AJOT: First of all, can you provide an overview of Agility’s footprint in Africa?
Geoffrey White: Agility’s core business in Africa is in funding, developing and managing a growing network of international standard warehouse parks across key markets. Agility warehouse parks are already open in Ghana, the Ivory Coast, Mozambique and Egypt, with Nigeria under development. Further countries targeted for warehouse parks include Morocco, Kenya, Tanzania, Ethiopia, Angola and the DRC.
AJOT: High hopes have been placed in the African Continental Free Trade Area (AfCFTA). What’s your view?
Geoffrey White: The AfCFTA is fundamental to the growth of Africa, creating the world’s largest single market of 1.3 billion people today and that will grow to 2.5 billion by 2050. According to the World Bank, the AfCFTA, when fully implemented, has the ability to add 81%+ to intra-Africa trade and 30% to African global trade.
AJOT: A long-standing issue in Africa is the development of adequate transportation and cargo-handling infrastructure to support the movement of goods. Do improvements remain slow or is some momentum building?
Geoffrey White: Africa continues to struggle with the legacy of infrastructure that was developed in a linear manner solely to support the movement of commodities from source to the coast for export. The required road and rail network interconnecting African cities across the Continent is significantly underdeveloped and remains a massive constraint to economic growth. The overall cost of moving goods in Africa is higher than any other Continent which adds to the cost of living in a region where average disposable incomes are already low. The high costs also impact Africa’s viability for the local production of goods and its ability to be competitive internationally.
The ‘infrastructure gap’ is estimated by the Africa Development Bank to be a shortfall of US$80 billion a year. However, on the ground there is some tangible progress where numerous investments in new airports and ports, road and rail networks have been made within many countries modernizing and improving their infrastructure facilities.
There have also been significant benefits for countries that have embraced digitization with the implementation of ‘single window’ custom solutions and the pre-clearance of goods prior to port arrival and improved port transit times at many ports improving efficiency.
There has been progress too in digital infrastructure to support the growth in communications and data with the development of sub-sea cables to the Continent and trans-Continent cables being laid. But there are struggles to keep pace with demand for internet services and technology that is growing rapidly, driven by a global population with an average age of 20.
AJOT: UNCTAD’s Economic Development in Africa Report 2023, entitled: The Potential of Africa to Capture Technology-intensive Global Supply Chains, highlights Africa’s large reserves of critical minerals that are vital to the global supply chains of high technology-intensive industries. Can African economies emerge as key suppliers to the automotive, electronics, renewable energy, and medical devices sectors?
Geoffrey White: Historically, Africa has been an exporter of raw materials, but the new focus of most of the region’s governments is to encourage and if necessary, legislate, to provide local beneficiation of raw materials, enabling Africa to gain from the added value and economic benefits of processing raw materials and moving them as far up the value chain as possible before export.
Many resource sector companies are now embracing this. This ‘philosophy’ has not only been adopted for raw minerals but also for agricultural produce, where Africa has huge potential to meet global demand.
AJOT: Which African countries are the most advanced today in terms of their logistics capabilities?
Geoffrey White: Historically, South Africa had the best logistics infrastructure on the Continent. However, a lack of investment in new capacity and woefully minimal expenditure in maintenance has resulted in its rapid deterioration and hence growing inefficiency, increasing costs and congestion. Power has become unreliable, and roads are collapsing. Durban and other gateway ports are now heavily congested, the coal rail link to the Richards Bay terminal is failing, water supply challenges are manifest and the country totters from infrastructure crisis to crisis.
By contrast, Morocco is an example of a country leading the way in infrastructure investment with initiatives such as Tanger Med (a fast-developing container port in Tangiers), the transformation of national carrier Air Maroc and the Al Boraq high-speed TGV rail line. This focus on developing quality infrastructure has helped Morocco to be successful in attracting numerous new, non-indigenous industries such as in the aviation, automotive component and electronics sectors.
Most African countries understand the necessity of good infrastructure to drive economic growth, but the struggle is three-fold: the lack of access to competitive funding for new developments; the very low number of proposed projects that succeed from concept through to actual development – currently only around 10%; and the exceptionally long lead times for project execution.
AJOT: Chinese investment in Africa has attracted a good deal of media attention. What has been the impact on the Continent’s transport infrastructure development?
Geoffrey White: Chinese construction companies were keen to enter the African market as a steppingstone to global markets and had the ability to bring funding and expertise to Africa, along with an appetite for government to government transactions – seemingly a perfect scenario. This has enabled the development of ports, roads, airports and desperately needed infrastructure on the Continent.
However, the challenge has been that many of these projects were driven by a combination of the construction companies’ desire to build and governments’ longing for infrastructure and were not commercially feasible and have struggled to become viable. As a result, there is significant debt to China in many countries that is not being serviced, leading to a growing number of defaults.
AJOT: Finally, a word on Africa’s air transport connectivity and the key role played by Ethiopian Airlines?
Airline capacity, for freight and passenger movement, is an important requirement to stimulate economic development and a lack of such capacity constrains growth.
The challenge in Africa is firstly the ability to connect the Continent to the rest of the world, and secondly to develop intra-Africa air routes.
Ethiopian Airlines is the African success story and continues to grow its network both internationally and on the Continent. There are very long distances between cities in Africa when compared to other continents (so flights are more costly on fuel consumption and aircraft hours) and regional trade is low (15% compared with 50% + in developed markets) which impacts demand. However, passenger and freight forecasts for both intra-African and Africa continental markets are bullish and predict the market to grow strongly in the coming decades.
