FROM MAGAZINE: ‘Acquisitions can strengthen our air freight business’

Providing logistics services over two decades in integrated freight management, contract logistics, and distributorship, Imperial Logistics is planning to spread more wings into the air freight sector with prospective acquisitions. Johan Truter, CEO, Africa Regions of the Johannesburg Stock Exchange-listed (JSE) company speaks on how the new East African hub can facilitate trade opportunities.

How will your bonded storage centre in Kenya help in serving the East African market and reduce supply chain inefficiencies?
centre, the supply chain inefficiency will be tremendously reduced. The 30 percent bonded facility will allow us to create a distribution hub in Kenya for products destined for Uganda, Tanzania, Ethiopia, Rwanda and beyond, with fewer links in the supply chain. Now, we have the benefit to import into Kenya and export to the neighbouring countries with lower duties. The bonded storage centre will save duties as well as rail levy, which is also included in it. Ultimately, our customers will be more competitive in bringing their product into the East African countries and even the price to the end-user will be reduced. 

Our current hub in Kenya can handle 1,284 pallets that are specifically designed for pharma and 450 for electronics. There is another warehouse having 650 pallets for chemicals. The biggest market in East Africa is still Kenya. There is a big demand from Ethiopia and it is one of the markets we are considering to expand. 

Full View

Do you have contracts with companies for this facility? In how many phases it will be built? 
We already have contracts with our existing principals for export. Our European counterpart is in talks with few chemical manufacturers in Europe to promote the Kenyan hub for their East African business.   

Currently, we are operating out of phase 1. As and when demand increases, we have made the provision to expand next to our existing warehouse, where we have already purchased land.

Any new African markets you would like to explore? 
Our business in Africa is largely focused on distributorships in both health care and consumer packaged goods. In health care, we already have distributors in Nigeria, Ghana, and Kenya. We are planning to foray into Namibia by acquiring a pharma distributor. In other African markets, where have consumer packaged goods distributors, there we are planning to expand into healthcare as well.

We are even eying to expand into French-speaking Africa and North Africa for distributorship business. The three verticals we would like to explore in Africa are consumer packaged goods, healthcare and automotive. 

Are you planning for any expansion strategies in international freight management? 
As we are into distributorship business, the benefit is that we can take control of our logistics needs. For instance, currently, all the products we fly into Nigeria or Kenya is delivered by multinational pharmaceutical companies. The ownership of the products is taken only when they deliver it to our warehouse.

If we expand in international freight management, instead of having at a delivered price we can collect the product from anywhere in the world. Thus, we see a very big opportunity in this space. With our clients, not only we talk about logistics costs, or optimisation of supply chain; but also discuss on how we can increase their market share, what are the new products they are going to introduce, are they going through any acquisitions, etc. We can ensure them that their products will be picked up from their factories and thus we can increase our logistics fees, which further results in increasing our revenue. So in tandem with our distributorship business, we also aim to strengthen our freight management and contract logistics businesses. 

What are your plans to strengthen your air freight business? 
Our strategy is very clear that we want to expand into air and ocean freight. So it is not only ocean freight at this stage. We are a very small player in the international air freight market. For further expansion, if we can find a strategic acquisition it will be beneficial for us and our partners. We are currently going through a process of finding a good acquisition that will complement our business. You will probably not find a global acquisition with a very strong footprint in Africa. We will buy from in-county or regions and then will expand into international freight management. So with our European counterpart, we will be looking at acquisitions in certain markets where we do not have an international network. 

How was your performance in the first quarter of 2019?  
We performed well in the first six months and expect to continue for the upcoming months. We grew about 12 to 13 percent year-on-year. In Africa, consumer requirement is more on healthcare and food products. We continue to see growth in Africa. 

This story was originally published in Logistics Update Africa's July 2019 issue.