African airlines have to cooperate better to create capacity

In the current landscape, negative ramifications of the Covid-19 virus are being felt throughout the supply chain. As the impact of the crisis reverberates around the world, crippling businesses and economies, the logistics sector is scrambling to find its feet. Logistics Update Africa’s Surya Kannoth speaks to Chaminda Gunasekera, senior director – air freight and ecommerce, Asia and MENA, SEKO Logistics to understand his views on the logistics landscape in Africa in the wake of the current crisis. Chaminda Gunasekera has spent over 18 years developing freight and over seven years on ecommerce business in Africa. He is one of the leading subject matter experts in Asia for the Africa continent with a very wide network of connections, relationships, and deep knowledge of what happens in Africa. Chaminda has contributed to policymaking in African countries to designing airline networks in Africa to meet challenges. Edited Excerpts:

Can you give us an update on how the Covid-19 pandemic has taken a toll on the logistics industry in Africa?
Africa cannot afford to let the Covid-19 situation escalate to a level they cannot handle. Most airports have been closed for months for passenger but cargo flights are allowed. However, many airlines find issues with flight crew limitations as they don’t allow crew to stay in the destination country. Most airlines have to either fly two sets of crew or not operate at all. This has created capacity issues in Africa. Another Covid-related issue was the social unrest that broke out in South China where many Africans come to purchase goods for their countries from South China. Due to Covid-19 infections in a small group of Africans in South China, locals refused to do business with the resident or visiting Africans in South China. This created a major shortage of goods to Africa. Few airlines are struggling to clear the backlogs in South China to Africa due to demand and capacity issues. The cost of freight and the scarcity of capacity have created a major hurdle in Africa as a continent facing the Covid-19 situation. This has also resulted in a higher cost of freight and longer lead times.

How is SEKO Logistics responding to the current crisis?
SEKO is more focused on ecommerce ex-Asia to Africa. We have steady solutions for our customers and we have a reliable network in Africa that we have access to. Apart from higher freight costs and longer lead times which we could not control much due to limited options, SEKO did not have many issues in servicing our customers.

How does an under-developed nation really deal with growing freight costs?

It is really a pity that some African nations need to pay over $8-10/kg for PPE from Asia. I have been lobbying with Hong Kong government and China Customs to open the Hong Kong border for PPE but could not get that working smoothly.

If that had happened, some countries could have moved freight out of Hong Kong at a cheaper price. I think Africa resorted to getting a local supply of PPE and only essential items came from Europe, Turkey, and Sub Continent. Some went out of China too but not to the tune of what we have seen to other continents.  Most countries did not have many options as Africa depends on Chinese products. East Africa moved a bit on Ocean and West and South West Africa depended on EU suppliers. 

Covid-19 has thrown upon new realities for the African consumer. Ecommerce has now got a whole new dimension. How do you deal with the disruption of logistics given the explosion in eCommerce?
It's been tough. I have always said in my last few interviews and write-ups that airlines, forwarders, ecommerce platforms should make money by offering services but not make attempts to kill the demand by charging higher. Everything has an equal and opposite reaction. Some linehaul rates have increased by 100 percent ex-Asia to Africa. The types of products sold by Chinese sellers in Africa do not have much margin to absorb higher logistics rates. Therefore, some platforms are forced to pass on the logistics costs to the buyers in Africa. It was not the case before. Lead times have increased to many markets as there are not make flights a day or a week. And we have to consolidate the shipments to meet the minimum pivots introduced by airlines to increase their (airlines) earnings. Due to higher linehaul costs, African buyers are looking for cheaper rates and are willing to wait for a longer time to get the parcels. Therefore, postal solutions are in demand. Many sellers are going for B2B2C modes into Africa but the local customs regulations, IOR requirements. Quality certificate requirements are creating a lot of challenges. 

What is at stake for the African Continental Free Trade Agreement? What economical changes can we foresee in terms of regional movement of goods given the current situation?
There are trade agreements like EAC or ECoWAS, which are good examples stepping up to AfCFTA recently signed. If we take EAC or ECoWAS, these trade agreements have not matured to a level of free movement of goods without the double taxation or duty assessments at each border performed without any standardization. If you send cargo to Kenya, pay duty and taxes in Kenya, technically you can send the goods under EAC agreement to Tanzania but it does not happen that way. On paper, it’s there but not at the border. The main challenge I see here is how the customs rules are liberalized to allow customs offices to assess valuations on the spot. Due to the challenges in capacity and access to goods by some African countries, there should be a way to operate e-commerce or B2B goods like Panama freezone, Dubai or HKG where sellers are allowed to do bonded warehousing and operate in a bonded transshipment environment of air to air, express shipments. I think the only country that could step into a position like this is Kenya or Morocco on the two sides of entry to Africa from East and East.  

What new avenues can logistics companies in Africa explore as new opportunities in the post-Covid-19 world?
Necessity is the mother of all inventions. The challenges we face in our industry are very unique to each other. My only advice to the industry is “think out of the box as anything is possible if you think without boundaries”. My vision for Africa is to have Hong Kong or Dubai style free trade zones in the West and East of Africa. I will pick Morocco, Ghana, Kenya as three places (of course, South Africa, but South Africa has been losing its hub status due to challenges of logistics). To create capacity, airlines in Africa have to cooperate better in terms of SPA based in META standards where it makes airlines to cooperate on an easy platform. If airlines cooperate with the help of IATA, I see that you can bridge the gaps of capacity in Africa and have more access to different markets. SEKO in the last 18-24 months has reached the top ladder as a service provider of ecommerce to Africa with the help of one of the top market places in Africa. We have a good network in Africa due to connections to good local players. I think a reliable network is essential in Africa to do your business.