Maersk's U.S. arm. 'In some countries Maersk is bigger, some countries Safmarine is bigger.'
Despite its growth, U.S.-Africa trade has been a disappointment to some. It is still dominated by oil and a small number of other commodities, and most trade is concentrated with a few countries.
Sub-Saharan Africa accounted for slightly more than 3 percent of U.S. merchandise imports. Petroleum products dominate, accounting for about 81 percent of total U.S. imports from Sub-Saharan Africa. As a result, big oil producers Nigeria and Angola account for nearly two-thirds of U.S. imports. Congo, Chad, Equatorial Guinea and Gabon are other large African oil exporters to the United States.
South Africa accounted for 11.6 percent of U.S. imports from Africa in 2008. Among the major commodities from South Africa, platinum and diamond imports declined while vehicles, iron and steel were up.
Leading U.S export commodities to Sub-Saharan Africa include motor vehicles, oilseeds and grain, petroleum and coal products, aircraft and parts, oil and gas machinery, and construction equipment.
Most of the U.S. imports from Sub-Saharan Africa, including oil, are eligible for preferential treatment under AGOA. Clinton noted there are 6,999 items that can be sent from Africa to the United States duty-free, but, 'we need more product diversification.'
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She said this is an area of focus for U.S. Trade Representative Ron Kirk, and that a number of AGOA countries are in the early stages of supplying the American market with new products. These include footwear from Ethiopia, cut flowers from Tanzania, eyewear from Mauritius, and processed fruits and jams in Swaziland.
'We're also seeing some countries take advantage of the fact that they can produce industrial products in partnership with international firms, and then export them duty-free to the United States,' Clinton said.
In a report issued in August the Government Accountability Office examined why Sub-Saharan Africa's textile and apparel industry has not achieved the growth anticipated under AGOA, which was signed into law by President Bill Clinton in 2000, and offered suggestions for improvements.
'Industrialization in many developed countries was initiated in the textiles and apparel sectors, and some developing countries have relied on these sectors to significantly increase and diversify exports, with positive effects on incomes, employment and poverty levels,' GAO said.
By providing generous preferences for African textile and apparel imports, the expectation was 'AGOA beneficiaries would be able to leverage these advantages to replicate this industrialization process.'
There was an initial surge of U.S. textile and apparel imports Sub-Saharan Africa ' from about $776 million in 2000 to $1.78 billion in 2004. However, after global quotas under the multifiber arrangement were removed after 2004, U.S. imports from Africa dropped to $1.18 billion in 2008. That's only about 1.3 percent of total U.S. textile and apparel imports compared to China's 35 percent share or Bangladesh's 3.8 percent share.
U.S. exports of yarn and fabric to Africa have also fallen, from $24.2 million in 1998 to $15.6 million in 2008.
GAO said many African countries 'face infrastructure and development challenges that must be addressed before they can fully take advantage of these benefits. It noted low-cost Asian producers such as China, India and Bangladesh have relatively modern production facilities and have developed a competitive advantage.
Also, GAO said consolidation in the U.S. retail market has led to 'lean retailing methods,' a combination of low inventories and frequent restocking. Retailers closely track sales using electronic data to facilitate fast communications with suppliers, who must be highly flexible and able to adjust output, and ship and deliver products quickly.
'Aspects of the lean retailing method do not favor African suppliers that have less advanced production technology that limits their flexibility to meet changing demands,' the agency explained.
Among the options the U.S. government should examine to help the continent's textile and apparel industry are extending the duration of a provision that allows AGOA countries to use fabric from third countries in exports that qualify under AGOA and extend the duration of overall AGOA benefits beyond 2015.
Lafont said Africa's farmers and agriculture industry faces many challenges.
'International competition is not very fair to Africa. There are a lot of subsidies, and it is difficult for Africa to stabilize its agriculture because of the great variation in commodity prices,' he said. A stronger agricultural sector could benefit the continent greatly, he added, encouraging people to farm rather than move to the city.
Madsen of APM said that going back to colonial times, Europe dominated trade with Africa. But there has been a big shift over the past decade with Asia, particularly China, becoming the region's biggest trading partner, particularly as an exporter of consumer goods.
Except for a small number of countries ,such as South Africa or Egypt, not many consumer goods are produced in Africa, and China has become a major source for products such as clothing and electronics, he said.
Africa is 'a continent where you import consumer goods and you export raw materials,' Madsen said.
That has a big effect on shipping, with many exports leaving on bulk or breakbulk vessels, while many imports arrive in containers. Many export containers, carry 'fresh air,' he said.
As containerization has become more prevalent over that past 10 to 15 years, many African ports have expanded container facilities, converting old general cargo docks into container ports. Many also handle roll-on/roll-off ships as imports of new and second-hand cars move to the continent from Europe or the United States.
Stephen Hayes, president of the Corporate Council on Africa, believes 'the U.S. needs to be much more actively engaged in Africa. The U.S. technically is still the largest investor in Africa but about 70 to 80 percent is oil and oil-related matters, so it's not long-term investment. It's not like a 50-year investment, but probably a 10-20 year investment.
'We need to invest in just about every other sector and throughout the continent,' he continued. 'If you take several countries out of the picture, then the U.S has very little investment in Africa. Compare that to China, which is invested in just about every country in Africa. Also Japan, India and the Gulf states are increasing investment. Once you take energy out of the equation, even South Africa is a larger investor in the West of Africa than the U.S.'
Lack of infrastructure has a strong effect on how the shipping industry operates in Africa.
'If containers are bound for delivery in consumer areas of big cities, it goes out to distribution warehouses,' Madsen said. But in many locations if cargo is bound for or originates far inland, it is stripped or stuffed at the port because roads are not good enough to run container trucks.
Lafont agrees. 'Unfortunately the roads are not good enough, and I am afraid to say they are probably deteriorating' in many locations. Weight restrictions are often ignored, though he said some countries are installing scales to prevent overloading of containers.
However, there are some exceptions. South Africa has a well developed rail and road system. Safmarine has its own trucking company and it uses the national rail system to move containers inland to reach population centers like Johannesburg.
Madsen said there are container trains that run from the East Coast of Africa from Kenya to Uganda, for example.
Bollor' has a fleet of 6,000 trucks and operates trains between Burkina Faso and the Ivory Coast and the Camrail network within Cameroon. It also operates inland container ports in Mombasa in Kenya and in Dar es Salaam in Tanzania, and river barges on the Ubangi River between Central Africa and the ports of Brazzaville and Pointe Noire.
Bollor' operates corridors throughout Africa, Lafont said, extending from ports such as Dakar in Senegal in West Africa, Port Sudan on the Red Sea, or Mombassa in Kenya on the Indian Ocean. For example, for a shipment moving from Mombasa it will handle customs clearance, storage of goods, transshipping cargo on trucks or by rail to Kitale in the Northern part of Kenya or Kampala in Uganda.
'Our strategy is to offer door-to-door service,' Lafont said.
Boudreau said Safmarine offers a variety of services that are appealing to shippers in Africa, and some other trades. For example, in addition to its fleet of containerships, Safmarine charters a fleet of about 40 breakbulk vessels. These are useful for moving pipe and drilling equipment, and other supplies for the oil industry in Nigeria and Angola, for instance.
Safmarine works with customers who may need containers for extended periods, or if it wants to buy containers, it can arrange programs for that. The company worked with Daimler Benz and a third-party vendor to develop a system for loading automobiles into racks that are then slid into shipping containers.
Reefer is a big area of focus for Safmarine. Boudreau said South Africa, like Chile, is a major producer of citrus, grapes and other fruit. He expects that business to grow as more fruit moves in reefer containers, offering exporters advantages over moving their harvest in conventional reefer ships.
'The cargo arrives in better shape. It doesn't come to market in such large lots that it depresses the price. There's less spoilage, less pilferage and it fits the supply chain better to plan for 40-foot containers rather than hundreds of pallets of fruit that need to be warehoused,' he said.
GAL/Galborg, which formerly traded under the name Gulf Africa Line, has operated liner services between the United States, Mexico and Southern Africa for 11 years, carrying breakbulk and containers on 30,000-deadweight-ton multipurpose ships. In the United States it calls at Houston, New Orleans, and Jacksonville, Fla.
'We had a very balanced trade for many years until cargo slowed,' said David Groves, owner's representative for Galborg in Houston. His company's ships are relatively full southbound, but northbound business was very quiet in the first half of this year. But volumes are picking up northbound, where major commodities include ferroalloys and steel products like pipe and coil and wire rod.
GAL is a joint venture between Nordana, which has its own service between the United States, South America and Africa, and MACS Maritime Carrier, which serves North Europe/Africa. It has recently expanded its port coverage through connecting agreements with two feeder companies: MACS East Africa, which calls ports along the East Coast of Africa from Durban, South Africa to Mombasa, Kenya; and Angola South Line, where GAL will connect with Angola South Line in Walvis Bay Namibia for cargo bound to and from Angola.
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| Hans-Ole Madsen vice president for business development, APM Terminals |
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| 'Through privatization, and I'd hope we have played a good part in that, ports are getting more efficient.' | |
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'Angola is definitely a booming country with a lot of Chinese money going in there for redevelopment of infrastructure,' Groves said.
The connecting carrier agreements allow GAL to reach shallow-draft ports in Angola that may only be able to accommodate 5,000 dwt vessels, he said.
Shipping executives say ports in Africa are a mixed bag from the super-sophisticated transshipment terminals that APM operates in Tangier, Morocco and Port Said, Egypt, to ports in West Africa where ships may have to wait days, sometimes weeks to discharge cargo.
But Madsen said, 'Through privatization, and I'd hope we have played a good part in that, ports are getting more efficient.'
Lafont, of Bollore, said Africa first opened itself to the concession model in the mid-1990s. 'I think it is well understood and produced good effects,' he said. His company has won concessions in eight ports: Abidjan in the Ivory Coast, Tema in Ghana, Tincan Island in Nigeria, Douala in Cameroon, Cotonou in Benin, Libreville in Gabon and Pointe Noire in Congo, and Pointe des Galets on the French Island of La R'union off the coast of Madagascar.
Lafont said there is stiff competition from many of the large global port companies to develop ports on the continent, including APM, the Terminal Link subsidiary of CMA CGM, DP World, Hutchison and ICTS.
But these companies are sometimes allies as well. For example, in May APM will become a member of the Bollor' consortium that has been selected to develop a new deepwater container terminal at the port of Pointe-Noire. The companies also have an association in Abidjan, Douala and Tema. And Zim is Bollore's partner at Tincan Island in Nigeria.
The improvements in Pointe-Noire and Cotonou will allow those ports to handle much larger ships, increasing the size of container vessels from a maximum of about 3,000 TEUs to 7,000 TEUs, Lafont said. He believes these larger ships will encourage more direct service to Africa and a reduced reliance on feeder ships, which he said may reduce congestion at some African ports.
Hayes thinks there are big opportunities for U.S. companies to increase sales in Africa to help build infrastructure, including roads, agribusiness, power and alternative energy.
Improvements such as ports and roads can not only help Africans trade better, but can reduce isolation and tribal affects, he says.
Better roads and storage facilities would reduce crop spoilage, bring more crops to market and increase incomes.
And improvements in telecommunications, including increased access to broadband technology, could help improve education.
'In the long run, we are optimistic because we believe the continent has now embarked on a development cycle, and this is largely due to the globalization factor ' the world is becoming smaller,' Hayes said. 'Information technology has enabled Africa to make a great leap forward. The ratio of people with a mobile phone is far greater than most people would have anticipated a few years ago. A lot of Africa is connected to the rest of the world and that creates a desire for people to have more transparency, democracy and money, which is all a positive factor in terms of economic development.'
