Mapping cargo route to Africa
Recent figures of African exports to Asia reflect a sharp increase in trade to China and India. Though China presents a more dynamic market for Africa’s exports, but with geographical advantage and skilled manpower, India has the potential to overtake Chi
The International Air Transport Association (IATA) Forecast 2014-18 highlighted the fact that Africa is the second fastest growing market of the world with a CAGR of 4.4 per cent. With this promising growth trajectory turning the region’s great economic potential to reality, the Indian air cargo industry is also bound to feel an impact. In recent years, Africa has also shown major interest in India in terms of investment in the air cargo sector. However, there are certain challenges that Indian freight forwarders and airlines face while moving cargo to and from Africa.
According to the United Nation’s Commission for Africa, more than 80 per cent of Africa’s exports, estimated at 1,730,000 tonnes per annum are destined for outside markets. And while Europe is still Africa’s primary partner the percentage split of this market has dropped from over 70 per cent to 56.9 per cent. Currently, the Middle East and Asia are fast gaining traction as critical export markets for Africa. Moderating a round table discussion on this topic, Tom Crabtree, Regional Director for Market Analysis, Boeing Commercial Airplanes explained that the rapidly expanding shares of these markets are presently gauged at 14.4 per cent for the Middle East and 12.9 per cent market share for Asia.
India’s interest in trade and invest- ment with Africa presents a significant opportunity for growth and integration of the Sub-Saharan continent into the global economy. Since 2000 there has been a massive increase in trade and investment flows between Africa and Asia as a whole. Today’s scale and pace of India’s trade and investment flows with Africa wholly unprecedented.
China and India are pursuing commercial strategies with Africa in terms of investment that are far more than resources. Industry veterans spoke to CARGOTALK about the African market, trade opportunities with India, challenges and more.
Bharat J Thakkar, Co Founder & Joint Managing Director, Zeus Air Services
Africa’s growth in the air freight industry is expected to be around four per cent in the next few years. The government has identified certain sectors of India namely transport equipment, pharmaceutical products, machinery exported to African countries. The government is also providing certain fiscal benefits to EXIM to explore these markets. India Africa bilateral trade during 2012-2013 was over $70 billion and target set for 2015 is $90 billion. While exports from India to Africa grew by over 18 per cent, imports from Africa to India registered a decline of over 6.5 per cent. During the meeting of India-Africa Business Council (IABC) at Johannesburg, a concrete action plan was recommended for strengthening sub regional and pan African levels for investment in technology transfer for small industries.
Shantanu Bhadkamkar, MD, ATC Group & Chairman,
The Export Import Bank of India sanction Lines of Credit (LOCs) for the East/West African Community (EAC) and is likely to strengthen India’s position as the top exporter to a region considered a virgin territory for investments and infrastructure development, and as a gateway to rest of Africa. Imports into India from Africa include minerals/ores, base metals, normally moved by sea route. The LOC will be used for sourcing of goods and services from India. Under the LOC, Exim Bank usually reimburses 100 per cent of contract value to the Indian exporters, upfront upon shipment of goods.
Ravinder Katyal, Director, UTI
Taking everything into account, Africa business is growing fast but majority of growth is coming through ocean as compared to air due to many project businesses or movements. IT, engineering, gas and oil, auto and infrastructure/project movements are the key opportunities to increase trade between two countries. Telecom sector has good demand in the country with the purpose of increasing Indian exports. Reliable solutions, carrier options and competitive pricing in air cargo are the main challenges freight forwarders are facing while moving cargo to and from Africa. We still need to have more reliable and direct solutions for expected growth between the two countries.
Keku Bomi Gazder, Regional Director – Cargo Indian Sub-Continent, Saudi Arabian Airlines Cargo
The African cargo market is growing exponentially. Earlier the markets of East and South Africa dominated the inbound loads. However, today the demand for destinations to West Africa has grown by leaps and bounds. Traders from Africa can be seen in many Asian countries today seeking deals for import of both consumer and luxury goods driven by strong economic growth in their home country. The scope of trade between India and Africa is immense. Most of the estimates point towards a trade growth of between 17-19 per cent between the two countries primarily driven by the pharma product. Although while moving cargo to and from Africa, we face several challenges like currency fluctuations, change in import regulations and delayed remittances.
Cyrus Katgara, Partner, Jeena & Co.
Africa is truly one of the fastest growing air freight markets and Indo-Africa trade has been traditionally strong with historical ties. Presently the trade basket is quite varied with major contribution from pharmaceuticals, consumer goods like FMCG and power equipments for infrastructure. Indo -Africa project trade is heavily reliant on the trade finance from Exim Bank of India and World Bank aid because of lack of the regulatory issues and legal infrastructure in most African countries. The political instability across the continent is also detrimental for the business between Africa and India. The scope of growth of trade between both the countries is immense as many Indian pharmaceuticals are already supplying both therapeutic as well as generic drugs to Africa. It is also very big market for vaccines because of the tropical disease.
Samar Nath, CEO, DHL Global Forwarding
Africa is definitely a high potential market for air freight, especially when the share of life sciences and health care and chemicals into this continent from India has seen an encouraging growth in the last decade. India and Africa are strategic business partners. As Indians we are heavily invested in this continent across various business verticals with investments to the tune of $60 billion in the pipeline. Although, each country in Africa may have a different regulation for the same cargo. Serving in many of those landlocked countries can be very challenging if one does not understand the terrain and typography of logistics needs as it has limited infrastructure and support over land movements.
Gurmeet Singh, Regional Manager-Cargo, Namaste
Africa has a strong “hub and spoke” market, with airports in cities such as Johannesburg, Nairobi and Cairo, which have strong infrastructure, acting as the “hubs”. The logical next step for African air cargo is to expand these airport hubs, particularly within the eastern coastal cities, to ease cargo flow from Asia across Africa. Asian imports to the continent will be the principle driver for growth of African trade with Asia. The rising demand for consumer goods, particularly in India and China, will boost air trade growth in the Asia to Africa direction.The growth in African exports to India in the last few years is largely driven by large unmet domestic demand for natural resources reflecting growing industries as well as increasing consumption by households. Petroleum is the leading commodity, followed by ores and metals.