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Africa has traditionally been weighed down by poor infrastructure. Starting a business on the continent that requires warehousing of goods can be a huge challenge and a massive cost on a company’s balance sheet. But Geoffrey White, CEO of Agility Africa, says his company is planning to build warehousing complexes across Africa that will provide businesses with an easier, more low-cost platform from which to launch on the continent. The company has already built a warehousing park in Ghana with plans to expand to 50 African countries. White spoke to BizNews along the sidelines of the WEF event in Durban. – Gareth van Zyl
This podcast is brought to you by RMB. I’m at the second day of the World Economic Forum for Africa in Durban and I’m speaking to Geoffrey White, who is the CEO of logistics and infrastructure company, Agility Africa. Geoffrey what are your impressions thus far?
I think it’s always a very useful collection of people coming together to discuss macro ideas. What’s encouraging is an increasing focus on looking at tangible results to come out of the process, rather than just topical discussions.
Right, so instead of just putting together plans and blueprints, actually putting those plans and blueprints into action.
Absolutely, I think if you look at all the sessions now, everybody’s focused on how do we actually execute and implement.
You head up Agility Africa; can you tell us more about what your company does?
Agility is one of the leading logistics companies globally. We do just over $5bn in revenue and we build infrastructure and provide logistics to a range of companies. We have 65,000 clients globally and do end to end integrated logistics solutions.
You were telling me earlier that your company’s busy building a whole set of parks or planning to build some parks in Africa?
As a company we have logistics parks or warehousing parks all around the world, so we have nearly 20 million square metres of warehousing and logistics parks from Singapore to Beijing to New York to London to the Middle East and what we’ve seen from our customers and what we’re seeing from the market demand, is there is a huge need across the whole of Africa, really above South Africa. South Africa is better, but for the rest of Africa, to get quality warehousing capability to support the growth of business.
What is the current state of warehousing in Africa?
Yes, it’s a step change, it’s not building hugely deluxe warehouses, but it’s a huge step change on what’s in the market now. It was interesting, when we researched our programme of investment and decided how we were going to structure it; it’s interesting how many multinationals said they weren’t going into the African marketplace. They now understood the African market, they were keen to be in the opportunity, but they weren’t executing a business plan and moving in because there wasn’t any decent infrastructure to support their business plans.
What are some of the challenges that you face when setting up this infrastructure? Africa is well known for its bureaucracy and its red tape.
From our perspective, an awful lot needs to be improved and fixed in Africa. We’ve chosen one little piece of that jigsaw puzzle to try and improve the whole flow of logistics and that is building warehouse capability in a secure environment where the power never goes off, the IT never goes down, and you can actually, if you’re a tenant you can focus on doing your business rather than trying to get the light switched on two days a week. It’s amazing how many big companies still struggle with finding that environment. Therefore, we’re creating that environment that we believe is just a platform for people to be able to do businesses and that’s applicable to two clear markets. We’ve just opened the first project at the end of last year in Ghana and that’s sort of ticked the boxes and verified that what we’re doing has a real market appeal.
Interestingly, there are two distinct markets that are interested. One is, multinationals who want to go in and deal in the continent and what we’re able to do by providing the right infrastructure for them to come and do final assembly and set up their operations, their investment decision changes fundamentally. So, instead of saying, “Right, to go into the Ghana market is $4.5m”, if they’re coming into proper infrastructure that’s already there, their investment decision to go into the Ghana market is $500,000 rather than $.4.5m because they don’t have to build their own infrastructure. So that attracts multinationals to come into the market an awful lot quicker and easier.
Then I think, possibly a bigger market is developing the SME sector locally in countries. We have an SME programme where we will rent you space of international quality standards that doesn’t require you to have a huge balance sheet; it doesn’t require masses of financials. Basically, you pay three months rent and you’re in the door, so exactly the same proof of concept from a Ghana perspective. We had a small company that was a consolidator of agricultural produce, had been trying to break into the international export market, had been struggling because they didn’t operate from the right premises.
They had been to a South African bank to borrow $3m to build their own infrastructure, the South African bank had said, “Yes, no problem we’ll lend it to you, but we’ll lend it in cedis and we’ll charge you 29% interest for it”, it was unviable option. As opposed to that, they’ve now come into our units and having now got into proper infrastructure that we bottom paid for and they pay three months deposit to come into, they’ve opened up their international export business and their challenge now is working capital and meeting the demands of the international retailers that they’re buying from.
It’s a very interesting concept, it’s like infrastructure sharing. We see it in the telco space where you have a provider who will come in and build the pipe and then different service providers will jump on top of that and sell the service. Is this a similar concept?
It’s very similar. As a company, we believe in the demographics, the urbanisation, what’s happening and the macro trends of striving Africa’s GDP from $3 trillion to $7 trillion, we think that’s a market that’s wide open. We’re prepared to commit capital to actually build these infrastructure projects. A key component to that is building a network. When we talk to our customers, we want to be able to move goods from Nigeria to Togo to Ghana to Cote d’Ivoire to Senegal and across the economic trade blocks. They want to be able to do that with tractability, traceability, and understand that their goods are going from one set of infrastructure to the same quality available in each of the country markets.
What is the long-term plan? You’ve started in Ghana, are you going to build nodes across the continent?
Absolutely, so we’ve identified 50 locations across the continent. Phase one was Ghana as a proof of concept, that’s open. We’re now in phase two in Ghana because phase one is full. We’ve just bought a site in Abidjan in Cote d’Ivoire, we’re closing a deal in Senegal, in Nigeria, and Angola, we’re still looking at Tanzania, Mozambique, and the idea is exactly that, to have a network that connects across the country. One warehousing complex in Ghana isn’t an African logistics solution. When you get 15, 20, 30, 40, 50 of these, all interconnected, all offering international standards, all offering warehouse management systems, that’s a real solution for many people.
Are you looking at South Africa?
South Africa’s actually quite well developed and quite sophisticated from a logistics perspective. As Agility, we have a very active company here that does a lot of logistics in and out of South Africa, but for this infrastructure play, it’s really above South Africa, the needs of a solutions development.
Trade and the state of the African economy has been a mixed bag. You have falling oil prices in recent years that have hit economies like Nigeria, South Africa was hit by political tensions, but there have been some success stories like Cote d’Ivoire, what do you make of it all?
I think, as you say, there are peaks and troughs, but overall, if you take the oil economy, that’s Angola, Nigeria, and set them aside because they’re in a very special place which is an international collapse in the price of oil (it is slowly recovering and both of those countries will come back online in the next 18 months and get more positive), the rest of Africa is still delivering 6%, 7% growth. That’s world class; you don’t get that in other markets, so from our perspective we’re very bullish. You’re not investing in Africa nowadays about a buck tomorrow, you’re saying, “This is a sustainable long-term investment programme, that if we can build a network of distribution parks across the whole continent, is a really solid business model over a 15 year business plan.
Geoffrey thanks a lot for chatting to me today. This podcast was brought to you by RMB.
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