Trade between the two huge emerging markets that are China and Africa has faced a number of significant hurdles this year, including political conflict, a viral pandemic, economic slowdown and the decline of oil prices. But the trade lane has actually performed better than one might have expected.

“Globally, MSC has had a good year in the China-Africa market,” says Caroline Becquart, senior vice-president of MSC. “Despite challenging market conditions, mainly on account of the oil crisis since many African countries’ budgets depend on the barrel price, we’ve achieved solid growth in every market in Africa.”

Maersk-owned Safmarine, which specializes in African shipping, has also maintained volumes similar to those in 2014, but says that the drop in oil prices has had knock-on effects on the foreign currency flows into and the buying power of West Africa.

“Close to a third of all our imports into Southern Africa originate from China, making it one of the most important trades,” says Gregory Marshall, Africa key account manager at Safmarine. “For the first half of the year, volume has only been marginally down into Southern Africa, despite very tough market conditions. The depreciation of the rand and other local currencies in the Southern Africa region has put some pressure on imports as some sourcing shifted to more competitive markets.”

It’s not just sea freight that has had a difficult year. South African Airways, which cut its flights to Beijing at the end of March 2015, now only flies daily to Hong Kong in China with a mixture of Airbus A340-300s and A340-600s, a route which experienced a decline this year.

“SAA Cargo’s performance so far in 2015 has not been as good as last year due to a reduction of capacity,” says Nely Kusmin, regional manager for Asia-Pacific and the UAE at South African Airways Cargo. “SAA operated more A340-600 aircraft last year compared to this year. Load factor out of Hong Kong is still above 90% and market share to Southern Africa is about 16%, while market share to the whole of Africa is less than 6%.”

Kusmin says the most common types of goods carried on the Hong Kong flight are electronic products and parts, communications equipment, sim cards, mobile phones from Chinese brands, tablet computers and other accessories. The main origins and destinations are mainly countries in the Southern African region such as Angola, Botswana, Mozambique, Namibia and Zambia.

Another complication was the outbreak of the Ebola virus in West Africa in 2014, which continued into 2015. “We did experience slight decreases in volume into and out of Africa,” says Marshall. “But more significantly, we had to change our vessel deployment to adhere to the various country restrictions around Ebola and further safeguard our West African customers, crew and vessels.”

Becquart says that MSC’s volumes also dropped, and although they are starting to pick up again, they have still not yet recovered back to the same levels as before the crisis.

Increasing Chinese investment in African infrastructure is a driver of growth for MSC. “China is building the Africa of tomorrow,” says Becquart. “As carriers, we have many opportunities to take part in these big projects by moving all the necessary goods and equipment for building the infrastructure which is needed for future trading across the continent.”

The main trend in African shipping that Becquart has noticed, which is true for the rest of the world, is that larger vessels are now being used, similar to Asia-Europe some years ago.

“MSC is the leading line in this respect,” she says. “With our Africa Express service, we are deploying 9,000 TEU ships, which are the largest to serve the African continent. We believe our way to service Africa will also set new trends.”

In 2015, MSC launched the Lomé Container Terminal in Togo, which the carrier is expecting to become a major hub for the region. MSC’s African services call at Port Louis, Durban and Lomé, where cargo is discharged and loaded onto smaller feeder vessels.

“We believe this approach will benefit all parties involved,” says Becquart. “It reduces congestion, which is good for ports; reduces transit time, which is good for customers; and also reduces our slot cost, which is good for carriers.”

Some of the problems facing air and sea freight operators in Africa are similar to those being experienced in other regions around the world.

“One major challenge will be yield dilution, as global air freight demand has been weakening but there is still overcapacity in the market,” says Kusmin. “Also, more carriers are operating directly out of China and offering huge capacity into Africa, so we will need to look at other markets to route via Hong Kong to close the gap.”

For Safmarine, an oversupply of capacity and low rate levels continue to pose difficulties. “To this end, we will continue to work with our partners to become cost-efficient whilst also making the necessary investments in our people and systems to gain further efficiencies both on the sea and in our day-to-day operations,” says Marshall.

On a separate but somewhat related note, Marshall says that there are still some operational aspects that are affecting the development of Safmarine’s network in Africa.

“We continue to work with private and government-owned stakeholders to ensure depths in our major African ports are increased to accommodate larger and more economic vessels,” he says. “On the landside, we work with our terminal and port operations partners, both in the private and public sectors, to increase the efficiencies involved in the loading and offloading of vessels as well as the dispatching of containers to our final customers.”

Carriers have also had to factor in macroeconomic issues and low fuel prices.

“Even though GDP growth in Africa remains above the levels of more mature markets, imports are suffering from the current oil crisis,” says Becquart. “Indeed, currency depreciation is making it difficult for local importers to do business. Main examples are Nigeria and Angola, two major economies that suffered in 2015.”

MSC, which is already present in 40 countries in Africa, sees a challenging and competitive market across the whole continent in the short term.

“However, over the longer term, we believe Africa will recover with a strong growth and become a major player in the shipping world, whether in exports or imports,” says Becquart. “We believe strongly in the potential of Africa and we want to be part of its development.”

By Jeffrey Lee

Asia Cargo News | Hong Kong