FROM MAGAZINE: Investments, digitalisation gearing South Africa to 'trade smart'

Setting up an international stage in 2020 for the annually rotating African Union chair, the South African government is exploring opportunities to transform maritime and aviation industries. Even logistics stakeholders are broadening their horizons to uplift the trading environment through AfCFTA and SAATM.

South Africa is set for a big 2020 as prime minister Cyril Ramaphosa will take up the African Union (AU) chair in January and aims to advance its Agenda 2063, the master plan for transforming Africa into a global powerhouse.

As trading within the African Continental Free Trade Area (AfCFTA) begins on July 1, 2020, the agreement ratified by 54 out of the 55 AU member states, will certainly give an impetus to the South African logistics sector. Also, the country's government is planning to establish a national shipping carrier as part of a push to transform the transportation sector, particularly in the maritime and aviation industries. The country has been without a national carrier since Maersk acquired the South African shipping line Safmarine in 1999. The announcement for revolution in the transport sector comes in the backdrop of the South African Airways (SAA) business rescue process, which is now in the face of liquidation.

Another flagship project of AU is Single African Air Transport Market (SAATM), which aims to create a single unified air transport market in Africa. Observing the benefits of both the agreements, Airports Company South Africa's (ACSA), senior specialist cargo, Nina Engelbrecht-Malherbe says, "SAATM agreement has been in place for some time now. However, growth in air cargo remains a function of overall macroeconomic conditions and growth prospects for international trade. We hope to support further expansion of routes within the continent of Africa. Most nations in Africa have signed the African Continental Free Trade Agreement and we are keen to play a role in developing intra-continental trade."

ACSA has also engaged continuously with network hubs and carriers. Through a process of air traffic development, the group is implementing measures to attract more carriers and hub connections to remain a preferred gateway for both cargo and passenger traffic at O.R. Tambo International Airport, Johannesburg.

Commenting on similar lines, Koen Rombouts, country managing director - South Africa for Bollore Logistics says, "There is a lot of red tape when doing business from South Africa into Africa." South Africa has a big advantage over other countries in manufacturing and engineering. The free trade in Africa will boost exports of South African products and services into Africa and with it, the logistics demands. We as Bollore Transport & Logistics have invested a lot into our African network in 47 countries. The simplification of rules and regulations for trade within Africa will make our logistics easier and significantly reduce the cost of logistics to our customers."

Bollore handled a volume of 680,000 tonnes for its South African business in 2019.

Last year, ACSA had outlined plans to invest R30 billion in infrastructures and upgrades at O.R. Tambo and Cape Town airports. "Developments at O.R. Tambo need to be viewed in the context of the overall build programme for Airports Company South Africa over the next five to eight years. Master plans have been developed and approved for both airports. Cape Town master plan has not been initiated yet. The preparation of similar plans for six smaller airports is underway. These plans cover anticipated requirements for decades to come," Malherbe states.

Bollore Logistics South Africa invested heavily in logistics and warehousing in recent years. "The Pomona facility is a 20,000 square metres warehouse with 19,700 pallet locations, housing over 20,000 stock keeping units (SKUs). The facility provides supply chain capabilities including labelling, re-labelling, kitting, fine picking, quality control and returns. Rombouts assures, "We have partnered with clients in automotive, FMCG, cosmetic, telecom, and electronic industries providing full warehouse management system (WMS) with increased visibility resulting in 100 percent accuracy, zero loss, along with fully-customised and automated reporting. With the increased demand for ecommerce, we are convinced that we are the right partner to support our customers with these new developments."

Bollore Logistics' Pomona warehouse facility in Gauteng.

The International Air Transport Association (IATA) recorded an increase of 19.8 percent for African carriers in its November 2019 data for global air freight market demand, compared to the same period a year earlier.

In September 2019, ACSA's strategy to boost air cargo volumes was significantly enhanced by O.R. Tambo by becoming global logistics giant FedEx's first location to host a regularly scheduled flight into Africa. In February 2019, EgyptAir Cargo started operations at the airport, moving goods from main hubs to smaller stations throughout the country, which had a positive effect on the local internal cargo carriers. 2019 also saw the introduction of flights from Astral Aviation, which confirms the support and commitment to the future growth that South Africa can provide for these airlines and the cargo they carry. "Further, we would like to grow services to the ever-growing markets in the Far East, while South America also looks to be a promising freight route," opines Malherbe.

Moreover, ACSA believes that the air cargo market saw a slight decrease during previous years, the volumes and vehicles moving through the airports remained steady, as the airport facilities serve as a major hub and connection point for domestic cargo that moves via road. As such, the entities serving these markets are still seeing consistent, or a slight improvement in operations.

Observing an increase in the air freight demand in the future, Malherbe states, "We hope to expand the facilities at O.R. Tambo airport that serve varied commodities and grow into niche markets such as the pharmaceutical and bio-technology fields, and e-commerce fulfilment. We are also reviewing how to better support the needs of the special economic zone partner that is on our priority which has a focus on perishables and valuable jewellery products."

FedEx B777 at O.R. Tambo airport in September 2019.

Currently, O.R. Tambo serves 16 dedicated freighters: SAA Cargo, Astral Aviation, BidAir Cargo, Cargolux, DHL, EgyptAir Cargo, Ethiopian Cargo, Etihad Cargo, Fedex, Air France KLM Martinair Cargo, Lufthansa Cargo, MK Freight Systems, Saudia Cargo, Singapore Airlines Cargo, Qatar Cargo, and Turkish Cargo.

On the technology front, Saloodo! became the first road freight digital platform available in sub-Saharan Africa (launch pad being South Africa). It offers a single, simple and reliable interface for shippers and transport providers to best optimise costs, routes, cargoes, and transit times. The range of services and products from the DHL-backed platform is aimed primarily at small- and medium-sized enterprises that rely on competitive offers and support for finding suitable transport companies for their full container loads, partial shipments or general loads.

A DHL spokesperson says, "With a market value of R121.1 billion (€7.5 billion) in 2018, road freight volumes in South Africa have been increasing steadily. The increasing volume of global trade within sub-Saharan region is putting more pressure on the existing supply chain and even though an efficient road freight network is a key conduit of trade, much of the region's road freight operations remain fragmented and highly traditional, missing out on the visibility, efficiency, and security that logistics technology offers. As such, given that this is the world's youngest continent with 60 percent of the continent below 25 years old, it is essential to prioritise digital transformation, and allow digital solutions to take dominance in the business context."

With the inauguration of B. Lab Center in France and Singapore in 2019, Bollore will use the innovation initiatives developed with its customers to accelerate the digitisation of the supply chain through blockchain, artificial intelligence (AI), robotics, and internet of things (IoT).

Speaking on providing technology support to its South African customers, Rombouts comments, "Furthermore, we see that we can add value to our customers by providing a control tower solution in South Africa. We provide a single point of contact here for all the business flowing from multiple origins to multiple destinations throughout Africa. Control tower management includes purchase order (PO) management, transparency, tailored and proactive management, and reporting."

When it comes to logistical challenges, 1997 established Bollore Logistics South Africa adds its experience on infrastructural issues witnessed over the years in this region. "Durban is facing more competition from ports in neighbouring countries. The productivity is not improving and there is too much interruption in service due to system failures or poor equipment. Furthermore, access to the port has not improved and connection with the hinterland by rail is not good enough. Therefore, more customers opt to ship their cargo via other ports, e.g. Dar es Salaam, Beira, and Walvis Bay," Rombouts adds.

Aerial view of cargo hub at O.R. Tambo airport.

Nevertheless, the same issue is on the air front too. Malherbe observes, "Currently, we face several challenges that are as a result of the changing business structures and commodities, as well as due to the historical growth in volumes of O.R. Tambo's cargo over the last 5-10 years. It is envisaged that by designing and developing new facilities and introducing several other operational and compliance guidelines and standards at our other airports, where infrastructure development might not be taking place, these old issues will be addressed. This certain degree of flexibility will be entrenched into all aspects of the future planning and operationalisation of the existing, and new facilities."

The introduction of the DHL Africa eShop app has enabled African customers to shop directly from over 200 US- and UK-based online retailers. Despite the growing demand, the many US and UK-based retailers do not offer shipping to African countries, owing to the perceived logistical challenges involved such as high last-mile delivery costs and fraud concerns. DHL Africa eShop app has seen its user base grow rapidly since its introduction in April 2019. Within the first three months of its launch, it was rolled out to 34 countries across sub-Saharan Africa. With the launch of the multi-channel tool (MCT) in November 2019, DHL Express customers have been appreciative of this live chat due to quicker response times, and the ability to interact with the company.

Meanwhile, a 25-year master plan for the Gauteng city region aerotropolis has been approved. The plan includes a five-year implementation plan to develop O.R. Tambo into a business hub over time. To meet the growing demand for international and local cargo operators, ACSA will develop midfield cargo facilities at the O.R. Tambo airport. An environmental impact assessment (EIA) will need to be conducted once the on-going conceptual design process is finalised. This will cater to future air cargo facilities in a dedicated cargo complex in a phased approach, such that phase 1 initially would accommodate up to 750,000 tonnes of air cargo annually and in the future will be expanded to two million tonnes. The facilities will have fit-for-purpose specialised cargo facilities - to cater to the growing demand for pharmaceutical and perishable products, as well as facilities for the existing volumes of animals and animal products emanating from Southern Africa. It is also developing an opportunity for the handling of e-commerce. The first phase of the development is expected to be completed during the course of 2024.

Another development is of O.R. Tambo International Western Precinct Project, which involves seven phases with an investment worth R4.6 billion. The Western Precinct comprises an 8.5-hectare site, with 180,000 square metres earmarked for mixed-use development (commercial and retail buildings and a hotel), which will be completed in phases by 2020.

This feature was originally published in January - February 2020 issue of Logistics Update Africa.