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 Smart investing in Africa means you’ll need to understand key regions and 85% Nigerians living on local markets. Africa is not just huge, less than US$2/day it’s hugely diverse. in 2010 What about the “softer factors” of Africa, and the east, west and southern regions of sub-Saharan Africa. We promoting trade, like customs and also looked at countries that are particularly relevant for the transportation trade facilitation? Here, again, and logistics sector as potential gateways. South Africa stands out, ranking #1 Certainly there are other countries not highlighted in our study which The bigger pictureThe bigger in Africa in logistics performance and 23rd in the world (out of 155 are also critical for Africa’s future economic growth. And in some cases countries). Egypt scores well too, our analysis also includes discussion of issues relevant for neighbouring coming in at #57 worldwide. On the countries too. downside, the DRC scores among the worst of all nations regarding Ten African countries profiled its logistics performance, ranking 143rd. These differences in infrastructure and logistics performance translate Algeria Egypt into real costs for supply chains. According to the World Bank, it takes just 12 days to export a container from Egypt, at a cost of US$625. The journey lasts four times as long – over a month and Nigeria a half – to export a container from Ghana Angola, at nearly triple the cost. And Kenya it can get even trickier if you need Democratic to cross borders within Africa. In Republic of Congo contrast, at the world’s largest ports Tanzania in Hong Kong and Singapore it takes just five days to export a container Angola at a cost of US$575 and US$456 respectively. Seeing the (rain) forest Mozambique through the trees, deserts, and savannahs South Africa Clearly, smart investing in Africa means doing your homework. This report aims to give interested GDP GDP Growth GDP Growth investors insight into the key (US$ bn) (y/y ‘10-‘12) (y/y ‘12-‘17) economic regions and countries in Algeria 209.3 3.2% 3.6% Africa. In particular, we’ve analysed Angola 115 4.2% 5.7% factors that are most relevant to the market potential for transportation DRC 17.2 7.1% 8.6% and logistics. We’ve focused on 10 Egypt 256.7 3.0% 3.4% of the most important nations out of the more than 50 countries in Ghana 40.4 10.3% 5.9% Africa to provide a snapshot of the Kenya 40.7 4.9% 6.2% range of business conditions and Mozambique 14.2 7.3% 8.0% opportunities. Some countries were chosen based on their significant Nigeria 270.2 7.3% 6.8% current GDP, while others are South Africa 384.3 3.0% 3.0% expected to grow strongly. Our list includes all major regions – North Tanzania 28.2 6.8% 7.0% Source: International Monetary Fund 4 Africa gearing up 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.