Hapag-Lloyd: Better connected to, from and within Africa by theafricalogisticsjournal

APRIL 2021

THE

Africa Logistics www.theafricalogistics.com

Better connected – to, from and within Africa

Savino Del Bene

Decarbonizing Transport

Boosting Electric transport in East Africa

Accelerating Africa’s Industrialization through successful SEZs

Hamburg is our home. So is Africa. For more than 170 years Hapag-Lloyd is connecting markets, countries and people. We are among the Top Carriers serving the African Continent – enabling the respective countries to strongly participate in World Trade. With 13 Services to and from Africa, we cover 17 different ports in the Region. That’s why we are proud to call Africa our home.

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EDITORIAL

Supply Chain challenges in COVID-19 Vaccine Rollout With the world in the midst of a massive COVID-19 vaccine rollout, and with the effort expected to gain more momentum over the coming months, the pharma supply chain is being asked to flex and adapt in this unprecedented environment. From the manufacturers that are producing the vaccines to the distributors that are managing the logistics to the carriers that are transporting the injections to their final destinations, all links in the supply chain are under extreme pressure to perform right now. This is a whole new world for many pharma supply chain operators. “Prior to COVID, the pharma supply chain wasn’t really exposed to the non-logistics/pharma world,” Trimble Transportation’s Chris Orban told Supply & Demand Chain Executive. “Drugs were produced, got to their final destination and distributed. A major product launch was still a big deal, and carriers had protocols and security requirements to follow, but it didn’t receive the sort of scrutiny that has appeared during COVID-19,” Orban continued. “As with many other areas of our world, COVID-19 has shown both the vulnerability of our way of life, and the power of our supply chain to succeed and deliver when it could have failed.” Similar to what’s happened in many other industries, the ongoing globalization of the pharma supply chain has introduced new complexities during the vaccine rollout. Much like automakers work with suppliers from around the globe and wholesale distributors sell to international client bases, the “flattening out” of the world presents new challenges for all companies participating in the supply chain. “Over the past two decades, pharma supply chains have steadily become more globalized,” Susan Beardslee of ABI Research told S&DCE. “Various steps of the drug manufacturing and distribution process occur in different parts of the world, for example, a medicinal crop might be farmed and harvested in Australia, processed in India, combined with other ingredients to form a

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final drug at a plant in Germany, and distributed to hospitals or pharmacies in the United States.” The current vaccine distribution challenges and their impacts on the supply chain should come as no surprise to anyone familiar with how those networks operate. The effort as a whole is completely unprecedented for modern times, and several logistics experts were openly discussing the potential pitfalls in 2020, before the vaccination effort officially rolled out. Roll out in Africa Africa marked the move from planning to action in the rollout of COVID-19 vaccines at a World Health Organization (WHO)-hosted African Health Ministers meeting on 17 February, as a rapid vaccine rollout is expected in the wake of the WHO listing of two versions of the AstraZeneca-Oxford COVID-19 vaccine for emergency use. In a significant step forward for the African region, national deployment and vaccination plans for COVID-19 vaccines from 35 low-income African countries eligible for free vaccines from the COVAX Facility have been accepted by an independent regional review committee. The plans are required for countries to receive vaccines from COVAX, the global initiative to ensure fair access to COVID-19 vaccines led by WHO, Gavi, the Vaccine Alliance, and The Coalition for Epidemic Preparedness Innovations (CEPI). While the regional committee of over 100 experts from six leading global public health bodies certified the deployment plans, it called for more work on setting up systems to manage the logistics and supply chain for vaccines, reaching refugees, migrants and internally displaced people and financing national vaccination campaigns. “Africa is revving up to rollout COVID-19 vaccines. These thorough vaccine preparation plans will help ensure African countries can hit the ground running in quickly immunizing the most vulnerable people. Meticulous planning is key to ensuring vaccines reach all priority groups, wherever they are, in every single African country,” said Dr Matshidiso Moeti, WHO Regional Director for Africa.

DISCLAIMER: The publisher does not accept responsibility for the accuracy or authenticity of advertisements or contributions contained in the journal. Views expressed by contributors are not necessarily those of the publisher. © All rights reserved. No part of this publication may be copied or reproduced without prior permission from the publisher. Circulation Ken Kilozo Robert Kimani Marketing Executives George Otieno Liz Kyalo

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inside ...

UNEP boosts electric transport in East Africa

COVER STORY

17 Connecting the World Across Oceans

NEWS & FEATURES 6.African airlines staring at bankruptcy

7. Lamu Port Set To Start Operations By June 8. IATA Launches EPIC to Enhance Digital Collaboration Across Air Cargo

9. New direct service links Port of Gothenburg to South Africa and Oceania 11. ENGINE: Europe & Africa Bunker Fuel Availability Outlook 13. No clear route to market for newly discovered South African gas fields

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OPINION

Mozambique Channel May Become the Next Maritime Security Hotspot

Africa goes Digital

IATA says 2020 was worst year in history for air travel demand

36 The East African Crude Oil Pipeline doubt

Accelerating Africa’s Industrialization through successful SEZs

Preferred financing sources for SEZs in Africa should hence come from lending institutions able to provide long term maturities and grace period on capital repayment during the project’s initial years. www.theafricalogistics.com

NEWS

African airlines staring at bankruptcy

frican airlines are staring at bankruptcy if their liquidity crisis is not addressed with urgency, a new survey has shown. The survey by The Economic Commission for Africa (ECA) and the African Airlines Association (AFRAA) reveals that Indeed, a number of airlines around the world are already insolvent. In Africa, for instance, Air Mauritius has entered into administration. But the report dubbed Policy research paper Covid-19 and African airlines overcoming a liquidity crisis’ also observes that some carriers on the continent were already struggling prior to the spread of COVID-19. South Africa is the worst-hit country in the continent in the air travel business so far with a loss of $3,020 followed by Nigeria losing $994 and Ethiopia has lost $430 due to disruptions caused by Covid-19 pandemic. Given the importance of air transport to economic development and job creation, many countries have bailed out their ailing carriers. For example, the German Government has provided a bailout package of 9 billion euros to Lufthansa. In the United States of America, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act is a stimulus bill that includes a $61 billion relief package for United States airlines. Unlike in Africa, governments in other parts of the world have provided relief packages for their airlines, including direct support, loans and loan guarantees, issue of equity, and waving of rents, among others. In addition, the European Union Commission has put forward proposals that include relaxation of the air carrier licensing rules in the event of financial distress caused by COVID-19, and a simplification of the procedure regarding the restriction of traffic rights. The Africa Logistics

“While there are various COVID-19 support initiatives in Africa, at both national and regional levels, airlines on the continent have generally received no direct financial support from their governments, unlike those in the United States of America and Europe,” the report reads in part. Out of 16 airlines that responded to the ECA-AFRAA survey, 15 provided information on their indebtedness in 2020 and 2021. The total aggregated debt of the airlines for the two years amounts to $3.2 billion. There are significant differences in the debt level of the airlines, which indicates their heterogeneity in terms of size and ambition. For instance, the financial commitments of three airlines overshadow those of the others. These three have aggregated debt, respectively, of $1.8 billion, representing 56.3 per cent of the total commitment of the 15 airlines that provided the required information; $423 million, or 13.2 per cent of the total commitment; and $399 million, or 12.5 per cent of the total commitment. Each of the other airlines have commitments of less than $100 million. It is a big challenge for the airlines to meet these commitments in addition to their operational expenses at a time when they have incurred heavy revenue losses due to the collapse of passenger flights. It is therefore not surprising that expansion plans involving the purchase of aircraft have been put on hold. The report recommends that governments and airlines to optimize the use of development finance institutions such as the Africa Development Bank to stay afloat even as the future remains uncertain.

NEWS

Lamu Port Set To Start Operations By June

amu port is set to begin clearing Ethiopian cargo by 15 June this year, according to multi agency team steering the project, Kenya News Agency reports. Speaking after an inter-agency meeting in Garissa, LAPSSET chairperson Maj Gen (Rtd) Titus Ibui, said following the meeting between President Uhuru Kenyatta and Ethiopia Prime Minister Dr Abiy Ahmed late last year at official inspection tour to Lamu Port Project, the government is keen to complete the project and start clearing Ethiopian cargo from Lamu port. “We travelled by road from Mombasa to Garissa to inspect the project. The progress is good. The road between Lamu and Garsen is complete,” Ibui said. “We have contractors on the ground in other areas to make sure by June we will have our first exports to Southern parts of Ethiopia, Hawassa Industrial Park and Adama Industrial Park which specialize in textile, motor vehicle assembly and food processing,” he added. The team through, Kenya National Highways Authority (KeHNA) Chairman Engineer Wangai Ndirangu said the government has allocated Sh17 billion to repair the road for effective transportation of goods. Ibui however said that the Lamu – Garsen – Garissa road is an alternative route until the completion of the railway, pipeline and road project. Garissa Governor, Ali Korane said the county government would fully support the project which

covers 400 kilometers stretch within Garissa County. “I fully support this project because it will help our people. The county government will provide land, waive cess for construction materials and provide security for smooth implementation of the project that will turn this region into a major economic hub,” Korane said. He urged contractors of the project to source labour from the locals in the area to boost their income especially among unemployed youth. According the team, there will be resting places after every 100 kilometers including Hindi in Lamu, Hola and Madogo in Tana River County. Present were Kenya Ports Authority Chairman Maj (Rtd) Joseph Kibwana, Kenya Railways Corporation Chairman Maj Gen (Rtd) Pastor Awita and acting Commissioner for Customs and Border control Pamela Ahago. The LAPSSET Corridor Project embodies Kenya’s dream of becoming a newly industrialized middle-income economy by 2030. The Project is intended to facilitate regional integration and interconnectivity within the African continent, through Regional Infrastructure, Social and Economic Development. Kenya and Ethiopia have come a long way in developing the LAPSSET Corridor Project, having various bilateral agreements.

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NEWS

IATA Launches EPIC to Enhance Digital Collaboration Across Air Cargo

he International Air Transport Association (IATA) today announced the launch of the IATA Enhanced Partner Identification and Connectivity (EPIC) platform to support the digitization of the global air cargo supply chain. EPIC simplifies the complex process of making digital connections across the air cargo value chain including enabling the efficient exchange of critical information such as messaging capabilities and identities. As the air cargo industry continues to digitalize, airlines, freight forwarders, ground handlers and customs authorities need to be able to securely work together digitally. This is a considerable challenge as today more than 40,000 freight forwarders exchange messages with more than 450 airlines, and 23 third party messaging service providers. In the absence of a tool for companies to exchange the information needed to make these business links, the process of digitization is essentially manual, slow and unduly complex. “EPIC is a simple idea. It makes the information needed to do business across a digitized air cargo supply chain easily accessible. And in doing so, it will accelerate efficiency gains for air cargo. The timing of

The Africa Logistics

this initiative is important. COVID-19 has led to exponential growth of e-commerce and shippers are demanding quality services that only a digitized supply chain can provide,” said Nick Careen, IATA Senior Vice President, Airport, Passenger, Cargo, Security. In addition to supporting business-to-business processes, the participation of customs organizations in EPIC also supports digital customs clearance processes. In particular this will help the efficient roll out of Advance Cargo Information (ACI) requirements, including Preloading Advance Cargo Information (PLACI) programs. Implementation notes:

When using EPIC, individual companies retain full control of their data with the flexibility to manage how they connect with respective business partners. EPIC is open for use by airlines (IATA members and non-members), freight forwarders and any third party, intermediary or IT provider in the air cargo business. EPIC has already attracted the participation of 32 airlines, 900 freight forwarder branches, 10 governments/customs authorities, 5 international organizations and 13 third party messaging providers.

NEWS

New direct service links Port of Gothenburg to South Africa and Oceania

tarting on 12 March, the Port of Gothenburg will have a regular direct service to South Africa and Oceania. The Norwegian shipping company Höegh Autoliners will operate the new service, with departures from the Port of Gothenburg every other week. “This direct service is a vital addition for industry, and it will certainly open up new opportunities. Oceania and South Africa are key markets for the automotive industry, as well as the Swedish engineering and construction sectors. This service will give the Port of Gothenburg an extra edge in its industry offering,” said Claes Sundmark, Vice President, Sales & Marketing, Gothenburg Port Authority. The new service will include a call at the Port of Gothenburg every other week, commencing on 12 March. On arrival at the final destination, Auckland in New Zealand, the vessel will return to Gothenburg, taking in ports throughout East Asia. The new service will present further opportunities for Swedish import customers to bring goods into Sweden and Scandinavia. With the new service, goods can also be linked up with other global markets via ports on the continent. Höegh Autoliners currently operates the world’s largest PCTC vessels* with a carry-

ing capacity of 8,500 car equivalent units. Shipments from Gothenburg are expected to include cars, heavy vehicles, construction equipment, and large project loads. “We are working closely with our customers to offer them sustainable transport options and we are pleased to be starting up a service in Gothenburg that will meet freight flow requirements to and from Sweden for the automotive and the high-and-heavy sectors,” said Oskar Orstadius, Chief Sales Officer at Höegh Autoliners. Höegh vessels will call at the Port of Gothenburg transocean vehicle and ro-ro terminal, and the freight will be handled by the terminal operator Logent Ports and Terminals. Scandinavian Shipping Logistics is the liner agent for Höegh Autoliners in Sweden. Fact file: The following ports will be included in the new direct service operated by Höegh: Exports: Gothenburg – Durban – Port Elizabeth – Maputo – Port Louis – Tamatawe – Fremantle – Port Kembla (Sydney) – Brisbane – Melbourne – Auckland Imports: To Gothenburg via ports in Japan, Korea, China, and other countries.

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FEATURE

UNEP boosts electric transport in East Africa

orty-nine motorcycles made little noise but raised much interest in Nairobi’s Karura Forest recently, as the UN Environment Programme (UNEP) launched a pilot electric bikes project in the presence of Kenyan government officials and business leaders. It is a A move that could signal the beginning of electric transport in East Africa. Following the pilot phase in four locations in Kenya, the project is expected to expand in an effort to reduce air pollution, improve national energy security, create green jobs and deepen electric transport in East Africa. “Kenya is importing more motorcycles than cars, doubling its fleet every 7-8 years. These are generally inefficient and poorly maintained polluting motorcycles,” said Joyce Msuya, UNEP Deputy Executive Director. “Kenya’s electricity is very green in 2019 with more than 80% was generated by hydro, solar, geothermal, and wind. Shifting to electric bikes in Kenya, Rwanda, Uganda and elsewhere will reduce costs, air pollution and Greenhouse Gas Emissions, as well as create jobs.” “The average motorcycle is estimated to be 10 times more polluting per mile than a passenger car, light truck or SUV. Hydrocarbons are dangerous to human health,” said Peter Anyang’ Nyong’o, Governor of Kisumu County. “Electric motorcycles not only mitigate against this health hazard but also help reduce noise pollution that the rampant increase of petroleum powered motorbikes currently causes in our cities.” The pilot aims to help policy makers assess the barriers in uptake of the much-needed technological shift towards electric bikes, and to demonstrate that the shift is feasible and within reach. In Kenya, the number of newly registered motorcycles, commonly used as taxis (boda-boda), was estimated in 2018 at 1.5 million and will likely grow over five million by 2030. Though developing countries have the fastest growing fleets of bikes, most lack vehicle emissions standards or programmes and incentives to promote zero The Africa Logistics

emission vehicles. The pilot test launched today in Kenya is based on a study implemented by the Energy and Petroleum Regulatory Authority, the University of Nairobi, and Sustainable Transport Africa. The pilot includes a host of local partners, including ministries, and national and sub-national authorities, and uses bikes donated by Shenzhen Shenling Car Company Limited (TAILG). It will last 6-12 months and is replicated in Uganda, Ethiopia, the Philippines, Thailand and Viet Nam. The overarching project, “Integrating Electric 2&3 Wheelers into Existing Urban Transport Modes in Developing and Transitional Countries” is supported by UNEP with funding from the International Climate Initiative (IKI) of the German Ministry for the Environment. John Chege, infrastructure coordinator from Friends of Karura Forest said, “In my restoration work, the bike will help me move swiftly through the vast forest of over 1000 hectares in a very short period. At first, I was nervous about having to charge it, but now I got used to it. Since it is fast and emits no noise and air pollution like the diesel motor, they allow us to provide better security in the forest and tackle one of Nairobi’s worst environmental problems.” Two- and three-wheelers are a central transport mode in many low and middle-income countries, including African ones, quickly rising in numbers to a 50 percent increase by 2050. Highly polluting two- and three-wheelers can account for the same amount of emissions as a passenger car. A rapid global shift to electric motorcycles can result in saving 11 billion tons of co2 and about USD 350 billion by 2050 (more than double the annual energy-related emissions in the USA and about 14 times the 2019/2020 budget of Kenya). A global leapfrog to electric vehicles, already underway in countries like Norway and China, is essential to curb carbon dioxide emissions. Transportation contributes approximately onequarter of all energy related CO2 emissions. By 2050 it is likely to reach one-third, when the global number of passenger cars is projected to more than double. This growth is expected mostly in low-income countries, where there are rarely any vehicle emissions standards. Scaling up the transition to electric mobility will require investments in battery charging infrastructure. Kenya’s electric power generation capacity is sufficient to support the charging infrastructure. However, while demand for motorcycles is high, particularly in rural areas, distribution networks are inadequate. However, this challenge may be tackled by using solar energy, setting up charging stations, consulting boda-boda operators and using lithium ion batteries. UNEP’s Electric Mobility (eMob) Programme promotes the transition of low-income countries to zero emission vehicles, in line with the UN Environment Assembly’s Air Quality Resolution and the Paris Agreement.

FEATURE

ENGINE: Europe & Africa Bunker Fuel Availability Outlook

unker fuels remain readily available in ports across Europe and Africa, but rough winter weather looks set to disrupt bunkering in several ports across the Mediterranean, Black Sea and South Africa. There is more fuel oil in independent storage tanks in ARA now than on average last year. Inventory levels are high even as refineries continue to curb production. Some European low sulphur fuel oil fuel oil cargoes have been fixed for East of Suez markets. Spiking LNG prices have boosted fuel oil demand from power plants in Japan and South Korea and exasperated the shortage of fuel oil volumes in Asia. Bunker markets in Singapore and Fujairah remain tight amid cutbacks to regional refinery production. Favourable arbitrage economics have increased their appetite for European cargoes. But while more European fuel oil cargoes are bound for Eastern markets, ARA and Gibraltar Strait ports show few signs of limited availability of any bunker grades. VLSFO and LSMGO stems are readily available with most bunker suppliers, and the ports have some of the shortest lead times for HSFO380 stems across global bunker hubs. HSFO380 bookings in ARA and Gibraltar require 3-4 days ahead, which is much lower compared to the 11 days in Fujairah and 1215 days in Singapore. HSFO380 is more limited in the Canary Islands, however, with six days of lead time needed and resupply not expected until April. Strong winds and choppy seas have battered ports across the Mediterranean and Black Sea this week, causing several ports authorities to suspend port and bunker operations. Bunkering was suspended in Ceuta on Monday and again on Tuesday and Wednesday. Huelva suspended pilot services and closed the port on Tuesday. Bunkering was temporarily suspended in Gibraltar at the start of the week, yet there are minimal bunker delays in Gibraltar and Algeciras with no vessels waiting currently, according to port agency MHBland. Moderate gale from the west is forecast in Gibraltar from Tuesday evening through most of Wednesday and could disrupt bunkering then. High wind and moderate gale have limited bunkering to one of Malta’s six offshore bunker locations from Monday. Gale is forecast to strike the island state from the southwest on Wednesday and could hamper offshore bunkering further.

Weather conditions are more conducive to bunkering in the Canary Islands for the next couple of days, but high swell from the north could disrupt bunkering at outer anchorage in Las Palmas on Friday and Saturday. Swell is set to push waves up to heights of 3.6 metres South Africa’s Port Elizabeth on Wednesday. Bunkering at the port’s outer anchorage can get suspended with swell above 2.5 metres. HSFO remains tight in Port Elizabeth and other South African ports, possibly as a result of lower domestic production of the grade. Two of the country’s refineries, making up about half its production capacity, have been offline following explosions and fires at the plants last year. VLSFO and MGO are in better supply and available on shorter notice in South African ports.

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South African gas fields

Market Dilema

he large offshore South African gas discoveries of late represent the potential for vast change in the country, however, as yet there is no clear route to commercialisation for the partners, says GlobalData, a leading data and analytics company. Conor Ward, Oil & Gas Analyst at GlobalData, comments: “The discoveries of Brulpadda and Luiperd offer South Africa the chance to develop significant gas resources and reduce its reliance upon imports. However, Sasol, a state-owned oil and gas company, currently supplies around 80% of the country’s gas demand via its pipeline from Mozambique. Development of South Africa’s newly discovered gas resources face competition from established imports flowing from Mozambique, LNG regasification and a currently unclear domestic gas outlook.” The gas currently being imported via Mozambique is priced at approximately US$6-7/ mcf. GlobalData has estimated a breakeven cost for the potential Brulpadda and Luiperd development of approximately US$3/mcf making it competitive against current imports. As the major Mossel Bay Gas to Liquids plant is running out of feedstock due to depletion of domestic fields, the country will unlikely be able to take advantage of newly discovered resources fast enough to secure supply in the near term. An alternative solution currently being considered is LNG regasification, at least for the near term, as a contract period of just five to eight years has been stipulated in the tender documents. Ward adds: “For the new discoveries to be developed, South Africa will have to transform its currently coal reliant power sector, which in the short term could be achieved through conversion of many of its diesel plants and continued investment into gas infrastructure. “The hurdles to development for Brulpadda and Luiperd are not insurmountable, but timing will be a key factor determining a path to monetization as the discoveries will be unable to alleviate the country of its near-term gas short-

age challenge.” Climate change is the defining challenge of our time, and clean energy and green transport are the keys to addressing it. Less than two decades ago, energy emissions seemed to be spiraling out of control as countries were locked into a debate about who should bear the costs of a green transition. A few years and international agreements later, the energy outlook is more hopeful, with renewable sources helping reduce power emissions by 1.2% in 2019. Decarbonizing energy is heading in the right direction, but transport — the second-biggest global source of greenhouse gas emissions — is in a very different situation. Emissions from transport increased by less than 0.5% in 2019, and although this is an improvement compared with 1.9% annual growth since 2000, transport still accounts for about 24% of direct carbon dioxide emissions from fuel combustion. If we are to keep the global temperature rise below 1.5 degrees Celsius, the time to make green transport the norm is now. At the root of the problem is that transport is a harder sector in which to control emissions than energy. It is highly decentralized with a wide range of actors across many different modes, such as rail, road, air, and maritime. Human behavior plays a larger role in demand patterns and is more difficult to manage proactively. Technological innovation in transport has not been primarily oriented to decarbonization but rather to greater consumer convenience, such as shared riding, with unclear effects on carbon emissions.

FEATURE

Before the COVID-19 pandemic slump, growing economies and expanding middle classes often meant shifts away from public transport toward more and larger vehicles. It does not help that transport also lacks a strong multimodal planning tradition because of institutions and jurisdictions’ fragmentation. Transport’s impact on climate change is plain to see. But addressing it will require a shared international commitment and a high degree of cooperation. This week, the World Bank and World Resources Institute Ross Center for Sustainable Cities are convening leaders in the sector to do just that. Transforming Transportation 2021 will discuss how COVID-19 recovery can be an opportunity to decarbonize the sector by adopting the “avoid-shift-improve” framework. Among other policy tools, this three-part framework aims to avoid unnecessary trips; shift passengers to public transport and nonmotorized transport, as well as freight to railways; and improve vehicles’ fuel efficiency to make lowercarbon modes competitive. Political will, technological tools, and economic incentives are aligned to turn transport’s climate trends around. We should not let this opportunity pass by. The World Bank is already helping countries undertake fossil fuel subsidy reforms and adapt technologies such as e-mobility to their contexts. Innovative initiatives are also on the table, such as regulating the export of used cars — which are, on average, more polluting and less safe — from higher-income countries to lowerincome ones, especially to those in Africa. The World Bank is already helping countries undertake fossil fuel subsidy reforms and adapt technologies such as e-mobility to their contexts. Innovative initiatives are also on the table, such as regulating the export of used cars — which are, on average, more polluting and less safe — from higher-income countries to lowerincome ones, especially to those in Africa. WRI designs practical, evidence-based policies to support cities and countries implementing mobility solutions that promote inclusion, sustainability, and safety, most recently support-

ing the transition to electric bus fleets in dozens of cities worldwide. The good news is that the decarbonization trajectories of transport and energy are interconnected, allowing for mutually reinforcing reforms. Increased diffusion of disruptive technologies such as e-mobility and electric buses means that the power mix’s greening will ultimately lead to cleaner passenger mobility. Moreover, the use of electricity to produce hydrogen fuel cells could enable decarbonization benefits in the heavy-duty vehicle and maritime sectors. Technological advancement in transport will benefit energy, and vice versa. Nonetheless, to realize these new technologies’ full potential, policymakers need to provide adequate incentives and take bolder actions. They should seek partnerships with the private sector and academia across industry boundaries. Thanks to regulatory sandboxes, emerging technologies and business models can be tested at a smaller scale to determine how to craft appropriate policies that will produce sustainable results. Much remains to be done to ensure that the decarbonization of transport systems and infrastructure benefits everyone, especially those with the lowest-incomes and most likely to suffer job and income disruption during the transition. Building greener, more livable, and inclusive cities requires low-carbon transport modes, along with better urban planning and infrastructure that encourage cycling, walking, and improved access to opportunity for more people: shorter, less dangerous commutes; more connections to jobs, health care, and education; and green space. The coronavirus has put many hard-earned achievements — from poverty reduction to climate action — on the line. But it has also opened a brief window of opportunity to help countries rebuild better, addressing obstacles to the lowcarbon, more resilient, more equitable economy of tomorrow. Globally, there are many promising initiatives. In India, the World Bank is helping to convert a 1,360-kilometer stretch of the Ganges into a modern inland waterway that will cut an estimated 162,000 tons of greenhouse gas emissions annually. From Bangalore to Buenos Aires, safer, more extensive cycling networks are providing new ways to get around cities. Across the world, WRI is working to support and revive public transport services in the wake of lockdowns. The bank is also launching an ambitious global transport trust fund facility to support analytical studies and knowledge exchange with a strong focus on decarbonization. To improve air quality and reduce emissions, the International Finance Corp., the World Bank’s private sector development arm, is investing in battery-electric buses and e-delivery trucks. To help cities better understand access to opportunity, WRI is pioneering data analytics that show the impact of transportation investments and policy changes at the neighborhood scale. As the 2021 United Nations Climate Change Conference, known as COP26, approaches and the world looks to a sustainable COVID-19 recovery, there is a unique window to accelerate transport decarbonization. Political will, technological tools, and economic incentives are aligned to turn transport’s climate trends around. We should not let this opportunity pass by. www.theafricalogistics.com

NEWS

he total Ctrack Freight Transport index declined by less than 2% compared to December of the previous year, which is a very good indication of the economic recovery of the trade and transport of goods. The index for the fourth quarter of 2020 showed growth of 5,3% compared to the third quarter. While the growth has slowed compared to the massive improvements seen in the third quarter of 2020, it is still good news. “The Ctrack Freight Transport index shows that the economy is slowly getting back to normal, however, the government needs to ease the restrictions on sectors such as travel in order for the industry to show further recovery, “comments Hein Jordt, Managing Director of Ctrack SA. The Ctrack Freight and Transport Index is still tracking 5,6% below its 2019 high and 7% below its all-time high achieved early in 2018, this shows that prior to the first COVID-19 lockdown the South African economy was already in a recession and until major economic sectors such as Travel and Tourism return to normal, it is unlikely that the Ctrack Freight Transport index will get near those previous record highs. For many decades Air Freight has been one of the fastestgrowing freight transport sectors. Due to the fact that the tourism industry remains under immense pressure, a closer look at the Air Freight industry was warranted as traditionally passenger aircraft carry more cargo than actual freight aircraft. The unexpected recovery of Air Freight Air Freight reached a twelve-year low in May 2020 but has remarkably recovered to record its first increase in volume of cargo and freight ton per kilometre. For the first time in 20 months, the volume of air cargo, number of unscheduled flights and the IATA international air freight indices all showed positive growth, with a 2,1% year on year growth. “The improvement of Air Freight in the final quarter of 2020 as measured by Ctrack of 30,6% is nothing short of a miracle. This performance is amazing if one takes into account that there was less international travel and fewer scheduled flights and shows the resilience of this sector,” said Jordt. Even though Africa faired slightly better than the rest of the world, during the COVID-19 hard lockdown, Air cargo was the worst affected sector globally with IATA estimating total losses of $86 billion in 2020. In South Africa, Airfreight received no government aid, space was at a premium as there were less flights and prices rose by between 200 and 300%, yet the sector has bounced back against all odds, showing how resilient it is. Over 20 thousand tons were transported during the month of December despite curfews and international flight limitations. 57% of all Airfreight is transported as belly freight, aboard normal passenger aircraft, while the remaining 43% is flown on dedicated cargo planes. Further recovery in 2021 is expected to be slow as passenger air traffic is still far below normal levels and this is likely to continue for some time. It does however seem that an increasing number of cargo planes are taking to the skies. Approximately 80 aircraft have been dedicated to the worldwide vaccine rollout while continually

increasing Air freight costs have also resulted in The Africa Logistics

Ctrack Freigh remarkable g operators making more cargo aircraft available. With Air Freight making up only 5,1% of the Ctrack Freight Transport Index some may think that it is not an important sector. Airfreight comprises 2% of the freight that crosses the border by weight compared to the 60% of Sea Freight, however Air Freight makes up about 30% of the value of cross border trade.

What is happening in Airfreight now?

Local Air Freight is showing positive growth, however, the combination of the extended curfew and border closures are bound to have a negative impact during the months of January and February. Predictions are that this is will only be a shortlived hurdle with the curfew expected to end in the middle of February and borders to open in March. Sectors that rely on fast-moving high-

NEWS

ht Transport index reveals growth end goods like mobile phones, tablets, laptops and medical equipment cannot withstand another lengthy period of disruption in the Air Freight business.

Pipeline, Sea and Road Freight show growth too

On a quarter-to-quarter basis, the Pipeline volumes have grown by 88% while Storage grew by 13,1%. The growth in Storage can be attributed to the combination of a less than perfect Black November retail campaign that resulted in a surplus of retail goods and supply chain disruption fears. Sea and Road freight grew by a respectable 3,5% and 2,6% respectively. Interestingly despite the long border delays at two of South Africa’s most important border posts, truck attacks and a host of other problems the trucking

industry did better than was expected. Sea freight did slow slightly in December

but it is not of major concern, as it seems to be due to international supply chain, as opposed to local issues. The only sector of the Ctrack Freight Transport Index that showed negative growth during the quarter was Rail, with a decline of 2%. There are unconfirmed reports of rail tracks being stolen in some areas and this may have some effect. In summary, the overall freight sector grew by between 2 and 5%, which is lower than normal, but acceptable given the large number of external factors that are putting pressure on the various industries. While these figures might not be cause for celebration they do signify that the worst is over for the industry, times are still tough but at least things are moving again. www.theafricalogistics.com

COVER STORY

Connecting the world across oceans

ext year, Hapag-Lloyd will celebrate 175 years in shipping. The German company has its roots in Transatlantic shipping and is the fifth largest container shipping company in the world. Despite its long tradition, HapagLloyd is always exploring new markets and sets ambitious goals. Last month, the carrier announced a new transaction which shows that Hapag-Lloyd is heading full steam ahead for West and South Africa. Chances are, people in West Africa will be seeing a lot more of Hapag-Lloyd’s famous orange containers. Africa is a key market for Hapag-Lloyd – and the company is not hiding that it’s serious about fulfilling its growth targets set out in its Strategy 2023. On 17 March 2021, Hapag-Lloyd announced that it has signed a sale and purchase agreement with specialized West Africa carrier NileDutch, headquartered in Rotterdam. The completion of the transaction is subject to the approval of the responsible antitrust authorities. “The acquisition of NileDutch will be an excellent addition to our existing activities on the continent. Once completed, it will strengthen our position in West Africa. Our combined customer base will benefit from a

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denser network from and to Africa as well as from a much high Habben Jansen, CEO of Hapag-Lloyd.

Rolf Habben Jansen, CEO of Hapag-Lloyd

Hapag-Lloyd Added expertise in West Africa Since NileDutch is active in African countries without current Hapag-Lloyd representation, it is a perfect strategic fit for the Hamburg-based carrier. With over 40 years of expertise, NileDutch is one the leading providers of container services to and from West Africa. The company is present in 85 locations across the world and has 16 own offices in the Netherlands, Belgium, France, Singapore, China, Angola, Congo and Cameroon. With 10 liner services, around 35,000 TEU of transport capacity and a container fleet of around 80,000 TEU, the company connects Europe, Asia and Latin America with West and South Africa. NileDutch has approximately 350 employees worldwide with particular expertise in the African market.

“

Africa is a key market for Hapag-Lloyd – and the company is not hiding that it’s serious about fulfilling its growth targets set out in its Strategy 2023.

her frequency of sailings,” said Rolf

NileDutch brings to the table a number of locations and port calls along the West African coast – complementing Hapag-Lloyd’s existing services to the Middle East, Asia, Europe, and South America.

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COVER STORY Hapag-Lloyd’s Africa services will be complemented by NileDutch’s tightknit feeder network along the Southwest African coast. Once the transaction is approved and completed, NileDutch will join forces with one of the biggest liner shipping companies in the world. HapagLloyd has around 13,200 employees working in 388 offices in 129 countries. The company’s fleet comprises 234 modern container ships with a total transport capacity of 1.7 million TEU. Six brand new ultralarge container vessels with dual fuel engines have just been ordered to bolster the fleet further. Its ships make up 121 liner services which call at over 600 ports on all continents. Hapag-Lloyd has a container capacity of approximately 2.7 million TEU – including one of the largest and most modern fleets of reefer containers. Growth in Africa Hapag-Lloyd entered the African market over a decade ago and has been growing its share in the market continuously.Since then, the company has opened offices in six African countries including a state-ofthe-art Quality Service Center on Mauritius, dedicated to African customers. “Our Strategy 2023 focuses also on selected growth markets worldwide. We see an enormous growth potential in Africa and will further invest into our services and selected countries”, Habben Jansen continues. “I believe that HapagLloyd can help connect Africa even better to key markets like Europe or the Americas.” H a p a g - L l o y d ’s state-of-the-art reefer fleet is a perfect match The Africa Logistics

Hapag-Lloyd recently opened offices in Nairobi and Mombasa in Kenya, Africa for Africa’s growing industries. Whether it’s pharmaceuticals from South Africa or fruits and vegetables from Nigeria, they all require reliable cold chains. Since entering the African market, Hapag-Lloyd has instated several reliable express services to specifically cater to key industries. To better serve its customers who want to ship to and from West Africa, Hapag-Lloyd established offices in Nigeria and Ghana and launched two dedicated services. The weekly West Africa Express (WAX) connects Tema with Antwerp and Hamburg in only 15 days. The Middle East-India Africa Express (MIAX), on the other hand, strengthens intra-African trade by calling in Tema, Lagos, Cape Town, and Durban before heading Northeast to India via Jebel Ali. Hapag-Lloyd recently expanded its East African presence by opening offices in Mombasa and Nairobi. Via the gateway port of Mombasa, the shipping company offers two different services. While the China Kenya Express Service (CKX) connects Kenya with some of the most important ports in Asia, such as Singapore and Shanghai, the East Africa Service (EAS2) connects the East African country with the west coast of India and Jebel Ali in Dubai. In order to serve landlocked African countries, Hapag-Lloyd has steadily expanded its

“

Our Strategy 2 focuses also on se lected growth mark worldwide. We see an enormous grow potential in Africa will further invest our services and s lected countries-

Rolf Habben Janse

2023 ekets e wth and into se-

Hapag-Lloyd

Hapag-Lloyd Hapag-Lloyd

inland services. With regular inland connections to and from Mombasa, Hapag-Lloyd serves countries such as Uganda, Rwanda, Burundi, and South Sudan. As part of its growth strategy, the shipping company is working on developing inland services to Somalia, Southern Ethiopia, and Northern Tanzania. Reliable inland connections are becoming ever more important since the African Continental Free Trade Area (AfCFTA) went into effect at the beginning of this year. Quality carrier for Africa In the past seven years, Hapag-Lloyd has undergone an impressive transformation from a traditional German company to a modern quality carrier. After merging with Chilean carrier CSAV in 2014 and Dubai-based UASC in 2017, Hapag-Lloyd solidified its position as a global player in container shipping. It has also defined a clear plan for the future. In its Strategy 2023, the company sets out to grow in key markets like Africa – and become the number one for quality in the container shipping industry. This latest transaction is a clear continuation of this strategy. Together with NileDutch, Hapag-Lloyd will be able to offer quality transport in its iconic orange containers to an increasing number of customers who want to ship to and from Africa.

Hapag-Lloyd at a glance Around 13,100 employees working in 388 offices in 129 countries. Fleet comprises 237 modern container ships with a total transport capacity of 11.8 million TEU Hapag-Lloyd has a container capacity of approximately 2.7 million TEU Entered the African market over a decade ago Recently opened offices in Mombasa and Nairobi in Kenya, Africa

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ENVIRONMENT

Africa can be resilient and green

frica can be green and resilient by turning immense political will into action in mobilising and using financial resources for sustainable development, leaders at the seventh Africa Regional Forum on Sustainable Development have urged. Africa is a rich continent with a poor disposition in tracking and deploying economic resources towards its development. This was the feeling underlining a highlevel panel discussion on transformative actions and investments needed for Africa to build forward better from the COVID-19 crisis at the Regional Forum which kicked off in Brazzaville, Congo, this week. To develop transformative actions and investments needed to build forward better from the pandemic and move towards a resilient and green Africa that will achieve Agendas 2030 and 2063, the continent needs to cap illegal logging and deforestation which are fuelling illicit financial flows, urged Albert Muchangana, Commissioner for Economic Development, Trade, Industry and Mining at the African Union. He noted that illicit financial flows were undermining the domestic resource base, adding it was imperative for Africa to mobilise public and private capital for low carbon growth. According to the United Nations Conference in Trade and Development (UNCTAD), Africa can half its annual financing gap of $200 billion it faces to achieve the SDGs by stemming illicit capital flight. Africa losses an estimated $88.6 billion annually in illicit financial flows which include money and assets sourced illegally and moved across borders. In addition, Africa needs to restructure

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We have to create conditions for the green economy and that calls for research and innovation. It calls for sustainable value addition to our resources. The Africa Logistics

its external debt to unlock resources that can go into social protection among other programmes to improve livelihoods of citizens, panellists agreed. “Of necessity we have to create conditions for the green economy and that calls for research and innovation. It calls for sustainable value addition to our resources,” opined Paul Mavima, Zimbabwe’s Public Service, Labour and Social Welfare Minister, who warned that for too long Africa has relied on extractive industries to drive economic growth yet sustainable industrialisation was equally profitable and laden with prospects of green jobs and innovation. “We need to garner enough will within our countries to fight corruption and fight the illicit flow of resources from Africa,” Mr. Mavima urged. “If we preserve those resources and come up with policies and programmes directly focusing on our priorities, then Africa can generate the resources we need to further objectives of achieving Agenda 2030 and Agenda 2063.” The recently launched African Continental

Free Trade Area, if implemented, offers Africa a fresh opportunity to grow green and build sustainable trade within Africa, the panellists agreed. Congo’s Minister of Tourism and Environment and incoming Chair of the Bureau of the seventh session of the regional Forum, Arlette Soudan Nonault, said the countries in the Congo Basin Climate Commission have demonstrated political will in action towards a resilient Africa that can achieve the 17 SDGs. They have mobilised resources through strategic partnerships to protect the basin which is Africa’s biggest carbon lung. “We cannot wait for disasters so that the international community mobilises funding for us,” Ms. Nonault said. “Should we burn the Congo basin for the international community to respond? We cannot do implementation unless we have resources. Hence political resources must be translated into action. We have the Green Fund and the Blue Fund that we should be able to tap into.”

Vice-President of the Economic and Social Council (ECOSOC), Collen Vixen Kelapile, said Africa must generate innovative and transformative action and use Agenda 2063 as a roadmap to build back better but added leadership was key to a post-COVID green and resilient Africa. Concurring that COVID-19 had increased inequalities across Africa with massive failures of health systems to respond to the pandemic, Diene Keita, Deputy Executive Director for Programmes at the United Nations Population Fund, said inter sectoral coordination at the highest level of government was critical for the continent to build better and greener by monitoring all health related goals.

African Continental Free Trade Area, if implemented, offers Africa a fresh opportunity to grow green and build sustainable trade within Africa

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FEATURE

It is time to decarbonize transport

limate change is the defining challenge of our time, and clean energy and green transport are the keys to addressing it. Less than two decades ago, energy emissions seemed to be spiraling out of control as countries were locked into a debate about who should bear the costs of a green transition. A few years and international agreements later, the energy outlook is more hopeful, with renewable sources helping reduce power emissions by 1.2% in 2019. Decarbonizing energy is heading in the right direction, but transport — the second-biggest global source of greenhouse gas emissions — is in a very different situation. Emissions from transport increased by less than 0.5% in 2019, and although this is an improvement compared with 1.9% annual growth since 2000, transport still accounts for about 24% of direct carbon dioxide emissions from fuel combustion. If we are to keep the global temperature rise below 1.5 degrees Celsius, the time to make green transport the norm is now. At the root of the problem is that transport is a harder sector in which to control emissions than energy. It is highly decentralized with a wide range of actors across many different modes, such as rail, road, air, and maritime. Human behavior plays a larger role in demand patterns and is more difficult to manage proactively. Technological innovation in transport has not been primarily oriented to decarbonization but rather to greater consumer convenience, such as shared riding, with unclear effects on carbon emissions. Before the COVID-19 pandemic slump, growing economies and expanding middle classes often meant shifts away from public transport toward more and larger vehicles. It does not help that transport also lacks a strong multimodal planning tradition because of institutions and jurisdictions’ fragmentation. Transport’s impact on climate change is plain to see. But addressing it will require a shared international commitment and a high degree of cooperation. This week, the World Bank and World Resources Institute Ross Center for Sustainable Cities are convening leaders in the sector to do just that. Transforming Transportation 2021 will discuss how COVID-19 recovery can be an opportunity to decarbonize the sector by adopting the “avoid-shift-improve” framework. Among other policy tools, this three-part framework aims to avoid unnecessary trips; shift passengers to public transport and non-

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motorized transport, as well as freight to railways; and improve vehicles’ fuel efficiency to make lower-carbon modes competitive. Political will, technological tools, and economic incentives are aligned to turn transport’s climate trends around. We should not let this opportunity pass by. The World Bank is already helping countries undertake fossil fuel subsidy reforms and adapt technologies such as e-mobility to their contexts. Innovative initiatives are also on the table, such as regulating the export of used cars — which are, on average, more polluting and less safe — from higher-income countries to lower-income ones, especially to those in Africa. The World Bank is already helping countries undertake fossil fuel subsidy reforms and adapt technologies such as e-mobility to their contexts. Innovative initiatives are also on the table, such as regulating the export of used cars — which are, on average, more polluting and less safe — from higher-income countries to lower-income ones, especially to those in Africa. WRI designs practical, evidence-based policies to support cities and countries implementing mobility solutions that promote inclusion, sustainability, and safety, most recently supporting the transition to electric bus fleets in dozens of cities worldwide. The good news is that the decarbonization trajectories of transport and energy are interconnected, allowing for mutually reinforcing reforms. Increased diffusion of disruptive technologies such as e-mobility and electric

FEATURE

buses means that the power mix’s greening will ultimately lead to cleaner passenger mobility. Moreover, the use of electricity to produce hydrogen fuel cells could enable decarbonization benefits in the heavy-duty vehicle and maritime sectors. Technological advancement in transport will benefit energy, and vice versa. Nonetheless, to realize these new technologies’ full potential, policymakers need to provide adequate incentives and take bolder actions. They should seek partnerships with the private sector and academia across industry boundaries. Thanks to regulatory sandboxes, emerging technologies and business models can be tested at a smaller scale to determine how to craft appropriate policies that will produce sustainable results. Much remains to be done to ensure that the decarbonization of transport systems and infrastructure benefits everyone, especially those with the lowest-incomes and most likely to suffer job and income disruption during the transition. Building greener, more livable, and inclusive cities requires low-carbon transport modes, along with better urban planning and infrastructure that encourage cycling, walking, and improved access to opportunity for more people: shorter, less dangerous commutes; more connections to jobs, health care, and education; and green space. The coronavirus has put many hard-earned achievements — from poverty reduction to climate action — on the line. But it has also opened a brief window of opportunity to help countries rebuild better, addressing obstacles

to the low-carbon, more resilient, more equitable economy of tomorrow. Globally, there are many promising initiatives. In India, the World Bank is helping to convert a 1,360-kilometer stretch of the Ganges into a modern inland waterway that will cut an estimated 162,000 tons of greenhouse gas emissions annually. From Bangalore to Buenos Aires, safer, more extensive cycling networks are providing new ways to get around cities. Across the world, WRI is working to support and revive public transport services in the wake of lockdowns. The bank is also launching an ambitious global transport trust fund facility to support analytical studies and knowledge exchange with a strong focus on decarbonization. To improve air quality and reduce emissions, the International Finance Corp., the World Bank’s private sector development arm, is investing in battery-electric buses and e-delivery trucks. To help cities better understand access to opportunity, WRI is pioneering data analytics that show the impact of transportation investments and policy changes at the neighborhood scale. As the 2021 United Nations Climate Change Conference, known as COP26, approaches and the world looks to a sustainable COVID-19 recovery, there is a unique window to accelerate transport decarbonization. Political will, technological tools, and economic incentives are aligned to turn transport’s climate trends around. We should not let this opportunity pass by. www.theafricalogistics.com

FEATURE

Poor countries punch above their weight in frontier technology adoption Although many low and middle-income economies are unprepared for the new technological wave, some are punching above their weight, and a new UNCTAD report spotlights the overperformers.

few developing nations are showing stronger capabilities to use, adopt and adapt frontier technologies than their per capita GDPs would suggest, but most are lagging behind, according to an index of 158 countries in UNCTAD’s Technology and Innovation Report 2021, published on 25 February. Frontier technologies are those that take advantage of digitalization and connectivity. They include artificial intelligence (AI), the internet of things, big data, blockchain, 5G, 3D printing, robotics, drones, gene editing, nanotechnology and solar photovoltaic. “Frontier technologies are redefining our world, especially our post-pandemic future,” said Shamika N. Sirimanne, director of UNCTAD’s division on technology and logistics. Ms. Sirimanne said despite some negative realities associated with these technologies, such as their potential to worsen inequality, widen the digital divide and disrupt socio-political cohesion, they could be transformative in achieving the UN’s Sustainable Development Goals (SDGs). The report provides a “country readiness index” that assesses the progress of countries in using frontier technologies, considering their national capacities related to physical investment, human capital and technological effort. It scores countries on their readiness for frontier technologies based on five building blocks: ICT deployment, skills, research and development (R&D), industry activity and access to finance.

Overperforming countries

The index spotlights developing countries that perform better on frontier technologies than their per capita GDPs would suggest. Their overperformance is measured as the difference between the actual index rankings and the estimated index rankings based on per capita income. The greatest overperformer is India, whose actual index ranking was 43, while the estimated one based on per capita income was 108. Hence, India overperformed by 65 ranking positions. It is followed by the Philippines, which overperformed by 57 ranking positions. How did the outliers exceed expectations? China, at position 25, and India perform well for R&D. This reflects their abundant supplies of qualified and highly skilled human resources available at a comparatively low cost. They also have large local markets, which attract investment by multinational enterprises. In China, the progress is partly a reward for spending 2% of GDP on R&D. The Philippines has a high ranking for industry, reflecting high levels of foreign direct investment in high-technology manufacturing, particularly electronics. Multinational enterprises are attracted by 24

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the country’s strong supply chains and solid base of parts manufacturing. The Philippines also has pro-business policies along with a skilled, welleducated workforce and a network of economic zones. Overall, however, the top five overperforming developing countries have lower rankings for ICT connectivity and skills. This drawback is true for developing countries as a group.

Top overall performers

According to the index, the United States, Switzerland and the United Kingdom are best prepared for frontier technologies. Most of the best-prepared countries are from Europe, except the Republic of Korea, Singapore and the United States. Some transition economies, such as Russia, also perform well on the index. The top overall performers have well-balanced performances across all building blocks of the index and are typically associated with high innovation and GDP.

How developing countries can catch up

To catch up and forge ahead, UNCTAD urges developing countries to adopt frontier technologies while continuing to diversify their production bases by mastering many existing technologies. These countries need to strengthen their innovation systems, as most of them are weak and prone to systemic failures and structural deficiencies, the report says. “A whole-of-government approach is needed to absorb these technologies, as opposed to working in silos,” Ms. Sirimanne said. Developing countries should also align science, technology and innovation (STI) policies with industrial policies, according to Ms. Sirimanne. “New technologies can re-invigorate traditional production sectors and speed up industrialization and economic structural transformation,” she added. UNCTAD also calls on governments to draw in various actors who can help build synergies between STI and other economic policies – industrial, trade, fiscal, monetary and educational. The state, industry and labour unions should work together to optimize the potential of these technologies for faster productivity. In this regard, UNCTAD’s STI Policy Reviews can help governments integrate STI policies into their national development strategies while working towards the SDGs. The report also urges policymakers to help people acquire the necessary digital skills and competencies to adopt and adapt frontier technologies into their countries’ existing production bases. Governments should also seek to connect everyone online, focusing on the farthest behind, as frontier technologies demand greater digitalization and connectivity. They should provide incentives and subsidies not just for internet access but also for the devices through which people get connected.

The Mozambique Channel May Become the Next Maritime Security Hotspot

The waters off Mozambique are becoming a major new security hotspot in the Indian Ocean. An Islamist insurrection in northern Mozambique that the government seems powerless to suppress has also increasingly led to disruption in the Mozambique Channel, a key global shipping route. The Quad countries and European partners must help contain the problem before other actors step into a regional vacuum. The insurgency in Mozambique has the potential to destabilize Southern Africa and embolden Islamists throughout the region. It threatens security in the Mozambique Channel, the 1,000-nm long waterway between Madagascar and East Africa that carries some 30 percent of global tanker traffic. It is also the location of some of the world’s largest gas reserves. The insurgency was started in 2017 by groups drawn from Muslim communities on the so-called “Swahili coast”. This has now included more than 800 separate attacks across northern Mozambique, resulting in at least 2600 deaths and more than 600,000 people displaced. A report from the UN Secretary-General to the Security Council also pointed to transnational links, with Somali-based Islamists in Puntland acting as a “command center” for Mozambique insurgents. However, other analysts discount close operational links with Islamic State. Armed clashes escalated sharply in 2020, with attacks spilling over the border into Tanzania, where the government faces local Islamist extremists. There are also growing attacks on maritime infrastructure. In August, insurgents seized a key

port in northern Mozambique from government forces, raising concerns that this is a first step in insurgents venturing into piracy, as occurred in the Horn of Africa. Maritime drug smuggling is a key source of funds for insurgents. The so-called “Smack Track” has long brought heroin grown in Afghanistan down the East African coast, where a substantial portion is now landed in northern Mozambique before being transported to Europe and elsewhere. Heroin is also increasingly supplemented by crystal meth, produced in Afghanistan from local shrubs. Map reproduced with the permission of CartoGIS Services, Scholarly Information Services, The Australian National University Another big factor is the development of a major offshore gas industry in the Mozambique Channel off northern Mozambique. This involves planned investments of some US$50 billion to extract an estimated 100 trillion cubic feet of gas, including a major onshore gas liquification plant. France’s Total and US-based ExxonMobil are major investors. In January 2021, following a series of escalating attacks, Total began to move part of its logistical operations from northern Mozambique to safety on the French-administered island of Mayotte in the Channel. The Mozambique government, which is in severe debt distress, is unable to take effective action against the insurgency, and has increasingly relied on mercenaries. But it has been somewhat reluctant to accept international assistance. Russia has tried to promote itself as a partner, eyeing a share of Mozambique’s offshore gas rewww.theafricalogistics.com

FEATURE serves for Gazprom and Rosneft. Moscow uses private security contractors as its proxies in many countries in Africa. In September 2019, up to 200 mercenaries from the Russian Wagner group were deployed to Mozambique with equipment and logistical support from the Russian Air Force and, possibly, also the Russian Navy. But the contractors suffered heavy casualties and were withdrawn from operations within months. France and other European partners are now stepping up efforts to contain the problem. France is historically a leading maritime security provider in the southwest Indian Ocean, with two French frigates and patrol boats based in French Reunion. But France lacks maritime patrol aircraft based in the region. Portugal, the former colonial power in Mozambique, has agreed to send a training mission of more than 1400 troops. Lisbon is also using its current Presidency of the European Union to lobby for the deployment of an EU military mission. Spain has also offered military support. The United States is also finalizing an offer of counter-terrorism assistance. The South African Navy has conducted intermittent anti-piracy patrols in the Mozambique Channel since 2011, and is now establishing a new forward operating base at Richards Bay in South Africa’s north in response to the insurgency. South Africa and its Southern African Development Community (SADC) partners

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have offered naval and intelligence support. But Mozambique appears reluctant to involve African partners. India has also long positioned itself as a net security provider in the south-west Indian Ocean and as a security partner to Mozambique. Since 2020, Indian Navy P8I maritime patrol aircraft, staging through Réunion, have conducted joint patrols with the French Navy in the Mozambique Channel. India is also in the process of constructing an air and naval facility on Mauritius’ remote Agalega island, near the north end of the Channel, improving its ability to cover the region. Australia will be wary of any new defence commitments in the western Indian Ocean. The Royal Australian Navy has been deployed there for years, interdicting smugglers on the Smack Track. But that presence is being reduced, following an increased focus on areas closer to home, including the Pacific. Australia may need to consider what non-military assistance it can provide. The Quad and likeminded partners have important interests in stopping the insurgency

spilling further across Mozambique’s borders or into the maritime domain. A decade ago, Somali-based piracy was the trigger for the international militarization of the waters off the Horn of Africa. There are good reasons to avoid a similar dynamic in southern Africa. The crisis should also be seen an opportunity for countries such as France and India to demonstrate their value as security partners in the region. It may also be an opportunity to build cooperation with South Africa, which is increasingly a “swing state” in geopolitical competition. Failure to contain the conflict will leave a vacuum for other actors to fill. Dr. David Brewster is with the National Security College at the Australian National University, where he specializes in South Asian and Indian Ocean strategic affairs. He is also a Distinguished Research Fellow with the Australia India Institute. This article is part of a two-year project being undertaken by the ANU National Security College on the Indian Ocean, with the support of the Australian Department of Defence. It appears here courtesy of The Lowy Interpreter and may be found in its original form here.

The opinions expressed herein are the author’s and not necessarily those of The Africa Logistics.

FEATURE

AfCFTA is Now Operational: What to Expect in the First Few Months

he African Continental Free Trade Area (AfCFTA) is one of the largest trading blocs in the world with the majority of African countries now operating under its preferential trade framework. Trading under AfCFTA commenced on January 1, 2021 under a liberalized trade regime that would gradually lead to an integrated continental market with tariffs phased out on 97% of tariff lines within 10 to 13 years. AfCFTA covers both goods and services, and provides a platform for individual countries or regional economic communities (RECs), as applicable, to engage in intraAfrican trade, through offers of tariff concessions and service commitments with reciprocal most-favored-nation treatment. There is already a degree of liberalized trade and integration under the eight RECs recognized by the African Union, and other customs and monetary unions that exist elsewhere on the continent. To date, it has been reported that 41 countries and the RECs, including SACU, EAC, CEMAC and ECOWAS, have submitted their tariff offers and service commitments. Admittedly, the implementation process has been slower than anticipated, with tariff books still being updated and administrative procedures getting rolled out. Negotiations are continuing with respect to how to open up the service sector. The five prioritized sectors for liberalization within

AfCFTA include business services, communication, financial services, transport and tourism. The second phase of services liberalization is anticipated to cover the remaining sectors. By some estimates, services make up around 60% of total intra-African trade, which is substantial when viewed in light of the continent’s overall GDP of roughly US$3 trillion. With Africa’s emerging technological capabilities and limited legacy infrastructure to phase out, digitally delivered services seem to be the most logical large-scale expansion opportunity. This would, however, largely depend on successful negotiations that keep restrictions on cross-border services to a minimum. With respect to goods, the sectors that are anticipated to immediately benefit from trade liberalization include agro-processing, automotives, pharmaceuticals, textiles, chemicals and mineral beneficiation. Numerous African economies are highly dependent on exports of raw materials. Hence, the lack of complimentary products suitable for trade could be an impediment until new industry develops. Those countries with large and diversified economies that have manufacturing capabilities are expected to benefit the most from AfCFTA. Under the AfCFTA’s rules of origin, which could be product-specific, preferential trade is extended to goods that have either origiwww.theafricalogistics.com

FEATURE nated from or undergone substantial transformation in countries that have ratified the agreement. The process for identifying products that wholly originate in the AfCFTA is likely to be straightforward, particularly for farm products and resources from extractive industries. Products with more complex supply chains, however, could require extensive analysis to determine whether they are “sufficiently worked or processed” within AfCFTA and, if so, whether the whole product or the incremental value addition would be availed of preferential tariff rates. Intra-African trade has been growing steadily and AfCFTA would simply accelerate that by removing the trade barriers that have caused the fragmentation of African economies. It should make basic necessities more accessible and affordable to the average African consumer by opening avenues for regional suppliers of processed goods to reach their target consumers more easily and allow payment options through local currencies. These features of AfCFTA should encourage industrialization, and multinationals seeking growth markets may find opportunities to establish or increase their African footprint. Any business expansion plan must take a range of factors into account. At the most basic level, the market and legal framework must be studied for each country of interest, taking into account such country’s track record in handling foreign investment and cross-border trade. In addition, the degree of commercial presence required as a condition of market access must be assessed, along with the permits and registrations to be procured for each activity. Domestic laws are implicated in much of the detail set forth in the AfCFTA agreement, and the regulatory framework for a particular activity could be drastically different from jurisdiction to jurisdiction. With respect to goods, while it is theoretically possible to set up operations in a few key jurisdictions and sell throughout the bloc, non-tariff trade barriers (NTBs) and measures that participating countries could take to protect local industry

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might cause disruptions to remote selling activities. Examples of NTBs recently implemented by some African countries include border closures, denial of permits and imposition of special taxes in the form of surcharges on imported products. While there may be valid reasons for taking such measures, any interruption to market dynamics could have serious consequences for an exporting enterprise. For that reason alone, establishing business operations in a large market that can absorb a significant amount of production would mitigate risk and, if combined with a well-developed transportation network that can reach potential satellite markets, it could be the ideal growth platform. Local presence brings with it more commitments and higher costs of doing business. Footprint could be managed via ready-to-use industrial parks and special zones, which may provide easy access to major roads, onsite “one-stop” administrative capabilities to handle basic regulatory and procedural matters, and tax and customs deferral until products are introduced into the local market or exported. The incentives offered by African countries vary widely, such as multi-year income tax exemptions based on the industry involved, location-specific tax reductions or reciprocal lowtax-rate arrangements under REC agreements. There is no single magic formula for operating under the AfCFTA agreement as its framework is layered onto existing trade relationships, and the manner of its application depends on the type of business activity involved and the arrangements among the countries that are implicated in a particular transaction. As a practical matter, low tariff rates are not the sole driver of business decisions. The profitability of any endeavor depends on many factors, commercial and otherwise, and AfCFTA’s value proposition lies in the incremental benefits it offers to enhance long-term value creation for goods and services to be traded in new markets.

FEATURE

India, South Africa and Indonesia join the World Logistics Passport The World Logistics Passport (WLP), has announced that India, Indonesia and South Africa as members. They join Colombia, Senegal, Kazakhstan, Brazil, Uruguay and the UAE in a club of trading nations sharing expertise to smooth trade flows around the world. The WLP creates opportunities for business across Africa, Asia, Central and South America to improve existing trading routes, and develop new ones, through the world’s first logistics loyalty program for freight forwarders and traders. It overcomes non-tariff trade barriers by fast-tracking cargo movement, reducing administrative costs, advancing cargo information and facilitating movement between ports and air. Take, for instance, the cargo journey from Jakarta to Johannesburg. Transporting high-value, low-weight goods through historically established transport routes in Europe takes considerably longer, and is therefore more expensive, than if the goods pass through Dubai. Through the WLP, traders can expect to save 25% on freight costs and 10% on transit time moving goods from Indonesia to South Africa. Mike Bhaskaran, CEO of the World Logistics Passport said: “The World Logistics Passport increases resilience in global supply chains and removes the barriers that prevent developing economies from trading as freely as they might, which is more important than ever as governments around the world seek to recover from the economic impact of COVID-19.” “Today’s announcement shows that governments and businesses are thinking differently about how goods and services move round the world, and we are delighted to welcome India, Indonesia and South Africa to the club.” India the largest economy to join the WLP to date The World Logistics Passport now counts Mumbai International Airport (Chhatrapati Shivaji Maharaj International Airport), Nhava Sheva International Container Terminal (Mumbai), and Emirates SkyCargo in India & Nepal as partners. As a trade enhancing policy initiative, the WLP is closely aligned with the Strategy for India@75 in its aims to boost national competitiveness,

increase the efficiency of India’s logistics sector and build tighter economic integration with emerging economies in South and South East Asia. The WLP now looks forward to welcoming the participation of the Ministry of Commerce & Industry to represent the government’s oversight of local operations, and the CBIC (Customs) as a partner, as well as other regional organisations. South Africa signs up to spur intraregional trade opportunities The WLP program is closely aligned with South African National Development Plan 2030, particularly in terms of increasing intra-regional trade and improving trade penetration into fast growing markets in Asia and Latin America. The Johannesburg Chamber of Commerce has signed a framework agreement with the WLP and bilateral negotiations with the government continue. Joining the WLP will be a key enabler of the African Continental Free Trade Agreement, opening up new market potential among countries in the region. South Africa has joined the WLP at a time where the country, and broader region, seek to recover from the economic impact of COVID-19. The WLP will help to achieve the goals in the Reconstruction and Recovery Plan, boosting job creation and supporting export-led growth. Indonesia the first Asian nation to the join

South-East

Indonesia is a strategically important market for the WLP, as it represents a region key to the WLP concept for its fast economic growth driven by manufacturing exports. The World Logistics Passport will compliment and reinforce the headline aims of the final stage of the Long-Term National Development Plan (RPJPN), specifically in terms of boosting national competitiveness and higher-wage job creation across all of Indonesia’s varied geographies. The World Logistics Passport now counts the Indonesia National Shippers’ Council as a partner, which will provide benefits related to navigating the local market. Last year, the Indonesia National Shippers’ Council signed a Memorandum of Understanding with PCFC in Dubai to realise trade cooperation, thus the registration can be seen as an evolution of an already entrenched and fruitful partnership.

“ Governments and businesses are thinking differently

about how goods and services move round the world, and we are delighted to welcome India, Indonesia and South Africa to the club. www.theafricalogistics.com

OPINION

AFRICA GOES DIGITAL

frica has enjoyed strong economic growth for most of the 21st century, mainly because of robust global demand for primary commodities. But the “Africa Rising” narrative that accompanied this growth is mostly a story of rising GDP, which is overly one-dimensional. In fact, Africa’s economic growth has failed to generate many good jobs—postponing, once again, the benefits of the demographic dividend of a large working-age population. Because there are fewer old and young people that require support than people of working age, the dividend is supposed to free up resources that can be devoted to inclusive development. Instead, African policymaking continued its now nearly half-century belief that achieving “development” is limited to managing poverty—in other words, equating the business of development to poverty reduction. The shift from the industrialization agenda of the early post-independence period to one of poverty reduction is a major reason for the continent’s economic malaise. As the African Innovation Summit (2018) put it, the development agenda shifted from socioeconomic transformation to the lowest common denominator, managing poverty. To generate economic growth that leads to sustainable development, Africa must shift its focus to retaining and creating wealth, better managing its resources, fostering inclusiveness, moving up on global value chains, diversifying its economies, optimizing the energy mix, and placing human capital at the center of policymaking. For this to happen, African policy must foster investment in research, development, and innovation (R&D&I) to reboot the continent’s economic structures and catch up technologically with the rest of the world. Innovation, and the digital information technology that accompanies it, has become a necessary component of any effort to address such challenges as food security, education, health, energy, and competitiveness. The world is driven by innovation: unless African policymakers reap the potential benefits of R&D&I, the global divide will keep growing. The problem is that innovation is talked about and debated, but not strategized. An opportunity to go digital It is here, paradoxically, that the COVID-19 pandemic, despite all the economic and social devastation it has caused, provides an opportunity for African countries to innovate and go digital. African countries will have to rebuild their economies. They should not merely repair them; they should remake them, with digitalization leading the way. So far, civil societies seem to be more ready than policymakers to embrace digital technology. With no help from government, the digital technology industry has grown in Africa—through incubators and start-ups, tech hubs and data centers.

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Information and communication technology (ICT) activities are spreading across the continent, and young Africans are responding with digital technology to the challenges posed by COVID-19. For example, at an ICT hub in Kenya, FabLab created Msafari, a people-tracking application that can trace the spread of infections. A similar application, Wiqaytna6, was developed in Morocco. In Rwanda, the government is demonstrating what enlightened policies can achieve. The country has invested heavily in digital infrastructure—90 percent of the country has access to broadband internet, and 75 percent of the population has cell phones. Early in the pandemic Rwanda parlayed that technological prowess into developing realtime digital mapping to track the spread of COVID-19, expanded telemedicine to reduce visits to clinics, and created chatbots to update people on the disease. These are promising endeavors, but digitalization is not widespread in Africa. Rwanda is the exception. Only 28 percent of Africans use the internet, a digital divide that prevents the continent from taking full advantage of digital technology’s ability to mitigate some of the worst effects of the pandemic.

In Africa, it’s not just internet connectivity that’s missing. So are other basics—including electricity, literacy, financial inclusion, and regulations.

OPINION That slow spread of internet technology also makes it difficult for the continent to leapfrog obstacles to sustainable development. To generate transformative growth, digitalization cannot be left mainly to civil society and the private sector. The socioeconomic divide in Africa feeds the digital divide, and vice versa. Digitalization needs to be scaled up forcefully by policymakers to unlock structural transformation. Digital divide When assessing the digital divide, it is important to remember that the issue is about more than access to the internet. How internet usage benefits the user is also a factor. The goal of digitalization should not just be greater consumption; it should enhance civil societies’ resilience, which demands a clear regulatory framework and an educated population. In Africa, it’s not just internet connectivity that’s missing. So are other basics—including electricity, literacy, financial inclusion, and regulations. The result is that people are unable to use the digital solutions that are available. Furthermore, a good share of African populations still struggle with such life-threatening problems as conflict and food insecurity, which make daily survival their only goal. Millions of Africans are not only on the wrong side of the digital divide, they are on the wrong side of many divides—lacking basic health and public necessities such as electricity, clean water, education, and health care. COVID-19 has exacerbated their plight because lockdowns and social distancing have made many public services accessible only online. The terrible truth is that these hundreds of millions of people have been left behind, and unless African policymakers realize that access to digital technologies is a critical tool for socioeconomic inclusion, progress will be confined to those with electricity and telecom services—further isolating the vast majority without such access. The divide will widen. The deep disruptions generated by the pandemic have opened up opportunities to remake society that are subtle. These are times that test policymakers’ vision and leadership. As McKinsey & Company (2020) noted, the “COVID-19 crisis contains the seeds of a large-scale reimagination of Africa’s economic structure, service delivery systems and social contract. The crisis is accelerating trends such as digitalization, market consolidation and regional cooperation, and is creating important new opportunities—for example, the promotion of local industry, the formalization of small businesses and the upgrading of urban infrastructure.” As Africa rebuilds from COVID-19 disruptions it must not return to a pre-pandemic reality. The moment is now. As Africa rebuilds from COVID-19 disruptions it must not return to a prepandemic reality; it must build a better reality that recognizes the need for innovation, particularly digital technologies. This is the prerequisite for victory over its myriad development challenges— such as poverty, health, productivity, competitiveness, economic diversification, food security, climate change, and governance. Receptive to change Over the past five years, change has occurred in Africa, suggesting that the continent may be

receptive to building better rather than merely rebuilding. Liu (2019) identified three major African initiatives that signal such receptivity to change: The African Continental Free Trade Area (AfCFTA), which aims to create a single market with a combined GDP that exceeds $3.4 trillion and includes more than 1 billion people; The South African government’s new Centre for the Fourth Industrial Revolution of the World Economic Forum (WEF), for dialog and cooperation on the challenges and opportunities presented by advanced technologies; The WEF’s Africa Growth Platform, which aims to help companies grow and compete internationally, leveraging Africa’s entrepreneurial activity—13 percent higher in its initial stage than the global average. These ongoing initiatives could become game changers, breathing life into the top-down dimension of going digital. So far, the change has been almost only from the bottom up. More than 600 technology hubs—places designed to help start-up companies—have emerged across the continent. Three have achieved international recognition: Lagos in Nigeria, Nairobi in Kenya, and Cape Town in South Africa. These tech hubs host thousands of start-ups, incubators, technology parks, and innovation centers driven by the private sector and young people who, despite adversity, are aware of how self-employment is linked to innovation. Public policy lacking Things are less promising from the top down. According to a 2018 WEF report, 22 of 25 countries analyzed had no public policies focused on an ecosystem for innovation. Investing in broad-based digitalization, from a geographic and sectoral point of view, is crucial not only to address socioeconomic problems but also to deal with peace and security challenges. And it boosts economic growth. A study by the International Telecommunication Union found that 10 percent greater mobile broadband penetration would generate a 2.5 percent rise in Africa’s GDP per capita. But digital solutions cannot be achieved in a vacuum. Policymakers must make implementation of digital technologies an element of an ecosystem of innovation, and there’s no time to lose. Well-calibrated regulatory frameworks, investment in infrastructure, digital skills, and financial inclusion must take priority. Most research shows that digital technologies are essential to addressing socioeconomic challenges. They are often described as the single ingredient Africa needs to leapfrog to sustainable and inclusive economic development. From an economic standpoint, better information and communication technology democratizes information crucial to production and market agents, which makes for more efficient value chains and more affordable products and services. And the most vulnerable people will benefit. However, the massive adoption of digital technologies also means that policymakers must be aware of and address the complex legal and ethical impact of technology in society, including privacy, data, and tax evasion. This is especially true in Africa, where weak institutions might not be strong enough to uphold the rights and interests of their people against those of the market. www.theafricalogistics.com

REPORT

IATA says 2020 was worst year in history for air travel demand

he International Air Transport Association (IATA) announced full-year global passenger traffic results for 2020 showing that air travel demand (revenue passenger kilometers or RPKs) fell by 65.9% compared to the full year of 2019, by far the sharpest traffic decline in aviation history. Furthermore, forward bookings have been falling sharply since late December. International passenger demand in 2020 was 75.6% below 2019 levels. Capacity, (measured in available seat kilometers or ASKs) declined 68.1% and load factor fell 19.2 percentage points to 62.8%. Domestic demand in 2020 was down 48.8% compared to 2019. Capacity contracted by 35.7% and load factor dropped 17 percentage points to 66.6%. December 2020 total traffic was 69.7% below the same month in 2019, little improved from the 70.4% contraction in November. Capacity was down 56.7% and load factor fell 24.6 percentage points to 57.5%. Bookings for future travel made in January 2021 were down 70% compared to a yearago, putting further pressure on airline cash positions and potentially impacting the tim-

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ing of the expected recovery. IATA’s baseline forecast for 2021 is for a 50.4% improvement on 2020 demand that would bring the industry to 50.6% of 2019 levels. While this view remains unchanged, there is a severe downside risk if more severe travel restrictions in response to new variants persist. Should such a scenario materialize, demand improvement could be limited to just 13% over 2020 levels, leaving the industry at 38% of 2019 levels. “Last year was a catastrophe. There is no other way to describe it. What recovery there was over the Northern hemisphere summer season stalled in autumn and the situation turned dramatically worse over the year-end holiday season, as more severe travel restrictions were imposed in the face of new outbreaks and new strains of COVID-19.” said Alexandre de Juniac, IATA’s Director General and CEO. International Passenger Markets Asia-Pacific airlines’ full-year traffic plunged 80.3% in 2020 compared to 2019, which was the deepest decline for any region. It fell 94.7% in the month of December amid stricter lockdowns, little changed from a 95% decline in

REPORT November. Full year capacity was down 74.1% compared to 2019. Load factor fell 19.5 percentage points to 61.4%. European carriers saw a 73.7% traffic decline in 2020 versus 2019. Capacity fell 66.3% and load factor decreased 18.8 percentage points to 66.8%. For the month of December, traffic slid 82.3% compared to December 2019, an upturn over the 87% year-to-year decline in November reflecting pre-holiday momentum that was reversed toward the end of the month. Middle Eastern airlines’ annual passenger demand in 2020 was 72.9% below 2019. Annual capacity fell 63.9% and load factor plummeted 18.9 percentage points to 57.3%. December’s traffic was down 82.6% compared to December 2019, improved from an 86.1% drop in November. North American airlines’ full year traffic fell 75.4% compared to 2019. Capacity dropped 65.5%, and load factor sank 23.9 percentage points to 60.1%. December demand was down 79.6% compared to the same month a year-ago, a pick-up over an 82.8% drop in November reflecting a holiday surge. Latin American airlines had a 71.8% full year traffic decline compared to 2019, making it the best performing region after Africa. Capacity fell 67.7% and load factor dropped 10.4 percentage points to 72.4%, by far the highest among regions. Traffic fell 76.2% for the month of December compared to December 2019, somewhat improved from a 78.7% decline in November. African airlines’ traffic fell 69.8% last year compared to 2019, which was the best performance among regions. Capacity dropped 61.5%, and load factor sank 15.4 percentage points to 55.9%, lowest among regions. Demand for the month of December was 68.8% below the year-ago period, well ahead of a 75.8% decline in November. Carriers in the region have benefitted from somewhat less

severe international travel restrictions compared to the rest of the world. Domestic Passenger Markets China’s domestic passenger traffic fell 30.8% in 2020 compared to 2019. It was down 7.6% for the month of December versus December a year-ago period, which was a deterioration compared to a 6.3% decline in November amid new outbreaks and resulting restrictions. Russia’s domestic traffic fell 23.5% for the full year, but 12% for the month of December, much improved over a 23% decline in November. Full year results were supported by booming domestic tourism over the summer and falling fares. The Bottom Line “Optimism that the arrival and initial distribution of vaccines would lead to a prompt and orderly restoration in global air travel have been dashed in the face of new outbreaks and new mutations of the disease. The world is more locked down today than at virtually any point in the past 12 months and passengers face a bewildering array of rapidly changing and globally uncoordinated travel restrictions. We urge governments to work with industry to develop the standards for vaccination, testing, and validation that will enable governments to have confidence that borders can reopen and international air travel can resume once the virus threat has been neutralized. The IATA Travel Pass will help this process, by providing passengers with an App to easily and securely manage their travel in line with any government requirements for COVID-19 testing or vaccine information. In the meantime, the airline industry will require continued financial support from governments in order to remain viable,” said de Juniac.

Mr De Juniac

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ANALYSIS

he East African Crude Oil Pipeline (EACOP) is expected to reach a Final Investment Decision (FID) as soon as the end of March 2021.This will pave way for the commencement of the construction phase of the pipeline. South Africa’s Standard Bank, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) and Industrial and Commercial Bank of China (ICBC) are among the lead financial advisers intending to secure $3.5 billion to fund the construction of this pipeline projected to release 34.3 million tons of carbon into the atmosphere each year once complete. This comes at a time when the entire world is aiming to remain within the recommended 1.50C and abide by the principles of the Paris Agreement. In a statement to an inquiry by Uganda’s Daily Monitor,Standard Bank claimed to have suspended their financial support to the disastrous project as they await an independent Environmental and Social Impact Assessment (ESIA). This process is, however, standard practice under the Equator Principle and it seems that Standard Bank is merely pointing to its routine due diligence process with little regard to the

call by numerous Civil Society Organizations and local communities to withdraw their support to such an irreversibly damaging project. High risks and meagre earnings for both countries The EACOP is touted as the project that will unlock East Africa’s future by taking Uganda’s oil to the rest of the world. This will supposedly increase the Foreign Direct Investment (FDI) for both countries by over 60% during the construction phase. Conversely, the value of Uganda’s oil reserves has already fallen by approximately 70% since 2013. This value is expected to fall even further as the world transitions into a low-carbon economy. Even from the Tanzania ESIA it estimated that the government will only get $240 million from the project after its construction, which is peanuts compared to the environmental and social implications faced. Furthermore, the Ugandan government is bound to accrue losses of up to $1.4 billion , much more than the $130 million that the Ministry of Finance intends to borrow from the domestic market. Public debt is already projected to rise to 54.1% by 2023 in Uganda.

The East African Crude Oil Pipeline doubt

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ANALYSIS The EACOP project thus risks driving East Africa further into unsustainable debt at the mere prospect of reaping meagre earnings with the only entities bound to benefit being the foreign oil companies such as Total. No government should take such dire economic risks and push the lives of its already struggling citizens into deeper poverty. Standard Bank in cahoots with other major EACOP proponents are, however, resolutely keen on baking debts, the kind that future generations will still be tasting decades from now. East Africa does not need oil or any fossil fuels to unlock its future especially when there are viable, affordable and clean alternative sources of energy such as solar and wind, which are renewable and have better prospects when it comes to long-term job opportunities. East Africa needs to focus on a just transition to renewable energy that guarantees the extensive deployment of millions of clean jobs. EACOP bound to destroy lives and natural habitats The proponents of the pipeline have claimed that EACOP will create short term employment for highly skilled and semi-skilled professionals, as well as casual laborers over a period of 2 to 3 years. It is estimated that 10,000 jobs would be created during the construction phase, boosting the income of the households along the pipeline. However, what we have witnessed in Uganda, Tanzania as well as other East African countries, very few jobs are usually allocated to the local community, thus leaving them even more vulnerable and disenfranchised. The project will result in the physical displacement of local communities from their ancestral and communal land. It is anticipated that EACOP will directly affect approximately 14,000 households in Tanzania and Uganda leading to loss of income and livelihoods. Moreover, the pipeline risks polluting water resources of which over 40 million people in 9 countries depend on; an

unacceptable human rights violation. Beyond ruining people’s lives, the pipeline will tear through some of the world’s most significant habitats, home to endangered species including African elephants, chimpanzees and lions, pushing them ever closer to extinction. What can Standard Bank and other financial institutions do? By playing an advisory role and without a clear commitment to withdraw their financial support from the EACOP project, Standard Bank will be fueling the transition of billions of dollars from public coffers into the pockets of a few fossil fuel proponents who are undoubtedly ready to create tons of emissions that will lead to a planet choking on carbon and exacerbate the already worsening climate crisis, making it extremely difficult for an already vulnerable continent experiencing the adverse effects of climate change. Standard Bank has a responsibility to take care of the people and the planet by leading a new pathway for Africa through spurring investment in renewable energy that will guarantee access to cheaper and cleaner power across Africa, and in the process create jobs for millions of youth across the continent. At a time when millions of petitioners have protested against the EACOP, Standard Bank needs to follow in the footsteps of Barclays Bank and Credit Suisse,who have publicly committed to not financing the disastrous EACOP project. The future needs banks that are committed to having a fossil fuel exclusion policy and an investment plan that unlocks Africa’s future with 100% renewables. By Charity Migwi of 350Africa.org, Edwin Mumbere of the Center for Citizens Conserving (CECIC) and Evelyn Acham of the Rise Up Movement.

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OPINION

Accelerating Africa’s Industrialization through successful SEZs

hile the size of the global chocolate market is valued at more than $100bn, only ~5% of this market is captured by Africa; whereas 70% of the world’s cocoa production comes from the African continent, namely from Cote d’Ivoire, Ghana, Nigeria and Cameroon. This example emphasizes the crucial role of industrialization in boosting economic activity along value chains; shifting from over dependence on raw material to higher value-added goods. Furthermore, industrialization is closely linked to economic and social development: it enhances productivity, innovation and economic diversification, and contributes to a rise in the workforce education as well as formal employment. As of 2019, industry generated on average $700 of GDP per capita in Africa, less than 30% of Latin America’s output ($2,500) and c. 20% of East Asia’s one ($3,400). Nonetheless, African economies have the opportunity to foster industrialization by capitalizing on two decades of steady GDP growth, along with an increasing young workforce, rapid urbanization, and technological development. To do so, Special Economic Zones (SEZs)

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have the right ingredients to achieve rapid and scaled industrialization of the African continent. SEZs are demarcated geographical areas within a country’s national boundaries, which benefit from a distinct regulatory regime. They generally provide four types of advantages to investors: (i) an access to reliable infrastructures and utilities, (ii) attractive customs regimes, (iii) fiscal incentives such as corporate taxes exemptions, and (iv) enhanced regulatory and administrative frameworks. From ~500 in 1955, SEZs’ number has risen to ~5,400 in 2019 worldwide, with Asia counting for three quarters of all SEZs (and China for 47% by itself). SEZ’s development is relatively recent in Africa, where most programs were adopted in the 90s and 2000s following governments’ ambition to replicate the East Asian economies’ rapid development. As of 2019, 237 SEZs were established in the African continent, with Kenya (61), Nigeria (38), Ethiopia (18) and Egypt (10) representing the top 4 countries, according to the United Nations Conference on Trade and Development (UNCTAD). Despite a growing number of SEZs in Africa, such projects have a mixed history of success. SEZs in early-stage bear multiple

OPINION

risks, including a significant ramp up period before reaching full commercialization (i.e. full occupancy of the zone) and consequently stable and predictable revenues (mostly derived from leasing the plots and pre-built facilities to tenants, selling utilities, and offering services such as logistics, warehousing or raw material sourcing). Preferred financing sources for SEZs in Africa should hence come from lending institutions able to provide long term maturities and grace period on capital repayment during the project’s initial years. Developers should also target lenders with specific mandate for industrialization, likely to provide optimized financing terms. Furthermore, it appears reasonable to limit the initial size of the zone and adopt a phased investment approach, whereby capital expenditures are incurred gradually over time as the SEZ attracts investors and requires additional plots’ development. Besides, if choosing the appropriate financing structure for SEZs enhances their viability, these projects are mostly dependent on non-financial factors such as strong institutions and robust legal and regulatory frameworks. Their planning should be fully part of the governments’ industrial policies

and development agenda, and they should be designed to bolster identified strategic sectors and maximize spillover effects on the overall country and regional economy. A review of SEZs’ successful experience worldwide[1] also emphasizes the importance of (i) a strategic location choice close to main commodities flows, workforce pools, export channels and internal markets; (ii) solid institutions providing one-stop-shop administrative and customs services to the customers; along with (iii) plans to address environmental and social concerns and ensure sustainable operations. Moreover, a key challenge to SEZs’ success relates to zone developers’ frequent lack of operational know-how in zone management. In respect of these challenges, Arise Integrated Industrial Platforms (Arise IIP), a developer of industrial and logistics ecosystems in Africa, has adopted a holistic approach to SEZ’s development. In addition to providing world-class infrastructures and industrial land for companies, Arise IIP’s unique model is to cover all the industry needs across the value chain: from the competitive supply of industrial inputs (e.g. raw material), to the provision of logistics services and the marketing and commercialization of the tenants’ manufactured products. This tailor-made solution has proven to be successful, as illustrated by the Nkok Special Economic Zone in Gabon, a c. 1,100 ha zone primarily focused on timber processing and developed through a long-term PPP between Arise IIP and the Gabonese Republic. Initially set up in 2010, Nkok SEZ has managed to attract over 105 industrial players in 10 years and has been categorized as the Best Free Zone for SMEs in Africa and the 3rd Best Free Zone in Africa in the FDI Intelligence 2016 report. Additionally, the SEZ has dramatically impacted the country’s wood sector and overall economy: Gabon has become the 3rd veneer exporter worldwide (as compared to the 18th position in 2010), and the sector’s contribution to Gabon GDP doubled. The number of jobs in the timber sector also doubled, reaching 17,000 jobs in 2019 (from c. 8,400 in 2010). Such successful project also relies on the close collaboration between Arise IIP and the government of Gabon, which implemented a ban on raw wood exports along with a sound legal framework for SEZs (cf. Gabon Law n°010/2011). Rightly implemented, SEZs can thus scale u industrialization in Africa and provide opportunities to the rising workforce on the continent. Finally, while the trade slow-down due to the covid-19 pandemic has strengthened the case for shortening supply chains and reducing dependency on Asian manufacturing; the growth of the African middle class and the associated shift in consumption patterns[2], coupled with the rising intra-African trade[3], suggest plenty future opportunities for SEZs in Africa. Melina Enoh is an Investment associate at ARISE IIP, a pan-African infrastructure and logistics solutions company specialized in integrated industrial zones. www.theafricalogistics.com

CORPORATE

Astral Aviation begins flights to Sharjah

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airobi-based cargo airline, Astral Aviation, will operate flights to Sharjah, as part of an expansion of its operations within the Middle East. The Sharjah Airport Authority said that there will be two flights per week from Nairobi in Kenya to Sharjah, using Boeing 767 aircraft, reported state news agency WAM. Sanjeev Gadhia, founder and CEO of Astral Aviation, added: “We will provide a scheduled service for perishables from East Africa to Sharjah for the UAE region, while on the return, Astral’s consolidations from China, and the UAE will be moved from Sharjah to Nairobi for onward connection to Astral’s intra-African network.” Astral Aviation headquartered in Nairobi, has second hub in Liege, Belgium, while the Sharjah Airport will be the third hub for the company and its first in the Middle East. “Sharjah Airport continues to attract new airlines and routes, such as Astral Aviation, which cements our leading position as an international hub for freight,” said Ali Salim Al Midfa, chairman of Sharjah Airport Authority. “Agreements such as this also confirm our commitment to providing the highest international standards and practices for the air cargo sector through specialised warehousing, which has obtained CEIV accreditation from the International Air Transport Association (IATA). We look forward to employing our full logistical capabilities and working with Astral Aviation to ship Covid-19 vaccines from China to the African continent in an efficient and smooth manner.” The storage and handling unit of medicinal products at the cargo centre in Sharjah necessitates continuous temperature control and monitoring thermal changes from the moment they disembark the plane to the moment of delivery. “The advanced infrastructure provided by the airport, and the support air freight systems that connect the cargo center to all international destinations, constitute a qualitative addition, especially since Sharjah Airport has proven its efficiency and ability to quickly respond to cargo operations that need special attention in terms of handling, shipping and storage,” added Al Midfa.

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