abrie de swardt imperial logistics growing new markets cross border

“Growing New Markets Cross Border”

Future Fuel Distribution Strategies

Johannesburg, South Africa

November 3, 2011

Abrie de Swardt

Marketing Director

IMPERIAL Logistics

2

� An African Storm

� Introduction

� The Big Picture, Neighbouring Hot Spots, Possible Growth

Scenarios

� Strategic Planning Required

� Closing Thoughts

Table of Content

3


� Introduction


Scenarios



Table of Content

4

� Logistics is not just a cost centre …

• “Logistics represents a strategic, competitive advantage for our company”

• The value of logistics operations in organisations / countries can sometimes

only be truly understood or measured when in fact it goes wrong rather than

functioning normally

� From a financial perspective, improved logistics operations result in …

• increased profitability and shareholder value …

• … as well as growth in revenue and market share …

• … but a true measure of the value of your logistics can be measured in terms

of customer satisfaction

Introduction

5

� A competitive network of global logistics is the backbone of

International Trade

� Recent World Bank Report states …

• “Improving logistics performance has become an important policy

objective in recent years because logistics have a major impact on

economic activity”

• “The importance of efficient logistics for trade and growth is now widely

acknowledged ... better logistics performance is strongly associated with

trade expansion, export diversification, ability to attract foreign direct

investment and economic growth”

Introduction

6

� However, the performance is strongly associated with country

specific factors such as trade procedures, transport and

telecommunications infrastructure and the domestic market for

support services

� Logistics performance depends on the reliability and predictability

of the supply chain

� Factors impacting logistics performance are:

• Infrastructure – IT / physical infrastructure (ports, pipelines, rail & roads)

• Efficient border management and the coordination of agencies involved in

border clearance

• Transport regulation

• Skills

Introduction

7


� Introduction


Scenarios



Table of Content

8

Transport Volumes Shifting to Emerging Markets

� Important sales and supply markets evolve in which emerging and

least developed countries play a major role

� However, current business practices such as international sourcing

and quick turnaround times challenge this by extending

transportation distances and minimising lead times in the supply

chain

9

Africa Consumer Market Growing ... Economy (1)

290

33

365

209

46

942

358

51

560

310

80

1359

SA CA NA WA EA Total Africa

2005 2009

5.4%

CAGR

11.9%

11.3%

10.4%

14.7%

9.6%

GDP Value Added in Africa 2005-09 in Bln USD

Africa expanded overall at a CAGR of 9.6% to 1.4 trillion USD between 2005-09

All African regions, except Southern region, are growing at a double digit

growth rate

Data Source –

United Nation

10

Africa Consumer Market Growing ... Economy (2)

Most of the Southern and Central parts of African countries grew > 10% per

annum between 2005-09

South African economy grew at a CAGR of 4% per annum only during the

same period to 257 bln USD in 2009

20.2

9.8

5.87.1

1.2

4.62.6

5.8 6.1 6.7

2.1

7.0

3.3

35.1

11.09.9

11.0

1.5

8.1

3.9

8.29.0 8.7

2.4

12.7

3.2

Angola Botswana Congo DRC Lesotho Madagascar Malawi Mauritius Mozambique Namibia Swaziland Zambia Zimbabwe

2005 2009

3.0%

14.9%

14%15.0% 9.1%

16.0%

GDP Value Added in Selected African Countries in South and Centre 2005-09 in Bln USD

11.5%

5.2%

10.3% 10.3% 6.6%

3.8% -0.5%

Data Source –United Nation

11

Africa Consumer Market Growing ... Retail (1)

African consumer trade market expanded to 184 bln USD over the last five

years at a CAGR of 10.8%

Again, All African regions, except Southern Region, are growing at a double

digit growth rate...!

40

4

43

28

6

122

48

7

68

48

12

184


2005 2009

4.8%

CAGR

14.0%

12.3%

14.2%

17.2%

10.8%

Retail Value Added in Africa 2005-09 in Bln USDData Source –United Nation

12

Africa Consumer Market Growing ... Retail (2)

South Africa retail market expanded only by 2.5% to 34 bln USD in 2009 from

30 bln USD in 2005

Whereas, Southern and Central markets are growing more than 10% per annum

2.07

1.06

0.43

1.13

0.11

0.51 0.46

1.080.88 0.95

0.24

1.52

0.24

3.69

1.58

0.67

1.87

0.13

0.840.70

1.50 1.44

1.18

0.25

2.29

0.26

Angola Botswana Congo DRC Lesotho Madagascar Malawi Mauritius Mozambique Namibia Swaziland Zambia Zimbabwe

2005 2009

10.6%

15.6%

11.9% 13.4%

8.4%

10.9%

Construction Added in Africa 2005-09 in Bln USD

13.4%

4.4%

11.1%

13.0%

5.6%

2.9% 2.4%

Data Source –

United Nation

13

Africa Consumer Market Growing ... Manufacturing

Manufacturing growth is not aligned with the customer demand growth in Africa ...!

Manufacturing competitiveness has been on a decline in southern Africa ...!

48.02

2.16

39.04

14.98

3.87

108.07

47.77

3.17

61.83

19.21

5.97

137.95


2005 2009

-0.1%

CAGR

10.0%

12.2%

6.4%

11.4%

6.3%

Manufacturing Value Added in Africa 2005-09 in Bln USD

Data Source –

United Nation

14

Africa Consumer Market Growing ... Summary

� Population: 161 mln

� Economy Size: 362 bln USD

� Retail Trade Value Add: 48 bln USD

� Retail Trade Per Capita: 298 USD

� Share of Manufacturing: 13.4%



� Retail Trade: 7.5 bln USD

� Retail Per Capita: 53 USD

� Share of Manufacturing: 6%

Southern Africa(Mauritius Angola Botswana Lesotho Madagascar Malawi

Mozambique Namibia South Africa Swaziland Zambia

Zimbabwe )

Central Africa(Burundi Central African Republic Chad Congo Democratic

Republic of the Congo Rwanda

Uganda )

Eastern Africa(Djibouti Eritrea Ethiopia Kenya Seychelles Somalia

Tanzania)

West Africa(Benin Burkina Faso Cote d'Ivoire Cameroon Cape Verde

Comoros Equatorial Guinea Gabon Gambia Ghana Guinea

Guinea-Bissau Mali Mauritania Niger Nigeria Sao Tome

and Principe Senegal Sierra Leone Togo )

Source: United Nation Data Base and Analysis by Volition

North AfricaAlgeria Egypt Libyan Arab Jamahiriya Morocco Sudan

Tunisia




� GDP Per Capita: 65 USD




� Retail Trade: 47 bln USD

� GDP Per Capita: 145 USD





� Retail Trade Per Capita: 306 USD

� Share of Manufacturing: 11%

GDP Growth

4-5%

5-6%

11-12%

8-9%

8-9%

Da

ta S

ou

rce

–U

nit

ed

Na

tio

n

15

Africa Consumer Market Growing ... Summary (2)

� African consumer retail & wholesale trade would reach to 400

bln USD market in 2020; if it is able to keep the current growth

rate of 8-10% p.a.

� However, South African retail market will continue to grow less

than the average growth rate in Africa.

� Hence the Industry future growth will come through by

expanding its market network into Africa.

� Logistics and Supply Chain excellence should be the key

differentiator given the location and cultural advantage to South

African Industry.

16


� Introduction


Scenarios



Table of Content

17

“The best way to predict the future is to invent it”

— Alan Kay, noted computer scientist

18

Africa ... Avoid / Ignore it at your peril!

� Shouldn’t underestimate the

opportunity and potential

� Africa needing to become more

competitive. To do this focus must

be placed on:

• Investment in infrastructure

– Ports, Railways and Roads

– Cross border corridor development

– Combined commitment by all African

governments

• Reducing the cost of logistics

– Movement of imported cargo to the

African destination ports

– Create balanced two directional volume

flows

19

Industry Challenge ... Competition from Asia

South Africa‘s trade with the SADC grew only at a CAGR of 4.5% (2005-09)

and our share has come down to 30% in 2009 from 40% in 2005 ...!

South Africa has been losing market share to India & China, whose export

volume to Africa is growing more than 40-50% per year ...!

7.23

0.62 0.68 0.93

0.35 0.68

0.31 0.24 0.45 0.40

8.63

3.27

2.22

1.71 1.47

0.97 0.78 0.68 0.63 0.60

South Africa China Portugal USA India UK Brazil UAE France Japan

2005 2009

52%

4.5%

9% 9%

Leading Export Partners to in SADC 2005-09 in Bln USD

35%16%

43%26% 29% 10.7%

Data Source –

United Nation

20

Logistics Challenge ... High Cost to Transport

1850

3010

3505

3818

1680 1713

1100

16861531

1754

2664

3280

500

1055

USD / TEU

The challenges, such as high cost of export, customs delays and infrastructure

bottlenecks will continue to exist ...!

Data Source –

United Nation

Landlocked CountriesLandlocked Countries

China and IndiaChina and India

Landlocked

Countries

Landlocked

Countries

21

� Intermodal concept is not well developed along the North-South

corridor given the fact that it covers more than half of the

continent’s population and economy

� Hence, high cost of transportation on Road and a longer lead time

on the surface than sea given the cross border delays

• However, port delays / bottlenecks remain a major challenge

� The developed / developing corridors lack a consolidated logistics

park at the key nodes of the network

� The high investment risk and a lack of critical volume have put off

South African Companies / LSPs to set up a Pan African or SADC

network

Logistics Challenge ... Intermodal Logistics

Network

22

� Globalisation

� Industry Consolidation

� Liberalisation and privatisation

� Financing transport infrastructure

� Sustainability

� IT in the supply chain

Key Strategic Transportation & Logistics Issues

23

� What are the key drivers of growth in transportation and logistics?

• GDP Growth (Growth)

• Population Density (Growth)

� Important sales and supply markets evolve in which emerging and

least developed countries play a major role

� New transport corridors will emerge, especially between Asia and

Africa, Asia and South America as well as intra-Asia


Globalisation

24

Transport Volumes Shift to Emerging Markets

� “LSPs will need to take an active part in the design of new transport

corridors, develop adequate structures and pricing systems and create

logistics clusters”

� Decisions where to set up production sites will increasingly be influenced by

transport costs

25

� In the coming years, the transportation & logistics industry in

emerging markets will grow tremendously with continued entrance

of multinational LSPs

� This will be followed by a period of fierce competition followed by

consolidation


Industry consolidation

26

� Multinational LSPs will operate

actively in domestic markets of

emerging countries, not only in

international transport

• Consolidation of the logistics market

will be the logical consequence

�� LSPs entering emerging markets

should adapt company structures

and their operations to local

peculiarities.

Customised Logistics Business Models are a

Necessity for Success in Upcoming Markets

27

� Worldwide, liberalisation and deregulation of T&L markets are in

progress or foreseen

� In the emerging markets, the degree and pace of privatisation of

state-owned transportation and logistics organisations will strongly

differ amongst countries


Liberalisation& Privatisation

28


Liberalisation& Privatisation

� IMF and World Bank set up requirements for

structural adjustments

� Emerging markets in different stages on this

‘journey’

� Governments will maintain oversight

functionality rather than being active market

players

• New market structures and processes will be

established and market dynamics will

significantly change with more active private

players

29

Massive investments in transport infrastructure will not be

sufficient to close all infrastructural bottlenecks by 2030


Financing Transport Infrastructure

$ 1,000 bn

$41,000 bn

30

Infrastructure ... Success stories!

31


32


33


34


35


36

A drop in the ocean ─ Investments into transport infrastructure are insufficient



UK spend

US$12bn

Germany spend

US$17bn

China spend

US$350bn

(annually over the next four years)

(annually over the past two years)

(annually over the past four years)

� Where will the UK, Germany and other

industrialised countries stand in 20 years

regarding their logistics performance?

� Do LSPs from industrialised countries like

UK or Germany successfully capitalise on

the apparent opportunities in emerging

countries?

37

� Public or private? — Despite strong financial pressures, governments

cannot completely shift transport infrastructure investments to the

private sector



38

� Global private project finance debt

market in infrastructure accounted

for US$139.2bn in 2009 (thereof T&L

represents the 3rd largest sector with

17%)

� Private investments can help TI

operators and governments to raise

capital for transport infrastructure

projects, but are no panacea

� Applicability depends on the

individual financing case and the

approach taken



Global PPP deals in value of total debt and equity investedSource: Dealogic Project Wave

39

� Reducing transport emissions will be a greater challenge for

transport companies than the supply of energy


Sustainability

40

� Oil prices will not rise in the order of

magnitude necessary to threaten

conventional transport

• Some operators have introduced “green

logistics products” (CO₂ neutral

transport)

� Costs related to the carbon footprint

of logistics processes will be allocated

to the causer

�LSPs will need to track, document and

disclose their caused CO₂ emissions in

the future.


Sustainability

13 %of CO2 emissions worldwide

from transportation

41

� Costs related to the carbon footprint of logistics processes will be

allocated to the causer


Sustainability

42

� Global costs of mitigating climate

change are estimated at around

US$600bn – 1,500bn annually

• The T&L industry contributes through

environmental taxes, tolls and (soon)

emission trading

��LSPs may need to document all types

of emissions, such as noise and

nitrogen oxide, and the use of

resources.

External costs will be allocated to the causer and

factored into the prices of products

43

� ICT has been promoted as a means to enhance logistics

competitiveness

� It is one of the few factors which has been proved to have the

capability of increasing logistics competence and decreasing its costs

simultaneously


IT in the Supply Chain

44

� IT integration accelerates the flow of

information between all players in

the supply chain

� IT connects almost every activity in

logistics, e.g. transportation,

warehousing, order processing,

material management, etc.

� Development of digital systems

offers high personalisation and

corporate tailoring which become

key elements of logistics services in

the future


IT in the Supply Chain

RFID

Barcode

WMS

Tracking

&Tracing

EDI

Route planning

GPS

45


� Introduction


Scenarios



Table of Content

46

� The need to compete motivates the use of next generation solutions in

the field of transportation, logistics and the supply chain in general

� These incorporate the following …

• Integrated intermodal and value added logistics capabilities

• Twinned Inland Ports and Logistics Gateways providing the same levels of operating

efficiency and security

• Dedicated Land Corridors, creating smart and secure transportation networks

• A Framework of Standards used to secure and facilitate Global Trade (WCO, DHS, AEO)

• Advanced Telecommunications Networks, providing a cost competitive broadband

infrastructure with convergent applications

• The Extended Global Supply Chain, incorporating product development,

commercialization order taking and fulfillment functions

• Overarching Programs, which seek to gain the greatest synergy between individual

ventures

An African Storm ... Next Generation Solutions

47

What’s Making Supply Chain Life More Challenging?

� Rapidly-Changing ��

• Global Economic Conditions

• Supply Chain Needs and Requirements

� Need to Continually Re-Evaluate Global Sourcing and Marketing

Strategies

� Conclusions:

• No Such Thing as a “Globally-Optimum” Supply Chain Solution

• Renewed Priorities on Flexibility, Adaptability, and Changeability

• Critical Need for Supply Chain Innovation

THANK YOU