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There is a lot more to doing business in fast-growing markets than meets the eye.

Published on: 31-Jan-2015

                                                           Interview: Peder SondergaardHead Africa-Middle East Region

APM Terminals operates a Global Terminal Network which includes over 23,000 employees in 68 countries with interests in 69 Ports and Terminal facilities and over 170 Inland Services facilities. In Africa, operations include a large and diverse portfolio of 9 container ports in 8 different countries with several port and terminal facilities currently undergoing expansion.

Can you tell me briefly what APM Terminals is about?
Our ambition is to become the leading port operator in the world. APM Terminals is part of a larger company: Maersk Group. We have been operating as an independent company since 2001. In 2004 we decided to move our company and the headquarters from Denmark to The Hague, the Netherlands. Today we are present in all the main markets, including Europe, the Americas, Asia and of course Africa. Our growth strategy is primarily focused on fast-growing, less mature, markets. Africa is a quintessential example. We became active there in 2001, building on the decades-long presence of Maersk Group. As such we feel very welcomed and familiar in Africa.

Most of the ports you operate are located in the west of Africa. Just a few are located in the east. What is the reason for that?
First of all, governments in West Africa are ahead of the curve in terms of commercialising ports. In many countries in West Africa, there was a transition when governments found that ports were better handled by commercial parties. By contrast, in East Africa there have been only a few select places where that transition has taken place. Though the coastline and geography are roughly the same size, the size of the market in terms of volumes, containers, et cetera is much bigger in West Africa. Consequently, there are fewer large ports in East Africa. There are simply fewer private parties involved in running ports. Secondly, the market in West Africa is much bigger than in East Africa.

Africa is growing. Can you describe the effect of the ‘rising continent’ on your work, the ports?
Strong economic growth means African countries have benefited from privatising their ports. These companies have increased the capacity of the ports dramatically over the last 10 years. Yet much of the infrastructure for transportation was built back in the 1960s, making it quite outdated. Ports are typically located in the middle of big, usually congested, cities. We are currently looking into how we can optimise these existing ports. However, there is a limit to what we can do and at some point governments will have to take the decision to relocate. That is not where Africa is today, but it is where we are heading. In the future we will see that new ports will be built away from capital cities, with new infrastructure for bigger ships.

Local content is now an important element in doing business in Africa. Can you tell a bit more about your business approach in terms of local content?
Our approach is that during the upstart phase, foreign experts come into these places to upgrade the local workforce. The effective transfer of knowledge hinges on a productive balance between foreign experts and local leadership. Typically, 80-99% of the employees are local. Safety is the key focus area. We often take over existing facilities, including existing practices and habits, and safety-wise they are typically not up to our standards. Ports can be a hazardous environment without appropriate regulations. One typical example of lacking safety standards, is that there is no institutionalised system for admittance to the facility. So, one of the first things we establish, is who is permitted to access the port.


What are the developments taking place in Africa?
We see three main developments. One trend is the upsizing of ships, mainly in West Africa. The economies of scale and the growing market create the possibility and opportunity to fill these bigger ships, which results in a decrease in shipping costs per unit.

The need to service these bigger ships fuels the drive for relocation and upscaling of ports. Countries with new ports that can handle the bigger ships are probably well positioned to gain advantages in the coverage of hinterland and potential transshipment. In cooperation with the Nigerian government, APM Terminals and its consortium partners are currently developing plans for a Greenfield port in Badagry, Nigeria. This mega-project meets the needs that are created by this trend, can accommodate a large range of products and aims to service the high-growth market that is West Africa.

Secondly, we see a number of countries in Africa starting to increase their export, with international and local companies setting up the aggregation or assembly of manufactured goods and then distributing it to neighbouring countries. Today, the dominant part of African trade is still import, largely driven by consumption as well as project investment (from windows and doors to more advanced products), while export tends to focus on commodities. The shift towards exporting manufactured goods is still relatively small but, particularly in Nigeria, we see it growing. I think we will see that trend develop further.

Thirdly, Nigeria is also at the forefront in the use of online tools. Customers can use a track and trace system for their cargo. They can receive and pay their invoices electronically. That is a first in sub-Saharan Africa. 70% of our import customers are using these tools. This highlights the need to focus on and try to improve the entire logistical pipeline. There is a lot more to delivering goods from point A to point B than just the port. 

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