“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
� An African Storm
� Introduction
� The Big Picture, Neighbouring Hot Spots, Possible Growth
Scenarios
� Strategic Planning Required
� Closing Thoughts
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
� An African Storm
� Introduction
� The Big Picture, Neighbouring Hot Spots, Possible Growth
Scenarios
� Strategic Planning Required
� Closing Thoughts
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
SA CA NA WA EA Total Africa
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
SA CA NA WA EA Total Africa
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%
� Population: 139 mln
� Economy Size: 51 bln USD
� 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
� Population: 177 mln
� Economy Size: 79 bln USD
� Retail Trade: 11.6 bln USD
� GDP Per Capita: 65 USD
� Share of Manufacturing: 7.5%
� Population: 322 mln
� Economy Size: 300 bln USD
� Retail Trade: 47 bln USD
� GDP Per Capita: 145 USD
� Share of Manufacturing: 5.7%
� Population: 202 mln
� Economy Size: 559 bln USD
� Retail Trade: 61.8 bln 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
� An African Storm
� Introduction
� The Big Picture, Neighbouring Hot Spots, Possible Growth
Scenarios
� Strategic Planning Required
� Closing Thoughts
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
Key Strategic Transportation & Logistics Issues
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
Key Strategic Transportation & Logistics Issues
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
Key Strategic Transportation & Logistics Issues
Liberalisation& Privatisation
28
Key Strategic Transportation & Logistics Issues
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
Key Strategic Transportation & Logistics Issues
Financing Transport Infrastructure
$ 1,000 bn
$41,000 bn
30
Infrastructure ... Success stories!
31
Infrastructure ... Success stories!
32
Infrastructure ... Success stories!
33
Infrastructure ... Success stories!
34
Infrastructure ... Success stories!
35
Infrastructure ... Success stories!
36
A drop in the ocean ─ Investments into transport infrastructure are insufficient
Key Strategic Transportation & Logistics Issues
Financing Transport Infrastructure
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
Key Strategic Transportation & Logistics Issues
Financing Transport Infrastructure
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
Key Strategic Transportation & Logistics Issues
Financing Transport Infrastructure
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
Key Strategic Transportation & Logistics Issues
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.
Key Strategic Transportation & Logistics Issues
Sustainability
13 %of CO2 emissions worldwide
from transportation
41
� Costs related to the carbon footprint of logistics processes will be
allocated to the causer
Key Strategic Transportation & Logistics Issues
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
Key Strategic Transportation & Logistics Issues
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
Key Strategic Transportation & Logistics Issues
IT in the Supply Chain
RFID
Barcode
WMS
Tracking
&Tracing
EDI
Route planning
GPS
45
� An African Storm
� Introduction
� The Big Picture, Neighbouring Hot Spots, Possible Growth
Scenarios
� Strategic Planning Required
� Closing Thoughts
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