Presentation about growth opportunities in Africa delivered by Ingo Brauckmann at LogiCon 2013 in Amsterdam.

1. Name of Department and/or Name of Presenter
Logistics Solutions for New Territories –
A Growth Plan for Africa
Ingo Brauckmann
Amsterdam, Feb 6, 2013

2. What Do You Think When You Hear the Word “Africa”?
10% …
Source: EMNID research 2010, 1002 participants > 14 yrs in Germany
Grow Africa – DHL | February 2013 DHL | Page 2

3. What Do You Think When You Hear the Word “Africa”?
and 47% …
think about hunger …
Grow Africa – DHL | February 2013 DHL | Page 3

4. In Fact It Is a Continent Full of Contradictions …
vs.
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5. Why Is Africa in Focus?
With largely positive economic and business indicators, Africa is
currently experiencing growth similar to BRIC a few years ago
Emerging Economies Fast-growing Consumer Markets
• Africa‟s collective GDP will grow from • Africa‟s population will double, from one to
USD 1.6tn in 2008 to USD 2.6tn in 20201) two billion, over the next 40 years
• Between 2011 and 2015, 7 of the 10 fastest- • In 2020, Africa‟s consumer spending will
growing economies will be African2) reach USD 1.4tn
– Annual GDP growth of 7–8% – Almost twice as much as RU today, with
(incl. TZ, GH, NG) USD 876mn in 2011
– Bigger than RU growth of 4%3) • By 2030 over 40% of the total population will
live in a city
Source: MRSC, McKinsey “Lions on the move” 2011, Ernst and Young “Africa Attractiveness Survey” 2011;
1) Real GDP 2011: IN = USD 2.0tn, BR and IT = USD 2.4tn, UK = USD 2.6tn, FR = USD 2.8tn; 2) ET, MZ, TZ, CG, GH, ZA, NG; 3) CAGR 2011–2015
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6. Why Is Africa in Focus?
The business environment is truly changing
Changing Business Environment Summary
Emerging Economies
Fast-growing Consumer Markets
• A generation ago, the BRIC accounted for 1% Changing Business Environment
of African trade
– Today they make up 20%, and by 2030 the
rate is expected to be 50%
• Intra-African trade increased from 6% to 13%
of the total volume
• There are 20 African companies with revenues
It is Africa’s time
over USD 3bn
Source: MRSC, McKinsey “Lions on the move” 2011, Ernst and Young “Africa Attractiveness Survey” 2011
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7. Why Do Business in Africa?
Companies mainly move operations to Africa for access to resources
• Western countries and CN have high
demand for abundant natural resources
in Africa
10% global oil reserves
40% global gold reserves
80–90% global chrome and platinum
metal groups
• Access to African resources has increased
since recent liberalizations
• Political instability remains a threat to
growing business in countries
(e.g. recent terrorism in NG)
Likelihood in short
and medium term
Source: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street Journal
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8. Why Do Business in Africa?
Companies also move to Africa for the growing domestic demand
• Household consumption expenditure as
high as 70%
• Emergence of sizeable middle class:
128mn households with income >USD 5,0001)
in 2020 vs. USD 85mn in 2008 – rivals the
middle class in CN and IN
• This middle class is keen on consuming more
(incl.
food, beverages, consumer durables, mobile
phones, etc.) and gaining access to property
Likelihood in short
and medium term
Source: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street Journal; 1) $PPP 2005
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9. Why Do Business in Africa?
Contrary to West-2-East moves, it’s NOT for lower production costs
• Workforce is large and cheap, property
inexpensive; however
Labor is relatively unskilled
Poor infrastructure limits manufacturers‟
ability to produce locally for export
Difficult access to power supply
reduces competitiveness (e.g. in KE)
• Manufacturing in Africa is interesting
For bulk/heavy products meant for
domestic market
If required by regulators for
domestic sales (e.g. drugs)
Likelihood in short
and medium term
Source: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street Journal
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10. Views on Growth Potential in Africa
Conclusions of the ‘Grow Africa’ project
Growth in Africa is sizable and sustainable
Customers (Western Multinationals) are focusing on Africa
Competitive landscape provides room to grow
Risk relatively high in Africa; however, mitigation possible
Logistics companies need to seize the growth opportunity
It’s time to Grow Africa
Source: Inhouse Consulting
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11. Typical Customer Maturity Path of Western Players
Lack of knowledge is hindering global players entering African markets
Test Enter Expand
Global companies Commencing in just Supply chains of both
start a footprint in one or perhaps a few types of players
Africa by leveraging countries (often become increasingly
existing distributors. South Africa). complex.
Source: Inhouse Consulting, Expert interviews
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12. DHL Supply Chain & DHL Global Forwarding
Current Footprint
• 8 countries
• 5,503 Employees
• 146 operational locations
• 591,700m2 warehousing
• Fleet of over 1,100 vehicles
• Regional offices: Dubai & Nairobi
• MEA Head Office: Johannesburg
• 54 countries
• 1,500 employees
• 58 terminals
• 6 highly secured locations DGF
DSC
DGF & DSC
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13. Capturing Growth Opportunities in Africa
Growth directly linked to a willingness to take risks
Risk-Reward Curve The Way Forward – Alternatives
Capturing growth in Africa relies on a company‟s Choose between „the status quo‟ and different
willingness to invest – hence take risks. levels of investment
Continue • Secure existing business
1
As-Is • Continue with existing
development activities
• Invest in additional sales/
Support
Risk
1 2 3 2 business development
Sales Push
resources
• Build up local expertise
Invest in • Speculatively invest in
3
Capacity infrastructure e.g. multi-user
warehousing
• And/or acquire local players
Potential
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14. How Can We Grow the Business Footprint in Africa Together?
DHL Supply Chain should continue to position its knowledge of
Africa and act as advisor to customers wishing to enter the market
Action Consider
Focus – Priorities sectors and sub-sectors Where to “place our chips” – given limited
with high and sustainable growth, as well as financial and human resources – to harvest
relevant logistical needs most growth?
Target – Continue identification of global Which customers do we believe will enter
players entering/growing in Africa and select and successfully expand in Africa, ready to
few customers DSC should “bet” on grow together with us?
Advise – Continue to leverage DHL local How and when should we engage with
expertise of business practices in Africa to customers to influence their decision to enter/
help customers with limited local experience expand in Africa?
Invest – Further build up capabilities to meet How can we make sure that we are capable
requirements of customers expanding; leverage to capture growth opportunities when they
possibilities for cross-selling in other countries arise?
Source: Inhouse Consulting
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15. Lessons & Key Messages
A unique opportunity
• Africa demonstrates obvious potential
• The time to act is NOW
• Opportunity to build a collaborative
infrastructure from scratch
– Retail and Consumer business divisions
(e.g. Carrefour)
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