‘Africa must present an attractive investment value proposition’

With Africa’s economic growth in 2010 likely to overtake the global average, companies should be developing the opportunities presented by this sizeable under-developed market, says Safmarine’s Africa region executive, Jonathan Horn. “Doing business in Africa presents a different set of challenges, but the rewards are there if you take the time to understand the market, have a long-term commitment and a very clear idea of what you want to achieve.” Horn believes that the continent should be pulling out all the stops to encourage investment, with a particular emphasis on job creation, by improving tax and labour regimes and quality levels. “The reality is that there are emerging economies across other continents competing for the same investment, and as Africans, we need to instil confidence and ensure the investment package we present is the most attractive.” On the shipping front, Horn forecasts increased demand for vessel space on all services to Africa as cargo volumes, both in and out of Africa, start to pick up. “But there is still a degree of uncertainty as to when the recovery signs emerging will gain substantial momentum,” he says. He believes it is likely to take some time for cargo volume growth levels to return to the highs experienced in the years up to mid 2008. “The current global economic crisis has been significant and its impact widely felt. This has led to a dramatic change in consumer behaviour and consumer confidence. The purchasing and consumption patterns – which drive commodity demand, a key component of current Africa trade – of the future are likely to be very different from those of the past.” Although demand for space has improved, Horn foresees no significant change in the available capacity picture in the near term. “An increase in capacity will only be justified by sustainable demand at freight rates which justify additional deployment.” In line with the Safmarine approach of growing its business in tandem with that of its customers, the line recently introduced a new fully containerised service (225 service) which provides a quick, direct link between South Africa and the West African markets of the Ivory Coast, Nigeria and Ghana and the Safari 3 service which links the Far East, Indian Ocean Islands and Mozambique (Maputo). Horn says that while Safmarine has experienced modest growth in the intra-Africa, West and East Africa trades, the general picture for the South African trades has not been as rosy. “2009 to date has been a very tough year for South African importers and exporters. Volumes have been down by 20% on 2008 levels and we’re hoping to see an improved picture in 2010. We’ve already seen demand for space firming and an increase in cargo volumes in and out of South Africa in what has traditionally been our peak period, which is an encouraging sign.” Another area starting to show signs of improvement is that of freight rates. “Freight rates, across all of our African trades are very – in fact unsustainably – low and have been for most of 2009. We are confident however that the situation will improve in the balance of 2009 and into 2010 as demand strengthens and GRIs (general rate increases) are accepted by the market.”