Name of Department and/or Name of Presenter

Logistics Solutions for New Territories – A Growth Plan for Africa

Ingo BrauckmannAmsterdam, Feb 6, 2013

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10% …

What Do You Think When You Hear the Word “Africa”?

Source: EMNID research 2010, 1002 participants > 14 yrs in Germany

7% …

8% …“Something beautiful …”

10% …

becauseof …

15% …

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and 47% …

What Do You Think When You Hear the Word “Africa”?

think about hunger …

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In Fact It Is a Continent Full of Contradictions …

vs.

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Why Is Africa in Focus?

With largely positive economic and business indicators, Africa is currently experiencing growth similar to BRIC a few years ago

Source: MRSC, McKinsey “Lions on the move” 2011, Ernst and Young “Africa Attractiveness Survey” 2011;1) Real GDP 2011: IN = USD 2.0tn, BR and IT = USD 2.4tn, UK = USD 2.6tn, FR = USD 2.8tn; 2) ET, MZ, TZ, CG, GH, ZA, NG; 3) CAGR 2011–2015

• Africa’s collective GDP will grow from USD 1.6tn in 2008 to USD 2.6tn in 20201)

• Between 2011 and 2015, 7 of the 10 fastest-growing economies will be African2)

– Annual GDP growth of 7–8% (incl. TZ, GH, NG)

– Bigger than RU growth of 4%3)

Emerging Economies

• Africa’s population will double, from one to two billion, over the next 40 years

• In 2020, Africa’s consumer spending will reach USD 1.4tn– Almost twice as much as RU today, with

USD 876mn in 2011• By 2030 over 40% of the total population will

live in a city

Fast-growing Consumer Markets

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Emerging Economies

Fast-growing Consumer Markets

Changing Business Environment

Summary

Source: MRSC, McKinsey “Lions on the move” 2011, Ernst and Young “Africa Attractiveness Survey” 2011

It is Africa’s time

The business environment is truly changing

Why Is Africa in Focus?

• A generation ago, the BRIC accounted for 1% of African trade– Today they make up 20%, and by 2030 the

rate is expected to be 50%• Intra-African trade increased from 6% to 13%

of the total volume• There are 20 African companies with revenues

over USD 3bn

Changing Business Environment

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• Western countries and CN have high demand for abundant natural resources in Africa

- 10% global oil reserves

- 40% global gold reserves

- 80–90% global chrome and platinum metal groups

• Access to African resources has increased since recent liberalizations

• Political instability remains a threat to growing business in countries (e.g. recent terrorism in NG)

Companies mainly move operations to Africa for access to resources

Source: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street Journal

Why Do Business in Africa?

Likelihood in short

and medium term

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Companies also move to Africa for the growing domestic demand

Source: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street Journal; 1) $PPP 2005

Why Do Business in Africa?

• Household consumption expenditure as high as 70%

• Emergence of sizeable middle class: 128mn households with income >USD 5,0001)

in 2020 vs. USD 85mn in 2008 – rivals the middle class in CN and IN

• This middle class is keen on consuming more (incl. food, beverages, consumer durables, mobile phones, etc.) and gaining access to property

Likelihood in short

and medium term

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Contrary to West-2-East moves, it’s NOT for lower production costs

Source: Inhouse Consulting, Expert interviews, McKinsey “Lions on the move” 2011, The Wall Street Journal

Why Do Business in Africa?

Likelihood in short

and medium term

• Workforce is large and cheap, property inexpensive; however

- Labor is relatively unskilled

- Poor infrastructure limits manufacturers’ ability to produce locally for export

- Difficult access to power supply reduces competitiveness (e.g. in KE)

• Manufacturing in Africa is interesting

- For bulk/heavy products meant for domestic market

- If required by regulators for domestic sales (e.g. drugs) Likelihood in short

and medium term

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Views on Growth Potential in Africa

Conclusions of the ‘Grow Africa’ project

Source: Inhouse Consulting

Growth in Africa is sizable and sustainable

Customers (Western Multinationals) are focusing on Africa

Competitive landscape provides room to grow

Risk relatively high in Africa; however, mitigation possible

Logistics companies need to seize the growth opportunity

It’s time to Grow Africa

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Source: Inhouse Consulting, Expert interviews

Lack of knowledge is hindering global players entering African markets

Typical Customer Maturity Path of Western Players

Global companies start a footprint in Africa by leveraging existing distributors.

Test

Commencing in just one or perhaps a few countries (often South Africa).

Enter

Supply chains of both types of players become increasingly complex.

Expand

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DGF

DSC

DGF & DSC

• 8 countries• 5,503 Employees• 146 operational locations• 591,700m2 warehousing• Fleet of over 1,100 vehicles• Regional offices: Dubai & Nairobi• MEA Head Office: Johannesburg

• 54 countries• 1,500 employees• 58 terminals• 6 highly secured locations

Current Footprint

DHL Supply Chain & DHL Global Forwarding

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Risk-Reward Curve

Capturing growth in Africa relies on a company’s willingness to invest – hence take risks.

The Way Forward – Alternatives

Choose between ‘the status quo’ and different levels of investment

Growth directly linked to a willingness to take risks

Continue As-Is

1

Support Sales Push

2

Invest in Capacity

3

Ris

k

Potential

1 2 3

• Secure existing business • Continue with existing

development activities

• Invest in additional sales/ business development resources

• Build up local expertise

• Speculatively invest in infrastructure e.g. multi-user warehousing

• And/or acquire local players

Capturing Growth Opportunities in Africa

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Focus – Priorities sectors and sub-sectors with high and sustainable growth, as well as relevant logistical needs

Where to “place our chips” – given limited financial and human resources – to harvest most growth?

Target – Continue identification of global players entering/growing in Africa and select few customers DSC should “bet” on

Which customers do we believe will enter and successfully expand in Africa, ready to grow together with us?

Advise – Continue to leverage DHL local expertise of business practices in Africa to help customers with limited local experience

How and when should we engage with customers to influence their decision to enter/ expand in Africa?

Invest – Further build up capabilities to meet requirements of customers expanding; leverage possibilities for cross-selling in other countries

How can we make sure that we are capable to capture growth opportunities when they arise?

Source: Inhouse Consulting

DHL Supply Chain should continue to position its knowledge of Africa and act as advisor to customers wishing to enter the market

How Can We Grow the Business Footprint in Africa Together?

Action Consider

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A unique opportunity

Lessons & Key Messages

• Africa demonstrates obvious potential

• The time to act is NOW

• Opportunity to build a collaborative

infrastructure from scratch

– Retail and Consumer business divisions

(e.g. Carrefour)