Secret of robust China-Africa trade lies in healthy two-way logistics

With the quick recovery of trade between China and Africa after the Covid pandemic induced lockdowns, logistics firms look deep into the nuances of this economic relationship. They are reporting an inflow of Chinese logistics companies into Africa and believe that the growing pie of the African economy needs them.

The trade between China and the African continent grew by 40.5 percent year-on-year in the first seven months of 2021, hitting a record high of $139.1 billion, according to the Chinese ministry of commerce.

Exports from Africa to China increased 46.3 percent to $59.3 billion during the January-July period. On a bigger time scale, in the last 20 years, China's trade with Africa has increased 20-fold, making China Africa's biggest bilateral trade partner for 12 consecutive years now.

To point out the shift in the movement of goods to and from Africa, Jérôme Petit, CEO Africa of Bolloré Logistics noted that “China has become for most African countries the largest trading partner, replacing historical trading partners located mostly in Europe.”

“Besides trading, China has become a major infrastructure contractor present in all large scale projects (power, rail, airports, ports) as well a major investor across Africa in very dynamic sectors like mining and oil & gas.”

The Covid has slowed down the trade between these two partners. However, Petit points out that the trade lane has been quick to recover in 2021 even though the shipping costs increase, the lack of containers availability and vessel capacity has hampered its growth to pre-Covid levels.

“At the macro level, the strength of this trade lies in the fact that it works both ways, with China exporting to Africa all kinds of consumer goods, textiles, telecom and electronics equipment, vehicle while importing petroleum products, minerals such as copper and cobalt as well as soft commodities. But clearly, some countries carry a bigger weight on this route such as Angola, Ethiopia, Kenya, DRC (Katanga) or Chad,” he said.

Reporting an interesting development, Bruno Plantaz, managing director for IMEA, CEVA Logistics, noted that clothing and accessories from Morocco to China increased by more than 1,600 percent between April 2020 and May 2021.

According to him, China is involved in more than 200 large development projects that range from the port, road and rail infrastructure, from the Makelle – Tadjourah Port railway, the Nairobi-Mombasa railway to increasing power generation capacity, telecommunications, mining and real estate.

“The Suez Canal corridor in Egypt has attracted Chinese investors too. Plans to build a second canal and new terminals at the Port of Alexandria are expected to start in 2022, increasing the port’s capacity to 1.5 million TEUs annually with quays of over 2 km in length. This investment in infrastructure development aids in boosting economic development by improving logistical efficiencies, increasing import and export capacities as well as intra-Africa trade,” he said.

“An extensive range of goods across sectors are exchanged, of which the top 5 in terms of USD value includes textiles, furniture, energy, appliances, machinery, technology and vehicles or vehicle accessories. A number of large development projects are underway which has increased the import of out-of-gauge and project cargo,” he added.

We see now coming into Africa both subsidiaries of large shipping and logistics Chinese Groups as well as small/medium size Chinese forwarders.

Jérôme Petit, Bolloré Logistics

How logistics companies leverage China Africa trade
Bolloré Transport & Logistics has been present in Africa for over 90 years with a network of agencies across 48 countries. In comparison, Bolloré opened its first office in China in 1993. Since then, they have developed our network across China with now over 20 offices across the country.

Petit, said, “Thanks to our strong presence on both sides, we were quick to identify the first signals of the China Africa trade, projects and investments and we have been targeting these developments since 2005.”

For example, Bolloré started cooperating with Huawei in 2008 when they started entering the African market, developing with and for them a complete end-to-end logistics model, from China to the destination countries. “This cooperation has strengthened over the years and continues to this day. Since we have as well expanded it with other Chinese Telecom OEM’s with success,” he said.

“To develop this trade, we have built up dedicated teams on both sides, with Africa experts in our China teams but as well Chinese delegates in about 20 countries/regions across Africa. We have signed several strategic agreements with leading Chinese companies involved in infrastructures, telecommunication and heavy equipment supplies to develop our mutual cooperation in a win-win mode. We have for several years now Chinese investors in several of our port concessions such as Lagos and Kribi in Cameroon,” he added.

CEVA Logistics also has a strong presence in Africa and in China, including a joint venture agreement with Anji (China's largest automotive logistics provider). CEVA Logistics now has a network of more than 80 offices and an integrated network across more than 40 countries in Africa.

Plantaz said, “Comprehensive local knowledge, experience and the ability to communicate and understand local languages are critical factors when developing reliable, multi-modal supply chain solutions. Given the growth of this strategic trade lane and increased Chinese investment in infrastructure on the African continent and trade flows on the silk route, CEVA is expecting an increase in volumes and revenue.”

“Our ambition is to make the African market account for a significant share of our revenue by 2025. With that bold target in mind, we see our capabilities across all logistics channels as strategic tools to reach that goal within our specific timeframe,” he added.

Africa is a continent with much to offer in terms of natural and agricultural resources, commodities, precious minerals, oil & gas. China too has several significant advantages, for instance, the capability of mass production using improved technology and gaining the benefit of economies-of-scale in turn, enabling the sale of manufactured goods at lower price points.

Some see Africa as an area of potential production for the world market, which is an opportunity for our contract logistics expertise.

Bruno Plantaz, CEVA Logistics

Future of China-Africa logistics
Petit reported that they are witnessing a growing interest in soft commodities such as cocoa with proposed Chinese investments in countries like Ivory Coast.

“On the export side, exports of petroleum products shall continue with various significant Chinese investments coming to delivery between Uganda, Niger or Chad. Exports of minerals, not only led by copper and cobalt but as well Manganese from Gabon or Bauxite from Guinea, for example, shall continue growing thanks to both direct Chinese investments in mines but as well the growth of the manufacturing sector in China in sectors using specifically these minerals such as electrical vehicles,” he added.

Petit also reported that there is an incoming flow of both subsidiaries of large shipping and logistics Chinese Groups as well as small/medium size Chinese forwarders into Africa. “The first ones tend to follow large scale infrastructure or mining projects involving significant barging/shipping or rail investments. The latter ones are more opportunistic and follow the development of mid-size projects thanks to their Guanxi (the Chinese system of social networks and influential relationships which facilitate business and other dealings) in China and recent local offices in certain African countries,” he said.

Plantaz said, “ In addition to retail and consumer goods, customers in telecom, automotive, technology and healthcare industries, were encouraging us to expand our presence into Africa as we had already done elsewhere in the world. There are also other customers specializing in exporting raw materials from Africa. Finally, there are those who see Africa as an area of potential production for the world market, not just for local production, which is an opportunity for our contract logistics expertise.

This article was originally published in Logistics Update Africa' November - December 2021 issue.