Future prospects in Africa for the transportation & logistics industry

Africa gearing up

www.pwc.com/africagearingup Contents

Foreword 1

The bigger picture: Transportation and logistics across Africa 2

Methodology 15

A deeper dive: 10 countries in profile 18 Algeria 19 Angola 25 DRC 31 Egypt 37 Ghana 43 Kenya 49 Mozambique 55 Nigeria 61 South Africa 67 Tanzania 74

Appendices

Key figures 82

Acknowledgements 88

Contacts 89

Africa gearing up Foreword

More than a billion people, 54 But the situation is changing fast. countries, a continent bigger than African logistics stands for much the USA, Europe, China and India more – namely the chance to build combined. Yet Africa is barely tomorrow’s markets. And while present on the map of world trade. tomorrow is still uncertain, logistics The continent still isn’t a major strategists can’t afford to ignore source of exports and its consumer the African market of the future. markets are tiny in comparison And the global transportation and to Asia, Europe or the Americas, logistics industry can play a vital despite its enormous size. So Africa role in Africa’s efforts to gear up – Klaus-Dieter Ruske seems relatively unimportant for building its infrastructure, enabling Global Leader the transportation and logistics supply chains and distribution Transport & Logistics industry. networks, providing mobility – and ultimately helping create jobs for its Or is it? There’s no doubt that people. Africa faces huge challenges – arguably bigger than any other In this report, we focus our region. Recent news about growing discussion on ten selected flows of refugees from Africa to economies on the African continent. neighbouring continents shows us We shed light on their demographic quite plainly how desperate living and economic situation, the conditions are for many in their frameworks in each country for African homeland. Not surprisingly, trade and business and their Peter Kauschke for many the phrase African transport infrastructure. Director logistics currently brings to mind Transport & Logistics humanitarian logistics. We’re hoping that our assessments will help you better analyse these important future markets and understand both relevant market risks and key opportunities.

Klaus-Dieter Ruske Peter Kauschke Global Leader Director Transportation & Logistics Transportation & Logistics

PwC 1 The bigger picture: Transportation and logistics across Africa

2 Africa gearing up US$7 525 Per capita GDP in South US$230 Africa vs in the Democratic Republic of Congo (2012)

Africa’s growth prospects vary, but there’s reason for optimism

In 1960, Africa was stepping out Is the new optimism With young, growing populations of the shadow of colonialism. The justified? in most countries, the chance for transition wasn’t without violence a “demographic dividend” looks – that year the United Nations In March 2013, the Economist good. But a growing population can (UN) Peacekeeping Force was sent published a new special report on only drive growth if enough people to the Congo to maintain order as emerging Africa. Their title this are above subsistence level. That’s the country sunk into civil war and time: “Africa rising”. Many other a question mark in some countries chaos. And in South Africa, police observers are also now predicting where the distribution of wealth is killed anti-apartheid demonstrators. great things for Africa. In the still very unequal. But many had high hopes. The same month, PwC’s own economic World Bank predicted a bright future intelligence unit predicted that nine Take Nigeria, Africa’s most populous for sub-Saharan Africa, with gross African economies would join the country. According to the World domestic product (GDP) projected to ‘7% growth club’, although they also Bank, 84.5% of Nigerians lived increase more than 7% per year.i noted that Africa can be a hard place below the US$2/day poverty line in to do business in.ii 2010, up from 83.1% in 2004. And 40 years of false in Mozambique, only 2.6% of the What does this mean for expectations population is considered part of the transportation and logistics (T&L) “stable middle class” (per capita That growth failed to materialise; companies? Is Africa the next land consumption level of US$4-20/ day). indeed, life got worse for Africa’s of economic opportunity, or will the But the situation is already very people, with HIV/AIDS, malaria, current bullish predictions turn out different in Egypt, where around and natural disasters plaguing to be yet another miscalculation? 30% of the population has made it the continent. Forty years later, into the stable middle class. debt levels were still high, while More than 50 different corruption and civil unrest answers Africa’s terrain also varies widely, were rampant. In May 2000 the from desert to rain forest. That has Economist famously called Africa In our view there’s no single answer. a big impact on critical transport the “hopeless continent”. Africa is one continent, but it’s made infrastructure in countries like up of over 50 countries with very Algeria and the Democratic Wrong again. Corruption is still a low connectivity between them. Republic of Congo, making it more big issue, and areas facing armed In 2011, total intra-African trade challenging to build road and rail conflicts remain. But from 2001 to represented only about 11% of networks, not to mention much iii 2010, six of the world’s ten fastest- African trade with the world. needed bridges and tunnels. But growing economies were in Sub- even without extreme geographic Saharan Africa. That’s partly due Levels of development also vary conditions, there’s a huge range of to natural resources; top-ranking enormously. While South Africa maturity in terms of infrastructure. Angola and fourth-ranking Nigeria already has a nearly US$400 billion Angola has just 4km of roads per 100 have both benefitted significantly economy, the Democratic Republic square kilometres of land; Ghana’s from oil exports. But other factors of Congo (DRC), despite significant road density is more than 10 times are at work, too, especially mineral resources and the fourth- as high, while the leader, South increasing government stability. largest population in Africa, has an Africa, has 62km of roads per 100 estimated GDP of less than US$18 square kilometres. To put this in billion. perspective, Ghana’s road density is similar to the level in China, while South Africa comes close to matching the US’s road density of 67km of roads per 100 square kilometres.

PwC 3 The bigger picture Africa gearingup 4 Africa major all includes regions –North expected to grow strongly. Ourlist GDP,current are others while significant basedontheir chosen were Somecountries opportunities. range and ofbusinessconditions to provideAfrica asnapshot ofthe in 50countries more than of the out nations most important of the and logistics. We’ve focused on10 market potential for transportation are most relevant to that factors the Inparticular,Africa. we’ve analysed in economic regions andcountries investors key insightinto the aimsto giveThis report interested means doingyour homework. Clearly, investing smart inAfrica and savannahs deserts, trees, the through forest (rain) Seeing the respectively. at acost ofUS$575 andUS$456 daysacontainer just five to export in HongKong andSingapore ittakes world’scontrast, atthe largest ports In Africa. to cross within borders it canget ifyou need even trickier Angola, cost. And atnearly the triple from acontainer –toa half export aslong–overtimes and amonth lasts four US$625. Thejourney from Egypt,container atacost of it takes just 12 daysa to export According World to the Bank, into real costs for supply chains. translate and logistics performance ininfrastructure These differences 143rd. ranking logisticsits performance, worst regarding nations ofall the downside, DRC the scores among coming inat#57 worldwide. Onthe Egypt scores wellcountries). too, worldand 23rd inthe (outof155 inlogistics performance in Africa #1 out,ranking stands Africa South Here, again, facilitation? trade promoting like trade, customs and of factors” “softer What aboutthe 85% in 2010 thanless US$2/day on living Nigerians : International Monetary Fund Monetary Source: International countries too. countries our analysis ofissuesrelevant discussion includes also for neighbouring Andinsomecases future economicgrowth. for Africa’s are critical also not highlighted countries inourstudy which are other there Certainly and logistics sector aspotential gateways. are particularly transportation relevant for that lookedalso the atcountries We regions Africa. ofsub-Saharan east, west andthe andsouthern Africa, Tanzania South Africa Nigeria Mozambique Kenya Ghana Egypt DRC Angola Ten profiled countries African Algeria

Ghana Algeria (US$ bn) Nigeria GDP it’s hugelyit’s diverse. isnot just markets.local huge, Africa regionsneed to and understand key investing meansyou’llSmart inAfrica 384.3 270.2 256.7 209.3 28.2 14.2 40.7 40.4 17.2 115 Angola Democratic of Congo Republic GDP Growth (y/y ‘10-‘12) South Africa 10.3% Egypt 6.8% 3.0% 7.3% 7.3% 4.9% 3.0% 7.1% 4.2% 3.2%

Mozambique Tanzania Kenya GDP Growth (y/y ‘12-‘17) 7.0% 3.0% 6.8% 8.0% 6.2% 5.9% 3.4% 8.6% 5.7% 3.6% Retail logistics companies The biggest agricultural producers are should keep an eye on South Egypt, Kenya, and South Africa, but Africa, Nigeria and Kenya. there’s huge room to expand modern farming in Tanzania and the DRC.

Growth sectors drive demand for transportation and logistics services Much of our analysis takes a closer an attractive market that can stand Agricultural production is also look at Africa’s countries and alone and also serve as a gateway to dependent on weather conditions, regions, but it’s also important to Western Africa. which can make it more erratic. understand the particular patterns In 2011, for example, Kenya’s tea of specific industries. We’ve singled Kenya is also emerging as a strong production was hard hit by drought. out a few sectors that are most choice for retail companies looking That had an impact on the country’s relevant for T&L investors: retail and to set up in eastern Africa.vi With its trade balance. And one estimate consumer, agriculture, raw materials large population, growing middle suggests that 90% of agricultural and manufacturing. class and central location, the jobs are ‘vulnerable’.viii country is well positioned both as Retail is growing along with a point of entry and as a gateway Still, countries currently dependent incomes to other markets. The primary on minerals or fossil fuels for challenges are around security exports, like Angola, see agriculture More than 70% of the world’s issues, as the September 2013 attack as a way to diversify. Nigeria has biggest consumer goods companies on a shopping mall demonstrates. already started down this path; 42% are already operating in Africa, and of the country’s GDP comes from there are a number of high-profile Will the DRC or Tanzania agriculture. The government has companies making big bets in the become Africa’s bread ambitious plans to expand, but here, region.iv too, infrastructure deficiencies are basket? constraining growth. Observers say that African retail Overall, agriculture is Africa’s markets will grow significantly over second-largest contributor to the Getting the most of natural the next decade. In most countries continent’s GDP, after mining and resources the demographics are favourable quarrying.vii Egypt, Kenya and South for increased consumer demand. Africa have significant agricultural The energy sector has been Populations are generally growing at exports, but much of the agricultural particularly critical to the economies healthy rates, and in many countries production across the continent is of Nigeria and Angola, both of the middle class is growing too. That subsistence farming. Agriculture which have become major oil said, in many countries most retail plays a huge role in employment in exporters over the past decade. Oil trade takes place in semi-formal or many countries, with 60-80% of the and particularly natural gas are informal settings, e.g. groceries are workforce employed by the sector in also important to Egypt. But energy bought at informal or semi-formal Ghana, Tanzania and Kenya. exports look likely to shift a bit in the markets rather than in supermarket coming years. Angola and Nigeria chain stores. The development of For some countries like the DRC, will to a different extent need to formal retail drives the highest agriculture already plays a major cope with decreasing demand from growth rates, but some consumer role in employment and food the US, where the shale gas boom goods companies are finding security, but production is still far has started to impact oil imports. potential in less formal markets too. below potential. The DRC only farms While the US is Nigeria’s main ‘Micro-distribution’ strategies are 10% of its arable land, and irrigation trading partner, Angola’s oil exports popping up as a way to reach African is practically non-existent at 0.4%. have been directed to China rather consumers, despite less-developed That means there is room for than America in recent years. supply chains.v massive improvements. The World Bank estimates that the DRC could And new players may emerge in East What are some retail hot-spots? feed a billion people if farming were Africa. The IMF believes that Kenya South Africa has the most developed modernised, potentially turning will begin producing commercial retail sector, with most consumers the country into the breadbasket of quantities of oil in six to seven shopping in formalised retail Africa. years. ix Tanzania has natural gas settings. It also has some major reserves too. And Mozambique local players expanding throughout Similarly, 20% of Tanzania is has massive reserves of both coal the continent, like supermarket suitable for farming, but only and natural gas. But accessing the chains Shoprite and Pick n Pay. 5% is cultivated. Poor rural road country’s coal is proving to be very Nigeria’s large urban population is conditions, limited irrigation challenging. and limited power supplies are constraining growth.

PwC 5 The bigger picture Africa gearingup 6 Africa hard.producers 2013,weeks inFebruary coal hitting for coalshipments twointerrupted line rail onthe Flooding needed. andmore investmentschedule is have line Senarail its beenbehind resource potential. Improvements to yet country’s the keeping pacewith improvementsInfrastructure aren’t growth. canstall infrastructure point ofhow inadequate transport MozambiqueIndeed, isacasein has planned. italready infrastructure build the costit will to US$20-US$25billion railways company, CFM,estimates and own Mozambique’s ports port. development ofanentirelythe new investment including isneeded, and Australia –butagain, massive gasnatural exporter, Qatar after world’s third-biggest liquefied havealso potential the to bethe to coal,Mozambique its may toneeds bedone.Inaddition major investments, more butfar companies are already making Private needed. infrastructure new paywill the for andrun But questions remain about who derailed. train a was line closedagain after the and phosphate. For countries, both gypsum tin, coal,kaolin, minerals, gemstones,diamonds, industrial underdeveloped ofgold, deposits gold. AndTanzania hassignificant and coltan, cobalt, diamonds, DRC ofcopper, hasmassive reserves wealth.mineral For example, the networks aren’t yet on capitalising developedless transportation with countries Butother Africa. gold producer, behindSouth right largest secondasAfrica’s ranking aswell, minerals some significant gold Ghanahas anddiamonds. quantities of significant exports Forminerals. Africa example, South resources too, like and timber natural important hasother Africa US$14.2 billion. entireMozambique’s 2012 GDPof xi That’s far more than more than far That’s x AndinJuly 2013, countries”. commodity-rich sectors inAfrica’s in new andnon-commodity andcompetitivenessdiversification padfor long-term as alaunching can“serve based industrialisation increasingbelieve commodity- that TheUNauthors add valueto them. that look to industries develop the should continent raw the materials, exporting than Rather commodities. continent’s making more ofthe UNargues for the on Africa, 2013In its EconomicReport income levels. Thathasamajordoubled. impact on to 2010, East while more Asia’s than actuallyoutputs from declined 1970 share ofglobal Africa’s In fact, 20%. more than GDP, resources while accounted for 10% than less contributed to overall In2012,decades. manufacturing overdeclined past several the hasactually industrialisation Africa, isacaseinpoint.But growth rapid China’s industrialisation. hasbeenlinked togrowth Historically, economic sustained Africa Industrialising significantly. potentialmining hasthe to grow Fund, Allafrica.com Monetary Source: International Funding infrastructure will bechallenging will Funding infrastructure infrastructure railways ports and Mozambique’s of improving Estimated cost >US$20 xii billion over past decade. the sharebut its ofGDPhasdeclined industry, manufacturing has asmall working Ghana inmanufacturing. already has1.2 citizens million seem to have Africa anedge. South better-educatedwith populations labour, less-skilled utilises countries somemanufacturing Although Where isitalready happening? Agreement. Act (AGOA) Cotonou andthe Growth andOpportunity African the under for manufacturers light USandEUmarketsaccess to the enjoys duty-free andquota-free also Africa Andsub-Saharan rise. particularly aswages inChina in low-wage, labour, less-skilled comparative advantage for Africa of products. to types similar manufacture starting consumer goods, andTanzania is sector producing mostly food and Kenya hasamanufacturing also manufacturing. but seesstrong potential inlight needfor industrialisation, the Development about Forum agrees The World Africa Bank’s together alocalpartner. with an auto assembly inGhana plant to announcedplans Mahindra build signs: inSeptember 2013, India’s work out.There are somepositive improve to highereducation links change ifgovernment to plans US$14.2 GDP in2012 estimated Mozambique’s billion xiii They seepotential xiv Thatmay xv

Africa needs more manufacturing to help drive growth. As wages go up in China, new opportunities are beginning to open up.

Coping with the African business environment

Many companies that aren’t Better education will help Africa grow considering investments in Africa cite the business environment as too By 2035, Africa’s labour force will Africa and Ghana have a secondary risky. Certainly there are big issues be larger than China’s.xvii That’s a education, the rate is under 10% in around security, corruption, and the huge opportunity for a ‘demographic Mozambique and Tanzania. Literacy workforce. But that’s been true in dividend’ – but it’s also a significant rates range from a poor 57% in China, too. risk. Africa’s population is growing Mozambique to a considerable 89% faster than the continent is creating in South Africa. Education needs to Security and corruption jobs. Unemployment rates are high be a government priority across the risks are still issues in many countries. For example, in continent. 2011, nearly a quarter of Nigeria’s It can’t be denied that there are workforce didn’t have a job. And the However, as the chart below shows, still significant security issues in majority of Africa’s workers are still public expenditures on education as a whole range of countries. In employed in the informal sector, part of GDP vary significantly. Algeria’s south, terrorism includes where jobs are more vulnerable. bombings, false roadblocks, Youth unemployment is also linked But education isn’t the only area kidnappings and ambushes. Other to civil unrest, so there’s an impact where the government can make a countries are facing this threat as on overall stability.xviii difference. Labour regulations are well. The legacy of war lingers in also critical. Africa includes some of Angola, where landmines and high Education and literacy levels the most inflexible labour markets in levels of crime make business a have been increasing in many the world. In Angola, for example, problem. And continuing conflict in countries, but there are still huge fixed-term contracts aren’t allowed the Democratic Republic of Congo variations. While more than half and firing an employee means has led some countries to take of the populations in Egypt, South getting approval from a third party. strict actions to avoid subsidising militants, like the Dodd-Frank Act in the US. In Mozambique, threats South Africa, Ghana and Egypt lead when it comes to secondary by dissidents to derail trains forced education coal producers to suspend shipments for two weeks in June and early July 100% 10% 2013.xvi

Even where the situation isn’t 80% 8% violent, theft is often an issue. From our interviews we learned, for 60% 6% example, that some companies avoid using rail, because containers are 40% 4% opened on the route and then there is no accountability. 20% 2% Bribery and corruption are a problem too. According to 0% 0%

Transparency International, a score DRC Egypt* Kenya Ghana Algeria* Angola* Nigeria*

of under 50 on their corruption Tanzania South Africa

perception index (CPI) suggests a Mozambique* high level of corruption. None of Adult literacy rate (% ages 15+, 2005-11) * Nigeria, Angola: No data available on secondary the countries we surveyed made Population with at least secondary education the 50 cut in 2012. Some of the education Egypt, Algeria, Mozambique, Nigeria: Public expenditure on education % of No data available on public expenditure on executives we interviewed expressed GDP (2012) education frustration. Source: World Bank/United Nations, PwC analysis

PwC 7 The bigger picture the continent. the to across helpstandardise training Training Organization was founded Aviation ofAfrican Association the apilot In2012,facing shortage. world, ofthe is Africa parts other Africa gearingup 8 Africa partners. trading African 11% other iswith trade ofAfrica’s involved. moment,only about At the countries the Thathelpsall trade. border andexpanded collaboration to encourage cross- andfacilitate together, governments candoalot challenges. Butby workingthese locallysolutions to many of own its to needs find in Africa 50countries more than ofthe Each Trading Africa within resulting disruptions. werefood shortages just oneofthe weeks in2012, forstrike three went drivers on truck African WhenSouth especially critical. are drivers road freight, truck as most carried goods inAfrica andlogistics? With transportation professionsimportant in most What aboutsomeofthe countries. African inother localstaff help train Kenyans inskilled by bringing to for example Africa, transfer within workingalso to increase knowledge and localtalent are working the with say Butothers they on expatriates. somerelyanswers primarily varied; Their to approach staffing. their we inAfrica, operating asked about When we spoke to T&Lexecutives localculture the understand Transfer knowledge and Dr Dirk Africa Baukmann, CFO, Sub-Saharan DHLExpress above businessisstill butgrowing small, average.”Africa Compared to other regions, exports. our their manufacturersdevelop African and help Network We inAfrica. to countries all provide ourcustomers markets accessto African the challenges under-developed the like Express we infrastructure, ourinternational extended Despite inAfrica. are engineofeconomicgrowth the “Express andlogistics services in crafting trade agreements to agreements trade in crafting hasbeenprogress there still exist, obstacles regulatory And while section. next inthe bediscussed will which trade to intra-African barriers There are someinfrastructure region.between inthe countries to Asia,whereis oftrade half that xix As inmany xx Compare Trade agreements stimulate trade cross-border Trade agreements The AFTZwould represent amajor Free African Tradethe Zone(AFTZ). together larger inamuch bloc, trade intention toannounced their join COMESA, EAC, SADC andthe Africa, andeastern in southern keyIn 2008,three blocs trade ofoneormore blocs. trade members are report analysed inthis countries 10 ofthe 2000. All was after made century, progress butsignificant 20th last quarter ofthe to the back date regional agreements of these cross-border Most possible. trade issues andultimately to make free andsecurity economic, political aim atpromoting on cooperation These IGAD andAMU(seetable). SADC, EAC, ECOWAS, ECCAS, COMESA, including agreements, signed anumberofregional have countries African continent. African cross-border onthe trade help overcome andstimulate these Source: Websites oflisted trade agreements AMU IGAD ECCAS ECOWAS AFTZ SADC EAC COMESA Arab Maghreb Union Development Intergovernmental Authorityon African States Economic CommunityofCentral African States Economic CommunityofWest African Free Trade Zone Community AfricanDevelopment Southern East AfricanCommunity Africa Southern and Common MarketforEastern Trade agreement African continent. continent. African providers onthe logistics service and for transportation opportunities means –andthat Africa within trade stepan important towards increased operational by the end of2017. byoperational the zonewould predicted the be official integrate. fully AFTZwill when the it remains to and beseenwhether Union’s African 2017the goal and are scepticalSome leaders about Africa’s population andGDP. population Africa’s of togetherbring nearly three-fifths andwould continent African on the process ofintegration step inthe follow. wouldintellectual then property by 2014. Talks and around services would becompleted barriers tariff removal ofgoodson trade andthe of phaseofnegotiations first said the 2011, minister trade Africa’s South Algeria 5 NorthAfricanstates,including Kenya 8 East-Africancountries,including Angola andDRC 10 CentralAfricanstates,including Ghana andNigeria 15 West Africanstates,including members COMESA, SADCandEAC Tanzania Mozambique, SouthAfricaand including Angola,DRC, Africanstates, 15 Southern Kenya andTanzania 5 EastAfricanStates,including Kenya states, includingDRC,Egyptand African 19 EastandSouthern xxii In2012, Union anAfrican xxiv If it happens, it will be Ifithappens,will Member states xxi In xxiii

Transport infrastructure needs to catch up

Taken as a whole, Africa’s Lions and Dragons: the China Getting around local infrastructure lags well behind that Factor markets of the rest of the world. But between the regions there are significant Africa is rich in a whole range of Most freight in Africa gets differences. While none of the natural resources, but poor in transport transported via road. But the African countries we analysed comes infrastructure. When it comes to majority of the continent’s roads are close to the United States and China hydrocarbons and some raw materials, still unpaved and many paved roads still has an edge too, South Africa’s China faces the opposite situation. are in poor condition. Quality tends overall transport infrastructure The Chinese Government and Chinese to deteriorate significantly once you scores almost identically to India’s, state-owned enterprises are looking leave international trunk roads. The for solutions. One route they’ve taken and better than Indonesia’s, situation is particularly dire in the is financing massive infrastructure DRC and Angola. And even in Kenya, lauded by many as one of the next projects throughout the sub-Saharan economies to watch. Egypt and region. which scored next after South Africa Kenya score lower, but they’re in road quality among the countries still ranked higher than Vietnam, The intention is clear: China needs we studied, only 14% of roads are another of Southeast Asia’s growing resources, and it’s willing to help paved. Kenya’s capital city, Nairobi, economies. build the infrastructure needed to suffers from massive congestion too. access them. In the DRC two Chinese In fact, when it comes to roads, ports state construction companies and Where roads are currently adequate, the DRC’s state copper company have and air transport infrastructure, road maintenance is looming as a signed a contract worth more than potential problem. For example, South Africa actually scores better the DRC’s state budget.xxiv Another, Nigeria’s roads carry more than 90% than China. But the People’s more direct case of China’s interest in Republic has a clear edge in rail. Africa’s resources is in Angola, where of domestic passengers and freight. infrastructure is rapidly expanding as But capital expenditures there Transportation and logistics part of an ‘infrastructure for oil’ trade aren’t keeping up with the need companies entering the market need agreement with China. In Angola, for preventive maintenance – just to understand local constraints and China is funding not only transport three-quarters of federal roads are in plan accordingly. Our interviewees infrastructure, but also infrastructure good or fair condition, and regional for everyday life like the large housing roads are in worse shape. And the confirmed that local transport xxv area of the city of Kilamba Kiaxi. situation is similar in other African infrastructure has a direct impact Meanwhile, Angola has became countries. on secure and on-time delivery. China’s top supplier of oil in 2010. To cope, one said his company In 2013 Kenya signed a US$5 billion “sometimes has to add a few days to deal with China. The deal includes the Africa’s rail networks are generally our standard delivery schedule.” construction of a rail link from the Port in even worse shape than its roads. of Mombasa to adjoining Uganda as In many countries, most rail lines well as other projects.xxvi are still left over from the colonial period and are in poor repair and In other African countries, like out of date. But there are some Tanzania, Ghana, Mozambique and notable bright spots. Between 2006 even South Africa, Chinese government and 2011, South Africa invested entities and companies are also supporting the funding and construction more than US$5 billion in railways. of a whole host of individual That’s had a profound impact – but infrastructure projects. By helping investments are set to increase improve Africa’s infrastructure, Chinese further in the coming years, as South companies make it easier to operate in Africa still lags well behind China Africa. At the same time they position and India in rail infrastructure. And China to take advantage of future Mozambique has major plans to growth in African markets. improve its rail network, start-up difficulties notwithstanding.

PwC 9 The bigger picture Africa gearingup 10 Africa west isnearly non-existent. inthe integration Butrail via rail. connected Uganda to neighbouring AndKenyain Burundi. isalready Kigali inRwanda andMusongati gateway with ofDaresSalaam city to onplans the link and Burundi working Rwanda neighbours with East, Tanzaniaproject. Inthe is Swaziland onajointrail with iscollaborating Africa South Africa. andeastern insouthern started has extension tracks ofexisting the new and lines rail with integration RegionalWhat aboutrail? develop into corridor. aviable However, future itcould inthe frequentlyothers subjectto floods. and unfinished somesections with available freight route atpresent, stretch ofroad isn’t an this experts Lobito view corridor. ofour Inthe Beira- Oneexampleunusable. isthe are essentially they bad repair that are route, insuch others transport highways. agood someoffer While Road patchy onthese quality isvery canbedeceiving. But appearances road travel continent. across all the network provides good accessfor highway map suggests the the that lookat Aquick plans. expansion Westthrough already include Africa, Lagos-Abidjanlike highway the highways,trans-African andseveral, There are already anumberof continent. the indeed, networksrail spanregions, and that world. road Thatmeanssolid and rest ofthe the andwith Africa within increasing cross-border both trade, future developmentAfrica’s be will in factors most important One ofthe Africa across and within Connecting a real constraint T&Lcompanies. for It’s better ground. onthe onpaperthan looks trans-continental highway networkAfrica’s Coast, but a local political crisis in Coast, crisis butalocalpolitical Ivory inthe ofAbidjan Port the strong role contender was for the hub.One maritime aclear lacks severalincludes itstill larger ports, coast western African the While andefficiency. capacity issues with are big of competing butthere ports, East andWest have Africa anumber Canal. Suez as wellofthe entrance asthe Mediterranean the serving 2004, sinceitbegan in operations facility has emerged asastate-of-the-art ofSaid centretranshipment ofPort SuezCanalinEgypt.route The isthe shipping most important the far by Africa, InNorth continent. the of whole butthe Africa, southern –not only numberoneport in the Durbanisindisputably South, In the remain.will evenis rising faster andcongestion direction, demand right step inthe projectsbeabig will these While in Tanzania (seemaponpage 11). east at LamuinKenya andMusoma and LekkiinNigeria,the of Luanda) andLobito inAngola, west (north doDande the atBarra –in ports five expand significantly to plans are currently buildor set toThat’s change. There growth. allow less much for traffic, existing to handle aren’t enoughports there most goods travelling by ship,but with continent African point to the entry most important are by the far –comein.Ports andairports ports world. wherethe gateways That’s – connectedcontinent rest toof the soisgetting is important, the Africa within transport While world Gateways ofthe rest to the xxvii

regional are connectivity underway. but anumberofprojects to improve are connections Rail too, lacking million passengersmillion annually). inEgypt (13 Airport International passengers annually) andCairo ofalmost(capacity 21 million Africa in Johannesburg, South OR Tambo Airport International Thebusiest continent. onesare the across for passenger traffic airports hasanumberofinternational Africa hinterland. network port and existing to the terminal Mombasacontainer Port railway to link better connectthe toplans buildanew accessroad and faster. Similarly, inKenya are there could helpgoods move through and Uganda are which planned, andRwanda,Dar esSalaam Burundi New railway between connections customs efficiently. through clearing congested issuesaround andfaces isnow also port butthe Salaam, to Dares shifting some shippers Congestion to inMombasahasled “gatewaymaritime into East Africa”. Tanzania compete preferred asthe in Kenya in andDaresSalaam east coast, Mombasa On the become more efficient. needtowill decrease congestion and ports grows, ofthese all As Africa for ships. risks posesecurity times constraints.Longwaitingcapacity stability, hassevere butitcurrently Tema from political Ghana’s benefits due to becompleted. of ThePort atLekkiinNigeriais port deep-sea 2016, after could shift whenanew massively congested. Thispicture large Nigerianmarket,the butitis directComplex, accessto offers competitor,Another Lagos Port the 2011 hashadanegative impact. xxviii

Major port projects are a big step in the right direction, but Africa will need to do even more to get goods flowing smoothly by sea.

Trans-African corridors, gateways and infrastructure projects

Skikda Port Azew Port Algiers Port of High-speed rail Tripoli Alexandria Damietta Port Casablanca Trans-Saharan Highway

Tripoli-Cape Town Highway Cairo

Cairo-Cape Town Highway Suez Canal

Cairo-Dakar Highway

Dakar Djibouti Dakar-N’Djamena N’Djamena Port Highway Highway Dakar-Lagos Highway N’Djamena-Djibouti Abuja

Lagos Addis Ababa Lagos-Mombasa

Port of Abidjan Lekki Port Highway Nairobi Port of Tema Lagos Port Complex Musoma port Port of Lamu

Rail project plans Port of Barra Port of Mombasa do Dande Port of Luanda Luanda Highway Port of Dar es Salaam Beira-Lobito Port of Lobito extension

Rail project

Port of Beira Walvis Bay

Key: Road Johannesburg Port Port of Durban Airport Planned project Port of Saldanha Bay (in surveyed country) Port of Port Elizabeth Cape Town

PwC 11 The bigger picture Africa gearingup 12 Africa increase there. connectivity to are starting South inthe Africa, East andJohannesburg, South the Kenya, in Addis inEthiopia Ababa HubsatNairobi continent. the in of eastdeveloped andsouth inthe hasalready astructure Such future hubs. ‘spokes’ develop will around these economiessuggest more African that West inthe consumerdemand rising Westthe market African andthe of 35000tonnes. Thelarge sizeof anannualcapacity with terminal 13 passengers million andacargo expected to have for capacity over Nigeria. Luanda, for is instance, Luanda,capital, andinAbuja, are already atAngola’s planned Two airports new international a strong hub-and-spoke structure. issues. AndWest still lacks Africa dueto inlarge security part difficult, Transporting airfreight ismore addressed. issues can be in a big way unless security off hubs.Butairfreight won’timportant take west inthe planned have potential the to be airports andtwoair infrastructure, new already have Africa East andsouthern Index value (minimum=1,maximum5) Index performance onlogistics list andEgypt top the Africa South 2.0 2.5 3.0 3.5 4.0

Algeria

Angola

Congo, Dem. Rep.

Egypt tracking and tracing, customs and tracing, and tracking logisticsshipments, competence, international infrastructure, six maincomponent indicators: (LPI)includes index performance goods. TheWorld logistics Bank’s go intothat shipmentof smooth There are range awide offactors hot spots. evolve logistics continent’s into the andthus countries landlocked gateways often for neighbouring, canbecome they performance, highlogistics iscombined with this geographical advantages. When sector. have Somecountries natural between government private andthe Ittakes collaboration expertise. capacity, andsubject-matter consent,planning political funds, requires that hugea herculean task excellenceachieving inlogistics is oraregion. Yet,for acountry systems are akey factor locational andlogistics transport performance high- It iscommonsensethat logisticsImproving performance Ghana

Kenya

Nigeria

South Africa

Tanzania high. remain services costs andport ofrail isgood, Africa inSouth performance However, logistics while performance. Egypt top list the onlogistics and Africa South analysed, 10countries Among the Mozambique asanunderperformer.mentioned from oursample that’s country Turkey, only Angola while isthe like China,Malaysiacountries and alongwith overperformers, the asoneof Africa South and identifies levels, measured by GDPpercapita, income LPIagainst their countries’ World the report, Bankanalyses In its “Connecting topeers. compete” well incomparison toperforming lower are scores,currently butboth Egypt andTanzaniacountries. have industrialised itonaparwith puts coming in23rd worldwide. That leader, clear continent’s isthe Africa According measures, South to these logistics professionals. nearly with 1000 from interviews techniques to aggregate data six areas. Itusesstandard statistical inthese ofcountries performance the TheLPIsummarises timeliness.

No data available Sources: World PwCanalysis Bank, average Sub-Saharan Africa Africa average Middle East&North Selected 10average xxix

When we acquire a domestic business, we are able to link it to our international express network and transfer knowledge around freight forwarding, so you will see an evolution of the business model. It might start with one service, but eventually you have the full service. We all know the potential is just massive. It’s about how quickly it will happen.

Hussein Hachem, CEO, Aramex

In another report, the Africa Building your Africa “There are many challenges Development Forum singles out four to operating in Africa, and factors contributing to poor trade strategy logistics in Africa: higher inland one can only operate within T&L companies have a vital role to this reality. Investors are travel costs, higher port and terminal handling fees, higher customs play in putting Africa in motion. definitely starting to show clearance and technical control Better transport and logistics a greater interest in Africa. fees, and higher costs to prepare capacity has a profound impact From Shoprite’s’ perspective, documents and letters of credit.xxx on economic growth potential. By helping Africa grow, T&L operators we see a lot of promise in Long dwell times of import can also secure future growth for Africa and we’re in it for the containers are a major problem for their own companies. But while long term.” most of Africa’s ports. When ports many are taking first steps, very work efficiently, containers only face few companies are forging a Photios Tzellios, Supply Chain two or three days’ delay between comprehensive strategy around Director, Shoprite the time they’re unloaded and building their presence in Africa. when they exit the port. The sub- Saharan Africa average is 14 days. When we spoke with executives from Poor connections to the hinterland logistics companies with operations and red tape at customs are at play, in Africa, 10 out of 16 named Nigeria but there are other reasons too, like as one of the African countries with collusion. Terminal operators may the most potential for their business. earn large revenues from storage, Yet only four are already operating giving them little incentive to there. That’s a vivid example of the improve. gap between today’s reality and future prospects.

Africa probably isn’t the best destination for companies just looking for quick revenue boosts. The continent needs better transport infrastructure, more connectivity across borders, and an improved business environment to reach its potential.

But for companies willing to make long-term investments and work together with local governments, the long-term pay-off may be huge. If you make the decision to expand in Africa, you’ll need a solid long-term strategy.

PwC 13 The bigger picture Africa gearingup 14 Africa xxx xxix xxviii xxvii xxvi xxv xxiv xxiii xxii xxi xx xix xviii xvii xvi xv xiv xiii xii xi x ix viii vii vi v iv iii ii i

http://www.bdlive.co.za/africa/africanbusiness/2013/04/17/news-analysis-mozambiques-shaky-transport-set-to-shrink-coal-bonanza

http://www.forbes.com/sites/baininsights/2012/04/04/growing-with-africas-consumers/ http://allafrica.com/stories/201303210565.html?page=2 http://www.businessdailyafrica.com/Kenya-to-start-oil-production-in-six-years/-/539552/1766782/-/d7snd0/-/index.html

http://www.issafrica.org/iss-today/realising-the-dream-of-greater-intra-african-trade

http://allafrica.com/stories/201307090295.html http://www.aluworks.com/site/index.php?option=com_content&view=article&id=89:the-dwindling-share-of-manfacturing-in-ghanas- http://news.xinhuanet.com/english/world/2012-05/26/c_123195304.htm http://www.reuters.com/article/2012/10/12/us-safrica-strikes-trucks-idUSBRE89B07920121012

http://www.modernghana.com/news/334116/1/three-years-to-launch-african-free-trade-zone-mini.html

http://www.africaneconomicoutlook.org/en/in-depth/youth_employment/ http://news.xinhuanet.com/english/world/2012-05/26/c_123195304.htm

http://www.issafrica.org/iss-today/realising-the-dream-of-greater-intra-african-trade

Arabian Business,12May2008:“Africa’s top10ports”,online:http://www.arabianbusiness.com/africa-s-top-10-ports-50442.html Ibrahim Foundation.Africa’s youth:fulfillingthepotentialNovember2012. (Economic ReportonAfrica2013),July2013 UN EconomicCommissionforAfrica.MakingtheMostofAfrica’s Commodities:IndustrializingforGrowth, JobsandEconomicTransformation 7-percent-club.jhtml PwC: “FocusonAfrica:Taking overthe7%club”,http://www.pwc.co.uk/economic-services/global-economy-watch/focus-on-africa-taking-over- beijing-than-nairobi/#116923/chinas-5-billion-deal-with-kenya-is-a-much-bigger-win-for-beijing-than-nairobi/ deal-with-kenya-is-a-much-bigger-win-for-beijing-than-nairobi/” http://qz.com/116923/chinas-5-billion-deal-with-kenya-is-a-much-bigger-win-for- HYPERLINK “http://qz.com/116923/chinas-5-billion-deal-with-kenya-is-a-much-bigger-win-for-beijing-than-nairobi/” \l“116923/chinas-5-billion- Jake MaxwellWatts, August20,2013:“China’s $5billiondealwithKenyaisamuch biggerwinforBeijingthanNairobi”, QUARTZ, online: en_lr.pdf Global witness,March 2011: “ChinaandCongo:FriendsinNeed”,online:http://www.globalwitness.org/sites/default/files/library/friends_in_need_ news/201202/81229.php gdp-manufacturing-in-ghana-must-prevail-the-aluworks-case&catid=1:latest-news&Itemid=18; http://business.myjoyonline.com/pages/ PwC, R&CWorlds Express: OpeningthedoortoAfrica,June2013. Washington 2012 World Bank:“ConnectingtoCompete2012,Trade LogisticsintheGlobalEconomy, TheLogisticsPerformance IndexanditsIndicators”, Africa DevelopmentForum,World Bank.LightmanufacturinginAfrica:Targeted PoliciestoEnhancePrivateInvestmentandCreate Jobs.2012. PublicationsLibrary/aldcafrica2013_en.pdf UNCTAD: “ECONOMICDEVELOPMENTINAFRICA,Report2013intra-Africantrade:Unlockingprivatesectordynamism”,http://unctad.org/en/ Mo IbrahimFoundation,2012ForumFacts&Figures, http://www.moibrahimfoundation.org/downloads/2012-facts-and-figures.pdf African developmentreport 2012,p.8 africa/ Venture-Africa, 14August2012:“The10BiggestAirports InAfrica”,online:http://www.ventures-africa.com/2012/08/the-10-biggest-airports-in- Hans ChristianMüller, “KontinentderChancen”,Handelsblatt,16.November2012 net/index.php?option=com_content&view=article&id=277:three-decades-of-china-angola-cooperation&catid=50:issue15 António EscobarandAnaCorreia daSilva:“Three decadesofChina-Angolacooperation”,macoamagazine,online:http://www.macaomagazine. http://articles.economictimes.indiatimes.com/2013-08-12/news/41333027_1_mahindra-group-mahindra-genio-mahindra-xuv http://www.ft.com/intl/cms/s/0/732067cc-d012-11e0-81e2-00144feabdc0.html#axzz2ZOq5QPLj Methodology

PwC 15 Methodology Africa gearingup 16 Africa networks. transport ofits efficiency onthe depend will quality infrastructure ofits andthe future anddevelopment growth economies, Africa’s into burgeoning its goods andservices or bringing the Whethercontinent moving resources off significance. transportation andlogistics hastaken ongreater destination over years, the past few sothe role of to prominence asaninvestment hasrisen As Africa Ten profiled countries African

Ghana Algeria Nigeria Angola Democratic of Congo Republic South Africa Egypt

Mozambique Tanzania Kenya specialists. andevaluatedEconometrix by our outby extensive carried research of are publication asummary this featured in profiles The country economic consultants. independent leading Africa’s South Econometrix, We worked closely with experts. industry independent and Econometrix, partners, as well asfrom economicresearch andlogistics group transportation Africa’s and from PwCSouthern andlogistics group transportation professionals from global PwC’s team comprises PwCindustry in abroad range ofareas. Our ofspecialists expertise draws onthe publication The content ofthis logistics gateways. and potentialtheir astransportation inrecent yearsstrong and growth their economicsignificance, their were basedon The countries chosen andTanzania. Africa Nigeria, South Ghana, Kenya, Mozambique, Republic ofCongo (DRC), Egypt, Democratic Algeria, Angola, the developing leading nations: Africa’s we report, focus on10In this of Research sources

The research results were drawn analyses how the country makes use or unattractive, if only this single mainly from five sources: of its resources and turns these into characteristic was taken into an economic output. account. • Business Monitor International (BMI), Pillar three includes not only a Evaluations of future prospects take country’s business environment, into account concrete measures for • NKC Independent Economists, but also political stability and growth in each country that are set • Africa Infrastructure Country security issues. Within pillar four, a to improve its performance. Diagnostic (AICD), country’s trade activity and its trade Visual icons depicting the • International Monetary Fund facilitation logistics (for instance, assessments are shown here: (IMF), its customs clearance processes) are analysed. • The World Bank, and • Icon colours depict the current state (2013) • The World Economic Forum. Finally, pillar five is dedicated to each country’s transport infrastructure, which is fundamental Commentary in the text that has Key: Attractive to the business of transportation and not been taken from these sources, Average logistics companies. Here we take a and that is not our own opinion, is Unattractive referenced in the endnotes at the closer look at the capabilities of the end of each section. countries’ ports, airports, railways, roads and other infrastructure. The accuracy and completeness of • Arrow orientation shows future information obtained from third- All findings noted in the country prospects party sources, and the opinions chapters were supported by based on such information, cannot interviews with executives from Key: Strong improvement expected be guaranteed. companies operating in Africa. A total of 17 interviews were Some improvement expected conducted between May and July Stagnation/marginal change expected Model of analysis 2013.

Following a five-pillar model, Assessments are based on: all countries profiled here Investment potential were analysed in terms of five assessment • Key statistics for all five pillars characteristics and their impact of analysis gathered from third- on the transportation and logistics We assessed the 10 countries party sources; industry: surveyed against each other in terms of the five pillars mentioned above. • Broad research on each country, 1. Demographics and resources; No other country was included in done by Econometrix and PwC; 2. Economics; the assessment. • Real-life experience of people who work in Africa; and 3. Business environment; Each assessment was made on • Expert opinions from our team of 4. Trade and logistics; and the current state and the five- year medium-term prospects. specialists. 5. Transport infrastructure. Current-state assessments examine These investment assessments whether investment into the local were prepared to help potential The first pillar is focused on the transportation and logistics sector investors get to know the risks resources of a country, both human today would be attractive, average, and natural, while the second and opportunities of the main transportation and logistics markets in Africa. They should not be regarded as investment recommendations.

PwC 17 A deeper dive: Ten countries in profile

18 Africa gearing up Algeria

Algeria is a big player on the African continent, not only because of its substantial land area, but also because of Planned its sizeable GDP. investment of US$286bn on infrastructure

To Cordoba Djen Djen Skikda To Almeria, Spain Port Annaba To Italy Foreign direct investment (FDI) Spain Azew Port Tenes Algiers inflows to Algeria tend to be below Oran the country’s potential considering Constantine its substantial natural resources, Medgaz Pipeline strong macroeconomic indicators Cairo-DakarGPDF Highway Pipeline Gem Pipeline and favourable demographic factors. Tunisia Morocco Hassi R´Mel This is amongst others due to a challenging business environment, Algiers-Lagos Highway new investment laws introduced by the complementary finance bill for 2009 and the existing tax regime.

Trans-Saharan Pipeline

Libya In its current five-year plan (2010- 2014), the Government made commitments to invest US$286 billion to improve the country’s infrastructure and human development and to diversify the country’s economy.i Tamanrasset Mauritania However, with declining oil demand Mali from the US and decreasing oil and Niger gas production affecting foreign earnings, the liberalisation of economic and investment policies To Warry is set to become an increasingly pressing issue.

These bubbles represent the cities of Algeria and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 19 Algeria Africa gearingup 20 Africa agreement. trade African as Algeriaisnot amember ofany couldbefairlyAfrica problematic, fostering in trade agreement, trade bybe established 2017. Despite the afree area trade will agreement, of hopefor Algeria.According to the European Union presents aglimmer the with Agreement An Association diversify economy. its anurgentAlgeria faces challenge to sectors promising, are not very 2011. Since prospects for these consecutive yearfor in afourth sector, andoilproduction declined hydrocarbon ofthe contraction the past few tothe years, contributing Gas production hasdecreased over from Algeria. imports their cutting considering andare ofsupplies stability the about are concerned countries as Italy, SpainandFrance. These such partners, European trading impetusgiven by further Algeria’s for newThis search markets be will America. andSouth economies inAsia,Africa products, presumably inemerging new destinationsfor hydrocarbon its a growing needfor Algeria to find isnow andthere oil andgas exports impactwill negatively onAlgeria’s gasRising shale potential US inthe . 20-25% oftotal exports for accounts US,which the market is biggest export Algeria’s earnings. 98% oftotal export than accountfor slightly more exports Oil andgas on hydrocarbon exports. isextremely position reliant external butthe trade, Algeria hassubstantial Dimming prospects look good. donot prospects Algeria’s but prosperous, is currently Trade andeconomicactivity 20-25% export market of export USA biggest isthe companies. import intheir local partner investment inAlgeria anda30% for 51%a localpartner oftheir companies are obliged to have Augustcreated after 2009,foreign Specifically, for businesses regulations for foreign investors. restrictive Algeria hasset forth businessenvironment.challenging level ofcompetitiveness anda problems alow include Structural economicdevelopment.long-term prospects for sustained undermine institutional framework to continue Weaknesses Algeria’s within Business environment large projects. execution of plateau ofthe interms hasnow a programme reached investment public the that warned IMFhas in recent years andthe ofeconomicgrowth driver principal investmentPublic hasbeenthe to 2017. 4% through belowaverage annualGDPgrowth an IMFprojecting the limited with seemto prospects bequite growth low very levels. debt Still,with position enjoys financial asolid economy andcurrently inAfrica fourth-largest Algeria hasthe with petrodollars. with state-driven development, paid for of amodel previous programme, essentially not moved beyond the has ofaction plan Government’s few years. current Meanwhile, the to over real GDPgrowth next the andless less contribute therefore prospects. economic constrain further factors risk and other business environment challenging Algeria’s projected annual GDPgrowth Less than Less than ii The programme will will Theprogramme 4%

challenges facing the country. the challenges facing socio-economic fundamental the isoneof rates are high,which GDP–andunemploymentcapita – despite arelatively highper hand, poverty remains widespread study. inthis surveyed other Onthe employed countries amongall ofGDPperperson interms Africa secondonly toAlgeria ranks South forceThe labour isproductive. prevalence ofHIV/Aids. andlowhigh life expectancy Algerianshaving indicators, with quite well ofhealthcare interms development. performs Italso and enjoys highlevels ofhuman Algeria hasalarge force labour Labour the southern part of the country. ofthe part southern the Kabylie regionandin east ofAlgiers particularly inthe occur often, andambushes,which kidnappings roadblocks, bombings,false include areactivities commonplace. These USState terrorist the Department, at Bureau Affairs ofConsular the to safety andsecurity. According to Terrorism to continues poseathreat consumption products. forto somelarge- control prices schemes andredistribution tariffs ceilings, Government usesprice locally. Additionally, the generatedprofits by exemptions tax isanobligation tothere reinvest foreign investors. Nevertheless, Tax exemptions to are granted market. labour inefficient by the workforce ishamstrung The well-developed iii

Plans to boost capacity by High per capita GDP and middle-class income levels 8 000MW present growth opportunities in by 2016 consumer goods industries

Growth industries Logistics

The labour market is inefficient, Given that most of the country’s Logistics Performance Index ranking last globally in the 2013 land is arid, agriculture currently

Global Competitiveness Index, and plays a minor role in Algeria’s Customs the wage determination regime is economy and there is a growing 5 highly inflexible.iv need to import food. However, the 4 3 Timeliness Infrastructure Government is investing heavily 2 Electricity in programmes to increase local 1 food production capacity. Logistics 0 services businesses should therefore Big energy projects will plan to adapt to imminent changes Tracking International address current power to the country’s import basket in the and tracing shipments supply problems. future. Logistics quality and competence While the oil and gas sector is Algeria Top performer (South Africa) Electricity consumption increased the most important to Algeria’s by an average of 6% per year economy, the mining industry also during the 2000–2010 period, shows strong growth potential. Source: World Bank but in 2010 grew by almost 20% The industry is small and has compared to the previous year. been neglected in favour of the Improvements in logistics Electricity consumption is expected hydrocarbons sector, but newly infrastructure promote to reach more than 11 000MW in discovered mineral resource deposits 2013 and 20 000MW by 2020. The are close to coming into production, Algeria’s Logistics Government has brought additional with the extraction of lead and zinc Performance Index rating. capacity on line to keep up with due to commence in 2013. Algeria demand, but it has also imposed has significant gold reserves, but Algeria’s logistics infrastructure rationing, leading to public protest v gold mining is largely unexploited is poor. It rates particularly badly in 2012. and gold production remains for its logistics infrastructure limited. and quality as well as for having Frequent power interruptions have bureaucratic/inefficient customs also negatively affected productivity High per capita GDP and upper- procedures. Encouragingly, the and growth in recent years. In middle-class income levels country has managed to improve response, the country’s public present significant growth its performance in areas such power company has announced opportunities for diversified as customs, track and trace and plans to boost capacity by growth in consumer goods timeliness over the past few years. 8 000MW by 2016 through the industries. Approximately 27.3% of construction of nine gas-fired vi the total population is classified as According to the latest Logistics power plants. being middle class. Performance Index (LPI), Algeria has improved its overall ranking Although Algeria is heavily reliant Algeria has one of the highest rates from 140th in 2007, to 130th in 2010 on fossil fuels for power generation, of urbanisation in Africa, which and 125th in 2012. the Government recently unveiled further contributes to growth plans to develop the country’s potential in the consumer goods Still, indicators such as renewable energy industry and industries. Urbanisation is currently infrastructure, international has aims to produce 5% of the at 73% and projected to rise to above shipments and logistics competence country’s electricity needs from vii 83% by 2030. show a slightly declining solar energy by 2017. In particular, performance. the country will expand its solar power capabilities by investing in the Desertec project, eventually also exporting electricity to Europe.

PwC 21 Algeria Africa gearingup 22 Africa Mediterranean. the in2011,came online stretches across newest to pipeline Spain,which Morocco andthe passes through via Tunisia to Italy. Oneto Spain fromlargest Algeria runs pipeline gas to Spain andoneto Italy. The natural twopipelines; transporting gas export transcontinental hasthree The country to Europe. industry Algerianoilandgas connect the inAlgeria,asthey importance railways are –pipelines ofspecial –air,transport shipping,roads and of regional andinternational four to In addition mainmodes the axis. and north-south east-west the onboth connectivity onlong-distance focus primarily Road connections strip. coastal northern is located alongthe ofeconomicactivity, bulk the andhence population, Most ofthe programme. extensiveits investment public of aspart inprogress expansions major and with upgrades priority a Government transport hasmade problems, the In addressing these developments.infrastructure challenge to poses apermanent geography vast desert country’s improvement. Meanwhile, the maintenance and in infrastructure war. backlog to Thisled asignificant between 1991 and2001, dueto civil inAlgeria standstill to avirtual Investment came ininfrastructure infrastructure Transport infrastructure backlog. infrastructure asubstantial with Algeria 1990sleft Civil war inthe ix

Delays are common. implemented by shippinglines. congestion surcharges are regularly isacongestedAlgiers and port traffic. container country’s the Arzew, almost handling 60%of after port most important the is Algiers For traffic, container exports. petrochemical aspecialfocusdeveloped on with followed by Arzewhasbeen Skikda. isArzewinOran, oftraffic in terms network. port Themost significant port national moving the through commercialof Algeria’s trade vast majority economy the with national toShipping isessential the Ports Mediterranean ports. Mediterranean congested onits depends economy Algeria’s Key indicators Key (global rank/144(score 1-7)) Global CompetitivenessIndex 2012 –Infrastructure (score 1-5)) Logistics PerformanceIndex2012(globalrank/155 Top exports Corp. IncomeTax (CIT)rate (score 1-7)) Global competitivenessindex2012(globalrank/144 GDP percapita(US$,2012) GDP growth forecast 2012-2017(avg,y/yrate) GDP (US$billion,2012) Population growth (2012-2020,avgp.a.) Population size(million,2012) Tenes, BejaiaandOran. to relieve as such congestion atports andTenes.Algiers bebuilt Thiswill tofor belocated anew port between Transport announcedplans Ministry In October 2011, Algerian the aswellAlgiers asDjenDjen. in operations responsible for port World World) (DubaiPorts is inAlgeria,where model DP port involvement wouldlandlord bethe issues. Anexample sector ofprivate involvement isunlikely to resolve the imply sectoras Algiers private that such on physical constraintsatports involvement reports atsomeports, levels sectorare of significant private there major Although Algerian ports. congestion isproblematicatmost In general itwouldport appearthat 100 (3.16) 125 (2.41) gas, liquefied(8.7%) state (20.0%);Natural Natural gas,ingaseous minerals, crude(45.0%); obtained from bituminous Petroleum oilsand 25.0% 110 (3.72) 5 582 3.6% 209.3 1.6% 38.5 US$520m US$87bn committed to airport investment in high-speed infrastructure & technology line crossing the country from Tunisia to Morocco

Air transport

The last year has seen a significant drifts of sand that block the route for Airports and air transport investment in rail infrastructure days at a time. are on the Government’s with a number of major routes agenda for further being commissioned or upgraded. The east-west highway project, expansion projects. This is part of the Government’s which is partly under completion long-term railway development at the moment, is vastly changing Algeria has 52 airports with paved and modernisation plan for the the highway profile in the country. runways. The primary airport state-owned rail company, Société It is Algeria’s most important road is Houari Boumediene Airport Nationale des Transports Ferroviaires project and is now near completion. in Algiers and Air Algérie is the (SNTF). national flag carrier. The domestic The only pending section is a market is served primarily by Air Long-distance connectivity along 150-km stretch of highway between Algérie, although there are also the north coast is also high on Constantine and Skikda. The other airlines. the agenda with the Algerian 1 216-km highway, which runs Government investing US$87 billion between Morocco and Tunisia, will The international air transport to develop a 1 300-km high-speed connect Algeria’s major coastal market is well served with regular east-west line that will cross the cities. x scheduled flights to Europe (mainly country from Tunisia to Morocco. France). The Middle East and other The line will include branches that Construction of the US$11-billion hubs in Africa are also served with will connect with major ports and highway began in 2009, with regular flights. cities. completion scheduled for the fourth quarter of 2013. However, The amount of funding earmarked Roads deadline delays led to urgent calls for airport infrastructure and by the Algerian Government in May technology indicates that there 2013 for the Japanese construction will be a considerable focus on Road corridor priorities consortium, COJAAL, to finish the xi airport investment in the near could change in the future project as soon as possible. It is future. The Government is currently from east-west to north- considered one of the largest public committed to spending US$520 south. works projects in the world and it million on airport infrastructure and is envisaged that the project will technology modernisation. contribute significantly to alleviating Roads are the main mode of the isolation of the eastern and transport in Algeria. It is estimated western provinces as well as Rail that 85% of goods and passengers facilitating better connections with use road as their primary mode Morocco and Tunisia. of transport. Road development A future rail line will connect essentially follows human The other major axis in the country, Africa’s northern coast and settlement patterns and the network the Trans-Saharan Highway, passes link Tunisia to Morocco. is much more developed in the through Algeria, Niger and Nigeria. northern coastal region where Development has been strong in The decade-long civil war in the economic activities and population the north of the country, with the 1990s left the rail network in ruins. concentrations are heaviest. focus on the east-west highway. Today, rail network upgrading, Future development will, however, renewal and expansion are major The south is served by a limited focus on the north-south highway priorities and there is a strong focus number of national roads linking in an attempt to realise greater on the alleviation of congestion the few densely populated areas. connectivity for the more remotely in urban areas. Algeria’s railways Road conditions can be variable, situated populations in the south. are heavily concentrated along the particularly in the south on the country’s northern coast. trans-Saharan corridor, as even newly paved portions of the road often disappear under immense

PwC 23 Algeria Africa gearingup 24 Africa alongside. sector asshown graphic inthe and logistics transportation Algeria’s investmentassessed the potential for Based uponouranalysis, we have Conclusion Algeria –Investment potentialAlgeria assessment Key: Transport infrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes i ix viii vii vi v iv iii ii

cab.cfm?fips=AG “Algeria analysisbrief”,USEnergy InformationAdministration,http://www.eia.gov/countries/ org/TRADE/Resources/239070-1336654966193/LPI_2012_final.pdf ”Trade LogisticsintheGlobalEconomy2012”,World Bank,http://siteresources.worldbank. Monetary Fund,http://www.imf.org/external/pubs/ft/scr/2012/cr1220.pdf “Algeria: 2011ArticleIVConsultation—Staff Report;PublicInformationNotice”,International cab.cfm?fips=AG “Algeria analysisbrief”,USEnergy InformationAdministration,http://www.eia.gov/countries/ docs/WEF_Africa_Competitiveness_Report_2013.pdf “Africa CompetitivenessReport2013”,World EconomicForum,http://www3.weforum.org/ http://travel.state.gov/travel/cis_pa_tw/cis/cis_1087.html “Algeria: CountrySpecificInformation”,Bureau ofConsularAffairs, USStateDepartment, “Algeria businessforecast report”, (BMI)(2013) BusinessMonitorInternational cab.cfm?fips=AG “Algeria analysisbrief”,USEnergy InformationAdministration,http://www.eia.gov/countries/ Note%20%202011-2012%20(01%20juin%202011)%20Revised%20English%20final.pdf fileadmin/uploads/afdb/Documents/Project-and-Operations/Algeria-%20Dialogue%20 “Dialogue Note2011-2012”,AfricanDevelopmentBankGroup, http://www.afdb.org/ Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Angola

Sub-Saharan Africa’s third-largest economy will stay on a fast growth path. Key drivers will be further rises in 3rd largest economy oil production, recently announced reform programmes in sub-Saharan and political stability. Africa

An abundance of natural resources have made Angola one of the leading destinations for FDI in Africa. Most FDI is directed into Angola’s core sector: oil. Huge oil resources have put the country in a strong fiscal position. While this favourable economic climate presents an ideal opportunity for the Angolan Government to make decisive investment decisions, the current transport and logistics infrastructure remains a major challenge for businesses in Angola.

The Angolan Government established a sovereign wealth fund, the Fundo Soberano de Angola (FSDEA), in 2012 and has ring- fenced the equivalent of 100 000 barrels per day of oil revenues (about US$5 billion by October 2012i) for priority projects and essential infrastructure.

In addition, government reforms are targeting the improvement of the private sector in Angola. With regard to monopolised sectors, Angola is one of the least competitive

These bubbles represent the cities of Angola and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 25 Angola Africa gearingup 26 Africa Luanda’saccordance objective with development iswelcome and in receipts. This for export support providegas further inparticular) and (diamonds earnings export non-oil lion’sshare, rising up the resources. oilstill While makes innatural isrich The country and Cabinda. zonesinLuanda,trade Catumbela intentionits to free create three or free zones, it hasindicated trade yet foreign established zones trade government the hasnotAlthough to provides trade. low barriers tariffs low regime trade with A liberal countries. neighbouring landlocked to supplier become animportant its asithopesto importance further beof will regional integration increase inregional Angola’s trade. shouldseean (SADC) andthis DevelopmentAfrican Community Southern Angola isamemberof the . Africa followed by France andSouth USA, Chinaandthe are partners andAngola’s maintrading Bank, revenues World, according to the foraccounts nearly 98%oftotal 7-10% between 2010 and2012. Oil to accountsurplus current its grew policy,tighter monetary Angola anda oilprices Due to rising spending government and boost growth Oil resources region. inastrongitself inthe position andput longrun inthe obstacles potentialfinancial to overcome business challenges.hasthe Italso Angola iswell aware current ofits promising opportunities. hopefullyReforms will offer Africa. economies insub-Saharan of total revenues. 98% for Oil accounts 98% challenge abig and security Business environment the Ease of Doing Business Index. EaseofDoingBusinessIndex. the lowestregion, having the in ranking SADC to dobusiness inthe in which country most difficult is rated asthe Angolaimpeding growth. industrial weak businessenvironment isalso economy, inthe diversification the framework ishindering aninadequateWhile institutional of the country’s US$10 country’s of the billion The impending commissioning sector.minerals oil sector byon the diversifying the of reducing Angola’s dependence settle at12-15% 2006-2011. during levelsfell from hyper-inflationary to civilwar in2002,inflation of the Followingeconomic growth. end the impact will which positively on major spending, upofcapital scaling increase by 14% in2013, basedona Government isset expenditure to market nearfuture. inthe large-scale investments retail inthe prospects for growth limits which inequality extreme remains, growth, 2012. Butdespite aggressive income since 2003to US$5700in reach incomehasgrown sixfoldcapita per sametime, production. At the andincreasedspending oil bybe supported infrastructure years . Thiswill five over next the to above remain 5%level the isprojected 2003 andgrowth eightfoldsince GDP hasgrown ore production. toaddition to plans commenceiron boost in to economicgrowth, near Soyo provide will afurther gas natural (LNG)liquefied plant connection electricity new a for Days 7 ii

2015. energy sector between now and approximately US$16 inthe billion and ithascommitted to investing governmentrecognised by the These problems have been rely generators. diesel onprivate To alarge extent businesseshave to . connection for anew electricity waiting anaverage ofseven days sameyear businessesreported the were electricity. spentwithout In 14 overall, andthat hours, 36days lasting onaverageoutages amonth endured sixpowerAngolan firms World found that Banksurvey A2010 inAfrica. least efficient the Angola’s power sector isamong outages electricity Frequent target and attack expatriates there. target expatriates andattack specifically groups Armed risk. distinct safety andsecurity-of-transit most dangerous presents places, country’s asoneofthe Cabinda, of war. province of Thenorthern to remnants andother landmines of Angola canbeproblematic due Luanda. Ground travel insome parts country,across the especially in an issue.Levels are high ofcrime of policy, still remains security any general changethrust inthe isunlikely there toalthough be 27-year war in2002,and ended Angola sincethe hasbeenstable processes. to reforms planned simplifywith latter the already countering a new business. Government is encountered inopening difficulties bureaucracy and tax inefficient enforcementcontract environment, to apoor isattributable This rating iii 20m of population Small “Transport infrastructure has a big influence on reliability and the ability to deliver on time. A trip from Luanda to Soyo (450km) usually takes two days, but during the rainy season, the delivery can be four or five days due to the poor road conditions and poor telecommunication signals. Sometimes the rain floods can destroy the bridges, which may even bring transportation to a halt for many days.”

Zhou Chuncheng, General Manager, Sinotrans Angola LDA

Workers need training

In relation to its size, Angola has investment programmes. Despite declining (evidenced by the high a small population of around these programmes, it will be a long level of goods lost in transit). 20 million. However, population way to go to diversify Angola’s highly growth is high at 3.1% per year. oil-dependent economy. In contrast, the ratings of Levels of urbanisation are also high Angola’s customs procedures and with more than half of Angolans Patchy improvement infrastructure have made significant living in cities. progress, rising up the ranks in logistics an impressive 50 and 57 places There is a large surplus of labour performance respectively. Reforms are gathering and a massive unemployment rate pace. Since 2001, the government giving employers easy access to Logistics Performance Index has been taking steps to update labour resources. Although this customs legislation and modernise offers some potential, workers are the customs administration. This mainly unskilled and the labour Customs has achieved good results and while market is heavily restrictive to 5 allegations of corruption remain 4 entrepreneurs and employers, as 3 frequent, trade laws and regulations Timeliness Infrastructure fixed-term employment contracts 2 have been promulgated, import are disallowed by law and the 1 documentation requirements 0 legislated minimum wage of $126 is have been simplified and customs among the highest in Africa. clearances at all borders have been

Tracking and International computerised. Dominance of oil and tracing shipments gas Logistics quality and competence Transport

Angola Top performer (South Africa) infrastructure and Oil and gas are by far the most important industries in Angola. operations Given the reliance on export Source: World Bank A major obstacle for investments earnings from the dominant oil into industries other than oil industry, most economic activity is According to the 2012 Logistics is the poor quality of Angola’s located in this sector. Even though Performance Index (LPI) released transport infrastructure. Overall, oil export earnings will remain by the World Bank, Angola is one of infrastructure was severely damaged the country’s dominant source of the world’s worst performers when it by the 27-year-long civil war that foreign income for years to come, comes to ‘trade facilitation’ logistics, ended in 2002, while periodic its share will decrease and other ranking 138th out of 155 countries flooding during the rainy season sectors will advance, pushed by the included in the Index, and 30th out also takes its toll. government’s plans to diversify the of 42 African countries. economy. In the Global Competitiveness The latest LPI shows there has been Report 2011/2012, Angola ranks Mining, along with the a slight improvement since 2010, 141th of 142 countries regarding the diversification of the minerals although the 2012 assessment still quality of its overall infrastructure. sector, offers significant new lags the level recorded in the first Angolan manufacturers stand at a growth opportunities. Over the LPI in 2007. While international very high risk of losing their goods short to medium term, the energy, shipments and logistics quality in transit. transportation and construction and competence remain more or sectors are expected to all benefit less stable compared to Angola’s Despite the weakness of the from a scaling up of public 2010 ranking and value, timeliness country’s infrastructure, Angola is and track & trace capabilities are one of very few African countries

PwC 27 Angola Luanda. road network, especially around goods to continues congest Angola’s of transport so the construction, and rebuilt orare still under have just recently been rehabilitated hinterland. However, railway lines the with cities port the connecting Namibe, railway shouldbe lines ofLuanda, cities Lobitoport and three roadsWhile connectthe coast. Luandacapital andalongthe is mainly concentrated around the Transport inAngola infrastructure biggest partners. trading investor inAngola asoneofits to continue China will beakey overtook in2010. Arabia Saudi ofoilandevenmain supplier AngolaIn return, becameChina’s Kiaxi. Kilamba of city projects inareas like the large railways, roads, andhousing of construction viathe landscape, Angolan infrastructure the changing in strides been makingsignificant Chinahas for agreement, oil’trade toAngola. an‘infrastructure Thanks isChineseinvestmentfunding in key Another factor ininfrastructure Africa gearingup 28 Africa Africa’. inSouthern importance into a‘logistical hubofconsiderable toAngolaessential transforming highways andrailways be will nation’sports, the and expanding Eduardo dosSantos, rehabilitating president, José country’s to the According needs. infrastructure to will political address the also There isnot potential, only the but and better cities. connectits economy the andmodernise expand shattered infrastructure, country’s issuesandto rebuild the structural resources to address financial the to large its Angola has oilreserves, gap. funding Thanks infrastructure donot asignificant face that iv

shipping. andopento international ports Namibe. Theseare deep-water all Luanda,trade: Lobito Cabinda, and of ports hasfourcurrently important Thecountry countries. neighbouring tosupplier landlocked its regional become animportant forbe essential Angola’s to plans will . Ports for 95%ofimports account which ports, country’s onthe dependent is entirely trade Angola’s international needed capacity and ports New Zambia. DRC,the Zimbabwe and namely countries, landlocked a gateway surrounding to the working andalready Africa as in ports fastest-growing the Itisoneof imports. country’s about80%ofthe handling trade, for international nation’smainconduit as the ofLuanda serves The port Key indicators Key (global rank/144(score 1-7)) Global CompetitivenessIndex 2011 –Infrastructure (score 1-5)) Logistics PerformanceIndex2012 (globalrank/155 Top exports Corp. IncomeTax (CIT)rate (score 1-7)) Global competitivenessindex2011(globalrank/144 GDP percapita(US$,2012) GDP growth forecast 2012-2017(avg,y/yrate) GDP (US$billion,2012) Population growth (2012-2020, avgp.a.) Population size(million,2012) dependent onports dependent are of imports 95% TEUs/year. general and700 000 merchandise tocapacity atotal 11 tons million of area to atotal of7.8km andincrease berthing extend will the programme ofLobito. Port This of the US$1.25 rehabilitation onthe billion Government to plans also spend of Luanda, isto beextended. The ofLobito,Port about500kmsouth Luanda) in2011. Additionally, the of (north do Dande atBarra port ofanew commercial construction Angola gave go-ahead for the the GovernmentLuanda, of the To of Port atthe reduce traffic Luanda. in Namibia,of some2 000kmsouth ofWalvis Port diverted to the Bay isfrequently being Angolan traffic is about18 To hours. save costs, average African sub-Saharan – the waiting of144 time pre-berth hours an excessive general cargo vessel has constraints.Theport capacity delayslengthy andhastremendous Luanda hasbecomenotorious for of Port the In spite growth, ofrapid 140 (1.89) 138 (2.28) minerals, crude(97.3%) obtained from bituminous Petroleum oilsand 35.0% 139 (2.96) 5 700 5.7% 115 3.1% 20.8 Reasonable US$3.3bn roads Dilapidated roads Landmines and spent to rebuild railway flooding remain key lines security issues

Three rail lines, no network Despite these ambitious projects, • Caminhos de Ferro Namibe productivity, infrastructure and The rail system in Angola consists of (Moçãmedes Railways) operational equipment also require three main railways that were built This links the port of Namibe to attention and new investment. eastwards from the coast during the southern provinces of Kuando Significant further investment will colonial times, linking Angola’s key Kubango and Hull (town of also be necessary to improve both Atlantic ports to the interior. Many Menongue) and on to the border coastal and inland infrastructure. of these lines were destroyed during of Namibia. It was officially the 27-year-long civil war, but a reopened in August 2012, but Inland water transport is hardly programme of rehabilitation has closed again for work to improve possible in Angola. The Cuanza been ongoing since 2005. the line and is due to reopen in River, south of Luanda, is navigable the second half of 2013. by ship 200km inland, but most of The rehabilitation or rebuilding of Angola’s rivers are not suitable for Angola’s current rail infrastructure A feasibility study for a fourth transportation. is a huge task, since in many cases it railway line linking Luanda with requires expensive works to remove Cabinda is being undertaken. The Aviation mines and complete the replacement line will cross the Congo River and of obsolete or deteriorated rails. 40km of the DRC to enter Angolan Capacity does not appear to be territory again in Cabinda. In Still, the speed at which the Angolan December 2012, the constructions a major issue in the Angolan air railroad system has been rebuilt transport system. There are 31 of a 300-km branch line linking is a first for the African continent. Moçâmedes Railways and the airports in Angola with paved In just a few years, 2 700km of runways. The Quatro de Fevereiro Namibian railway system was railroads were rebuilt and more vi International Airport just outside announced. The project was due than US$3.3 billion was spent on to commence in the first quarter of Luanda is the country’s busiest the three main lines. airport and serves international 2013. and domestic airlines. TAAG Angola The three railway lines are: Airlines is the national flag-carrying Regional cooperation is essential to the joint plan to repair, maintain airline of Angola and one of the most • Caminhos de Ferror de Luanda successful airlines in Africa. and operate the Lobito Corridor (Luanda Railways) railroad linking Angola, the DRC This links Luanda to Malanje in The major challenge facing the and Zambia. Utilising this rail line, northern central Angola. Freight Angola now has the opportunity aviation sector is safety, which is a rail from the port of Luanda Government priority. All Angolan to play an important role in the began in March 2013. It is outflow of the minerals coming airlines are on the European Union hoped that the construction of a blacklist, with the exception of from the Copperbelts in Zambia railway at the port will motivate and Katanga (DRC), which would specified Boeing 777s and Boeing companies to use the railways as 737s operated by TAAG. further increase the country’s profile a means of transport instead of within SADC. trucks. New airport Roads Notwithstanding capacity issues, • Caminhos de Ferro de Benguela (Benguela Railways) the construction of Luanda’s new Most of the freight in Angola is international airport, which is to This links the Port of Lobito and Luau on the eastern border of the transported by road on trucks, be completed in 2014, will create since inland water navigation is the largest airport in Africa. It will DRC. Plans to connect this line with the railway networks of the not an option and the few railway offer capacity for over 13 million lines have just started operations. passengers per yearv, and will have DRC and Zambia will facilitate greater intra-African trade. According to the World Bank’s AICD, a cargo terminal with an annual transportation causes a significant capacity of 35 000 tonnes. bottleneck in Angola’s economy.

PwC 29 Angola Africa gearingup 30 Africa ports. from useofAngola’s makinggreater countries discourages surrounding and countries surrounding with Angola to develop regional trade for makessituation itmore difficult regional roads isinferior. This andAngola’s corridors African trans- quality these ofboth the aspirations, noble Despite these LobitoMozambique inAngola. with from East to West, in Beira links Thesecondone,running Africa. CapeTownin Libya with inSouth Tripoli linking to South, from North runs The first corridors. African oftwoAngola major ispart trans- rainy season. the during away by floods sudden washed roads andbridgesare often Inaddition, recognised minefields. andendupoutside displaced asminesmayto become April, from November runs season, which Angola’s rainy during risk is extra majoroutside urbanareas. There roads. remain Landmines aproblem Safety isabigissueonAngola’s dilapidatedand more . sparser are side eastern on the roads while condition, reasonable appearto bein country of the half western inthe mainlinks the routes are traversable. Specifically, maintransport Still, the flooding. impact torrential ofperiodic the networkthe was destroyed, and civilwar,to the of whenmuch network due part isinnosmall road ofthe The poorcondition ofmajoroutside towns. foris generallytravel necessary 10.4% and 17%, four-wheel drive of paved roadsbetween ranging World BankandAICDestimates overall economic development. With logistics inhibitAngola’s transport and Poor road infrastructure Angola’s transportation and logistics sector as shown in the graphic below. andlogistics sector asshown graphic Angola’s transportation inthe Based onouranalysis, we have investment assessedthe potential for Conclusion • • • Various role players are involved notably: inroad rehabilitation, Key: Transport infrastructure 5. Trade andlogistics 4. Business environment 3. 2. Economics Demographics andresources 1. Angola –Investment potential assessment growth of the transport and logistics industry inAngola. industry andlogistics transport ofthe growth to have canbeexpected apositiveand this impact onthe few years over next the ofeconomicgrowth driver essential to development bethe isexpected infrastructure in Africa, onroads spenders highest Angola beingoneofthe With End notes Natural resource companies. Chinese investments; and partnerships; ofpublic-private form The Government inthe vi v iv iii ii i

http://angolaairport.net/airport/ Evaluation-Reports/Angola%20%20-%20Private%20Sector%20Country%20Profile.pdf African DevelopmentBankreport: http://www.afdb.org/fileadmin/uploads/afdb/Documents/ production_197.aspx#.UgCyr-waJMs // http://www.energyglobal.com/news/liquid-natural-gas/articles/Angola_LNG_commences_ Angola Quarterlyupdatefrom NKCalsostates$10bn,aswellthefollowingtwoarticles: by-2012/ Railways Africa,http://www.railwaysafrica.com/blog/2010/11/angolan-railways-complete- report-angola.html#axzz2ZxvjuZri Global Finance,online:http://www.gfmag.com/archives/134-february-2011/11059-country- Documents/Publications/Angola%20Full%20PDF%20Country%20Note.pdf African EconomicOutlook:Angola(2012): http://www.afdb.org/fileadmin/uploads/afdb/ angola/ Sovereign Wealth FundInstitute,24Oct.2012,online:http://www.swfinstitute.org/tag/ Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Democratic Republic of Congo

The Democratic Republic of Congo has immense potential but remains a risky investment location. 2nd largest country in Main hurdles include pervasive poverty, political Africa turmoil, security issues, vast land area and inadequate infrastructure. If it were not for the numerous obstacles, the Democratic Republic of Congo (DRC) would be a highly Central African Republic South Sudan attractive investment location. It is the second-largest country and Lagos-Mombasa Highway has the third-largest population in

Gabon Tripoli-Cape Town Highway Africa. Most significantly, the DRC is considered to have among the Kisangani Congo River Uganda largest endowments of minerals on the continent.

North Kivu Province Social and economic conditions are very challenging and the Rwanda DRC is recognised as one of the most difficult places in which Congo Ilebo Burundi Pointe to do business in the world. In Noire Kinshasa Tanzania addition to these factors, transport Matadi infrastructure is a major impediment SNCC Port of to economic growth. Banana Port of (extensions/ Matadi deepwater port) An escalation in conflict in the Katanga Province Angola eastern DRC also stands to impact Atlantic growth prospects, but not as severely Kolwezi SNCC Beira-Lobito Highway as a commodity price crash scenario, Ocean Lobito Lubumbashi given the country’s high dependence on the mining sector. Zambia Notwithstanding the challenges it faces, the DRC should see sizeable economic growth over the short to medium term, while remaining an extremely challenging place in which to do business.

These bubbles represent the cities of the DRC and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 31 Democratic Republic of Congo Africa gearingup 32 Africa Commission (SEC) andExchangeU.S. Securities of aproduct’.” orproduction functionality to the minerals are ‘necessary minerals ifthose conflict useof the disclose publicly areCompanies required to tungsten. tantalum, gold, tin, and include They countries. of Congo orneighbouring Democraticthe Republic from minerals originating minerals are “Conflict minerals Conflict international developments.international drops involumes asaresult of couldbetemporary increase, there beingexpected toDespite exports flows. andfinancial demand on external dependence revealing country’s the region, eastern inthe conflict in anescalation with coincided prices incommodity when acrash was in2009 This fragility exposed ofextracted commodities. form are inthe Over 90%ofexports per annumrespectively. 2011, estimated at8.6%and12.3% betweenand imports 2001 and There inexports was notable growth 68% and78% ofGDPrespectively. for accounting andimports exports DRC, inthe economic growth with to significantly domestic contributes activity trade International resources The economy and underdeveloped largely industry Gold industry largely underdeveloped. industry have gold keptand turmoil the example, ofconflict decades For massiveits reserves. mineral DRCthe from fully utilising back isholding that minerals conflict It isnot recent issueof only the States African Central (ECCAS). of EconomicCommunity and the Development (SADC) Community African Southern (COMESA), the Africa for andSouthern Eastern CommonMarket the including communities, several trade African amemberof isalso The country simplify foreign operations. trade introduce aone-stop-shop to reform DRC– the to set group upasteering 2010 World aidofthe the with Bank DRC’s –conducted policy trade in a diagnostic study to draw upthe of world aftermath In the trade. to improve with integration its The DRC distinct hasmade efforts resources. mineral its from to asawhole benefit country in someareas andperhaps allow the levelcould decrease ofconflict the minerals conflict to export difficult makingitmore that It isthought tungsten DRC. andgold from the tantalum, oftin, purchase the companiesrequiring to disclose Commission (SEC)passedrules andExchange USSecurities the This was reinforced in2012 when andcomputers. smartphones as ofelectronics such manufacture are usedinthe that minerals certain sources of their anddisclose verify requires electronicscompanies to and ConsumerProtection Act Dodd–Frank Wall Street Reform 1502 Section momentum. ofthe isgaining minerals, on conflict butfocusingof blooddiamonds, spread toestablished control the A campaign one to similar the i

the IMF forecast period until 2018. until IMFforecast period the single-digit range over the within itshouldremain is expected that andit to inflation moderate price have recentlyauthorities managed but high levels ofinflation, The DRC hashistorically suffered over force. labour 60%ofthe around 39%ofGDPandemploying sector, agricultural the contributing 2017. Theeconomy isdominated by average of8.6%between 2012 and to increase to this expects anannual between 2010 and2012. TheIMF estimated at7.1%growth, annually strong economic experienced hasnevertheless country base, the anextremely lowComing off DRCthe globally. andMalawi rate Burundi worse than GDPofjust US$230,onlycapita US$17.2 in2012. billion per With market GDPestimated at size,with The DRC hasarelatively small West the off Coast. ‘zoneofcommoninterest’ so-called inthe agreement production-sharing DRCthe are negotiating anew Angolaoil andgas and reserves. offshore hassignificant The country remains andunderdeveloped. fragile sector, localfinancial is the which isselective.code challenge Another complexenforcement legal ofthe Furthermore, administration. public ishamperedrights by dysfunctional protection while growth, ofproperty prospects for diversified undermined hasseverely risk High political factor for businesses. environmentpolitical isakey risk country.the Theunsettled socio- in turmoil political has beenthe DRCeconomic development inthe The greatest impediment to Risk to business Large population of Potential to be Africa’s largest 65.7m power exporter

High poverty, low productivity

The DRC’s high taxes are a further The DRC has a large population, this publication, has a labour discouragement for investors, with estimated at 65.7 million in 2012. productivity of US$1 239 per person a corporate income tax rate of 35% A high population growth rate of employed. and additional types of taxes that 2.7% will intensify the already can increase the total tax payable challenging social conditions. Power potential significantly. According to the World Bank, approximately 50 million live on Power blackouts and electricity The DRC’s immense natural less than US$1.25 a day. The DRC shortages occur frequently and resources have fuelled conflict has a low HIV/Aids infection rate as present major problems to the rather than development. Human years of war and little infrastructure rising number of mining companies rights abuses and banditry deter development have restricted human operating in the country. This economic activity, but at the movement and the spread of the situation is fuelled by fast-rising moment this mainly affects the virus. demand for power and ageing country’s eastern region, close to the infrastructure. About 40% of firms borders with Rwanda and Uganda. Despite having a labour force of in the DRC own and operate their nearly 25 million, available labour own backstop generator to shield The eastern part of the country still is mostly unskilled, with only 23.2% themselves from frequent power sees frequent clashes between the of the population having secondary interruptions. rebels and government forces, and education. Labour productivity is there is sporadic fighting in other extremely low, with every person Despite these challenges, the DRC parts of the country. Security forces employed contributing US$691 has immense power generation are known to set up occasional, to national GDP. In comparison, potential. It boasts the largest and spontaneous roadblocks, especially Tanzania, the second-lowest most cost-effective hydropower after dark, which places a constraint of the ten countries profiled in potential on the continent and could on transportation and results in produce up to 100 000MW of power. delays. The entire installed capacity of sub- Saharan Africa is only 48 000MW Key indicators and the DRC has the potential to become Africa’s largest power Population size (million, 2012) 65.7 exporter.

Population growth (2012-2020, avg p.a.) 2.7% The Government has ambitious GDP (US$ billion, 2012) 17.2 plans. While less than 10% of the population has access to electricity GDP growth forecast 2012-2017 (avg, y/y rate) 8.6% today, the Government has set GDP per capita (US$, 2012) 230 an ambitious target to provide electricity to 60% of the population Global competitiveness index 2012 (global rank/144 n/a (score 1-7)) by 2025. The first step in achieving this goal is the construction of the Corp. Income Tax (CIT) rate 35.0% Grand Inga dam, which will produce Top exports Cathodes and sections of about 40 000MW at a cost of US$80 cathodes (24.7%); Cobalt billion. ores and concentrates (17.8%); Copper ores and concentrates (11.9%) Logistics Performance Index 2012 (global rank/155 143 (2.21) (score 1-5)) Global Competitiveness Index 2012 - Infrastructure n/a (global rank/144 (score 1-7))

PwC 33 Democratic Republic of Congo Africa gearingup 34 Africa between 2010 and2012, the with fell significantly performance DRC.businesses inthe Logistics andlogistics prospects for transport growth limit and inefficiency infrastructure Poor facilitation trade Source: World Bank Logistics area ofbasicconsumergoods.in the GDP, islikely this to beconcentrated However, low given the percapita high potential retail sector. for the impliesrobust growth, population The large with coupled population, copper output. equivalent to around 2.7%ofglobal tonnes. Thisis 440 000 reaching increased by anestimated 28%, DRCproduction ofcopperinthe In2011,economic growth. mine playwill akey role inmedium-term product, largest export country’s Copper, term. medium in the the ofeconomicgrowth main driver the sector,agricultural be miningwill dominated currently by the DRC’s the While economy is sectorResources and tracing Timeliness Logistics Performance Index Performance Logistics Tracking last twolast years. inthe significantly dropped has performance Logistics Logistics qualityandcompetence DRC Around Around waterways navigable is by of the country Customs 0 1 2 3 4 5 Top performer(SouthAfrica) 2/ 3

Infrastructure International shipments infrastructure investmentinfrastructure needed According World to the the Bank, . country approximately ofthe two-thirds means ofmoving around dominant traditionally beenthe has waterways andwater transport ofkilometres ofnavigablethousands has On apositive note, country the networkrail into hasfallen disuse. isdilapidated andthe infrastructure to deteriorate. Roadleft andrail have damaged beenseriously or networks As aresult ofconflict, networks. development ofinfrastructure complicate the further rivers extensive forests, andcriss-crossing geography, low density, population vast country’s andthe difficult hasalways been transportation world. inthe countries Ground challenged infrastructurally The DRC most isoneofthe environment inAfrica. infrastructure transport challenging The DRC most probably hasthe Infrastructure Africa. insub-Saharan peers ofits that than 50%higher ismore than and export average, cost to import the while sub-Saharan the higher than issignificantly to andexport import requiredof documents time andthe number ofthe interms performance TheDRC’s andtracing. tracking and infrastructure, shipments, customs,timeliness, international logistics competence, period: this worsened during infrastructure indicatorsAll oflogistics Index. Logistics Performance 143rd outof155 onthe countries to from declining 85th country US$3bn infrastructure andurban road for China promises China promises adequately. country ofthe western part the of needs the and are to unable fill low anda low capacity draught DRC, have which BomaandMatadi, There areinthe two mainports vessels. Republic ofCongothe usingsmaller from Pointetransshipments Noire in hasto rely on country and the from conventional cargo liners DRCin the cantake direct calls nature andvast area. No ports ishampered country’s ports by the to poorandconnection the very DRC in the infrastructure is Port landlocked. DRCsea, the ispredominantly to poorconnections With the Ports on infrastructure development.on infrastructure haveinstability hadamajor impact and east, where conflict felt inthe developmentinfrastructure hasbeen impacton serious ofinsecurity Themost cities. three these linking well-developedlittle infrastructure There is northeast. Kisangani inthe and southeast, Lubumbashi inthe southwest, areas –Kinshasainthe areactivity concentrated inthree The DRC’s andeconomic population . projects urban infrastructure and for road primarily billion, US$3 Chinapromises signed with agreement major new financing Fornon-OECD partners. example, a fromcommitments OECDand financing upswing inexternal hasbeenalargeSince 2006,there promising signs. last few havein the years there been But deficit. infrastructure country’s to redress the acentury more than improved,and efficiency take itwill UnlessAfrica. isincreased spending DRC highestin the in isamongthe

Regulatory Rail network used oversight needs to extensively for be strengthened in copper exports airline industry

In addition to the two main ports, The Congo River traverses the Airlines – a company partially owned the DRC has the sea port of DRC, linking two of its main cities, and technically supported by SN Banana, which currently has Kinshasa and Kisangani, while its Brussels. limited capacity and is used numerous tributaries cross much mainly for crude oil export. of the country. About 15 000km of Rail the Congo River and its tributaries According to AICD, the Port of are navigable, or potentially so with The DRC has two main rail systems Matadi on the Congo River is regular dredging and relatively of strategic importance to the playing a greater role in serving modest investments in quays and country, “Société Commerciale des Kinshasa and the southwest area signalling. Transports et des Ports” (SCPT, of the country, but also has limited formerly ONATRA) and the “Société cargo-handling capacity and a Air transport Nationale des Chemins de Fer du low draught, as well as costly and Congo” (SNCC). The networks are inefficient port services. Air transport could open up access inefficient and tariffs are relatively to this vast country if security high. Both have fallen into disuse for Because of the high internal improves. the most part. transport costs and large distances involved, trade from southeast DRC, There are a number of airports in SCTP railway connects Kinshasa notably copper, is channelled mainly the DRC. Since 2000 the number to the Port of Matadi. The line is through Durban in South Africa of domestic air transport routes only 30 years old and the track is in and to a lesser extent through Dar has dramatically increased and reasonable condition. es Salaam in Tanzania. Mombasa the aircraft fleet has undergone in Kenya remains the key port for renewal. Given the vast size of SNCC operates an extensive network Kisangani and the northeast part of the DRC, its disparate population centred in the southeast of the the country. centres and deficiencies of the country. The most important branch surface transport network, the of this network connects Katanga on While an improved Port of Matadi air transportation system has an the Zambian border to Dilolo on the will be able to service the southwest important role to play in passenger Angolan border. It also connects the DRC for some years to come, in the travel. However, the DRC is not well northern part of the Katanga region longer term additional capacity will connected with other countries, to Ilebo in the Kasaï region. need to be found. To achieve this, being served primarily by South the DRC faces two strategic options. African Airways, Ethiopian Airlines The SNCC network is used One is to further develop the Port and Kenya Airways. extensively for copper exports of Banana and convert it into a leaving the DRC for the port of deep-water port. The establishment The DRC’s domestic air transport Durban and will also facilitate of such a port would cost around services have a worrying safety exports through Lobito in Angola US$2 billion and take 10 years to record and the most urgent issue once construction on the Benguela complete. The other option involves facing the sector is to strengthen Railways is completed. The SNCC strengthening land links with the regulatory oversight in order to network is in poor condition, with Republic of Congo to facilitate access improve the safety of domestic speed limits of 10-35km/h. to the Port of Pointe Noire. flights. One of the consequences of this problem has been the Railway connections to While the network of rivers across diversion of a significant volume neighbouring countries are set the country poses one of the biggest of domestic air transport outside to gain importance, as the three challenges for national roads and of the country to avoid using major companies providing railway rail lines, it provides an opportunity domestic air services. This means services for Zambia, Tanzania and for inland water transportation. that domestic transit was often the DRC have signed a tripartite Inland waterways can provide undertaken via a foreign country. agreement in the hopes of making low-cost surface transport, with This situation has significantly traveling and transportation of only relatively modest investments changed since the arrival of Korongo goods easier. needed to improve navigability.

PwC 35 Democratic Republic of Congo Africa gearingup 36 Africa in2006. started recovery that agricultural toit hasmade the contribution been recognised for the roads, has specifically infrastructure, Rehabilitation ofrural paying off. isalready country. of the Theeffort side well eastern asroads alongthe KinshasaandLubumbashi,linking as major road corridors country’s the These initiatives cover many of companies investing also inroads. mining playingalso arole, with is enterprise China.Private with infrastructure-for-minerals deal development aswell funding asan hassecured major The country road network hasbeenapriority. the in2003,rehabilitating conflict national endofthe Since the tarred. andonlycondition, 1.8% being beinginpoor infrastructure road majority ofthe the with DRC ofthe much isdisconnected Following conflict, years ofarmed Roads 2015 World under Bankfunding. acquisition of47 locomotives by companythe anew isplanning region. Inaddition, southern in the locomotives to revive sector rail the Recently, SNCC acquired the nine lines. ofexisting upgrading renovation, and rehabilitation Worldby the Bankmainly include are widely funded projects that complications Other ofany sort. or re-marshalling trans-shipping, necessarily vice versa, without Mposhi andLubumbashi, and and from to DaresSalaam Kapiri can now move direction ineither cargo inplace, agreement this With transportation and logistics sector as shown in the graphic below. andlogistics sector asshown graphic transportation inthe Based onouranalysis, we have investment assessedthe potential for DRC’s Conclusion DRC –Investment potential assessment Key: Transport andinfrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes i

Commission, http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171484002 “SEC AdoptsRuleforDisclosingUseofConflictMinerals”,USSecurities and Exchange Sovereign Wealth FundInstitute,24Oct.2012,online:http://www.swfinstitute.org/tag/1 Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Egypt

Prospects for Egypt were challenging even before the More than recent unrest and political turmoil. Major obstacles 1/2 of population include widespread poverty, rising unemployment, slow with secondary education economic growth and a lack of investment.

FDI flows into Egypt declined sharply after the popular uprising in 2011 as a result of the increase in political risk and deterioration in macroeconomic stability that followed the overthrow of the Mubarak regime. While these recovered slightly in 2012, the recent uprising in 2013 will once again decrease FDI flows into Egypt.i

Despite the challenges, Egypt has a number of key indicators supporting growth. The Egyptian economy can draw upon a large population, with more than 50 per cent having finished secondary education – which is far above the average of the African peers analysed in this report. Egypt has the biggest share of stable middle-class population, a widely diversified economy and the Suez Canal, the country’s greatest asset.

Egypt is still waiting for a large IMF loan of US$4.8 billion. But even before the removal of Mohamed Morsi and his government, there were many uncertainties as to when the 22-month stand-by arrangement would be finalised.ii However, in the

These bubbles represent the cities of Egypt and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 37 Egypt the aftermath of the uprising. uprising. ofthe aftermath the Egypt to continue will in that suffer suggest andalso forecasts difficult tensionspolitical make definitive andsocio- levels ofuncertainty increased situation, The political others. Council(GCC)and Cooperation having Gulf beenacquired from the duetoloan hasdiminished funds ofthe importance the meantime Africa gearingup 38 Africa (COMESA). Africa Southern Common Market for and Eastern (PTA) Africa and and Southern Preferential Trade Area for Eastern (AEC), Economic Community African the blocsincluding trade Egypttrade, isamemberofseveral To international helpfacilitate sharply.widened 2012, has deficit trade its while during slightly innominalterms isestimated todeficit have widened overallEgypt’s account current rapidly over past two the years. hasdeteriorated position external country’s inEgypt, the growth to trade economic international of importance Despite the major ofexports. the proportion gasproducts andnatural constitute respectively. Petroleum andrelated foraccounting 21% and25%ofGDP GDP, andimports exports with ofdomestic proportion sizeable constitutes trade a International Trade Hussein Hachem,CEO,Aramex are fairly unknown.” problem shipping.Butthe the wesubsidise that have, agreements these isthat commerce backinEgypt give will you anincentive shippingaswell: onthe they itgoes itto Ontop duties. transport without East chamberof the ofthat, Africa, powerproduced inCairo –andCairo hassomemanufacturing –ifyou product you Every are trading example. between for Cairo andEast Africa, “COMESA Anditcomesasanadvantage isafantastic trade agreement. if removal ofMorsi. the halted in2013with environment trade were the Positive to measures improve Government needto will implement stage. The atthis people to the to communicate to bedifficult appears butthis beneeded, will tightening andmonetary fiscal ofpainful extremely high.Aperiod is also debt andpublic months inrecent deteriorated further has position fiscal Egypt’s have beendelayed. improvements ineconomicpolicy development,political much-needed 2013. general to Inaddition the been reduced to 3.4%inOctober have sameperiod for already the to beachieved. Growth forecasts 2013,in April isnow this unlikely to 4.9%between 2012 and2017 Fund to rise Monetary International 2012, andwas projected by the averaged 3.0%between 2010 and economicgrowth Although from 9%to 7%. wereaverage reduced tariffs import taxes hadbeeneliminated and developments. Notably, export all recent political beforeplanned the reductions hadbeen tariff Further bands. numberoftariff the 14.6% to 14.1% of slashing andthe weightedthe average rate from tariff acutin system, with tariff Egypt’s changes to brought significant drive reform post-2004 The Government’s free zones. canset upbusinessinthese export Companies producing largely for US. inthe entry zero-rated tariff zones inthese manufactured zones,allowingindustrial products qualified Egypt hasdefined USGovernment. Notably, the with looking to leverage strong its ties EUandis the with agreement Egypt signedanassociation also the institutionalframework.the toreforms of improve efficacy the toinability implement structural Government’s bybeing fuelled the climatesocio-political inEgypt was unstable removal the the ofMorsi, subject to severe delays. Before often transactions and property for foreign legal companies, with majorBureaucracy isanother issue business. imagehave of the tarnished scandals and several high-profile investigations 6 000corruption than began in2011 andMay 2013, more upheaval political the that time the economicsystem. Betweenin the to continues erode trust corruption are not protected effectively and country. rights across the Property oflaw hasbeenunstable The rule development. innovation offinancial andlack institutional environment, of lack weak are the this driving factors betweenplaces 2011 and2012. Key Competitiveness andfell Index 26 Egypt israted poorly Global onthe investors. for makecould also life difficult Anti-Westernreforms. sentiment against pro-market backlash public economy. There isevidence ofa years ofstate ofthe domination legacy of tocontinues bearthe businessenvironmentEgypt’s Business environment have improved both lately. ofpayments balance rate andthe toDollar Egyptian Pound exchange increases. US Still, andtax cuts the assubsidy measures such austerity iii

80m 4GW shortage of Largest population electricity in summer in Arab world

As part of the economic reform one hand and creating pressure on Egypt’s mineral and energy resource plan that was sent to the IMF to wages on the other. base is made up for the most part close the multi-billion-dollar loan, by oil and natural gas, iron ore, the Egyptian Government included By African standards the labour phosphates and gold. Notably, crude some tax measures. These included force is also well educated and has oil production has been in decline an increase in the corporate tax rate the third-highest rate of secondary for several years, but oilfields in and sales tax rate on six products education among the ten countries the Mediterranean seabed have as well as the introduction of a in this study. Only South Africa and opened up fresh opportunities for financial transaction tax. Ghana rate higher. reviving the country’s oil export business. The Government has also Labour An important structural problem in been encouraging the exploration, Egypt is its labour policies, which production and domestic are frequently cited as an obstacle consumption of natural gas. If the political situation in doing business since there are settles, Egypt could benefit significant restrictions on the hiring Rising demand and capacity from its large, well-educated and firing of workers. constraints in electricity supply are in danger of negatively affecting labour force. Power industrial growth in Egypt. This could have a knock-on effect in other With the largest population in areas such as transport and logistics. the Arab world – about 80 million With its huge investments in – Egypt has a fairly large labour the energy sector, Egypt is A recent statement by the National force of nearly 27 million, with Electricity Control Center indicates up to 700 000 new entrants into beginning to address rising power demand. that the shortage of electricity the market annually. The growing reached 4GW during the summer. surplus of labour is increasing strain While the power grid is supposed to on the working population on the generate 26.5GW, available capacity only reached 22.3GW.

Egypt had planned to invest US$110 Key indicators billion in power infrastructure over the 2010-2027 period. For the 2012- Population size (million, 2012) 80.7 2017 phase, there are ambitious targets, including an additional Population growth (2012-2020, avg p.a.) 1.5% 12GW to be added to the national GDP (US$ billion, 2012) 256.7 grid, along with 1.2 million new connections. These targets would GDP growth forecast 2012-2017 (avg, y/y rate) 3.4% appear to be beyond reach in the GDP per capita (US$, 2012) 3 112 current circumstances and it is doubtful that they can be met. Global competitiveness index 2012 (global rank/144 107 (3.73) (score 1-7)) A major problem affecting the sector Corp. Income Tax (CIT) rate 25.0% is a lack of natural gas feedstock for power plants, a challenge that has Top exports Petroleum oils and oils obtained from bituminous become more acute in the past year. minerals, crude (18.3%); There are suggestions that some of Natural gas, liquefied Egypt’s gas export ambitions will (9.5%); Light oils and have to be limited in order to create preparations (5.5%) sufficient supply for domestic usage. Logistics Performance Index 2012 (global rank/155 57 (2.98) (score 1-5))

Global Competitiveness Index 2012 – Infrastructure 83 (3.61) (global rank/144 (score 1-7))

PwC 39 Egypt Africa gearingup 40 Africa have numbers tourism nosedived, Following removal the ofMorsi, growth. key ofdomestic employment driver sector, hashistorically beena which tourism impacted country’s the environment inEgypt adversely socio-political unstable the turmoil, Even most recent before political the Tourism US$4075 by 2017. isprojected towhich increase to GDPofUS$3 112, percapita with constitutes 31.6% population ofthe goods industry. class Themiddle andconsumer retail in Egypt’s positively augurs for growth peers comparedclass to regional its middle sizeofthe The greater sector. negative services impact onthe likelytherefore to have most the sector.the unrest is Thecurrent mainsources ofrevenuethe in constitute SuezCanalall on the bankingandshippingservices trade, approximately 50% of GDP. Tourism, Egyptian economy, for accounting largest andfastest growing inthe sector isby the far The services Services to GDPisdeclining. contribution sector’s agricultural the force. labour However,40% ofthe GDPandemployscountry’s roughly 14% contributes Agriculture ofthe intensively andcrop are yields high. crops peryear. is worked Theland several waterand plentiful permit potential. Warmgrowth weather agricultural Egypt hassignificant Agriculture amid ongoing unrest. Tourism profoundly suffers growth potential growth agricultural Significant Logistics industry.burgeoning construction concentrated inCairo anda activity,in industrial is which total force labour isemployed GDP. Approximately 13% ofthe in Egypt, for accounting 37% of second-largest economicsector sector isthe The industrial Industry sectortourism take will sometime. been restored, recovery afull ofthe holiday has destinationsoncecalm are typically to resilient andreturn economy.Egypt’s tourists Although 10% makes upmore than that of for asector concerning is greatly in2011. uprising popular the This werejust asthey recovering after country’s logistics performance. logistics performance. country’s improvements rate strongly inthe andinfrastructure shipments ininternational Increased efficiency improvement indicators. inall in 2010 to 57th in2012 andshowing moving from 92nd country the with over past fewperformance the years, improvedsignificantly logistics its shows Index Performance Egypt has The World Logistics Bank’s Source: World Bank Timeliness Logistics Performance Index Performance Logistics and tracing Tracking Logistics qualityandcompetence Egypt & consumersectors positively retail for augurs class middle Greater sizeof Customs 0 1 2 3 4 5 Top performer(SouthAfrica) International Infrastructure shipments iv

to that of its African peers. Transport peers. African ofits to that relatively good compared condition, isin infrastructure transport Egypt’s situation, current Despite the issue. serious becomeanincreasinglytherefore Infrastructure nearterm. inthe any further logistics its advance performance put onhold,Egypt isnot likely to have infrastructure been country’s Since major investments inthe relatively inefficient. 2010 and2012, are still they improvementsignificant between customsWhile procedures saw also austerity programme. austerity ofits year aspart infuelsubsidies IMF to phaseoutUS$14.5 a billion pressure beunder from the then Government will IMFloan,the the Government to isable if the secure Evenparticularly severe south. inthe problems are affected, butthe hasbeen territory Most ofEgypt’s andtrucks. queues taxis ofcars, are resulting inlong shortages well. suggest Recent reports fuel problems as numerous other faces sector inEgypt The transport Transport forthcoming. investment isnot likely to be uncertainty,political international current on FDI.But,given the bealmostand will wholly reliant require ahuge investment drive will consideration under currently The sheerscopeofprojects hold. haveprojects beenputon asnumerous sustained not will be infrastructure ofcurrent The good state v Fuel could 40 5 seaports international airports

Rail routes in Egypt are mainly focused sophisticated equipment in the on Cairo and also follow settlement Middle East, while Port Said and Up to 85% of rolling stock patterns along the Nile. The road Port Suez occupy strategic positions is long past its replacement transport network is supplemented at each end of the Suez Canal. date.viii by good inland water connections along the Nile as well as a good rail In addition to the sea ports, a Egypt has a fairly reliable state- network. network of river transport across run railway system. The railway the Nile Delta and its tributaries connects Cairo and Alexandria with Ports and Suez Canal facilitates the transport of goods and the main towns in the north of the commodities. country, all the large towns in the Nile Basin down to Aswan, and Egypt owns the Suez Air transport Safaga on the Red Sea coast. Canal and a broad port infrastructure. The rail network essentially follows Egypt’s airport development the Nile settlement patterns with high network coverage in the north Egypt’s geographical location lends plans are driven by long- east of the country and following an important aspect to the maritime term tourism opportunities. the Nile through the length of the transport sector as it overlooks both country. Egypt’s rail sector can be the Mediterranean and Red Seas, Egypt has 73 airports with described as adequate in its ability linked by the Suez Canal. The Suez paved runways, five of which to handle the country’s needs, Canal will remain a huge asset as are international airports. The although its operational capacity is it is the main trade route between largest and most active airport is stretched to the limit. Europe and Asia, accounting for in Cairo, being the second-busiest roughly 7.5% of world sea trade. airport in Africa after O R Tambo The rail system is not safe and Despite being Egypt’s greatest asset, in Johannesburg. There are non- accidents are common. In January the Suez Canal could also become a stop flights from most major 2013, the Ministry of Transportation huge liability though. Any disruption African, Asian, North American and confirmed that 82% of track relies on the narrow passage could cause European cities. on outdated mechanical systems and major delays and cause a spike in that there are an average of 12 rail transport costs. Despite current setbacks resulting crashes per month in Egypt.ix from the political situation, tourism Considerable work is required to Most importantly, the Suez Canal is a long-term growth industry upgrade the system and improve the is one of the world’s five ‘strategic in Egypt, and airports need to be safety record. chokepoints’, defined as narrow improved to keep up with increased sea passages or straits, through demand. One step in meeting this which the overwhelming majority need is the extension of Hurghada Roads of the world’s oil flows. In light of International Airport, where a new its strategic importance, the threat airfield is to be built. The airport has of maritime terrorism at the Suez also undergone massive renovations Road density follows Canal cannot be ruled out.vi to accommodate a dramatic rise in economic activity at the leisure traffic. coast and along the Nile Egypt has 40 sea ports, of River. which 12 are commercial ports; The international market is well six mining ports; six fishing served by numerous European and Egypt’s roads carry the largest ports; five marinas; and 10 oil- Middle Eastern carriers, while about share of freight (53%), which shipping ports. Among the most a dozen local airlines compete in increases the country’s dependence vii important ports are Alexandria, the domestic market. There are on the maintenance of the road the biggest port in Egypt, and the frequent flights within the country infrastructure. Until now, the quality Port of Dekheila, which is a natural and improvements to the air of Egypt’s road network has been extension to the Port of Alexandria. infrastructure will increase handling considered good, with 92% being capacity and efficiency, which will paved. Roads in Egypt are mainly Damietta Port has the largest benefit the transport and logistics container terminal and the most sector.

PwC 41 Egypt Africa gearingup 42 Africa Cairo-Dakar the first, corridors: for two major highway trans-African point starting moment Egypt isthe economicdevelopment. drive At the in helpingto easecongestion and step beavital will freight corridors road network creation of andthe ofthe expansion continual the that increased substantially, itisclear levelsWith ofcarownership having more unlikely.infrastructure making development ofnew road quality andcongestion while ofdeterioration inroad risk the increase circumstances current movement ofgoods. However, the more efficient to the facilitate improve system road transport the ininvestmentsUS$5.46 billion to economy national andoutlined the road network ofthe importance to Government hadrecognised the the Before was President ousted, Morsi region ofUS$3billion. in the estimated tocost of construction, be and would usetolls to recoup the to androad rail traffic, both handle way Thebridgewould off. bebuilt Egypt, butnow appearto bealong in change leadership ofpolitical recently revived following the ofAqaba Gulf wereacross the andEgypt Arabia Saudi connecting toPlans builda32kmbridge need to beexpanded. and are sparser country of the south the within connections Nile, the andalong network north-east inthe reasonablycontrast to extensive the SinaiPeninsula. In the through East Middle restas toofthe the aswell ports Cairoconnects to the and country ofthe north-east the The densest network ofroads isin Nile. alongthe settlement patterns ingeneral –followinfrastructure country’s railway andthe lines focused onCairo and–just like road by carried freight of share Largest transportation and logistics sector as shown in the graphic below. andlogistics sector asshown graphic transportation inthe Based onouranalysis, we have investment assessedthe potential for Egypt’s Conclusion Highway, to south. north running Cairo-Cape Town Coast, andsecond,the Highway Mediterranean alongthe Egypt –Investment potential assessment Key: Transport infrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes ix viii vii vi v iv iii ii i dire-need-to-overhaul-everything/ MENA RailNews,http://www.menarailnews.com/transport-infrastructure-egypt-hears-of- Sam Applegate,“Transport Infrastructure EgyptHearsofDire NeedtoOverhaulEverything”, stories/201301301315.html?viewall=1 “Egypt’s Hazardous RoadsandRailways”,AllAfrica,http://allafrica.com/ egypt “Egypt countryprofile”, Centre for Aviation, http://centreforaviation.com/profiles/countries/ transportation-logistics/publications/security-transport-systems.jhtml “Transport &Logistics2030:Securingthesupplychain”,PwC,http://www.pwc.com/gx/en/ worsen-fuel-shortages-1.1358884 http://www.cbc.ca/news/business/egypt-s-political-crisis-will-put-5b-bailout-on-hold- “Egypt’s politicalcrisiswillput$5Bbailoutonhold,worsenfuelshortages”,CBC News, industry-economic-decline-due-political-unrest.htm Travelers Today, http://www.travelerstoday.com/articles/7221/20130827/egypt-tourism- Karen Fredrickson, “Egypt:Tourism IndustryInEconomic DeclineDuetoPoliticalUnrest”, http://www.brookings.edu/research/opinions/2013/05/01-egypt-economy-transition-ghanem Hafez Ghanem,“CanEgypt’s Transition andEconomyBeSaved?”Brookings Institution, MonetaryFund,http://www.imf.org/external/np/sec/pr/2012/pr12446.htmInternational “IMF ReachesStaff-Level Agreement withEgyptonaUS$4.8BillionStand-ByArrangement”, deter-egypts-foreign-investors/#.UjBee-waJMs BRICS Post,http://thebricspost.com/political-instability-economic-woes-will-continue-to- Amira Salah-Ahmed,“Foreign capitalbecomesrefugee from crisis-afflicted Egypt”,The Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Ghana

Ghana is making strides to establish itself as an Among world’s important gateway to the West African market. Key fastest growing supporting factors are its abundant natural resources, countries economic liberalism and track record of political stability. With annual GDP growth averaging 10.3% between 2010 and 2012, and forecast to average 5.9% between 2012 and 2017, Ghana is among the Burkina Faso world’s fastest-growing countries and a rising star in Africa.

Ghana’s investor attractiveness is buoyed by its political stability Tamala Benin (one of Africa’s most stable Yendi governments), economic liberalism, abundant natural resources and diverse economy. Foreign direct Togo investment inflows have flourished in recent years, especially since the commercialisation of oil began in 2007, which is a further factor Côte d’Ivoire contributing to Ghana’s investor Kumasi attractiveness.

To Lagos On the downside, critical limiting Nsawam factors are the rising tax burden, Lagos-Abidjan Highway AccraTema weak rule of law, as well as the country’s growing fiscal deficit. Port of Tema To Abidjan Kotoka Int. Airport We believe that Ghana will continue Takoradi to foster its reputation and position Port of Takoradi Gulf of Guinea to be known as a safe gateway to West Africa and an ideal point of arrival for newcomers to Africa.

These bubbles represent the cities of Ghana and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 43 Ghana Africa gearingup 44 Africa licensing andimport quotas, tariffs eliminated orreduced import its of ECOWAS. Ithasprogressively members the with tariffs external has focused onharmonising policy,open trade Government the to commitment ofits an As part (AEC). EconomicCommunity Africa StatesAfrican (ECOWAS) and ofWestEconomic Community the blocs,including trading Ghana isamemberofseveral Nigeria. inWestpartner behind Africa, second-largestAfrica’s trading Ghanaisnow countries. South both in and economictransformations political ofthe inlight and expanded since 1994, asrelations improved steadilyexample, has strengthened andGhana,for Africa South Bilateral between trade important. very isalso trade Intra-African diversify relationships. trade its longer itshouldlookto term the negatively impact Ghanaandin The ongoing could Eurozone crisis UKandFrancNetherlands, e. economies:the European by led developed are partners oil, andcocoa.Themaintrading productsexchange are gold, earning respectively. foreign Theprincipal and50%ofGDP foraccounting 44% andimports exports with growth, economic ofGhana’s portion Trade represents asignificant anddebt Growing opportunities presents uncertain danger. uncertain presents deficit Ghana’s highfiscal but favourfactors growth, Trade andeconomic i European are partners Main trading perday by200 000 barrels 2019. production estimated to to rise to becomeanet oilexporter, with resources,natural Ghana enabling scopeof 2007 hasbroadened the commercialisation ofoilsince and bauxite. Additionally, the of gold, salt,manganese diamonds, forestsland, deposits andsubstantial resources,natural arable including Ghana isendowed anumberof with protect domestic industries. to useofhightariffs outthe ruled TheGovernmentdecades. hasalso requirements over last two the experience another fiscal blowout. fiscal another experience proportionately,back Ghanacould own standards. isnot Ifspending cut even country’s was enormous by the slippage extent last year ofthe the are not uncommoninGhana,but Fiscal slippages years inelection . processes businessplanning term longer- into burden debt their public ofarising risk the factor of GDPin2012. Businessesshould to widened 12% which deficit, fiscal growing A key inGhanaisthe risk 19.8% total population. ofthe per day, presently constitutes only consumption levels ofUS$4-20 percapita with population, class retail sector.the middle- Still, the in demand to rising GDP andthus increase percapita inGhana’s is expected to to lead atangible 2017. robust and Thisismore than of5.9%betweengrowth 2012 and The IMFpredicts annualGDP commercially viable. notproduction ofoil,butiscurrently Gas isproduced asby-product inthe planning inlong-term debt public factor rising Business should ii

agencies. government and departments involvesprocess that numerous setting upacompany isalengthy issue.For isanother tape examples, Red report. inthis survey countries least 10 ofall and amongthe region, inthe countries other than from less corruption Ghana suffers oflaw.weakness rule inthe Still, dueto persists overallcorruption are poorlyrights protected and Property There obstacles. are other packages). be quite costly ofseverance (interms easy toworkers, hire andfire itcan laws make itrelatively country’s the market efficiency. But even though hasquiteand italso good labour context African developed inthe bankingsectorGhana’s iswell and interests. for protectingAfrica investors’ rights Projects rates highly insub-Saharan World DoingBusiness Bank/IFC’s framework, the regulatory which attractiveness, legal asdoesits and improvesliberty investment Ghana’s macroeconomic Civil policies. business environment and better by havingthis restrictive aless itmakes upfor countries, African as favourable assomeother quite profile a demographic Ghanamightnot haveAlthough Business environment environment. favourable business Ghana hasaquite Plans to more than double power capacity in Nearly 54% of population has 4 years secondary education

Political stability, but Energy crisis Education and human security issues development Ghana’s most pressing challenge Ghana has been a stable democracy lies in the power sector, where the since 1992 and is considered a lack of reliable power is a major Ghana has the advantage regional model for political and constraint to economic growth. of comparatively high economic reform. After 20 years Due to rising demand and problems levels of education and and two changes of government, with the reliability of hydroelectric human development. democracy is very deeply rooted in supply, the country is increasingly Ghana and the prospect of a return reliant on expensive oil-based generation. The Government Ghana’s population is small in to military rule seems implausible. absolute terms, but its population Political stability adds tremendous has plans to address the energy supply gap by increasing its power density is much greater than in most value to Ghana’s business other sub-Saharan countries. The environment. generation capacity to 5 000MW, from a current level of 2 000MW, World Bank’s World Development within the next four years. Indicators suggest the population is However, despite its political growing fast at an estimated 2.0% stability and fairly favourable per year. business environment, security The Government intends to remains an issue. Violent crime has diversify the power sector away from its overwhelming reliance The growing workforce is grown in frequency over the past well-educated by sub-Saharan years and armed robberies have on hydroelectric power towards thermal fuel sources by converting standards and nearly 54% of occurred in expatriate residential the population has at least areas. existing thermal power plants to be more fuel efficient as well as secondary education. Government initiating renewable power projects. expenditure on education – 8.2% Piracy in the Gulf of Guinea provides of GDP – is higher than in Kenya or a further threat, especially as vessels South Africa. This has facilitated have been attacked while waiting a fast-rising labour productivity at to be served at Ghana’s congested iii 7.9% per year between 2009 and ports. 2011. Still, the country offers a large, low-cost labour pool. The majority of Key indicators Ghanaians – an estimated 60% – still work in the agriculture sector. Population size (million, 2012) 25.4 Ghana’s human development Population growth (2012-2020, avg p.a.) 2.0% indicators have improved notably GDP (US$ billion, 2012) 40.4 over the past few years, having achieved a medium level of human GDP growth forecast 2012-2017 (avg, y/y rate) 5.9% development according to the GDP per capita (US$, 2012) 1 622 UNDP’s Human Development Report.iv Global competitiveness index 2012 (global rank/144 103 (3.79) (score 1-7)) Agriculture Corp. Income Tax (CIT) rate 25%

Top exports Cocoa beans, whole or broken, raw or roasted Agriculture remains (46.4%), Cocoa paste, an important sector in not defatted (7.2%), Ghana’s fairly diversified Manganese ores and concentrates (5.7%) economy.

Logistics Performance Index 2012 (global rank/155 108 (2.51) Being blessed with a diverse natural (score 1-5)) resource base, Ghana’s economy Global Competitiveness Index 2012 - Infrastructure 110 (2.87) is quite diversified and there are a (global rank/144 (score 1-7)) number of sectors that contribute

PwC 45 Ghana Africa gearingup 46 Africa relatively compared advanced to baseis industrial Ghana’s exports. 12%contributed country’s to the had ashare ofjust 7%ofGDPand in 2011 (49%),manufacturing largest to contributor GDP Ghana’s were already the services While sectors. development to ofthese the economy importance greater adds andservices-based industry- Ghanaintotransforming an focusThe Government’s on Ghana. makes sector mininganimportant in bauxitediamonds, andmanganese asindustrial such minerals of other to Inaddition presence gold, the century. Empire Ashanti 18thof the inthe days to dates the back country asagold-rich Ghana’s reputation and earner top export Gold isthe manufacturing Mining and large indigenous forests. and land arable advantage of the industry,strong takes forestry which hasa also d’Ivoire. Thecountry worldthe neighbour, its after Cote second-largestthe cocoagrower in is . Thecountry exchange foreign of earners principal one ofits revenue generator inGhanaand mainagricultural Cocoa isthe potential. agricultural most the with Africa sub-Saharan in countries Ghana isoneofthe for 21.1% total area land ofthe and accounts land Ghanaians. Arable employment of half than for more sector inGhanaand providesvital However, a isstill agriculture transition. inthis importance gas are playing arole ofgrowing based.Oiland andservices industry based economy towards is onethat from anagriculture- transformation undergoingGhana iscurrently a GDP.meaningfully country’s to the v for more than more for accounts Agriculture employment ½ of Côte d’Ivoire, where difficulties with Côte with d’Ivoire, where difficulties most its competitivethan neighbour, region sub-Saharan andbetterin the It isnow slightly better average than since 2007. (103rd), ithasimproved consistently isnot exceptionalformalities) simplicity of andpredictability proceduresclearance (speed, customs ofGhana’s efficiency the Although andtracing. tracking and timeliness in infrastructure, weaknessesImportant remain logistics quality andcompetence. and shipments in international was by driven which good rankings previous assessment, since the overall improvement ofnineplaces 2012. Index Performance Thisisan Logistics 155 onthe countries Ghana israted 108th outof : WorldSource Bank Logistics and real estate. andstorage, transport trade, include sectors services mostits important and countries many African other Timeliness Logistics Performance Index Performance Logistics and tracing Tracking those of its regional peers. regional ofits those better are than procedures andcustoms performance Ghana’s logistics Logistics qualityandcompetence Ghana Customs 0 1 2 3 4 5 Top performer(SouthAfrica) earner istopGold export Infrastructure International shipments during Ghana’s 2012 Ghana’s during election growing sentiment anti-China major player region, despite inthe to continue and Chinawill bea developed by Chinesecompanies investment and isbeingfunded transport ofthe much In addition, needs. infrastructure country’s the to receipts address andthus fiscal from increased its infrastructure for funding public additional raise to Ghanaisinaposition reserves, commercialisation oil ofits Following successful the constraint to growth. presents amajorinfrastructure Likebenchmark. electricity, this indicators with inline infrastructure its on upgrading needto Ghanawill focusthreshold, middle-income the approaches Butasit inAfrica. countries low-incomecompared other with when platform infrastructure Ghana hasanadvanced Transport shippers. international customs remain ahuge problem for spatial distribution ofeconomic distribution spatial the networks generally reflects ofinfrastructure distribution the regions. However, different its and helpsto integrate territory covers entire national backbone the infrastructure Ghana’s countries, Unlike inmany African other hopeful. is situation infrastructure Ghana’s Overall, ofinfrastructure. delivery and financing sectorprivate inthe the with looking to partnerships Increasingly, Government isalso the middle-income country.middle-income ofa needs to meet the toneeds beupgraded Transport infrastructure threat a presents of Guinea inGulf Piracy vi . “Ghana is making major advancements and is an attractive investment destination, benefitting from a strong rule of law and stable political environment combined with a strong economic outlook in both the broader economy and the oil and gas sector in particular. It is particularly attractive for English-speaking companies – language barriers need to be accounted for when operating in Africa.”

Marco Raffinetti, Divisional Chief Executive – Capital Projects, Grindrod Freight Services activity, with a greater density of remain exposed to the potential flights. Despite Ghana continuing to transport, power, and information of pirate attacks, are constant face significant safety and security and communications technology evidence of the capacity gap in issues in air transport, domestic and (ICT) infrastructure in the south and maritime facilities. What’s more, international passenger numbers southwest of the country than in the cumbersome procedures in the have grown massively in the past north. clearance of goods have led shippers few years. to call for the simplification of Ports clearance procedures of goods at With growing incomes and more the country’s ports and borders to and more foreign companies prevent delays. establishing themselves in Ghana, Ghana plans to make its the prospects for the air transport ports a maritime hub for The Government is already trying industry are good. And, just like in West Africa. to address these problems with the ports sector, West Africa lacks a expansion plans for the Tema and clear air transportation hub. Accra Takoradi harbours, but freight is still behind rivals Lagos, Dakar, Ghana has made significant progress volumes will continue to rise too, and Abidjan and requires significant in modernising its ports sector and suggesting that congestion problems investment to make it the regional is committed to making further will not go away. leader. improvements. Still, ports in Ghana are struggling to keep up with the At present West Africa lacks a clear Rail demands of the expanding economy. maritime hub. Abidjan had begun to play that role, but with the political Domestic maritime trade is served crisis in Cote d’Ivoire, major shipping by two ports: Tema, around 25km Rail freight and passenger lines diverted their West African volumes are negligible. east of Accra, the capital; and operations to Malaga (Spain) or Takoradi, 230km to the west. The Tangiers (Morocco). two ports handle more than 90% of Ghana’s railways network is insignificant and appears to be foreign-trade volume. While Cote d’Ivoire has better port largely neglected. It currently infrastructure at present, Ghana’s handles less than 2% of freight and While Takoradi is serving the rapidly political stability, better economic passenger traffic. Rail infrastructure developing offshore gas and oil policies and strong economic growth is concentrated in the south and fields, Tema in particular is also give it strong potential to become was designed to transport export increasingly serving as an outlet for the regional gateway. Ghana’s landlocked neighbours, commodities. The network forms Burkina Faso, Niger and Mali. This a triangle that links Accra-Kumasi- trend has intensified since shippers Air transport Takoradi, and currently only the began to shift over from the Port of Western line (Kumasi-Takoradi) is Abidjan in 2011, following post- partially operational. electoral violence in neighbouring Low volumes in the air Cote d’Ivoire, further adding to transport sector offer vast The railway also connects the the total throughput at Ghanaian future potential. major mining areas to the sea facilities. ports. In recent years, the Ghana Ghana’s air transport market is small Railway Company (GRC) has been The ports at Tema and Takoradi in absolute terms and average in increasingly unable to carry the are considered fairly well equipped the African context. The country full volume of mining traffic and a to service local production and has eight airports, including one growing share of minerals is being international traders. However, international airport (Kotoka) diverted to the road network. This sharp increases in demand over in Accra. A number of major is severely limiting development of recent years have led to congestion international airlines fly there the mining sector in the Western and capacity constraints, which have regularly. region and it will clearly not be able become serious impediments to to support the development of the further development. The bulk of the country’s air emerging oil and gas industry. transport market is international The long lines of vessels outside and fairly evenly divided between There are big plans to upgrade the entrances to the ports, which intra-African and intercontinental and expand the railway network.

PwC 47 Ghana Africa gearingup 48 Africa country. south-west region ofthe oil-rich the investing road network inthe near roads aswell existing upgrading as Projects repaving include and highest levelsof the inWest Africa. average 1.5% ofGDPonroads, one The Government on isspending centres. main problem inthe particular Urban congestion remains a networkrural inadequate. appears physicalgood, the extension ofthe road quality isremarkablyrural connectivity.as isrural Although country,of the are still problematic, north particularlyconditions, inthe But somechallenges remain. Road country.middle-income levels expected the ofa nearing among low-income and peers are well foundthey aheadofthose are strong. Byalmost measures, all indicators roadGhana’s transport According to aWorld Bank report, freight. country’s and 98%ofthe 95% ofpassengers Roads carry requires greatest consideration. the sector that in Ghanaandisthe meansofmovingimportant freight most isby the Road far transport Roads hasmaterialised. significant nothing andagain,time butsofar Government hastouted plans such from Tamale to Yendi. However, the Burkina Faso(on the border) and Kumasi to through Pagarunning of arailway Nsawam, connecting construction One project seethe will ofnew railwayconstruction lines. toto the standard-gauge tracks, These range upgrades from track economic growth. qualityroad to isessential so roads, happening onthe is transport Inland of GDPonroads 1.5% onaveragespending is Government transportation and logistics sector as shown in the graphic below. andlogistics sector asshown graphic transportation inthe Based onouranalysis,investment we’ve assessedthe potential for Ghana’s Conclusion border. country’s each at Niger, couldbehindered by customs barriers corridor alongthe buttrade Burkina asMali, region Faso such inthe used by countries landlocked and are highway expanded that isto provide seaports road to link avital the Lagos-Abidjan highway, the and expand in2014. starting for Theplan the In acollaborative project, sixWest have neighbours to African agreed invest Ghana –Investment potential assessment Key: Transport infrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes vi v iv iii ii. i. china-in-ghanas-2012-electioneering-discourse.html Ghana, 8November2012,online:http://www.modernghana.com/news/428517/50/Modern the-history-of-the-asante-kingdom-the-hard-facts.html Ghana, 15November2003,online:http://www.modernghana.com/news/112983/1/Modern undp.org/en/media/HDR_2013_EN_complete.pdf “Human DevelopmentReport2013”, United NationsDevelopmentProgramme, http://hdr. Guinea“, DVZ Michael Hollmann,No.56,12July2013:“GemeinsamgegendiePiratenim Golf von double-by-2021-with-new-fields.html Bloomberg, http://www.bloomberg.com/news/2013-04-24/ghana-oil-output-to-more-than- Ekow Dontoh,“GhanaOilOutputtoMore ThanDoubleby2021WithNewFields”, for%20the%20SMME%20sector%20Dr%20Brendan%20Vic.pdf thedti.gov.za/sme_development/sumit/The%20BRICS%20Formation%20Benefits%20 “South Africa’s Trade StrategyandtheBRICS”,DepartmentofTrade &Industry, http://www. Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Kenya

Kenya’s long-term growth prospects appear to be solid. Preferred entry Key supporting factors will be its increasingly broad- point to East Africa based economy, youthful population and strategic location in the East African Community (EAC).

Many companies looking to expand South Sudan Ethiopia To Juba into East Africa are looking at Kenya

To Addis Ababa as their preferred entry point. One of the country’s biggest strengths is the relatively stable political environment at present.

Somalia While ethnically-based political rivalries and security concerns Uganda LAPSSET Corridor exist, Kenya is still one of the easier

Lagos-Mombasa-Highway African countries in which to do Eldoret LAPSSET Corridor business.

The Government has big plans. Kisumu Kenya’s ‘Vision 2030’ provides a blueprint for future development Jomo Kenyatta Nairobi Int. Airport and there have already been some initial successes with institutional Lamu and business reforms to improve the Tanzania Port of Lamu business environment. Malindi We believe that Kenya will Port of Malindi Mombasa consolidate its position as a regional Dongo-Kundu bypass Port of Mombasa leader and begin to play a larger and more influential role in the EAC.

These bubbles represent the cities of Kenya and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 49 Kenya Africa gearingup 50 Africa quantities ofoilin6-7years commercial beginproducing will 2012. Kenya TheIMFbelieves that commercial inMarch oildeposits change following of discovery the set to looks ofoil,butthat imports Kenya reliant on iscurrently rapidly overchanging recent years. andhaveand regional rules been combinenational tariffs import notably China.Thecountry’s countries, other with economic pacts Kenya of signedavariety hasalso neighbours. to African its exports ofits half EU, Kenyathe with around sending (COMESA) with now that outstrips Africa for andSouthern Eastern Trade CommonMarket the with future by strong regional growth. Thismay inthe beoffset exports. had anegative impact onKenya’s a sluggishEuropean economy has so EUcountries, UKand other the have traditionallypartners been budget biggest Its trading deficits. Kenya haslarge currently and trade deficit despiteforecast, Strong growth to US$1365by 2015. rise GDPwill percapita means that positive outlook growth 2022, the expected to remain above 2%until is growth population Although gives many reasons for optimism. 2012, Kenya’s profile demographic low, US$967in just reaching GDPiscurrently percapita While in2008and2009. growth 2002 and2012, largely dueto weak averagedwhich 4.2%between inrecent years, performance growth improvement economic onthe 2017. Thisrepresents asignificant average 6.2%between 2012 and isprojectedReal to GDPgrowth in 6-7years oil commercial produce Kenya will i . Competitiveness 2013. Report World EconomicForum’s Africa rated aheadofitinthe Africa only South with continent, innovative onthe countries Kenya most one ofthe isalso marketcapital funding. and debt through growth support markets for businesseslookingto easeinaccessingcapital greater Thisfacilitates Africa. and Central developed most inEast as the sector israted Kenya’s financial ones. receive sametreatment aslocal the allowlaws that foreign investors to regulationslabour andinvestment Ithas its regionalflexible peers. than conducive businessenvironment Kenya presents arelatively more climate and investment Favourable labour of28.1%. tax profit a andincludes businesses is44.4% regime. Thetotal rate tax payable by Kenya hasafairly also restrictive tax and taxes contracts Corruption, Somalia. from Kenya’smost part proximity to regions,coastal resulting for the in andpiracy activity of terrorist problem insomeareas andsigns a crime violent is anissue,with is regarded asbeinglow, security in Kenya risk political the Although 41% than more rise to expected Per capita GDP ii by 2015 by

iii

byof capacity 2030. energy,geothermal aimingfor 5GW largestone ofthe generators of The goal isto Kenya establish as generation of280MW. capacity power total installed with plants, onnewbillion geothermal Kenya to plans spend US$1.4 issetThis situation to change, as ofdrought. periods during generation, power less isavailable Kenya relies heavily onhydroelectric since environment. Furthermore, business wider constraint to the rates are amajor electrification in aglobal comparison. Inadequate to ability getbusinesses’ electricity poorly itranks on peers, African its aboveperforms average compared to power Kenya While infrastructure. KenyaOne major facing isits risk solutions Power and problems also fairlyalso low. human development indicators are quitecurrently low andKenya’s productivityis aslabour though, still room forThere’s improvement region. inthe countries well-educated compared to other Kenya’s workforce isrelatively means vocational which skills, and andboosteducation technical todrive provide free secondary 24. TheGovernment hasanongoing under population two-thirds ofthe Kenya ayoung isalso country, with increase. isonthe but urbanisation lives currently population incities, annum. Only around aquarter ofthe growingmillion, ataround 2.6%per Kenya hasalarge of43.2 population dividend Demographic plants poweron geothermal US$1.4bn toPlans spend iv

Most developed Large population of financial sector in East and Central 43.2 m with 2 Africa /3 under 24

Agriculture Logistics performance

Agriculture is very important to Once they develop traction in Kenya, Logistics Performance Index Kenya’s economy, especially in firms have ample opportunity terms of ensuring food security for expansion to the rest of the Customs and employment. All of Kenya’s top East African Community, which 5 merchandise exports are agricultural includes Uganda, Tanzania, Rwanda 4 3 commodities and the sector provides and Burundi. In addition, fragile Timeliness Infrastructure jobs for around 75% of the country’s recent conflict countries in which 2 1 labour force. consumer demand is rapidly rising 0 and consumer goods are in short Kenya is the largest tea producer supply like South Sudan and Tracking and International in Africa and is also Africa’s largest Somalia are easily accessible due to tracing shipments exporter of flowers, but overall strong historical trade links. Kenya’s export base is fairly narrow. Logistics quality and competence Logistics service providers have Kenya’s retail market comprises a Kenya Top performer (South Africa) focused heavily on serving the mixture of modern retail outlets that agricultural sector so far, but with supply consumer goods from major drought an ever-present threat, international firms and informal Source: World Bank there is significant risk involved. traders or family-run concerns that sell more basic goods. Kenya’s logistics performance has deteriorated in recent years. Retail The country’s Vision 2030 includes From an overall global ranking plans to improve the efficiency of the of 76th in 2007, it is now 122nd For logistics companies, retail market and once the formal out of 155 countries on the prospects in the retail and retail expands, there should be Logistics Performance Index. Although international shipments, manufacturing sectors are significant opportunities for logistics service providers. infrastructure and logistics the most critical. competence have improved marginally since 2007, customs, The outlook for the retail sector Manufacturing track & trace and timeliness have is strong and Kenya is starting to all declined significantly over the be seen as an ideal point of entry The World Bank has identified period. for launching retail outlets and significant opportunity for growth in consumer goods distribution into light manufacturing in sub-Saharan While the time to import goods, as East and Central Africa. Africa, but contends that feasible, well as the number of documents low-cost, focused policy initiatives necessary, are comparable to the Kenya has a growing local market aimed at enhancing private average in sub-Saharan Africa, the with a wealthier consumer base investment will be needed to enable cost to import is significantly higher. from which to launch into other the region to realise its potential. These values are all considerably regional markets. Only about 16.8% Kenya currently has a small higher than OECD benchmarks, as of the population currently falls into manufacturing industry dominated are similar indicators for exporting. the middle class, but that should by food and consumer goods grow strongly. processing. The Government’s trade Low logistics efficiency is a key strategy now looks to encourage concern and business risk for The dynamism in the consumer greater exports of processed goods, companies importing to or exporting market has also sparked strong so there’s potential for growth. Still, from Kenya as well as the logistics growth among local producers, inadequate power and transport service providers involved. increasing competition. Local infrastructure and poor trade supermarket chain Nakumatt’s logistics are major obstacles to Transport ‘blue label’ packaged food line and growth in the sector. Interconsumer Products’ popular Despite having made significant feminine hygiene and diaper lines, progress in infrastructure for example, are rapidly gaining development in recent years, market share. Kenya’s transport infrastructure is

PwC 51 Kenya Africa gearingup 52 Africa years to come. inthe railways, andports transport, regional hubforan important air still limited, butKenya couldbe are countries neighbouring with market. Road connections andrail competitivenessits global inthe attempts country to increase the water as andsanitation, airports, to roads, railways, seaports, improvements significant include Kenya’s development plans percentage points. three by moreannual growth than couldboost income countries region’s level middle- to ofthe the Kenya’s up Bringing infrastructure Egypt orNigeria. economies,likemiddle-income below levels found the inAfrica’s remain butthey inAfrica, countries compared to low-income other indicators may lookrelatively good infrastructure Thecountry’s needs. inadequate to country’s meet the Key indicators Key (global rank/144,(score 1-7)) Global CompetitivenessIndex 2012 -Infrastructure (score 1-5)) Logistics PerformanceIndex2012 (globalrank/155, Top exports Corp. IncomeTax (CIT)rate rank/144, (score 1-7)) Global competitivenessindex2012(global GDP percapita(US$,2012) GDP growth forecast 2012-2017(avg,y/yrate) GDP (US$billion,2012) Population growth (2012-2020,avgp.a.) Population size(million,2012) US$53m of Mombasa to beinvested inPort v

currently major atMombasa, currently ports to Kenya’s There are future growth. keys outasoneofthe stand Ports Ports fragmented infrastructure coverage.fragmented infrastructure by populated andcharacterised country, by contrast, issparsely ofthe half route. Thenorthern –havebackbones followed this andfibre-optic transmission major andits powerroad artery principal country’s the – including Kenya’s backbones infrastructure and into Uganda. to Nairobi onto Kisumu andthen Mombasa linking corridor along the country, ofthe half southern in the areactivity heavily concentrated Kenya’s andagricultural population problem. but congestion isamajor asaport, importance in Mombasa isgrowing 103 (3.09) 122 (2.43) decaffeinated (6.1%) Coffee, notroasted, not flowers fresh (13.1%), tea (18.6%),Cut other partlyfermented Black tea(fermented)and 30.0% 106 (3.75) 967 6.2% 40.7 2.6% 43.2 1.2m add will facility New Mombasa’s capacity TEUsto has suggested and technical specific . TMEA over 2012-2016 period the ofMombasa Port inthe million (TMEA)is investing US$53 Africa Kenya-based Trademark East better at59th. competitor Tanzania’s ismuch rank while Index, Logistics Performance 2012 ofthe category shipments international inthe countries Kenya outof155 isranked 88th (20) andDurban(15). hour, behindDaresSalaam isfar productivity, at10 per containers However,Africa. crane container its andsouthern in eastern ports other relativelyfares well compared with Mombasa ofperformance, In terms 7.1%. compared to a global average of grow by anannualaverage of11.6% steadily seentotal cargo volumes lastMombasa has decade, Over the services. marketAfrican andglobal shipping be amajor between link East the particularly given potential its to constraint inKenya,infrastructure major the port the Bank considers TheWorld situation. tofactors this road feeder systems are contributory and rail congested andinsufficient Delays incargo aswell clearance as constraintsandcongestion.capacity serious But Mombasaisfacing shipment centre for East Africa. trans- anatural isalso The port region. East Africa centres for the key Mombasa isoneofthe trading Together DaresSalaam, with tonnage handled. andcontainers of Durbaninterms after Africa second-largest insub-Saharan port year, each handled Mombasaisthe tonsTEUs and3.7million ofcargo almost 800000 as Uganda. With such countries in neighbouring Kenyan hinterland, markets butalso not only the serving main port, the Mombasais Lamu andMalindi. East African rail corridor requires

US$2.1bn investment grant support, including a port- and Ethiopia could all be shipped Railways wide productivity improvement through the new facility. In April study, upgrading rail links and space 2013, Kenya awarded a construction rationalisation within existing port contract for the first three berths to Railways are strategically land, along with improving port a Chinese firm, but questions about important, but major access, yard facilities and stacking financing for the overall project investments are needed. areas at berths. remain. Environmentalists have also raised concern about the impact on Kenya’s rail corridor, linking the A new berth next to the old marine life. Port of Mombasa to Nairobi and container terminal is making it continuing onward into Uganda, possible for larger ships to dock. Aviation is of strategic importance to the Work is also being undertaken on region. It is a key conduit for a new container terminal. Once Kenya is well served from an airport bulk freight, easing pressure and the final phase has been completed and airline perspective and is a providing additional capacity along (by 2019), the new facility will regional leader in air transportation. the northern corridor. But the have added 1.2 million TEUs to According to 2007 figures, Kenya corridor is still poorly developed, Mombasa’s capacity. has 225 airports, with 15 of these and there is an urgent need to having paved runways. There are improve the rail-port interface at A new access road and a railway link four runways longer than 3 000m. Mombasa. will also be constructed to connect the container terminal and existing Jomo Kenyatta International Airport Improving rail infrastructure is port network to the proposed in Nairobi is a major international also critical to increasing trade Dongo-Kundu bypass and the gateway in sub-Saharan Africa. A throughout the East Africa Region Mombasa-Nairobi Highway. major fire caused extensive damage and the EAC estimates the to the airport terminal in August corridor requires US$2.1 billion in Port mega project 2013, but the Kenya Airports investment. Authority (KAA) announced normal service would resume by the However, Kenya’s national rail Multi-modal mega project beginning of 2014. carrier, Kenya Railways Corporation is planned in Lamu, but (KRC), is reportedly insolvent, and questions remain. The domestic air transport sector although it registered a profit of in Kenya is thriving, and is the US$13.2 million in 2012, it could be Kenya is also looking to develop a fourth-largest in sub-Saharan Africa extremely difficult for the company new mega port project in the north according to the World Bank. to lead the planned revival of the of the country at Lamu. According railway sector.vii to BMI the new facility will include Kenya Airways is among the top a 10-berth container terminal, three three international carriers in Africa In 2012, KRC signed a landmark bulk cargo terminals and an oil and one of the most respected. Its US$2.6 billion contract with a terminal. The site will also be home extensive network across Africa Chinese construction company to to a new international airport. In and safety record is on par with build a new standard-gauge railway total, price estimates for the multi- international standards. The airline running from Mombasa to Nairobi to modal project range from US$16 bn is one of the few African flag carriers Malabi. to 26 bn.vi to have been successfully privatised. Currently the Rift Valley Railways The port will serve as the maritime Much of the company’s success Consortium (RVR), a group led entry point to the Lamu Port- is attributable to an innovative by South African companies, runs Southern Sudan-Ethiopia Transport public-private partnership with a much of the rail system in Kenya (LAPSSET) Corridor, which will key investor, KLM. KLM only has a and Uganda under a 25-year include rail, road, oil pipeline and minority stake in the company, but is concession contract. RVR runs trains fibre-optic cable connections with fully responsible for its management. on old narrow-gauge track that South Sudan and Ethiopia. Kenya Airways currently flies to 59 won’t be compatible with the new destinations worldwide, 47 of which standard-gauge line. While RVR has Aid for Somalia and transit cargo are in Africa, and carries over three been upgrading – in June 2013 it for northern Uganda, South Sudan million passengers per annum. announced it had completed repairs to 73km of track between Mombasa

PwC 53 Kenya Africa gearingup 54 Africa maintenance great andhas made system for road funding Kenya asound has established Corridor. LAPSSET the of part Juba,isanintegral capital Sudanese South the of Eldoret with Kenyan north-west town the linking development corridor. Theroad, US$1.08the Juba-Eldoret billion to donors finance international several with consultative talks have Sudan and South started The Governments ofKenya (ODA)Assistance loan. Development by aJapaneseOfficial are being financed some ofwhich growinghandle freight traffic, atMombasatoconnections help There are to plans improve road GDP.national 30%of foraccounts more than Nairobisince the Metropolitan Area developmentThis isanimportant . area the throughout connections improving transport greatly to 2-3hours 30-45minutes,from town andNairobi hasdropped to taken The time traverse Thika economic engine,isagood example. ofKenya’s heart very located atthe new Nairobi-Thika superhighway, Investments are The beingmade. markets.city to deliver food directlyfarmers to and urbanareas, soitishard for roadsrural decent connecting lacks Kenya roads, but hasenoughtrunk and few roads have beentarred. ofmostcondition roads isonly fair well-developed road network, the Kenyaand while hasareasonably onroads falls currently transport burden offreight Most ofthe Roads encourage more competition. RVR’s andwants to performance with isdissatisfied country the hasalready noted that secretary and Nairobi –Kenya’s new transport 3 tofrom time reduced traverse Nairobi-ThikaNew superhighway hours tohours 30 minutes transportation and logistics sector as shown in the graphic below. andlogistics sector asshown graphic transportation inthe Based onouranalysis,investment we’ve assessedthe potential for Kenya’s Conclusion condition maintainable networkto trunk beaddressed before the canbeconsidered to beina to improve needs andamajor remains, which backlog rehabilitation quality investment of public the positiveDespite strides, these still needs sector. requirements. Associated revenues are beingfully also captured by the US$0.12 road maintenance perlitre) adequate country’s to fundthe fuellevy isset atalevel andthe good (around criteria design practice the road fundmeets most of Thecountry’s institutionalreforms. with strides Kenya –Investment potential assessment Key: Transport infrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes vii vi v iv iii ii i co.ke/news/article-386/kenya-railways-now-back-profitability James Waithaka, “Kenya Railwaysnowbacktoprofitability”, theStar, http://www.the-star. http://www.reuters.com/article/2013/04/11/kenya-port-lamu-idUSL5N0CX38D20130411 Jorgic, Drazen,“Kenyasays ChinesefirmwinsfirsttenderforLamuport project,” Reuters, handle/10986/3361/WPS5596.txt?sequence=2 Continental Perspective.”World Bank,https://openknowledge.worldbank.org/bitstream/ “Briceño-Garmendia, CeciliaandShkaratan, Maria,“Kenya’s Infrastructure: A Power, http://ltwp.co.ke/press-room/news-overview “AfDB FacilitatesEnergy DiversificationandAccesstoCleanEnergy.” Lake Turkana Wind docs/WEF_Africa_Competitiveness_Report_2013.pdf World EconomicForum,“AfricaCompetitivenessReport2013”.http://www3.weforum.org/ PwC, “PayingTaxes 2013:,http://www.pwc.com/gx/en/paying-taxes/index.jhtml d7snd0/-/index.html businessdailyafrica.com/Kenya-to-start-oil-production-in-six-years/-/539552/1766782/-/ “Kenya tostartoilproduction insixyears,saysIMF.” BusinessDailyAfrica,http://www. Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Mozambique

Mozambique has massive potential underpinned by its vast natural resources, but it will take some time until Large reserves the benefits spread through the whole economy. Key of natural gas hurdles are the challenge to diversify the economy, the discovered in 2012 need to upgrade infrastructure to meet rising demand Mozambique ranks 185th out of 187 and a lack of investment in human capital. on the UNDP’s Human Development Index and is one of the most aid- dependent economies in the world. Tanzania Palma Port Unity Bridge Its economy is highly dependent Pemba on natural resources – mainly coal, Pemba Int. ores and other minerals – and this Airport Malawi Nacala Railroad is not expected to change over the Great East Road Nacala Zambia medium term, particularly since Port of Nacala large reserves of natural gas were Tete mining hot Great East Road spot discovered in the Rovuma Basin in Tete Nacala Railway Corridor Bridge across Zambezi 2012. Cahora Bassa (extension project Vale)

Dam Harare Tete–NacalaMacuse Railways Rail Beira Railroad (CFM Centro) Sena Line Zambezi River Promising coal and Zimbabwe Macuse Port gas reserves

Beira This find, in addition to massive coal reserves in the Tete Province, not Port of Beira only demonstrate Mozambique’s potential, but also points to the Botswana Indian intense pressure on the already Ocean shambolic transportation infrastructure, with massive

South Africa investments in infrastructure needed to catch up with sharp North-South National Road (A1) Maputo Int. increases in coal production. Airport Rising coal production will lead to Maputo growing transport volumes from the Port of Maputo hinterland to the coastal ports and Maputo Development CorridorSwaziland Technobanine port project To Gauteng Maputo Railroad (CFM Sul) (Deepwater Port) increased earnings from exports.

These bubbles represent the cities of Mozambique and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 55 Mozambique Africa gearingup 56 Africa (22.7%). Africa and South mostly directed to Europe (26.4%) are exports value. Thecountry’s product bysecond-largest export country’s are the Coal exports beingaluminium. value ofexports narrow, ofthe half more than with baseremains export Mozambique’s low base High growth, process. Mozambique islikely to beaslow operators in and logistics service for transportation vast opportunities realisation ofthe the recognise that prevailing we circumstances, the investment imperative. Given world,in the sector makingprivate country third-poorest asthe ranks Mozambique Nations that reports United the isneeded, infrastructure massiveWhile investment in goods increase. intransit intensifyThis will asvolumes of channels. transport country’s the to continue will neighbours congest ofgoods to landlocked its flow the pointfor andexit entry as anatural geographicallocation Mozambique’s and Zimbabwe have already been Malawi with Bilateral agreements were which initiated in2008. tariffs, ofSADCconsolidation free trade a after importance to gain further isexpectedIntra-regional trade countries. neighbouring the with deepwater ports coastal the linking logistics corridors (SADC), with DevelopmentAfrican Community Southern of goods inthe transit Mozambique isresponsible for 70% commissioned by 2018. gas (LNG) to liquefaction trains be tonnes-per-annum natural liquefied two five-million- first the with term, medium product inthe main export gas couldemerge asMozambique’s in2013.US$ 3.6 billion Natural 14.4%increase by afurther to are projected toEurope, exports in ongoing economiccrisis the 1/ Mozambique in 2012was in and gas discovered 3 ofglobal oil i Despite since 2010 1.1% (reaching in2012). overall ithasbeendeclining erratic, hasbeen inflation consumer price While shortcomings. infrastructure state attemptsas the to address is projected to increase by 10% Meanwhile, government spending in2012.just US$634 percapita low avery baseof coming off at 7.4% between 2012 and2017, Per GDPisforecast capita to grow economy.the couldhavewhich amajor on effect are expected to decrease, Aid flows revenue ofthe base. diversification challenge isthe economic structural most pressing medium-term Thecountry’s Africa. sub-Saharan smallest economiesin one ofthe Mozambiquespite remains ofthis, annually between 2012 and2017. In and isprojected to bearound 8% 7.3% between 2010 and2012 averagedReal GDPgrowth around Nigeria. and second-largest after inAfrica gas natural globallyof liquefied exporter fourth-largest become the MozambiqueOECD expects will discovered was inMozambique. globaloilandgas ofall one third has beenphenomenal.In2012, looking for gas natural offshore The successrate ofcompanies being recorded in2011. resourcesnatural rent ofabout7% isextremelyextraction high,with resourcenatural discoveries and Economic potential from arising and government revenues. increase incoalproduction in2012 – by was supported an –which growth foreign investment, economic boost toa substantial exports, gascoal andnatural shouldprovide of massiveMozambique’s reserves value. based onaproduct’s oforigin signed to rules enforce the It takes compliant to becometax 8-hour days 29

compliant. nine 8-hourdays, to becometax ortwenty- 230hours, it takes estimatesDoing BusinessProject country.the TheWorld Bank’s cost in ofoperating heightens the bureaucracy Mozambican tax created by the of inefficiency However,growth. level the to businessdevelopment and regime isnotThe tax too restrictive 2018. to beginin fordeadline gas exports a with platforms, first build the not yet receivedgo-ahead to the as for example oilcompanies have to doingbusiness, beabarrier also andgovernmenttape can decisions considered to beaproblem. Red is by officials and bribe-seeking is perceived to bewidespread framework. corruption Corruption governance its with andanti- Mozambique challenges faces also sector. informal into the enterprises These have many driven and people • • • • • including: number offactors, Mozambique are undercut by a Trade andinvestment in policies improvement Vast potential for improvement. massive potential for offers and businessenvironment The weak institutional Weak oflaw. rule and permitted, ownershipPrivate isnot ofland rights; Minimal enforcement ofproperty policies; tax Arbitrary economy; Government interference inthe ii Formal employment accounts for only a US$12bn 1/ of total employment of power projects are in the 3 pipeline

Having successfully completed the on the United Nations Human in the agricultural sector, but the transition from one-party state to Development Index. impact on transport volumes is not democracy in 1994, Mozambique expected to be significant. is considered a low political risk Low life expectancy of 50 years country and the security issues are and high stagnant poverty levels, Trade facilitation not as significant here as in other with 54.7% of the population living African countries, though given below the national poverty line, logistics and customs pervasive poverty, social pressures are the focus of the Mozambican will remain for the long term. Government’s Action Plan for Trade facilitation logistics Reducing Poverty 2011-2014 However, a new problem emerged (PARP). The plan aims to reduce and customs procedures early in 2013 when Renamo, a levels of food poverty to 42% by are a serious obstacle to former rebel group and opposition 2014.iii logistics efficiency. party, threatened to sabotage the only railway access to the coalfields. Power generation and Mozambique ranked 136th out of It is understood that this is the result 155 countries in the World Bank’s of the group’s bitter dispute with the exports 2010 Logistics Performance Index ruling Frelimo party and heightened (LPI), a decline from 110th out of political tensions ahead of general Most of Mozambique’s electricity 150 countries in 2007. elections in 2014. capacity is exported to South Africa with less than a quarter of Logistics Performance Index Mozambicans being connected Low human to the local grid. Electricidade de development level Moçambique (EdM), the national Customs 5 electricity provider, expects affects skill level of 4 electricity demand in the country to 3 Timeliness Infrastructure available workforce grow by around 15-20% per annum 2 1 over the next few years on the back 0 Mozambique has a reasonably small of a boom in the coal and natural population of just over 25 million gas industries. At the same time the people. The population growth rate Tracking International energy sector is expected to continue and tracing shipments is high at 2.5% and the estimated its expansion of nearly 10% a year, 300 000 new entrants into the which will lead to a gap in supply. Logistics quality and competence labour market every year are a reasonable number. To address this gap, power Mozambique (2010 figures) Top performer (South Africa) projects worth US$12 billion are The formal economy accounts for in the pipeline. Source: World Bank only a third of total employment. Agriculture and small This poor showing is largely due As a result, many of the new to problems with customs. The entrants into the labour market business development efficiency of Mozambique’s customs are forced into marginal jobs in the clearance procedures (i.e. speed, informal economy, both in rural and One objective defined in the simplicity and predictability of urban areas. One possible reason PARP programme is to focus on formalities) rated below average for this is that Mozambique’s labour increased agricultural production as customs clearance is a slow, iv regulations are restrictive and as a and fishery. However, this could complicated and uncertain process. consequence the cost of laying off an be limited to some extent by the employee is high even if the non- scarcity of arable land, which makes In the same study, Mozambique also salary cost of employing a worker is up only 7.2% of the country’s total ranked poorly in ‘trade facilitation’ low. land area. logistics. It takes on average 23-28 days to export or import goods, While there are vast numbers of The Government also hopes to making Mozambique a costly place workers available, their skill levels create jobs and boost agricultural to either sell or manufacture goods. are low as Mozambique still ranks production by facilitating and among the bottom 2% of countries developing micro, small and The country was excluded in the medium-sized enterprises. Thus most recent survey in 2012 due to an there should be some improvement PwC 57 Mozambique Africa gearingup 58 Africa Unmet demand by road. than other are, however,clusters’ not connected Zimbabwe. Thesetwo ‘transport Swaziland and Africa, of South part Maputo north-eastern to the of network Port the transport links over The southern term. medium the developmentinfrastructure projects hubfor to continue will bethe this inMaputopopulation meansthat ofurban The concentration marginally to Malawi andZambia. to ofBeira Port Zimbabwe, and extends from the infrastructure transport Thecentral ports. exit to countries and neighbouring clusters inMozambique agricultural west-east, miningand connecting being developed transversally, Transport ismostly infrastructure be inevitable. uneven build-outwill infrastructure primarily,industry an andtherefore resource natural the to serve projects are beingdevelopedthese However, itshouldbenoted that to allow for exports. greater capacities port andexpanding ports to increasedincluding links rail , pipeline inthe are billion US$17 Transport worth projects war ended. twocivil its disarray after decades remain in andlinks infrastructure Overall, transport Mozambique’s operations and infrastructure Transport reliability concerns. data other numberofresponses or insufficient pipeline. inthe are projects of transport met. not will demand be properly upgrades, considerable and performance Despite good port US$17bn v

. border African Techobanine, South closeto the at anew deepwater port construct to isplanned project US$7-billion anew atMacuse.Inaddition, port anew basinwith Moatize rich coal- the link will line 525-km rail –a toproject coalexports boost development railway andport inviting for bids aUS$2billion MozambicanGovernment the with agenda, areNew onthe also ports investments ports. existing inits considerable ofMozambique’s part This issueisbeingaddressed as toability accommodate more traffic. constraining its access, significantly sea hasrestricted ofBeira The Port high. isvery Mozambican ports productivity, dwell container in time have also ports above-average crane these While ports. African Southern comparetimes well other with andNacala’sBeira, truck-processing indicators, Maputo, performance strongly inrecent of years. Interms hasrisen demand asport capacity ports’ useofits increased the Mozambique hassignificantly ofcoal. export for the render itinefficient that limitations physicalproducts. faces Beira ofcoalandheavy-bulk export the of cargo. Nacala iswell suited for kinds hubfor various primary the and busiest port Maputo isthe as someadequate road linkages. network rail viathe countries aswell hinterland andneighbouring linkages rail functioning to the have ofthese All important. andNacalaBeira most are the Maputo,Mozambique, ofwhich There are in seven mainseaports demand. projects to meetinfrastructure that development of andthe demand between lag time increase in the isstill asignificant systems, there port ofMozambique’s modernisation inthe Despite progress important LNG sector. of the Pemba insupport of for planned Palmanew north port vi There a isalso hinterland adequate to linkage with Main ports 7 standards. safety andcompliance with airport Maputo atthe troubles, performance financial carrier’s flag national the (AirCorridor), carrier a private competition following of exit the in challenges, adecline including major still faces air industry However,airports. Mozambique’s international smaller as someofthe aswell Maputo Airport International the Mozambique through service Numerous airlines international to becompleted in2013. isdue ofNacala airport expansion and rehabilitation million US$114 Inaddition, million. a total investment of US$ 420 forplanned Pemba andTete with hubsare airport Additional Airport. International andextension to Maputoan upgrade underway,are currently including projects limited. Anumber ofairport are country the within Flights asmininghubs. destinations, such oreconomic tourist either service airports Airport, International In general, from aside Maputo standards. remaining relatively low by global quality the recent years, with have seenlimited investment in last few inthe years, airports growth airtravelAlthough hasshown strong needs. country’s seem to adequately the serve donot andairtransport Airports Air transport The Nacala (CFMNorte) railroad network: rail in Mozambique’s majorThere are three corridors Rail projects. anumberofrail funding are mining companies Private Coal production More than US$500m exceeds rail capacity planned spend on airports.

“There is a Tete railway connects the Nacala Development This requires balancing the line, but everyone has to Corridor and links to the Central demands of maintaining the existing buy their own rolling stock East African Railway (CEAR) of infrastructure while also completing Malawi. the Moatize-Nacala corridor. and the line’s capacity is a constraint.” Beira railroad (CFM Centro) In addition, railway lines in is the oldest railway system in Mozambique are still operating Vernon Harvey, consultant on Mozambique. It connects the city of below capacity because there is a African operations Beira with Harare in Zimbabwe, and shortage of locomotives and wagons also connects Beira to the coalfields to run on them. of Moatize. It also has the potential Despite being further away than to link to the railway of Malawi as The quantity of coal that Beira – with the railway line having well as to Zambia via the Sena line. Mozambique can currently to go through the south of Malawi produce exceeds its rail capacity. and then north to Nacala – the The third corridor, Maputo railroad This explains private sector interest Nacala transport option is seen as (CFM Sul), links Maputo to the in several rail projects, particularly a better long-run solution for coal northeastern part of South Africa. since transporting coal by road miners in the Tete region than the It also connects with Zimbabwe is prohibitively expensive and Sena/Beira line. and Swaziland through railway inefficient. branches. The refurbishment of the Sena As the narrow highway between the railway line has repeatedly The railway system is functional mines in Tete province and Beira been delayed. Although mining and has been attracting private is congested with trucks, Brazilian companies have been able to use interest in recent years. The main mining group Vale – a leading the line to transport coal, the trains challenges in the rail sector are mining investor in Mozambique – is cannot run at full speed and capacity meeting the increasing demand due spending a total of US$4.5 billion is limited. to growing trade with neighbouring developing the 912km Nacala countries and a significant increase railway corridor. There are several other projects in domestic coal production. being proposed by the private sector such as Eurasian Natural Resources Corporation’s (ENRC) plans for the construction of a second new railway linking Tete province to the Key indicators Port of Nacala. Such potential infrastructure Population size (million, 2012) 25.2 development plans are positive Population growth (2012-2020, avg p.a.) 2.5% and will ensure that Mozambique’s exports will increase substantially GDP (US$ billion, 2012) 14.2 over the medium to long term. GDP growth forecast 2012-2017 (avg, y/y rate) 8.0%

GDP per capita (US$, 2012) 634 Road network

Global competitiveness index 2012 (global rank/144 138 (3.17) (score 1-7)) Roads regionally connect

Corp. Income Tax (CIT) rate 32.0% Mozambique to its neighbours, just as rail does. Top exports Aluminium unwrought, not alloyed (48.0%); Electrical energy (7.5%); Mozambique has one of the Natural gas, liquefied least developed road transport (5.0%) infrastructures in the Southern Logistics Performance Index 2010 (global rank/155 136 (2.29) African region. With the exception (score 1-5)) of major arteries, overall road conditions in Mozambique Global Competitiveness Index 2012 – Infrastructure 129 (2.36) (global rank/144 (score 1-7))

PwC 59 Mozambique Africa gearingup 60 Africa Nacala Developmentof the Corridor, Great East Road, ofthe part upgrade Large-scale road projectsan include west-east corridors. betweenconnection several the limited) no(oronly very virtually National is Road, there north-south exception recently finalised ofthe other. to each the corridors With connectparallel linkages that are the economic clusters isquite limited, as betweenConnectivity urbanand and Zimbabwe. Swaziland Africa, access to South Gauteng province andprovides Africa’s South Maputoconnects with The Maputo Development Corridor hinterland countries. to andlink coalexports serve (Maputo, andNacala) Beira that mainlogistics corridors three the have developedcorridors around railway toSimilar the network, road integration Regional maintenance andrepair. now are overloading of andalack road network the facing right The predominant problems isrelatively good.corridors, transport of roads alongthese settlement, as well quality asthe between ofhuman concentrations Today,in place. connectivity the generation road fundhasbeenset andasecond- and rehabilitation some improvement ininvestment The road network has,however, seen rate. highgrowth country’s the requires to expansion keep pacewith Theroad networkcountries. also to move goods to neighbouring assets region port its andutilising indevelopingbottleneck inthe trade Road are conditions asignificant underdeveloped. network ismostly unpaved and are generally road poor–the success story Corridor, African agreat The Maputo Development below. andlogistics sector asshown graphic transportation Mozambique’s inthe Based onouranalysis,investment we’ve assessedthe potential for Conclusion alleviate longtailbacks. perpetually will new structure andthe Bridgeoneatatime, Machel Samora existing for completion by September 2014. Until now, have hadto cross the trucks ZambeziRiver inTete ofasecondbridgeacross the Construction was due makingto region. development it’s inthe contribution important Mozambique andTanzania was openedin2010 andisrecognised for the Unity Ruvuma River the Bridgeacross the between north, far In the provinces. Zambiato andeastern central linking northern Mozambique’s Mozambique –Investment potential assessment Key: Transport infrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes vi v iv iii ii http://www.doingbusiness.org/~/media/giawb/doing%20business/documents/profiles/ i FurtherInformation,online:http://www.macauhub.com.mo/en/2010/07/19/9448/ World Bank,2012,TheLogisticsPerformance IndexandItsIndicators,p.35 Seeabove. IMF, June2011,Republic ofMozambique:PovertyReductionStrategyPaper, p.4 country/MOZ.pdf With TheWorld” http://trade-info.cec.eu.int/europa/index_en.php European UnionDirectorate-General forTrade, “Mozambique:EUBilateralTrade andTrade Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Nigeria

Nigeria is rapidly advancing and scale of real 2nd growth stands second only to government plans. largest economy & leading oil Key supporting factors will be the huge, young and producer urbanised population, large oil and gas reserves and an A lot of companies expanding into increasingly diversified economy. West Africa see Nigeria as a gateway to the region, even before Ghana. While Ghana’s main advantage is Niger Chad a stable democracy and thus a safe entry point for total newcomers to the African continent, Nigeria offers by far the largest market in the region, being home to nearly 170 million of the 250 million people living in West Africa. Nigeria is also Benin Africa’s second-largest economy and its leading oil producer.i Trans-Saharan Highway

Trans-Saharan Highway

Abuja “Although trading in Africa has its challenges, Abuja Int. Airport

Niger River the opportunity exists to Lagos free trade zone future port invest in its future with Cameroon Lekki Port particular emphasis on

Lagos Lagos Airport infrastructure and utilities

Lagos-Mombasa Highway such as electricity, water Tin Can Port of Island Port Apapa and telecommunications. Besides the need to upgrade Port Harcourt Ibaka Port Delta Port(s) roads and ports there is an

Gulf of Guinea Niger Delta Onne Port absence of refrigerated space Oil and gas free zone area to accommodate agricultural and perishable product.”

– Photios Tzellios, Supply Chain Director, Shoprite

These bubbles represent the cities of Nigeria and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 61 Nigeria ongoing global economiccrisis. credit downratings asaresult ofthe haveof which recently suffered top-20 economies,some current weak projections for many growth as somemightassumegiven the are plans notSuch asunrealistic by 2020. world’samong the top 20economies 20:2020Nigeriaaimsto Vision its be governmentambitious With plans. basisfor the form These factors Africa gearingup 62 Africa providers. logistics service wellThis augurs and for transport development have increased. also for imports infrastructure capital appetite for while consumerimports, byis beingdriven anincreasing (13.9%).strong growth import This are exceeded byNigerian exports Economy andtrade but to Africa as a whole. asawhole. but to Africa not only asagateway to West Africa, potentialhas the to itself establish providers. Nigeria logistics service and potential for transportation generate will inturn, strong this, investorsinternational andthat to destinationfor bealeading we continue Nigeriawill believe that challenges, Notwithstanding these Government. byactions the restrictive and, insomeinstances, country ofthe north mainly inthe arising violence increasing sectarian ofinadequate form infrastructure, targetambitious remain inthe to obstacles the Nevertheless, prospects. prospects. growth has tremendous sectortrade it ensure and prosperous indicators economic robust Nigeria’s top 20economiesby to oneofthe world’s it 20:2020 aimsfor vision Nigeria’s 2020 ii

GDP isquite moderate compared to to Per term. medium capita short non-oilsector bydriven over the the to continue will be GDP growth 20:2020.Real Vision Government’s wouldwhich helpspeedupthe economies over 2011-15 the period, world’sone ofthe fastest-growing NigeriatoThe IMFexpects be massive resource. toin place take advantage ofthis presently haslimited infrastructure butit inAfrica, gas reserves largest hasthe Nigeria also natural common. onforeign workersattacks are andviolent andpipelines oil fields oilsector where sabotagein the on However, are elevated businessrisks Libya. second-largest after the oilreserves andhas inAfrica oilexporter leading Itisthe oilprice. international the oilproduction levels and crude is highly ondomestic dependent Nigeria For earnings trade external impediments to trade. remain severe bureaucracy andgraft measures remain and inplace However, several protectionist TariffCommon External system. ECOWAS the with five-band replacing 19-band its regime tariff relaxed by restrictions trade Government system, the tariff Tocommunities. simplify Nigeria’s (ECOWAS) andseveral trade other ofWestCommunity States African Economic Nigeria isamemberofthe . growing is Africa ChinaandSouth with buttrade location, geographic its dueto America isNorth partner majorpositive. Nigeria’s trading remains accountposition current the In spite growth, import ofrapid geographic location geographic to due is North America partner Major trading hiring flexibility. hiring undercut productivityand labour minimumwageincreases inthe have investment. Incontrast, further system being initiated to attract tax to amendments the with made are being also reforms Structural andbusiness regulation.allocation to improve inresource efficiency management, finance in public particularly reforms, important show Nigeriahas undertaken that Policy andInstitutionalAssessment” Development 2011 Bank’s “Country African The results ofthe country.the of law isgenerally weak throughout rule interferencepolitical andthe system judicial issusceptiblethe to as The legal system isinefficient, protection ispoor. achallenge,investoris also while process. property Registering private consuming andcumbersome anew businessisatime- Starting challenging. Nigeria remains very businessenvironmentStill, in the mismanagement. and to eliminate corruption inorderprocess ofreform Government isinacontinuous development inNigeria,the been aconstraint onbusiness hashistorically corruption While Business environment considered class. middle andonlyline about10% couldbe is stillbelow living poverty the population most ofthe distribution, However, dueto unequal income about 6.8%between 2012 and2017. it isexpected to grow steadily at peers; African sub-Saharan Nigeria’s economic growth. a major impediment to issuesare and security The businessenvironment Security and Arable land is operational risk in oil sector is 40%, creating significant major agricultural opportunity

Security and operational risk Top of Nigeria’s list of infrastructure Labour in the oil sector is particularly shortcomings is the poor significant. Foreign workers in the performance of the energy Niger Delta region, in particular, sector: According to BMI, 54% of Nigeria has a large are subject to frequent kidnappings manufacturers cited unreliable workforce, but workers are by the network of militias and power as the most binding constraint mostly unskilled. bandits long active in the region. to efficient production.iii Furthermore, the International Nigeria is Africa’s most populous Maritime Bureau has classified the Ageing transmission facilities and nation providing entrepreneurs waters off Nigeria as one of the gas supply shortages, exacerbated with the continent’s largest labour worst pirate hotspots in the world. by gas pipeline vandalism in force. This, coupled with a high In Lagos and the capital, Abuja, the Niger Delta, are the primary rate of unemployment means that road travel, especially at night, is problems. An improvement in wages are likely to be relatively dangerous owing to inadequate security is therefore even more competitive, despite the increase in vehicle maintenance, poor driving important than investment, which is the minimum wage. conditions and the risk of armed highlighted by the fact that although robbery. the Government poured more However, Nigeria’s poor human than US$10 billion into the sector development performance means Power between 2000 and 2007, service that skilled labour is not easily actually declined over the period. available and carries a premium to it. While labour productivity in Improvements in energy Nigeria’s four refineries operate at Nigeria is comparable to its regional supply will depend a fraction of capacity, while most peers, it has improved faster than on security, not only businesses rely on generators. This them, but is still below the rate of investment. makes Nigeria one of the most economic growth. energy-intensive countries in the world. HIV/Aids poses a significant risk to Nigeria and the country has the third-highest HIV infection rate in the world, which could negatively Key indicators impact labour productivity in the long term.

Population size (million, 2012) 168.8 Agriculture as Population growth (2012-2020, avg p.a.) 2.8% alternative to oil GDP (US$ billion, 2012) 270.2 dependence GDP growth forecast 2012-2017 (avg, y/y rate) 6.8% Despite oil’s dominance, agriculture GDP per capita (US$, 2012) 1 640 takes a significant share in the Global competitiveness index 2012 (global rank/144 115 (3.67) Nigerian economy, accounting (score 1-7)) for about 42% of GDP in 2012. Corp. Income Tax (CIT) rate 30.0% Sustainable expansion of agriculture will play a major role in driving Top exports Petroleum oils and oils economic growth, reducing poverty obtained from bituminous and enhancing food security. minerals, crude (85.9%); Natural gas, liquefied (6.9%), rubber Nigeria is starting to take advantage of its agricultural potential and Logistics Performance Index 2012 (global rank/155 121 (2.45) it lists among the countries with (score 1-5)) the most commercial agricultural Global Competitiveness Index 2012 - Infrastructure 130 (2.28) opportunities in Africa – with arable (global rank/144 (score 1-7)) land making up nearly 40% of total land area. Agribusiness is seen as

PwC 63 Nigeria Africa gearingup 64 Africa Source: World Bank Logistics economy. andservices-based an industrial increasinglyNigeria will grow into economic potential suggest that vast with coupled of urbanisation, world inthe city by 2025.Highrates twelfth-largest expected to bethe isurbanised).Lagospopulation is (50%ofthe urbanisation rapid is ofconsumerindustries growth favourable factor toAnother the Nigeria. retailers are increasingly targeting and under-served retail market, potential for economicexpansion, population, sizeofthe Given the facilities. being converted into modern markets andinformal constructed country,the new being malls supermarket entering brands international with transformation sector undergoing iscurrently a for 18.8% ofGDPin2012. Theretail sector,important accounted which andretailWholesale an isalso trade Retail on oil. economy to reduce dependence its for the best opportunities one ofthe Timeliness Logistics Performance Index Performance Logistics and tracing Tracking Logistics qualityandcompetence Nigeria consumer sectors attractive urbanised makingretail & of theis population 50% Customs 0 1 2 3 4 5 Top performer(SouthAfrica) Infrastructure International shipments good international portals. Itis good portals. international past fewthe years, resulting in investmentseen considerable over have andports hand, airports other behind,too.is falling Onthe investment infrastructure andrail Roads behindin are far lagging growth. country’s impediments leading tothe the asone of and hasbeendescribed isinadequate infrastructure though nation’sterritory. Transportthe coverthat extensive areas of networks infrastructure advanced Nigeriahasrelativelypeers, Compared to many African ofits infrastructure Transport providers. logistics services and for transport costs andrisk logistics system andadd to business Nigerian effective ofthe functioning still amajor inthe stumbling block customs are procedures, which areAdding burdensome to this 2010 sincethe ground rating. 2012Index andhaslost significant Logistics Performance onthe factors Nigeria ranked poorly these onall industries. logistics andtransport weigh prospects forthat ongrowth competence risks are industry all and poorlogistics quality and capabilities andtracing tracking poor shipments, for international industry. Time delays, bottlenecks logistics inthe constrained growth has poorinfrastructure Nigeria’s well ahurdle. butremains comparatively performs Transport infrastructure constraint toconstraint trade. apersistent are procedures facilitation Logistics upgrades infrastructure accelerate will projects unfinished Completing national inreach. national are that backbones infrastructure Nigeriahasdevelopedneighbours Fortunately, unlike someofits country. ofthe north inthe activity and agricultural population ofboth concentration important Meanwhile, an is also there and larger towns are clustered. cities where country’s many ofthe density,high population is andthis by relatively ischaracterised south The south. inthe economic activity of concentration spatial the mirror networks infrastructure Nigeria’s upgrades. infrastructure accelerate would further projects Completing unfinished . plants and gas andoil factories roads, including projects, butunfinished funded, examplesis littered ofwell- with country andthe unfinished left many projects ofNigeria’s have been completion, becausehistorically, to project be managedstart from the investmentsinfrastructure have to projects. But several transport for partnerships public-private increasing useof advocating the The Government been hasalso infrastructure. resources goingshare offiscal to to neighbours increase the African better many ofits than placed petroleum revenues, Nigeriais economy. Dueto abundant its national ofthe strength given the are not substantial, daunting though challenges, infrastructure Nigeria’s by around four percentage points. could boost annualreal GDPgrowth region’s countries middle-income level ofthe infrastructure to that country’s the raising estimated that iv Port at Lekki Lagos has not estimated to cost established itself US$2bn as a regional air Project to rehabilitate & transport hub US$1.55bn construct 2 000km could be gateway to West of rail in the region Africa

Ports

operations throughout West and structure has developed around Port infrastructure has Central Africa. Johannesburg, Nairobi, and Addis seen major improvements Ababa. Additionally, air travel in recent years. Because of the absence of a deep- to and from Nigeria, as well as water port, plans have reached an within, is sometimes hampered Nigeria’s port system has advanced stage for the construction by fuel shortages that cause flight traditionally put a brake on of two deep-water ports in Lekki cancellations. economic development, due to poor near Lagos and Ibaka in Akwa Ibom performance and high costs. After River State. The port at Lekki, A number of projects are currently a comprehensive reform of the port which may become operational underway at airports across Nigeria. sector, beginning in 2000, the ports by the third quarter of 2016, at an In February 2011, the Government have undergone a major overhaul estimated cost of US$1.55 billion, approved a new international with operational management being will be part of the Lagos Free airport in the capital, Abuja, the converted to a landlord model. Trade Zone. The port is located construction of five new terminals at 65km east of Lagos Mainland and five airports, the redevelopment of Terminal concessions now attract could become the gateway to the five existing terminals and six cargo private investment on a scale West African region, which currently terminals. unprecedented for Africa. Partial lacks a clear maritime hub. privatisation has helped eliminate Rail overstaffing at the ports, cargo theft Air transport and excessive port-related charges, Nigeria’s railway network is in addition to unlocking funds for While Nigeria has a well-developed dilapidated and vastly underutilised. infrastructure improvements. air transport sector, Lagos has not Traffic volumes (both freight and established itself as a regional air passengers) have consequently Still, a number of key challenges transport hub. collapsed due to deficient remain, such as poor customs performance and erratic service, performance and corruption. There Nigeria’s aviation sector has seen despite the potentially significant is also a need to improve both enormous growth over the past demand for rail. marine and landside access to ports. few years, largely due to the rapid expansion of domestic services. The inability to transport There are a number of ports Today, Nigeria is well served commodities at reasonable cost in Nigeria, with the two most by air transport, with sufficient by means of a bulk transportation important ones located in Lagos. competition to offer competitive system could severely impact Apapa and Tin Can Island Port fares in the domestic market. the country’s ability to leverage together form Lagos Port Complex opportunities from bulk products. and serve Lagos as well as western The size of Nigeria’s air market Often, the food grown in the north Nigeria. Apapa Container Terminal is second only to South Africa in ends up rotting in the fields because is West Africa’s largest container sub-Saharan Africa. Nigeria has the cost of driving it to markets is terminal. 22 airports, four of which are more than its value. international airports. Still, Lagos Aside from the two Lagos ports there has not yet assumed its place as an The rail network is comprised of are several ports serving the oil and air transport hub for the region. eight lines with an overall length gas sector, such as Delta Port, which The primary reason for this is that of more than 3 500km. Investment is located in the petroleum and the Federal Airport Authority of projects in the sector concentrate natural gas producing Niger River Nigeria has not been reformed and on railway modernisation, line Delta region of Nigeria. has not been allowed to proceed rehabilitation and completion or with the concessioning of airport upgrading of existing rail lines. Onne Port is located about 19km terminals, which are in dire need of from the city of Port Harcourt. investment, to the private sector. In addition, Nigeria also plans to Onne Port has been designated participate in the AfricaRail project as an Oil and Gas Free Zone by By contrast, on the eastern and by upgrading lines from 1 067mm the Government of Nigeria and it southern side of the continent, gauge to 1 435mm gauge. AfricaRail serves as a hub port for oil and gas a strong hub-and-spoke is a project to rehabilitate and

PwC 65 Nigeria Africa gearingup 66 Africa Kenya. DRC,Republic, the Uganda and African Central Cameroon, the Mombasa Highway, Nigeria, links Lagos- route,cross-African the AlgeriaviaNiger.Nigeria with A The Trans-Sahara Highway connects d’Ivoire. inSenegal inCote orAbidjan Dakar roads joiningroutesas coastal to Chad, Cameroon andBenin,aswell like Niger, countries to neighbouring connections Theseinclude corridors. fair, anumberoftransnational with regionalNigeria’s are connections country.the of westerncentral, parts andeastern are generally concentrated inthe andthose to backbones, national Few areas remain unconnected future. projects are completed near inthe see animprovement oncenumerous androadconnectivity quality will country.across the National between good, andpoor fair generally quite patchy, alternating Road network are conditions countries. middle-income found inAfrica’s levels still only ofthe half although countries, African resource-rich ofother that double is more than and freight. Road network density 90% ofdomestic passengers than more roadsbridges. Nigeria’s carry networknational ofroads and Nigeria hasdeveloped anextensive Roads estimated costs ofUS$2billion. Togo andultimately Nigeria,atan d’Ivoire, Burkina Faso, Niger, Benin, railway the systemslinking ofCote 2 000kmofnew railway,construct network. transport of Nigeria’s mainstay Roads the are v transportation and logistics sector as shown in the graphic below. andlogistics sector asshown graphic transportation inthe Based onouranalysis,investment we’ve assessedthe potential for Nigeria’s Conclusion Nigeria –Investment potentialNigeria assessment Key: Transport andinfrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes v iv iii ii i AFRICARAIL, online:http://64.33.72.83/africarail.program.htm Economies ofAfrica,www.cseaafrica.org/index.php?option=com_docman&task...‎ Katz, Menachem.“TheRoleofFiscal Policy inPromoting Growth” Centre fortheStudyof businessmonitor.com/nigeria-petrochemicals-report.html “Nigeria Petrochemicals http://store. Report-2012.”BusinessMonitorInternational, Nigerias-Looking-Good-to--Join-Top-20-Economies/Page1.html Business World, 2013,online:http://businessworldng.com/web/articles/2839/1/2020- external/pubs/ft/weo/2013/01/weodata/index.aspx “World Monetary Fund,http://www.imf.org/ EconomicOutlookDatabase”,International Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected South Africa

South Africa has the largest economy in Africa and is the most developed in sub-Saharan Africa. As a member Best performer of the BRICS countries, an association of five major in Africa for trade emerging market economies, South Africa is recognised facilitation logistics as a key emerging market along with other members of the group Brazil, Russia, India and China.i Key factors supporting South Africa’s position are its well-developed financial, legal, communications and transport sectors, as well as an open trade policy and a comparatively strong domestic market. South abwe Zimb Africa is the best performer in Africa Botswana when it comes to trade facilitation Mozambique Tripoli-Windhoek-Cape Town logistics and among the best in

Cape Town-Cairo Highway terms of transport infrastructure. However, there are some obstacles, O.R. Tambo Int. Pretoria Airport including rigid labour policies that Namibia diminish growth prospects to a Gautrain eMalahleni Johannesburg mediocre level. Furthermore, South Gauteng Freeway Ermelo Improvement Project Swaziland Africa faces the triple challenge of Walvis poverty, unemployment and income Bay N3 Sishen inequality. King Shaka Richards Bay Int. Airport Port of Richards Durban To address these weaknesses Lesotho Bay cabinet has officially endorsed a

N1 Port of programme of action, the National Durban Development Plan (NDP). This plan represents the most comprehensive N2 and constructive attempt at Saldanha providing recommendations for Port of redressing structural imbalances Saldanha Cape Town Int. Airport Port of Ngqura in the economy. However, there Cape Town Port Elizabeth has been a loss of momentum with Mossel Port of Port Elizabeth Bay the implementation of the NDP Port of Cape Town due to political developments and industrial unrest.

These bubbles represent the cities of South Africa and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 67 South Africa growth in neighbouring countries. countries. inneighbouring growth economic extraordinary from the vastly to itstands continent, benefit gatewayimportant African to the top investment destination.Asan potential to asa itself establish hasthe uncertainty, Africa South notably policy business confidence, issuesundermining fundamental Provided itcanget with to grips Africa gearingup 68 Africa years. inrecent exports in manufacturing beenanincrease hasalso but there are dominated byExports minerals, 30% ofdomestic GDPrespectively. for accounting imports 29%and economic activity. and Exports component ofdomesticsignificant makingupa activity trade with hasanopeneconomy, Africa South performance Economic Community (SADC) and Southern (SADC)Community andSouthern Development African Southern isamemberofthe Africa South BRICnations. particularly the emerging economies, and with continent, region, onthe in the integration functional deepening Trade by isunderpinned policy . activity trade of rates supportive are low tariff Todayeconomic growth. relatively strong Africa’s tocontributor South earlythe 1990s hasbeenamajor since undertaken liberalisation and intermediategoods. Tariff hand,consist mainly other ofcapital onthe imports, African South Africa. impact costs ofhighlabour inSouth competition east andthe from the asaresult ofmore intense exports debate focused onrecent lossesin global economy. the with correlates growth economic Africa’s South ii There has been much There hasbeenmuch trade activity trade of supportive rates are tariff Relatively low Bushveld Complex. estimated Africa’s to beinSouth resources mineral platinum are world’s –90%ofthe platinum global ofgold, and exporter chromium world’sthe largest producer and resources. natural abundant Itis isendowed Africa South with quickly to developing opportunities. entrepreneurscanrespond that income,means at 0.3%ofpercapita abusiness,estimated cost ofstarting powerhouse. Importantly, low the asaregional economic status its are keystate institutions,which to andstrong Africa in sub-Saharan sophisticated businessenvironments most hasoneofthe Africa South Business environment and 2017. around 3%annually between 2012 isprojected to which be growth ofsuboptimal fromitself arut ofextricating incapable appears Theeconomy peers. African Saharan sub- ofits unfavourably that with comparesa tepid 3.0%,which between 2010 and2012 registered Averagemomentum. GDPgrowth growth weighed Africa’s onSouth constraintshaveStructural . to Africa exporting were firms of manufacturing 75% showed than more that which Circle, Manufacturing by the latest survey to the according manufacturers, African for South destination export isaprime ofAfrica The rest opportunities. regionalprovides trade significant Customs UnionAfrican (SACU). This economic powerhouse. asaregional status Africa’s South environment supports A fairly favourable business African countries African to export firms manufacturing 75% thanMore iv iii

of business in South Africa. business inSouth most problematic issuesfacing the frequently cited asoneof theft’ business isclear, and ‘crime with impact ofhighlevelson ofcrime country. inthe operations The costs onbusiness considerable to impose butalso individuals, notrates, only which poseathreat highcrime very with struggling haslongbeen Africa South Africans. number ofincentives for non-South regime isprogressive a andincludes tax climate isrobust, the while regulatory andfinancial The tax countries. African inmost other than isbetter situation the means that it.This to inplace fight structures There are anumberofinitiatives and not endemic. is anissue,though environment isrobust, corruption general governance the While most conducive inAfrica. climate regarded isalso asoneofthe businessregulatory The private bankingsector.resilient andstable isacknowledgedThe country for its countries. countries. to many sub-Saharan other educated incomparison andskilled force labour isfairlyAfrica’s well- an investment destination. South attractiveness as country’s to the remains obstacle aconsiderable rates poorly by global standards and system education Africa’s of South robust at70.4%.Yet,very quality the isalso education least asecondary at with population percentage ofthe is fairly highat89%,andthe Africa The literacy rate inSouth Labour significant challenges. significant high unemployment are and system, shortages skills An inadequate education at andprojected peers lagging growth Average GDP until 2017 until 3% annually The ratio of State-owned power Services and minimum wage to utility is expanding manufacturing value added is capacity that will have overtaken add 17GW by 2019 agriculture the average 3x and mining in for other BRICS contribution to GDP countries

Energy

One of the biggest obstacles to Energy and utilities infrastructure growth in the country is putting its Energy capacity has become has historically accounted for a human capital to work. The labour a government priority small portion of total infrastructure market is relatively inflexible and following the power crisis industry value. However, this has lacks a robust labour relations that began in late 2007. changed since the power crisis, framework. According to the World with energy and utilities having Economic Forum, although South After years of underfunding, South accounted for the largest portion Africa has very low non-wage labour Africa’s power sector reached a crisis since 2008. costs (such as social insurance point at the beginning of 2008. The state-owned power utility, expenditure), the country has some Power shortages and steep tariff Eskom, is busy with a capacity of the most excessively rigid hiring increases have seriously damaged expansion programme that will and firing practices, as well as South Africa’s economy, as well as its cost 337 billion Rand (about very low flexibility with regard to appeal to foreign investors.vi wage determination. The ratio of US$33 billion) and add 17GW of minimum wage to value added is Despite there being two large-scale new generating capacity to the almost three times the average for 4 800MW coal-fired power stations national grid by 2019. v other BRICS countries. currently under construction as well as a number of renewable energy Consumer market projects, energy supply remains a major risk factor in South Africa. Growth in purchasing power opens new opportunities in the consumer market.

Key indicators South Africa’s economy was originally based on agriculture and mining. But this has Population size (million, 2012) 51.2 changed over the years with Population growth (2012-2020, avg p.a.) 0.3% services and manufacturing now contributing the greatest share GDP (US$ billion, 2012) 384.3 to GDP. The country’s economy GDP growth forecast 2012-2017 (avg, y/y rate) 3.0% is reasonably diversified with key economic sectors including mining, GDP per capita (US$, 2012) 7 525 agriculture and fishery, vehicle Global competitiveness index 2012 (global rank/144 52 (4.37) manufacturing and assembly, food (score 1-7)) processing, clothing and textiles, Corp. Income Tax (CIT) rate 28.0% telecommunication, energy, financial and business services, real Top exports Platinum unwrought estate, tourism, transportation, and or in powder form wholesale and retail trade. (7.6%); Gold (incl. gold plated with platinum), in unwrought forms (excl. South Africa’s per capita GDP is high powder) (6.9%); Iron ores due to the sizeable and developed & concentrates, non- nature of its economy. Per capita agglomerated GDP (based on purchasing power Logistics Performance Index 2012 (global rank/155 23 (3.67) parity) is US$11 375, compared to (score 1-5)) the average of US$2 476 for sub- Saharan Africa. Real GDP per capita Global Competitiveness Index 2012 – Infrastructure 63 (4.13) is expected to more than double in (global rank/144 (score 1-7)) US-dollar terms over the coming 10 years, which will further increase

PwC 69 South Africa Africa gearingup 70 Africa Italy. betweennow ranks Norway and 2012, improving and by ranks five between progress made 2010 and Africa South Index. Performance 2012155 inthe countries Logistics an overall of23rd ranking outof good with very isalso performance Globally, logistics Africa’s South region. in the best andisamongst the neighbours’ considerably better its than isgenerallyof formalities) speed, simplicity andpredictability customs procedures clearance (i.e. Africa’s ofSouth The efficiency Source: World Bank Logistics a more consumption-based one. toeconomy from anexport-oriented country’s the shifting in further play will class adetermining role middle black rising Africa’s South andretail.wholesale Additionally, as sectors such forward and drive power purchasing the ofconsumers Timeliness Logistics Performance Index Performance Logistics and tracing that of its regional peers. regional ofits that outperforms performance logistics Africa’s South Tracking South Africa Logistics qualityandcompetence World Cup boost hosting 2010FIFA received substantial Physical infrastructure Customs 0 1 2 3 4 5 (Singapore) Best performerinternationally Infrastructure International shipments very longfreight corridors. very atDurban.Thishasresulted in port nearest local 500kmfrom the than 1 400mabove sealevel andmore concentrated lies inGauteng, which GDPis country’s Some 35.6%ofthe Africa. Asia, Australasia coasts of andboth Americas, to andfrom Europe, the traffic transshipment further attract could andareduction intariffs ports African A re-positioning ofSouth in comparison to global benchmarks. However, have remained high tariffs equipment. handling supporting as ship-to-shore andother cranes of investment innew assets such improved considerably asaresult has efficiency port African South major roads are ingood condition. largest andthe continent, onthe networksThe airandrail are the World Cup. 2010FIFA the associated with projects from boost a substantial received physical infrastructure most developed Its the inAfrica. andamong ismodern infrastructure markets. transport Thecountry’s competitiveness inglobal Africa’s tocontributor South sector isakeyThe transport Transport Morocco (50th). followed by Tunisia (41st) and best performer, isby the far Africa South continent, African On the intensive economy. domestic has created atransport- ofcommerce centres inland The needto move goods to infrastructure over 3years to boost US$80bn of expenditure hasbudgetedGovernment infrastructure projects. infrastructure andnew major existing both year,2013/2014 fiscal to boost years, beginninginthe three the over (about US$80 billion) billion ofR827 a budgeted expenditure National Ithas Plan. Infrastructure has adopted anaggressive new Government African South the years, fiscal and subsequent three For 2012/2013 the year fiscal partnerships. private Works andpublic- Programme, government’s Public Expanded initiatives other while the include development sectors, inother infrastructure undertake also andthey infrastructure and port provided for funding freight rail companiesParastatal have government. national Africa’s is largely provided by South for funding roads Infrastructure reliability andperformance. owners’ door-to-door for needs in anattempt to address freight fleet truck Africa’s increase inSouth to –hasled solution asignificant transport provides most efficient the usually –which solution intermodal absenceofan The continued begun to Africa. bypass South investmenthampering growth, has bottlenecks increasing infrastructure only gateway Becauseof to Africa. challenges anditisnolonger the some faces also infrastructure transport Africa’s South Despite impressive its credentials, vii

Port of Durban is 96% of Africa’s busiest – No. 1 South exports are making it a suitable African Airways, the conveyed by sea candidate for national flag carrier establishing a mega was voted best airline in port Africa for 10th year in a row Ports Air transport

significant investment in ship-to- South Africa has an excellent Africa’s busiest port, Durban, shore cranes and straddle carriers infrastructure of airports, with will be extended by the area at Durban, South Africa remains airports in all major cities. of an old airport. behind its global competitors These include the three main regarding port productivity. international gateways of OR Tambo South African ports are generally in Johannesburg with a capacity considered to be the gateway to Comparatively high tariffs payable of 21 million passengers a year, southern Africa. Approximately by vessels calling at South African Cape Town International Airport 96% of the country’s exports ports have also contributed to lower (14.5 million) and King Shaka are conveyed by sea, and its volumes and shorter port stay times. International Airport in Durban (7.5 commercial ports are the conduits Although port capacity is not the million). for trade between South Africa and biggest constraint in operations, its southern African neighbours as operational efficiencies, port Capacity is not a major issue well as hubs for traffic to and from charges, customs procedures and within the South African air Europe, Asia, the Americas and the inland linkages all serve to constrain transport system and the state east and west coasts of Africa. port performance. of infrastructure and associated services is good. In fact, over- South Africa has eight main Port infrastructure development capacity in the airport sector has commercial ports. Some focus is currently being prioritised, resulted in airlines paying higher almost exclusively on bulk although investment is also airport charges. Airports have been commodities, while others serve required to enhance performance significantly upgraded in recent one major industry only, such as the and efficiencies. Transnet – South years, mainly in preparation for the offshore oil industry in the case of Africa’s state-owned transport 2010 FIFA World Cup. Mossel Bay. Richards Bay has the company and main operator of world’s largest bulk coal terminal. ports, railway and pipelines – is South African Airways (SAA) is Durban was previously the largest focused on expanding handling the national flag-carrier which container handling facility in the capacity at the main container ports continues to hold considerable southern hemisphere (overtaken in of Durban, Cape Town and Ngqura. aviation market share in Southern recent years by Jakarta, Indonesia). Africa and has considerably With regard to long-term growth Ngqura, which opened in 2009 near expanded the number of African in container terminal capacity, Port Elizabeth in the Eastern Cape, destinations to which it now flies. Transnet is looking beyond current is the deepest container terminal in In 2012, it was voted the best investment programmes. A Africa. airline in Africa for the 10th year comprehensive container strategy in a row by UK global aviation Durban is Africa’s busiest port. is being developed, including both research organisation Skytrax. More than three out of every five port capacity and inland terminals. containers entering or leaving Expansion of the Port of Durban the country go through this port. will include the conversion of an Durban’s position in relation 800-hectare site, including the to the N3 highway and its high old Durban International Airport, throughput volumes make it into a dig-out port with a planned a suitable candidate for the handling capacity of approximately establishment of a mega port to 9.5 million TEU. The first phase attract world trade. is expected to be operational by 2019, with the project scheduled for Constraints at the Port of Durban viii have, however, resulted in some completion by 2050. importers and exporters bypassing Durban in favour of ports such as Port Elizabeth, Walvis Bay in Namibia and Maputo in Mozambique. While there has been

PwC 71 South Africa Africa gearingup 72 Africa soon dueto beretired. being 46years) and51% fleet ofthe amaximumlife span years (with average is30to 40 fleet age ofthe investment system. rail inits The ofalmost 30years ofunder-effects feeling iscurrently the Africa South andforestry.agriculture aswellindustries, aslarge-scale miningsector heavy andother of the growth ofthe historically insupport network rail Africa’s developed offreight South rail, In terms day.every about40000people transports Tambo it Airport, International Johannesburg, Pretoria andOR FIFA World Cup.Connecting 2010 ofthe days start before the wasspeed train, openedjust only high- Africa’s The Gautrain, Swaziland. Mozambique, Zimbabwe and Namibia,neighbouring Botswana, region sub-Saharan and in the networks other with – connects 14th– the longest world inthe extensive Africa’s network rail South cities. African South travel day by within every train twoand more people million than majority emerging markets ofother inthe more those developed than system rail issignificantly country’s total. The about 80%ofAfrica’s represents Africa, ofSouth rest the with ports the connects which infrastructure, rail The country’s Rail investment. by ofunder- decades sector hasbeenimpeded rail inthe Progress 80% represents infrastructure Rail of Africa’s total ofAfrica’s and improving efficiencies. and improving efficiencies. processes equipment, infrastructure, assignalling equipmentother such inrollingstockbeing made aswell as investment Significant is traffic. increase market share ofcontainer increase freight volumes rail and projects aimingto with priorities, government’s topis oneofthe network rail Improving country’s the offerings. competingthan road freight atlowerand reliable service cost increased to deliver apredictable offreight are rail efficiencies operational ifthe road transport a cost-effective alternative to only will become industry rail are major African issues.TheSouth outages asaresult theft) ofcable power outages power (including and security failures, signalling constraints. Rolling stock failures, institutional andtechnical majorexperiencing operational, Bay. Thenetwork isalready to coalline Richards the including especially onkeyserious, corridors, becomemore will limitations ten next years, systemIn the network. already major onthe limitations attention. There are, however, still require and performance improved, freight densities although hasconsiderably infrastructure investment sector rail and inthe There hasbeensignificant on the road networkon the road 89% . oftransport mode onthis relies freight country’s about 89%ofthe and country longest ofany African network road Africa’s isthe South Road freight traffic. for passenger both and transport a major from road to rail shift prioritise will plan initiatives, the Amongst needs. other transport long-term to Africa’s meet South system transportation multimodal development2050 to of a the guide National Transport Master Plan initiated aproject to develop the Governmentsystem, in2007the transport existing inthe imbalances constraintsand Recognising the ten years. in maintenance over to five next the huge for backlogs the eliminating remain inadequateinfrastructure roads, resources allocated to roads Despite increased for funding maintenance andrehabilitation. There isamassive inroad backlog 20-year life. design original its is estimated to than beolder road networkAfrica’s 78% isthat The major challenge for South deteriorated over significantly time. paved provincial road network has the condition, are insatisfactory andmetropolitancondition, roads network isingood to excellent national toll roads.90%ofthe While 19%About roads national are ofthe with rising demand. rising with toincreasingly unable cope networkin the becoming hasresulted roads maintain to failure Long-term of freight relies relies offreight x ix

Conclusion

Based on our analysis, we’ve assessed the investment potential for South Africa’s transportation and logistics sector as shown in the graphic below.

South Africa – Investment potential assessment

1. Demographics and resources

2. Economics

3. Business environment

4. Trade and logistics

5. Transport and infrastructure

Key: Attractive Strong improvement expected Average Some improvement expected Unattractive Stagnation/marginal change expected

End notes

i South African Government Information, http://www.info.gov.za/events/2013/brics_ background.html

ii “Imports and exports”, South African Reserve Bank, http://www2.resbank.co.za/internet/ Glossary.nsf/0/0e423e39f84af20042256b43002da8ac?OpenDocument

iii “Manufacturing Bulletin”, Manufacturing Circle, http://www.manufacturingcircle.co.za/ docs/80885-bulletin-8th-edition-2013.pdf

iv “Estimated Western World Gold Production (1887-2002)”, Chamber of Mines of South Africa, http://www.bullion.org.za/content/?pid=79&pagename=Historical+Summary

v African Economic Outlook, South Africa 2012, http://www.africaneconomicoutlook.org/ fileadmin/uploads/aeo/PDF/South%20Africa%20Full%20PDF%20Country%20Note.pdf

vi Thomas Hartleb, “Expect tight energy supply for four years”, Mail & Guardian, http://mg.co. za/article/2008-02-11-expect-tight-energy-supply-for-four-years

vii “Summary of SA National Infrastructure Plan”, Department of Economic Development, http:// www.economic.gov.za/communications/presidential-infrastructure-coordinating-commission

viii Lisa Steyn, “Pressure on to build new Durban port”, Mail & Guardian, http://mg.co.za/ article/2013-07-05-00-pressure-on-to-build-new-durban-port

ix CSIR: “The fifth annual State of Logistics Survey for South Africa 2008”, http://www.csir. co.za/sol/docs/SOL_2008.pdf

x “National Transport Master Plan plots the path to 2050”, Engineering News, http:// www.engineeringnews.co.za/article/national-transport-master-plan-plots-the-path- to-2050-2008-09-12

PwC 73 Tanzania

Tanzania is expected to become one of the fastest- A rapidly growing economy growing economies in the world. Key drivers will be but still small in recent natural gas discoveries, regional integration, absolute terms reforms to ease of doing business and a long-term stable democracy. Tanzania is already one of sub- Saharan Africa’s most rapidly growing economies, but it is still rather small in absolute terms, Uganda with a market size of about US$28 billion. Recent discoveries Lake Victoria Kenya of natural gas offshore and a broad Rwanda Musoma number of planned infrastructure Musoma Kigali Port projects promise to further boost to Mwanza Kilimanjaro the economy. However, increased Burundi development will lead to greater Musongati Moshi congestion at the Port of Dar es Salaam, which the construction of a Isaka DRC Kigoma new US$10 billion port at Bagomoyo Central Corridor Korogwe Tanga will alleviate once it begins Kigoma Tabora Cairo-Capetown Highway Mwambani Port Port expansion operating in 2017. Bagamoyo

La Port Project k e Dodoma Malindi With regard to the low level of Tanganyika Port Dar es Salaam human development and poverty, the Tanzanian Government has

TAZARA Rail Port of called for more active private sector

Dar es Salaam participation in its Second National (Rehabilitation Project) (expansion) Strategy for Growth and Reduction Mbeya Indian Kilwa of Poverty, MKUKUTA II, initiated in Ocean 2010.i There are positive signs that Zambia Lake Malawi Kilwa Port Mtwara Tanzania will stay on a favourable Mbamba Bay i expansion Port Port expansion growth path in the long run and w a l Mbamba Bay establish itself as a viable alternative a

M to Kenya as a gateway to the East Mozambique African region.

These bubbles represent the cities of Tanzania and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

74 Africa gearing up “In terms of rating it as an investment haven, I would say it has potential and I haven’t been exposed to any corruption. There are large areas that are relatively unexplored and therefore a good investment attraction.”

Dick Kruger, Deputy Head: Techno Economics, Chamber of Mines

Trading hub Despite reforms, challenges remain continues to play an important A liberalised trade regime role in the process of establishing and regional integration will a Common Market by the SADC Despite impressive reforms, foster economic growth and member states. the challenging business increase traffic volumes. environment and security Diverse natural resources provide still remain important International trade constitutes a the basis for attracting investment issues. significant proportion of GDP in and support economic growth. Tanzania, with exports and imports Tanzania is a significant producer of Tanzania’s historically state-led accounting for 31% and 50% of GDP gold and diamonds, with gold being economy is now more market-based respectively. The widening trade the most important mineral and key but remains hindered by weak deficit has been driven by a sharply growth area. Tanzanite gemstones property rights. Land in Tanzania rising oil import bill. and coal have the potential to become among the fastest-growing is officially government property and can only be leased from the Tanzania’s export base is fairly mining subsectors. Tanzania also Government for 33, 66 or 99 years, broad. The principal exports has substantial reserves of uranium depending on its use. However, include gold, coffee, cashew nuts, oxide. Exploration has also been annual land rentals are low and new manufactured goods and cotton. conducted in nickel, oil and natural legislation gives the lessee first right Major trading partners are from Asia gas. of refusal to extend a lease when it – with China and India of growing expires. importance – the Middle East and Tanzania achieved almost 7% Europe. average growth over the last decade. For the 2012-2017 period, the IMF In addition, recent reforms have been aimed at establishing a reliable Export growth remained below its projects annual economic growth to system of transferable property potential at 5.4% between 2001 vary between 6.6 and 7.2%, placing rights. Despite efforts to reform the and 2011. However, this is likely to it among the world’s fastest-growing ii business environment, the country change as the Government is actively economies over the medium term. continues to suffer from a regulatory working to increase competitiveness, At the same time per capita GDP environment that is not sufficiently while participating actively in will grow at a robust 5.7%, though responsive to the needs of investors. regional trade integration. Notable starting from a low base. Economic reforms in facilitating increasing growth is constrained by high Corruption is one of the major trade efficiency include the lifting levels of poverty and other poor obstacles facing investors in of price controls on most products socioeconomic indicators. Tanzania, even though less severe and a decrease in the number of than in neighbouring Kenya. road blocks to facilitate greater At the beginning of 2012, inflation Tanzania’s ranking in Transparency cross-border trade, although further stood at 19.8%, but thanks to International’s Corruption reduction is still required. structural and fiscal reforms on the part of the Government, the IMF Perception Index 2012, though high at 102 out of 174 countries, is Tanzania is a member of the predicted it would reach single better than that of most of its African East African Community (EAC) digits by mid-2013. This proved to peers. as well as the Southern African be correct as the Tanzania Bureau Development Community (SADC). of Statistics reported that annual Furthermore, the lack of efficiency Given its active role in these inflation stood at 9.4% in April within state institutions and the regional trade communities, the 2013 and 6.1% by September 2013. goods market as well as an overall Government’s plans for increasing This has been accompanied by lack of business sophistication trade competitiveness have a continuing decline in prices of add to the challenge of domestic sped up. Tanzania has pursued staple foods which, together with productivity growth. Access to implementation of the EAC Common low lending rates, provides a more finance is another bottleneck to the Market Protocol, which became positive environment for investment iii development of the private sector. operational in July 2010, and growth.

PwC 75 Tanzania Africa gearingup 76 Africa sixth-largestin population had the rate. It a robust growth population Tanzania hasalarge and population Unskilled workforce atnight. cross-country busses are not to permitted drive urban areas. To protect passengers, an increasing problem inlarger congestion with becoming concern Traffic safety isaleading risk. most commonsecurity isthe crime regions times, andatelection these . Outside Rwanda andBurundi to borders nearthe in regions prevalent banditry armed with isanissueinTanzania,Security challenge. workforce isamajor local The unskilled Key indicators Key (global rank/144(score 1-7)) Global CompetitivenessIndex 2012 -Infrastructure (score 1-5)) Logistics PerformanceIndex2012(globalrank/155 Top exports Corp. IncomeTax (CIT)rate (score 1-7)) Global competitivenessindex2012(globalrank/144 GDP percapita(US$,2012) GDP growth forecast 2012-2017(avg,y/yrate) GDP (US$billion,2012) Population growth (2012-2020,avgp.a.) Population size(million,2012) in agriculture employedforce of the labour 80% private investmentprivate but ineducation, growing levels ofgovernment and economy.of the Thishas spurred in new sectors andfast-growing inTanzania,operating particularly challenge for firms a significant are labour ofskilled Shortages low. areas comparatively isalso in rural andpeople amongyouth education Thelevel Africa. sub-Saharan of 2011 average was to similar the for Human Development in Index remain weak. score Its onthe Tanzania’s socioeconomicindicators sector. agriculture forceisemployedlabour inthe oflabour.surplus Up to 80%ofthe large force labour andasustained by 2050.Consequently, isa there by 2020andfourth move upto fifth in2010Africa andisexpected to 3GW to exceed isexpected supply By the endof2015,power 132 (2.27) 88 (2.65) decaffeinated (6.4%) Coffee, notroasted, not stripped (8.7%); wholly stemmed/ Tobacco, partlyor than silver(14.5%); and concentrates,other Precious metalores 30.0% 120 (3.60) 628 7.0% 28.2 3.0% 47.8 export. as well for asproviding asurplus sectors manufacturing stimulate the to meet domestic and demand increase beenough will incapacity . The comeonstream projects to exceed 3GW, power asvarious end of2015,supply isexpected by the term, short supply inthe is expected to to continue outstrip for demand electricity Although amountbyto 2015. that bedouble isexpectedmeeting which demand, about 800MWofelectricity, scarcely Tanzaniagrowth. presently produces higherlevelsattaining ofeconomic in country assist will the distribution to electricity. Improving supply and hasaccess currently of 45million population Only 20%ofthe growth. outages aconstraint to economic andfrequentshortages power past makingelectricity decade, the economy over the asawhole than grown at aslightly slower pace Tanzania’s has industry electricity Power necessary approval. necessary to get can sometimes bedifficult the it conditions, certain under granted work may for expatriates be permits additional Although expatriates. five foreign investors only to up to recruit Existing regulations labour allow a competitive advantage. large its translating into population Tanzania still hassomeway to go in iv Pre-Arrival Tourism 2nd Declaration system highest earner of will improve foreign currency customs procedures

Agriculture Economic Logistics improving diversification

Agriculture is crucial to Logistics Performance Index Tanzania’s economy and Economic diversification is Customs domestic employment. 5 driven by good development 4

3 in manufacturing and Timeliness Infrastructure Tanzania has immense agricultural mining. 2 1 potential. Only 5% of land is 0 permanently cultivated, but There have been some signs of 20% is considered cultivatable. diversification in Tanzania’s However, while most other sectors Tracking International economic output, with strong and tracing shipments are growing, agriculture faces growth in manufacturing value-add stagnation in productivity growth. over the 2005-2010 period of around Logistics quality and competence In 2011, agriculture accounted for 8.8% annually, and manufacturing 25.2% of GDP and was the largest Tanzania Top performer (South Africa) exports to the EAC and SADC contributor to employment. countries also expanding briskly over this period. Source: World Bank However, it continues to be dominated by small-scale and Most activities in the manufacturing subsistence farmers with average Logistics performance has sector are concentrated on the farm sizes between 0.9 and 3 improved significantly in manufacture of simple consumer hectares and with little capital to recent years goods for the domestic market. invest in machinery and irrigation. Because of Tanzania’s low per capita As a consequence the Government GDP, retailers must also focus on The Logistics Performance Index is supporting large-scale investment basic goods, but even this is not shows that Tanzania’s overall into the agricultural sector. easy since the inefficient and logistics ranking has shown inadequate product supply chain significant improvement over the Tourism is one of the main impediments to past few years. From an overall expansion in the retail sector. global ranking of 137th in 2007, Tourism is the second-highest it is now ranked 88th out of 155 earner of foreign currency in Thanks to the country’s wide natural countries and 9th in Africa. Tanzania and the country is resource base, mining is a sector already one of the top tourist of growing importance, though Although international shipments, destinations in Africa. With a its contribution to GDP remains infrastructure, track & trace and quarter of its land area set aside relatively small at 3.2%. The logistics competence have improved for conservation and vast natural Government aims to expand this to significantly since 2007, customs attractions, there is still much 10% by 2025. and timeliness have declined untapped potential, which will slightly since 2010. However, be able to be more effectively the performance of customs exploited once necessary tourism procedures is likely to improve in infrastructure upgrades have been the near future, since Tanzania made. has started implementing the Pre- Arrival Declaration (PAD) system, an electronic submission system for customs declarations to promote trade and to improve the business environment generally.

PwC 77 Tanzania Africa gearingup 78 Africa projects. rehabilitation railway funding iscurrently which asChina, such countries other with or viabilateral agreements Government by the be financed rest will the ofloans),while form by (inthe to donors befinanced projectsMany are expected ofthese . pipeline inthe are US$19 billion worth projects infrastructure to come.Transport and utilities ismore in recent years andthere impressivewitnessed investment inTanzaniaInfrastructure has economy’s productive capacity. and hasanegative impact onthe butquality peers, isstill poor African fairly wellperforms compared to its Overall, Tanzania’s infrastructure appropriately. customs through shipments clearing of perspective, interms butalso nottrade, only from acapacity to ability country’s the limiting isamajores Salaam bottleneck, markets. Finally, ofDar Port the andinternational ports with these marketsneighbouring andconnect to adequately domestic and serve requiresinvestmentRail significant mining interests. and development ofagricultural the couldconstrain connectivity of rural low butthe levels oftrade, purposes for the Roads are sufficient also good connections. international domestically, hasrelatively butalso well by air, served particularly major Itis oftransport. modes largelydiffers between four the Tanzania’s quality infrastructure infrastructure Transport peer countries. most better than performs Transport infrastructure inthe pipeline US$19bn infrastructure worth worth infrastructure &utilities Transport – caused by high traffic growth growth – causedby hightraffic constraints capacity significant cargo from asitsuffers handling, are delays others in costlier than port DaresSalaam What makes the . Africa insub-Saharan facilities port other is24%higherthan port Currently, ofusingthe cost the world. highest inthe among the shipping costs are atDaresSalaam European Union that (EU)reports The But quality comesataprice. cargo handling. top ingeneral amongthe and ranks productivity handling in container Africa sub-Saharan leads port the productivity.high crane Asaresult, processing and time, lowtime, truck Ithasalow dwell container ports. African andsouthern eastern other indicators compare well of to those performance Dar esSalaam’s and Uganda. DRC, RwandaZambia, the Burundi, ofMalawi, countries landlocked the liquid cargo annually. serves Italso cargo tonnes andsixmillion ofbulk 4.1handles tonnes million ofdry DaresSalaam region, for part, its largestinthe the port is currently Mombasa While hub inEast Africa. mainmaritime Mombasaasthe with hubandincompetitionmaritime isamajorDar esSalaam regional competition Port Dar es Salaam. Dar esSalaam. of Mombasa inKenya Port andthe of Port hubs:the region’s two export to linking the corridors transport two major inthe infrastructure afocus onimprovingwith rail developed, links regional transport EAC shouldseeanumberofnew entire ofthe plans The infrastructure US$400-500m atcost of be expanded to ofDaresSalaam Port flights. availability ofdirect intercontinental increased from the greatly benefit destinationwouldappeal asatourist Tanzania’s Africa. sub-Saharan market smallest in isoneofthe market,transport international its In contrast to domestic vibrant its air passengers itaccommodates. of numbers ofthe interms capacity beyondoperating design its iscurrently airport the Indeed, especially airport. atDaresSalaam toleads constraints, capacity buthighdemand Africa, Saharan marketstransportation insub- largestone ofthe domestic air Tanzaniadomestic airports. has are anumberof there addition, Kilimanjaro andZanzibar. In inDaresSalaam, airports Tanzania international hasthree Air transport Kisumu inKenya. to inUganda Bell and JinjaandPort connects hubthat is animportant situated onLake Musoma Victoria. inZanzibarandMusoma, Malindi South, Kilwa andMtwara inthe Bagamoyo, Mwambani inTanga, at ofnew ports construction the projects include port Other million. estimated to US$400-650 cost development plan authority’s port the with to beexpanded, isdue ofDaresSalaam The Port inefficiencies. constraintsandoperational capacity cannot dueto handle own its severe Mombasa that transhipments accommodates also Dar esSalaam pressure,Mombasa. Adding to the after highest inAfrica isthe ratio congestion. demand-to-capacity Its networks transport –and inland linkagesand poorbackward with Chinese Government signed One of 2 countries in sub-Saharan Africa that US$42m with allow competition in its Tanzania-Zambia Railway domestic airline sector Authority to rehabilitate regional transport network

Tanzania stands out for allowing US$2.7 billion project to develop a Nevertheless, compared to competition in its domestic air new railway line from Tanga at the benchmark groups, both paved transport market and has more Indian Ocean to Musoma on Lake and unpaved roads in Tanzania can than one provider on each of its 17 Victoria. be considered to be good. Due to routes. This is outstanding for the great progress in road sector reform region, as only one other country The Chinese Government has in recent years, Tanzania is also in sub-Saharan Africa, South signed a US$42 million agreement one of the few African countries Africa, permits competition in its with the Tanzania-Zambia that appear to be allocating domestic air transport sector. Railway Authority (Tazara) adequate resources to road network enabling Chinese companies to maintenance. Flight safety is a concern and greater rehabilitate the railway, which is investment is needed in this area. an important regional transport As mentioned earlier, road safety is network connecting Eastern Africa a major concern, which increases Rail to Asia and the Far East through operational risks and undermines the Port of Dar es Salaam. Once the viability of logistics businesses. completed, the deal will drastically There are big plans increase capacity. On a trans-African level, the Cape- for investment in rail Cairo route traverses Tanzania along infrastructure. Tanzania, together with Rwanda the main part of a central corridor and Burundi, is also developing that links Dar es Salaam to Rwanda, plans for a new railway linking the Burundi, Uganda and the DRC. This Tanzania’s rail corridors are key three countries. The 1 651-km line is is part of one of the four corridors conduits for bulk freight in the planned to link Dar es Salaam with that form Tanzania’s infrastructure region as they ease the pressure on Isaka (Tanzania), Kigali (Rwanda) backbone: roads. The rail system consists of two and Musongati (Burundi). It is main lines. The central line, which estimated the project will cost • From Dar es Salaam west to runs from Dar es Salaam to Tabora, US$ 5.1 billion. Dodoma and northwest to has two branches: one to Kigoma in Mwanza on Lake Victoria; the west along Lake Tanganyika, and Although much work is being one runs from Tabora to Mwanza considered in the rail sector, it • From Dar es Salaam west and port on Lake Victoria. should be noted that plans are southwest to Mbeya and on to ambitious and funding has yet to be Zambia; The other line runs from Ruvu secured for many of the projects. northward to Korogwe and then • From Dar es Salaam north to branches to Tanga port on the A central road the mountainous area around Indian Ocean. The other branch goes Kilimanjaro; and north-west to Moshi. It connects network forms to the Kenyan railway system at Tanzania’s • From Mwanza to Kigoma on Lake Taveta as well as to Kenyan and Tanganyika. Ugandan networks by rail ferry on infrastructure Lake Victoria. Still, not all railway backbone The rest of the country, by lines are operational and significant contrast, is sparsely populated and further investment is needed. Tanzania’s road coverage is better characterised by only fragmented than the regional average and the infrastructure coverage. The national railways of Tanzania, network of trunk roads is adequate. the DRC and Zambia signed an Although the network provides basic agreement in March 2013 to regional and national connectivity, facilitate easier movement of cargo linking the capital Dodoma to and people between these countries. the coast, roads are generally in poor condition and can become Rail projects with an estimated impassable in rains, when floods value of more than US$14 billion sometimes wash them away. are currently in various stages of development. These include a

PwC 79 Tanzania Africa gearingup 80 Africa Tanzania –Investment potential assessment Tanzania’s below. andlogistics sector asshown graphic transportation inthe Based onouranalysis,investment we’ve assessedthe potential for Conclusion Key: Transport infrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes iv iii ii i index.php/biz/19640-dar-es-salaam-eyes-export-markets-for-electricity “Dar esSalaameyesexportmarketforelectricity”,DailyNews,http://www.dailynews.co.tz/ co.tz/index.php/biz/21285-declining-inflation-a-boon-to-mortgage-business “Declining inflationaboontothemortgagebusiness”,DailyNews,http://www.dailynews. external/pubs/ft/weo/2013/01/pdf/text.pdf MonetaryFund,“WorldInternational EconomicOutlookApril2013”http://www.imf.org/ Mkukuta%20English.pdf http://www.tanzania.go.tz/nsgrf.html http://www.povertymonitoring.go.tz/Mkukuta/ United RepublicofTanzania, “NationalStrategyforGrowth andPovertyReduction(NSGPR), Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected Appendices

PwC 81 Key figures

82 Africa gearing up Commments

World Bank – World Development Bank – World World Indicators 2013 World Bank – World Development Bank – World World 2.1 Indicators, p42/ Table Calculation Human Development Index (United Nations) Human Development Index (United Nations) World Bank – World Development Bank – World World Indicators 2013 Calculation World Bank – World Development Bank – World World 2.4 Indicators, p54/ Table World Economic Forum – Global World Competitiveness Index 2012 World Bank – World Development Bank – World World Indicators 2013 World Economic Forum – Global World Competitiveness Index 2012 United Nations – Human Development Report 2013, p170 (United Nations) World Economic Forum – Global World Competitiveness Index 2012 World Bank – World Development Bank – World World Indicators 2013 Calculation Africa Development Bank – The Middle of the Pyramid: Dynamics the Middle Class in Africa, p5 Tanzania

47.8 60.4 3.0% low 152 22.8 1 239 3.2% 4.6 72.0% 4.6 7.4% 2.7 6.2% 36.6 2.9%

51.2 52.4 0.3% medium 121 18.6 20 662 3.0% 3.94 89.0% 3.9 70.4% 3.98 6.0% 450.4 19.8% South Africa Nigeria

168.8 210.2 2.8% low 153 51 5 298 5.0% 4.5 61.0% 3.2 n/a 3.31 n/a n/a 9.9% Mozambique

25.2 30.6 2.5% low 185 11.4 1 246 4.3% 3.72 57.0% 3.5 3.6% 2.39 n/a n/a 2.6% Kenya

43.2 52.9 2.6% low 145 16.1 2 528 2.6% 4.6 87.5% 4.6 41.9% 3.6 6.7% 63.1 16.8% Ghana

25.4 29.7 2.0% medium 135 10.5 3 848 7.9% 4.1 67.0% 4.7 53.8% 3.4 8.2% * 130.4 19.8% Egypt

80.7 91.1 1.5% medium 112 26.6 9 650 1.1% 3.1 72.0% 5.3 51.2% 3.3 n/a n/a 31.6% DRC

65.7 81.3 2.7% low 186 24.9 691 3.3% n/a 67.0% n/a 23.2% n/a 2.5% 6.5 4.7% Angola

20.8 26.5 3.1% low 148 7.4 15 541 0.0% 4 70.5% 2.9 * n/a 1.9 * 3.5% 193.5 13.2% Algeria

38.5 43.8 1.6% high 93 12 17 442 1.1% 2.8 72.5% 5.4 24.1% 3.4 n/a n/a 27.3% Demographics Population 2012 (in m) Population 2020 (in m) Key figures Population growth (2012-2020, Population growth avg, p.a.) Human Development Level (2012) Human Development Index (rank out of 186) Labour force 2012 (in m) Labour force Labour productivity (GDP / Labour productivity person employed 2012, US$) Labour productivity (GDP / Labour productivity person employed, % growth 2009-2011) Labour market efficiency (2012, Labour market efficiency 1-7) score Adult literacy rate (% ages 15+, 2005-11) Health and primary education 1-7) (2012, score Population with at least secondary education Higher Education and Training Higher Education and Training 1-7) (2012, score Public spending on education % of GDP (2010) Public spending on education per capita (2010) Size of (stable) middle class (2010, % of total; per capita consumption level of US$4-20 per day)

PwC 83 Key figures Africa gearingup 84 Africa

Economics Algeria Angola DRC Egypt Ghana Kenya Mozambique Nigeria South Africa Tanzania Commments

Key figures Market size 2012 (GDP US$ 209.3 115.0 17.2 256.7 40.4 40.7 14.2 270.2 384.3 28.2 IMF – World Economic Outlook billion) (Oct. 2013) Market size 2017 (forecast, GDP 230.3 156.3 27.0 373.0 63.8 70.1 22.4 398.9 438.7 43.1 IMF – World Economic Outlook US$ billion) (Oct. 2013)

GDP growth 2010-2012 (avg, 3.2% 4.2% 7.1% 3.0% 10.3% 4.9% 7.3% 7.3% 3.0% 6.8% IMF – World Economic Outlook y/y rate) (Oct. 2013) GDP growth forecast 2012-2017 3.6% 5.7% 8.6% 3.4% 5.9% 6.2% 8.0% 6.8% 3.0% 7.0% IMF – World Economic Outlook (avg, y/y rate) (Oct. 2013) GDP per capita 2012 (US$) 5 582 5 700 230 3 112 1 622 967 634 1 640 7 525 628 IMF – World Economic Outlook (Oct. 2013) GDP per capita forecast 2017 5 700 6 671 311 4 075 2 255 1 446 904 2 114 8 090 827 IMF – World Economic Outlook (US$) (Oct. 2013) GDP per capita growth rate 0.4% 3.2% 6.2% 5.5% 6.8% 8.4% 7.4% 6.3% 1.5% 5.7% Calculation 2012-2017 (avg, y/y rate)

Macro-economic environment / 5.7 4.2 n/a 3.1 4.1 3.4 4.6 5.2 4.6 4.1 World Economic Forum – Global stability (2012, score 1-7) Competitiveness Index 2012

CPI inflation (2012 average) 8.9% 10.3% 9.3%* 7.1% 9.2% 9.4% 1.1% 12.2% 5.4% 16.0% World Bank – World Development Indicators 2013 Commments Transparency International – Transparency Index Corruption Perception Development Bank – World World 5.2 Indicators, p288/ Table 2013, http:// PwC – Paying Taxes www.pwc.com/gx/en/paying-taxes/ data-tables.jhtml Economic Forum – Global World Competitiveness Index 2012 Economic Forum – Global World Competitiveness Index 2012 Economic Forum – Global World Competitiveness Index 2012 Economic Forum – Global World Competitiveness Index 2012 Economic Forum – Global World Competitiveness Index 2012 Economic Forum – Global World Competitiveness Index 2012

Tanzania 102 49.5% 45.3% 3.6 3.6 3.9 3.9 3.5 3.1

South Africa 69 15.1% 33.3% 4.37 4.4 4.7 5.7 4.3 3.5

Nigeria 139 40.9% 33.8% 3.67 3.3 4.2 4.1 4 3.1

14.8% 34.3% 3.17 3.4 3.8 3.1 3.1 2.6 123

Mozambique Kenya 79.20% 44.4% 3.75 3.4 4.1 4.7 4 3.4 139

Ghana 38.8% 33.5% 3.79 3.8 4.2 4.2 3.6 3 64

Egypt 15.2% 42.6% 3.73 3.6 3.8 3.7 3.8 2.8 118

DRC 65.7% 339.7% n/a n/a n/a n/a n/a n/a 160

Angola 48.9% 53.2% 2.96 * 2.9 * 3.2 * 2.7 * 2.4 * 2.1 * 157

Algeria 66.6% 72.0% 3.72 2.7 3 2.4 2.5 2.1 105

Business Environment Key figures Informal payments to public (2002-2012, % of firms) officials Rate as a percentage Tax Total (PwC – profits of commercial paying taxes 2013) Global Competitiveness Index 1-7) 2012 (score 1-7 ) Institutions (score (score Goods market efficiency 1-7) Financial market development 1-7) (score Business sophistication (score 1-7 ) 1-7) Innovation (score Corruption perception Corruption perception index (2012, rank out of 174 countries)

PwC 85 Key figures Africa gearingup 86 Africa Trade & Logistics Algeria Angola DRC Egypt Ghana Kenya Mozambique Nigeria South Africa Tanzania Commments

Key figures Exports of goods & services 31%* 65.0% 68.0% 21.0% 44.0% 29.0% 29.0% 40.0% 29.0% 31.0% World Bank – World Development (2011, % of GDP) Indicators 2013 Export volume growth (2001- -0.20% 10.4% 8.6% 8.7% 7.6% 3.5% 6.9% 4.7% 0.9% 5.4% World Bank – World Development 11, % avg annual growth) Indicators, p338/ Table 6.1 Imports of goods & services 22%* 43.0% 78.0% 25.0% 50.0% 45.0% 46.0% 36.0% 30.0% 50.0% World Bank – World Development (2011, % of GDP) Indicators 2013 Import volume growth (2001- 11.2% 18.0% 12.3% 12.0% 10.7% 8.9% 8.5% 13.9% 7.1% 13.0% World Bank – World Development 11, % avg annual growth) Indicators, p338/ Table 6.1

Balance of Trade (2011, % of 9.0% 22.0% -10.0% -4.0% -6.0% -16.0% -17.0% 4.0% -1.0% -19.0% Calculation GDP, Exports – Imports) Logistics Performance Index 2.41 2.28 2.21 2.98 2.51 2.43 2.29* 2.45 3.67 2.65 World Bank – Logistics (LPI 2012, score 1-5) Performance Index 2012

LPI – Customs (score 1-5) 2.26 2.33 2.1 2.6 2.33 2.08 1.95* 1.97 3.35 2.17 World Bank – Logistics Performance Index 2012 LPI – International shipments 2.68 2.26 2.23 3 2.81 2.69 2.77* 2.6 3.5 2.91 World Bank – Logistics (score 1-5) Performance Index 2012 LPI – Logistics quality and 2.13 2 2.17 2.95 2.68 2.38 2.20* 2.52 3.56 2.64 World Bank – Logistics competence (score 1-5) Performance Index 2012 LPI – Tracking and tracing 2.46 2 2.35 2.86 2.31 2.34 2.28* 2.35 3.83 2.77 World Bank – Logistics (score 1-5) Performance Index 2012 LPI – Timeliness (score 1-5) 2.85 2.59 2.38 3.39 2.76 2.88 2.40* 2.92 4.03 2.97 World Bank – Logistics Performance Index 2012 Port/airport supply chain cost 1 000 n/a 5 000 773 775 1 455 n/a 1 261 1 861 n/a World Bank – Logistics (US$) Performance Index 2012, p43 Land supply chain cost (US$) n/a n/a n/a 1 097 775 1 651 3 000 500 1 442 n/a World Bank – Logistics Performance Index 2012, p43 Commments Containerisation International 2009 Yearbook,

World Bank: Africa Infrastructure Bank: Africa Infrastructure World Country Diagnostic (AICD) table Global Competitiveness Index 2012 World Bank – Logistics World Performance Index 2012 World Bank – World Development Bank – World World Indicators 2013 Global Competitiveness Index 2012 World Bank – World Development Bank – World World Indicators 2013 World Bank: Africa Infrastructure Bank: Africa Infrastructure World Country Diagnostic (AICD) Report by country Global Competitiveness Index 2012 Global Competitiveness Index 2012 Estimation: Rail lines (km 2000- 2010)/ total land area Global Competitiveness Index 2012 World Bank: Africa Infrastructure Bank: Africa Infrastructure World Country Diagnostic (AICD) table World Bank – World Development Bank – World World Indicators 2013 World Bank – World Development Bank – World World Indicators 2013

Tanzania 334.1 Dar es Salaam 14.1% 3.1 2.41 9.6% 3.5 1 7 3.3 2.3 0.3 3.2 94.7% 14.9% 10

2 511.7 Durban n/a 4.5 3.79 1.6% 6.1 1 173 4 4.7 3.4 1.7 4.9 92.0% 20.3% 62

South Africa Nigeria 235.8 Lagos 29.9% 3.2 2.27 8.9% 4 n/a 42 3.6 1.9 0.4 2.8 67.4% 15.0% 21

80.4 Maputo 23.0% 3 2.04* 2.4% 4.1 5 22 3.4 2.2 0.4 2.3 83.0% 20.8% 4

Mozambique Kenya 585.4 Mombasa 37.0% 4 2.16 6.3% 4.8 334 5 3.8 2.5 0.5 3.9 84.0% 14.3% 11

Ghana 458.1 Tema 17.6% 3.9 2.05 5.6% 4.1 1 25 4 1.7 0.4 3.5 75.0% 12.6% 46

Egypt 1 195.6 Damietta n/a 3.8 3.07 3.2% 5 346 n/a 4 3.1 0.5 2.9 n/a 92.3% 14

DRC n/a n/a 30.0% n/a 1.96 22.7% n/a n/a 25 n/a n/a 0.2 n/a 70.0% 1.8% 7

Angola 407.6** Luanda n/a 2.1 2.48 12.6% 3.1 64 12 2.3 1.6 0.2 2.5 42.0% 10.4% 4

Algeria 100.0 Skikda n/a 3.5 2.02 4.0% 3.3 15 n/a 2.7 2 0.1 3.4 n/a 77.1% 5

Transport Infrastructure Transport Main Port capacity (TEUs in thousands handled in 2007) Main Port Perceived transport quality (% Perceived of firms identifying transport as a major business constraint) Quality of overall infrastructure Quality of overall infrastructure (2012, 1-7) LPI – Infrastructure (score 1-5) (score LPI – Infrastructure Value lost due to electrical Value outages (% of sales, 2002-12) Quality of air transport (rating 1-7 worst infrastructure to best, 2012) Air freight (2012, million ton-km) Air freight Average of port delays: Average Container dwell times (2008, avg days) Quality of port infrastructure Quality of port infrastructure (rating 1-7 worst to best, 2012) Quality of railroad infrastructure infrastructure Quality of railroad (rating 1-7 worst to best, 2012) Rail line density (2000-10, km per sq km of land area) of road Quality of roads (rating 1-7 Quality of roads worst to best, 2012) Paved road network condition Paved road (% in good/fair condition) Paved road (2000-10, % of Paved road total) Road density (2001-10, km per 100 sq km of land of road area) Key figures

PwC 87 Acknowledgements

PwC thanks Econometrix for its • Vernon Harvey, Consultant on contribution to the development African operations of this report, as well as all those who contributed data, insights and • Zhou Chuncheng, General Manager, analysis. In particular, we would like Sinotrans Angola to thank the following executives for their time and insights: We also thank those interviewees who shared their views with us, but wished • Dick Kruger, Deputy Head: their names not to be disclosed. Techno Economics, Chamber of Mines The editorial team for this publication consisted of: • Dr Dirk Baukmann, Chief Financial Officer, DHL Express PwC Transportation & Logistics Econometrix sub-Saharan Africa Klaus-Dieter Ruske Diederik Fouche Rob Jeffrey • Frank Wagner, Chief Executive Officer, Unitrans Supply Chain Peter Kauschke Andrew Shaw Ilse Fieldgate Solutions Tobias Pütter Shenaaz Peer Luchelle Soobyah

• Gregory Hocking, Commercial We would like to express our Executive, Imperial Logistics appreciation for the expertise and support provided by: Akhter Moosa, • Hussein Hachem, Chief Executive Anil Khurana, Bernard CL Li, Catherine Officer, Aramex, United Arab Ensor, Chris Siewierski, Elizabeth Emirates Montgomery, Evniki Antoniadou, Grace Correia, Hirokazu Nakabachi, • Marco Raffinetti, Divisional Chief Linda Botha Language Solutions, Executive – Capital Projects, Ludivine Allardon, Maged Ezz Eldeen, Grindrod Freight Services Manqoba Madinane, Marcus Blömer, • Mervyn Ekron, Supply Chain Dr Paulo Fernandez, Said Benikene, Manager (Mining & Metals), Sarah Aghahassani, Tarek F Mansour Anglo American Platinum and Vivien Wu.

• Photios Tzellios, Supply Chain Director, Shoprite

• Raymond Wong, Deputy General Manager, COSCO Pacific

88 Africa gearing up Contacts

Algeria Democratic Republic of Ghana Noël Albertus the Congo Felix Addo Country Senior Partner Benjamin Nzailu Country Senior Partner Email: [email protected] Country Senior Partner Email: [email protected] Algiers office Email: [email protected] Accra office lotissement Piette Villa N°56 Kinshasa office No. 12 Airport City rue N°6 Paradou, Hydra Immeuble Midema Una Home, 3rd Floor Alger 16000 13 Avenue Mongala Airport City, Accra Tel: [213] 21 48 4183, 21 48 4427 Kinshasa 1 Tel: [+233] (21) 761 500 Fax: [213] 21 48 4071 Tel: [243] 999 309 900, 998 396 271 Fax: [+233] (21) 761 544 Fax: [243] 812 616 010, 813 016 485 Angola Kenya Pedro Calixto Egypt Anne Eriksson Country Senior Partner Tarek Mansour Country Senior Partner Email: [email protected] Country Senior Partner Email: [email protected] Luanda office Email: [email protected] Nairobi office Edifício Presidente Cairo office PwC Tower Largo 17 de Setembro 3 Plot No 211, Second Sector Waiyaki Way City Center No 3, 1 Andar – Sala 137 Nairobi New Cairo 11835 Tel: [244] 227 286 109 Tel: [+254] (20) 285 5000 Tel: +20 (0)2 2759 7700 [244] 222 311 295 Fax: [+254] (20) 285 5001 Fax: +20 (0)2 2759 7711 Fax: [244] 222 311 213

PwC 89 About this report Africa gearingup 90 Africa Fax: Tel: Dar esSalaam Oyster Bay 369 Toure Drive Pemba House office Dar esSalaam Email: [email protected] SeniorPartner Country Mususa Leonard Tanzania Fax: Tel: 2157 Sunninghill 2 Eglin Road Johannesburg office Email: [email protected] SeniorPartner Country Hein Boegman South Africa Fax: Tel: Lagos Island Victoria AjoseAdeogun StreetOff Street Okunola 252E Muri Lagos office Email: [email protected] SeniorPartner Country Ken Igbokwe Nigeria Fax: Tel: Maputo Rua Sé114 de 5ºandar Centro Escritórios, de Pestana Rovuma Hotel Maputo office Email: [email protected] SeniorPartner Country João Martins Mozambique [+255] (0)222192200 [+255] (0)222192000 [+27] (11) 797 5800 [+27] (11) 797 4335 [+234] (1)270 3108/270 3109 [+234] (1)271 1700 [+258] (21) 307621 [+258] (21) 350400 [email protected] +45 3945 3639 Bo Schou-Jacobsen Denmark [email protected] +357 25555000 Yiangos Kaponides Cyprus [email protected] +852 22892828 Ng Alan China &HongKong [email protected] +1 4035097486 Stephen D.Shepherdson Canada [email protected] +55 11 3674 2780 Lutterbach Márcio Brazil [email protected] +32 32593332 Peter Eynde den van Belgium [email protected] +61 82661144 Joseph Carrozzi Australia contacts Territory [email protected] +49 211 981 2877 Klaus-Dieter Ruske Germany [email protected] +33 15657 8391 Gaide Vincent France Italy [email protected] +62 21 52890400 Thomson Batubara Indonesia [email protected] +91 2266891133 Jai Mavani India [email protected] +30 210 4284000 Socrates Leptos-Bourgi Greece [email protected] 4462 7667+64 Shires Karen Zealand New [email protected] +971 3100 4304 Anil Khurana EastMiddle [email protected] +52 5552635834 Gonzalez Elena Martha Mexico [email protected] +60 (3)2173 0512 Azizan Zakaria Malaysia [email protected] +81 8012475338 Nakabachi Hirokazu Japan [email protected] +39 657025 2465 Luciano Festa Norway Sweden Rita Granlund Fredrik Göransson +47 95 26 02 37 +46 31 793 11 46 [email protected] [email protected]

Philippines Switzerland Anjji M. Gabriel Thomas Brüderlin +632 459 3005 +41 58 792 5579 [email protected] [email protected]

Portugal Taiwan Jorge Costa Charles Lai +351 213 599414 +886 (0) 2 27296666 25186 [email protected] [email protected]

Russia The Netherlands Alexander Sinyavsky Isis Bindels +7 495 2325469 +31 88 792 3606 [email protected] [email protected]

Singapore Turkey Kok Leong Soh Cenk Ulu +65 6236 3788 +90 212 3266060 [email protected] [email protected]

South Korea United Kingdom Bong-Jun Baeg Coolin Desai +352 4948 481 +44 2072 124113 [email protected] [email protected]

Spain United States David Samu Villaverde Jonathan Kletzel +34 915 684 013 +312 298 6869 [email protected] [email protected]

PwC 91 About this report Africa gearingup 92 Africa PwC 93 The information contained in this publication is provided for general information purposes only, and does not constitute the provision of legal or professional advice in any way. Before making any decision or taking any action, a professional adviser should be consulted. No responsibility for loss to any person acting or refraining from action as a result of any material in this publication can be accepted by the author, copyright owner or publisher.

©2013 PricewaterhouseCoopers (“PwC”), the South African firm. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers in South Africa, which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity and does not act as an agent of PwCIL. (13-13786)