Globalization is making the world a smaller, busier planet for exporters encountering unexpected challenges as they move into new, promising markets. That dynamic between surging trade and required adaptation to local factors is perhaps most evident within booming business between Asia-Pacific and African nations.
Trade between Africa and Asia-Pacific countries has increased rapidly in recent years, reflecting a synergy between two of the world’s fastest growing economic regions. Foreign Direct Investment (FDI) and trade between Asia-Pacific and Africa jumped from just $2.8 billion in 1990 to around $300 today and are expected to surpass $1.5 trillion by 2020.
Those exchanges are unbalanced, however. The mostly manufactured goods exported Africa constitute just 26% of Asia's global total, while the commodities Africa exports to Asia-Pacific nations represent only 3% of the continent’s tally. China dominates Asia-Pacific/African exchanges with $200 billion annually, followed by Japan’s $30 billion, Thailand’s $11.6 billion, Indonesia’s $10.7 billion and Singapore’s $9.5 billion.
“Booming Asian economies, especially China, need raw materials to fuel continued industrial expansion, while consumer goods going back to Africa answer growing demand from the rising number of African middle class households,” explains Cyril Dumon, Director of the Greater China unit for the Shanghai-based SDV PRC International Freight Forwarding Co., who says those flows will continue increasing with time.
That rising pace of exchange between the two regions is pushing Asian exporters to shift their focus from traditional American and European trade partners to expanding opportunities in Africa. And that’s already altering some of the standard practices in moving goods between the two regions.
“A lot of exporting companies that used to ship goods to Africa via Europe are instead loading up entire cargo ships that sail directly to African destinations,” Dumon says. “So far we’ve managed to get maritime companies to meet that escalating capacity demand, though air transport hasn’t been able to match rising cargo demand as well. That’s forcing some exporters to re-think their options.”
But the real challenges - and choices - await Asia-Pacific exports once their products arrive in African ports.
“You can’t just put a container on a ship somewhere in Asia and say, ‘Part goes to Kenya, part to Tanzania and part to Uganda’ – it just won’t work”
Africa’s internal transport network is still largely fragmented in national rail and road systems, and transporting goods from ports to land-locked countries remains notoriously laborious. Meanwhile, Asia-Pacific companies that attempt to embrace trade opportunities with the entire African continent discover their goods end up navigating patchwork of different 47 nations – each with its own transport, logistics, customs, duties and administrative differences and complexities.
“You can’t just put a container on a ship somewhere in Asia and say, ‘Part goes to Kenya, part to Tanzania and part to Uganda’ – it just won’t work,” says Dumon. “Africa isn’t integrated the way European Union nations or US states are. Exporters need to have experienced partners on the ground in Africa who know how to deal with all facets and variations of transport, storage, handling and customs work that is involved.”
Adding to that complexity are the very different structures and states of evolution of distribution systems across Africa. Those can range from standard retail chain and logistics models to 100% Internet transactions that are delivered directly to end-customers, whose emergence as middle class consumerism coincided with the rise of e-commerce.
“Asian exporters really need to have partners in Africa who can cover all transport options, know the most efficient corridors, and have experience in the oldest and most recent distribution models alike,” Dumon says. “With the Bolloré group’s history and infrastructure in Africa, and its activity in Asia, we’re one of the few players who can cover that entire range of options based on client need – all the way to end-to-end solutions right into the hands of individual consumers.”
Those capacities were evident in SDV’s work for Asian clients active in Africa recently. For example, it has been essential helping a Chinese company building Senegal’s power transmission grid emanating from the capital Dakar into outlying areas. SDV’s quick and efficient transportation of equipment also made it a critical partner to other Asia-Pacific customers constructing a 400 km-wide solar electricity transmission line in Ivory Coast.
The importance of having that kind of partner is expected to double in value as investment in Africa builds the industrial capacities and local companies capable of sending large volumes of consumer goods back to Asian markets, rather than primarily raw materials. As that happens, both the volume and complexity of Africa/Asia-Pacific trade will grow, along with the critical role of specialized logistic and transport partners facilitating it.