Exporting to African Markets: Risk and Return. Specialists to reveal the inside track at June 25 event of London branch of Institute of Export, By James Brewer
A keen focus on logistics, including port gateways and shipping, and on strategic approaches to doing business, is in prospect when the London branch of the Institute of Export and International Trade hosts a key event on Africa at a time when the continent as a whole is powering ahead in economic growth.
The Institute’s London team has lined up for the June 25 2014 half-day session Exporting to African Markets: Risk and Return, a panel of six speakers closely involved with finance, trade, shipping, legal aspects, cultural issues and securing payment for transactions.
Organisers say that many British exporters are unaware of the wealth of opportunities in Sub-Saharan markets and how to tap into them, despite the fact that the region hosts seven out of the world’s 10 fastest growing economies.
Amid specific worries on global growth, the World Bank has just said that medium-term prospects for the region remain favourable, with GDP growth projected to remain broadly stable at 4.7% in 2014, before rising moderately to 5.1% in each of 2015 and 2016. Growth in the region’s low-income countries is seen by the IMF as nearing 6.9% in 2014.
There is a robust message, though, that Africa is a diverse continent of 54 countries with different business practices, legal systems, and cultures, so that what works in Durban may not work in Dakar.
One of the June 25 speakers, Geoffrey de Mowbray, will underline the importance of the ‘four pillars’ that support the development of the African markets – people, IT, finance and logistics – elaborating on the logistics and distribution aspect.
Mr de Mowbray, chief executive of Dints International, a supply chain provider for the mining and heavy equipment industries, was named as BExA (British Exporters Association) Young Exporter of the year 2013.
As a result of an infrastructure system that badly needs investment, logistics across Africa is often complicated, said Mr de Mowbray, but because of Europe’s history of involvement, many of the roads and train lines lead to the major ports.
South Africa is often the gateway as it has the largest and busiest terminal in Africa – Durban. It is on major international routes and as the main cargo and container port is often the logical point to export to. Tema Harbour in Ghana and Abidjan in Ivory Coast are strategic gateways into the landlocked countries in West Africa.
For Central Africa, Douala – the main port of Cameroon, serving landlocked countries of the region – is a key hub, and the addition of a deep-sea port at Mboro near Kribi (the first $500m phase of this Chinese-backed project is due for completion around now) will strengthen Cameroon’s position as a central African hub. For southern Africa, Walvis Bay in Namibia is creating a new corridor up to south of the Democratic Republic of the Congo.
Since many mine sites are located in remote locations it is essential to work with local knowledgeable partners, advised Mr de Mowbray, as there are often height restrictions, for example under bridges, information about which is not readily available internationally.
The vast majority of work at Dints is export to Africa, and on the heavy equipment side this is reliant on shipping into the major ports of Durban, Tema, Conakry (Guinea) and Toamasina (Madagascar). Mr de Mowbray will stress the importance of clear planning to support that aspect of the supply chain.
Mr de Mowbray was living in Cameroon when he first began doing business in Africa “and it was a very interesting experience!” he told us. “It was definitely easier in that I was physically there so I could meet face to face with my clients, and they had the chance to get to know me.
“The major plus was that there was no-one else offering to do what I was – sourcing parts from a range of suppliers and working with the client’s requirements rather than manufacturers’ sometimes archaic processes.
“The frustrations were always around the restrictions in the availability of parts based on the manufacturer, poor management of the supply chain and a lack of financing availability for small African businesses. There were many points where I would assume that something workable was in place and end up banging my head against the many brick walls that were in place – so although it was frustrating it is also what drove me to focus Dints on solving these issues. Perhaps the frustrations ended up being the biggest plus. If there weren’t challenges and problems there would be no fun!”
Asked to name some African countries that he might advise newcomers to address for export or import, Mr de Mowbray replied: “Business in Africa is very often about relationships, and to work effectively you should know who you are talking to and they should know you. Never underestimate the power of someone being able to look you in the eye. Of course there are some countries and areas that are easier than others to export to because of a stronger infrastructure and governmental support, for example South Africa, but it entirely depends on what is being exported or imported and who are the end users of your products.”
With the already developing markets in Africa, “is your target the growing middle classes? If so, you should be considering Nigeria and Ghana. If you are focused on mining, agriculture or fishing then perhaps Madagascar could be an interesting prospect. In general I find francophone Africa to have some of the greatest opportunities for UK companies, as very few operate there.
“But the most important thing an overseas company should ask itself is, who do we know there? Who can we arrange to meet? How can we start building relationships in that area? Language is a key factor so if you don’t have a multi-lingual team that must be a consideration.”
The firm of Dints works primarily with the mining and construction industries across sub-Saharan Africa “and we can provide all heavy equipment required for these operations, but our service is much broader than simple supply of heavy equipment, ” said Mr de Mowbray.
“We offer a range of services across four service lines; managed parts supply, engine rebuild services, business process outsourcing and innovative finance solutions. We are able to custom-develop and package solutions that are unique to our clients’ specific business needs. One client may only need us to supply their heavy equipment and related parts but we try to develop this further to make a more effective supply chain; for example, the heavy machinery used is very expensive and works in intensive conditions but it is imperative that it works to its maximum capacity and efficiency.”
Supplying people who can measure the effectiveness of the machinery, do essential day-to-day maintenance and train local workers, will enable the machine to run for longer and perform to its maximum. Once the engine has reached the end of the first stage of its life, Dints will arrange for a full rebuild which means shipping it to the UK or other location, having it re-fitted and cleaned making it to within 3% of an ‘as-new’ engine and then shipping it back to the site. “Not only is this more cost effective than buying a new engine or entire machine but it is more environmentally friendly.”
How does Mr de Mowbray view China’s role as a driver of engineering and other projects in Africa?
“There has not been enough investment in Africa as a continent that has supported its broad development, ” he said. “For too long it has lagged behind for a variety of reasons, so the right kind of investment in projects is a good thing – by that I mean that it should be of long term benefit to countries and the communities concerned. Recognising the potential that lies in this continent is what drove me to start Dints and is what drives our business to this day. Driving projects that tap into that potential and finding ways to skill a local workforce and support development should be the aim.
“China provides much of what Africa requires and vice-versa. As with all foreign direct investment it is paramount that local labour is trained and utilised, and partnerships with local companies and suppliers needs to be encouraged and further developed. China’s influence has undoubtedly fast tracked Africa’s development, but it is not always apparent at what cost.”
Kevin Korgba, managing director of Enterprise, Training & Knowledge (ETK) Group, will speak of his keenness to see the private sector in Africa take a more prominent role in promoting growth on the continent.
He told us: “I think foreign direct investment is certainly important in helping the private sector move forward but crucially, the indigenous private sector must ultimately be the vehicle that drives sustainable growth on the continent, particularly small and medium-sized enterprises.
“If we look at a majority of the countries in Sub-Saharan Africa, upwards of 60% of the population on average are employed in the SME sector, and with the burgeoning youth population and high unemployment rates across the continent, it is vital that the private sector becomes more developed.
“First of all I think private initiative must be encouraged from the ground up i.e. support for micro-business all the way up to established private sector corporate.”
This support should be on several levels. Government must continuously strive to create the enabling environments (proper infrastructure, functioning and effective government institutions, legal frameworks etc) that will allow and encourage private sector growth and at the same time make it attractive to foreign business as well as financial investment.
Private sector organisations must be willing to invest in and submit themselves to proper development of their internal structures and human resources (capacity building). “What this will do is to increase their effectiveness and, where they are looking for funding, position them as attractive investments. Any investor, whether foreign or indigenous will look for what we call the three Ss – Structure, Sustainability and Scalability.”
Mr Korgba said that UK companies could help by building stronger relationships and partnerships with private sector organisations; knowledge exchange between businesses (which would ultimately benefit both UK and African businesses); investing in emerging sectors which are not the traditional sectors for investment; and being willing to educate themselves on private sector practices that are unique to African emerging markets.
At the age of 20, Mr Korgba set up his first business for the sale and distribution of petroleum products – petrol, diesel, kerosene and lubricants – when the lack in Nigeria of these products was at a crippling stage. The business operated solely within that country, supplying organisations in Lagos where he was based and servicing contracts to supply other parts of the country. He had large kerosene tanks dotted across Lagos to serve individuals and micro and small business owners.
What could smaller companies offer that the major oil companies cannot? “One of the major things that a small oil company can offer is community engagement. It is helping small indigenous firms do better than the oil majors, because they are listening to the local people and as a result, improving productivity.”
Mr Korgba said: “I am not an expert on energy and natural resources, but if we consider that Africa holds more than half the known gas reserves in the Atlantic Basin, and that upstream giants such as Total are pointing at countries like Nigeria, Angola, Congo-Brazzaville for hydrocarbon resources, then these would certainly be worth considering. You would also want to keep track of the new and emerging ‘oil’ states such as Ghana, Tanzania, Kenya and Namibia where oil exploration is ongoing.”
Mr Korgba’s ETK Group aims to share knowledge and build capacity for businesses seeking to engage the continent. “Our primary form of direct education and training is our very specialised, UK-accredited programme called the African Business Management courses (ABM®), which concentrate on the practical aspects of conducting business on the continent.”
The courses are grouped into three categories – strategy courses, professional skills courses and sector-specific courses – all of which aim to prepare participants for the realities and practicalities of the various African markets.
“We developed the ABM using on-the-ground research and input from individuals and companies who have been operating across Africa, in addition to our own personal experiences working with businesses on the continent.”
The courses are suitable for among others corporate organisations going into Africa, those already there and looking to provide training to their staff, students interested in placements with companies in Africa, and the returning Africa diaspora.
As to the business pitfalls, Mr Korgba remarked: “This may sound absurd, but it is amazing how many people still approach Africa as one homogenous entity and this is the very first pitfall we tackle – AFRICA IS NOT ONE COUNTRY!
“We are also trying to help companies who have in the past, allowed the general perceptions about Africa affect their go-to-market strategy. Many companies have discovered that given the right preparation, they could have overcome several challenges which are covered in our range of courses.”
Rollo Greenfield, chief executive of the UK operations of Diamond Bank, will address the relevance to African commerce of trade instruments such as letters of credit and bank guarantees. He grew up in Africa, and worked as head of credit and head of risk with international banks.
Well known in the maritime world is speaker Steve Cameron, who is vice-chairman of the Business Council for Africa, marine director at RTI Forensics and a consultant specialising in many African countries. He was one of the founding team of OT Africa Line.
Donna Marsh, a consultant with Farnham Castle Intercultural Training, has wide experience in banking and information technology.
Grace Asemota, legal director at Clyde & Co, is a member of the firm’s international trade, energy and arbitration group, with a particular interest in West Africa. She has a distinguished record in trade finance, international trade, shipping, oil and gas and commercial disputes.
Exporting to African Markets: Risk and Return is on Wednesday June 25 2014 at 15.30hrs for 16.00 followed by a networking reception at 18.00. The event is supported by the Business Council for Africa, and media partner iswww.allaboutshipping.co.uk. Venue is the Arab British Chamber of Commerce, 43 Upper Grosvenor Street, London W1. Booking and payment details are at www.export.org.uk