Tarek Sultan, CEO and vice chairman of Agility - African Business Magazine
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Tarek Sultan, CEO and vice chairman of Agility

Tarek Sultan, CEO and vice chairman of Agility

Over the past decade Africa has seen substantial investments in its ports and roads.

We have seen new terminals being built and upgrades in ports along the whole coast, in Morocco, Togo, Cameroon, Mozambique, Kenya and more, and yet it often costs less to send a container halfway around the world than to unload and move it from a port such as Mombasa to Nairobi or Kampala. For Tarek Sultan, chairman of Agility, a global logistics service provider, the solution is simple: a greater emphasis on the soft infrastructure.

“A lot of investments have taken place in ports and airports, more than enough,” he says, “but we need a corresponding revolution in the electronic infrastructure for trade, that is customs and documentation to facilitate the clearing process so that it is done with the least amount of friction. Containers will stack up in the port, not because the port is inefficient but because the stakeholders that are responsible for getting those goods through the port are not working as efficiently as they could.”

Operating across the globe and with extensive operations in emerging markets, Agility experiences first-hand the gains that can be made through these efficiencies. Some of the markets it operates in have introduced an e-declaration form that acts as a onestop shop for customs clearance.

Since it was installed at one border in Pakistan, it is calculated that the e-platform has replaced 26 clearance forms, requiring 34 signatures and 62 verifications. More importantly, it has increased import duties at that location by 25%. “These [innovations] have a real, tangible ability to improve trade flows and to make the movement of goods quicker and faster.”

Sultan feels that there is much low-hanging fruit providing opportunities for kickstarting trade across the continent and that it begins with “taking advantage of what’s around you, in your own neighbourhood.” For Sultan this means not only making the African market accessible internationally, but also making it easier for people and small and medium-sized enterprises (SMEs) to trade regionally.

The old adage that time is money could not be truer in the logistics business. In Dubai and Singapore, which have built their economies around being global trading hubs, clearance times are measured in hours, says Sultan.

In Africa, clearance times take days if not weeks, which is costly. A 2011 report from the World Bank said containers sit waiting in African ports for an average of three weeks, compared to a week in other emerging markets. In Durban, Africa’s biggest port, boats must sit an average of four days to clear and unload. Given that 90% of trade is channelled through the ports these delays have a significant cost.

And that cost has an impact also in terms of exports. Another report, this time by the African Development Bank, estimated that it takes only 10 days and $1,000 to export a 20-foot container in OECD countries, whilst it takes nearly 40 days and costs nearly $3,000 in the East African Community.

For Sultan it is imperative to have an efficient logistics and infrastructure backbone to be able to send goods to market. Across Africa, Agility is embarking on an ambitious programme to build 70 100-acre distribution parks.

This has been driven by demand from multinational clients who are looking to grow their activities in Africa and Agility’s recognition that there was a lack of international standard warehousing and logistics parks. The concept is to give its clients reliable infrastructure from which they can conduct business – in short, a facility where the power will never go off, the IT will never go down and everything is fully secured.

The endgame for Agility is to build this network of distribution centres so that they can allow their clients to move goods from one country to a neighbouring country with total transparency, understanding where these goods are at all times.

The main beneficiaries, he explains, will be the SMEs, as it is they who have the most to gain from easing the cost of doing business. One of the first tenants at Agility’s facility in Tema port in Ghana, which was opened earlier this year, was a small company that had contemplated building its own $5m warehousing facility. When it asked for a loan, the bank wanted to charge the business a rate in excess of 20%, which would have made its operations unviable. Instead, the company signed a five-year lease at the logistics park, paying $24,000 entry money. This enabled it to start operating straight away without having to take on a substantial debt. This client is now servicing five new international agents from this facility. Still plenty of

When it asked for a loan, the bank wanted to charge the business a rate in excess of 20%, which would have made its operations unviable. Instead, the company signed a five-year lease at the logistics park, paying $24,000 entry money. This enabled it to start operating straight away without having to take on a substantial debt. This client is now servicing five new international agents from this facility. Still plenty of

This enabled it to start operating straight away without having to take on a substantial debt. This client is now servicing five new international agents from this facility. Still plenty of upside Currently Africa is responsible for under 3% of global trade and much less in terms of exports, once you take away the extractive industries. Sultan feels that Africa should be contributing 10% or 15% of global trade and it is this opportunity that makes him so optimistic about Africa as a whole and emerging markets in general. “All of our customers, when they look at where their growth is going to come from, the only reasonable answer is the emerging markets.”

Sultan feels that Africa should be contributing 10% or 15% of global trade and it is this opportunity that makes him so optimistic about Africa as a whole and emerging markets in general. “All of our customers, when they look at where their growth is going to come from, the only reasonable answer is the emerging markets.”

He isn’t perturbed by the current global slowdown and fall in commodity prices – volumes are up – although the rapid fall in the price of oil has delayed some projects for which Agility would be providing logistical support, such as an offshore gas project in Mozambique. The rollout of the distribution parks is a few months behind

The rollout of the distribution parks is a few months behind plan, but the opportunity remains the same: “The slowness has come from us as opposed to a slowdown in the opportunity. The [logistics park in] Ghana is being leased out and the interest there is basically validating our thinking and strategy. We are going to accelerate our rollout with another seven we are hoping to get underway this year.”

When asked to compare the Asian opportunity with that of Africa he remains equally upbeat about both. Asia, he says has benefited from population growth and rising income levels, trends that are happening in Africa today.

The third and key ingredient to Asia’s success has been its ability and track record in simplifying and making it easier to do business. “It’s a great model for the continent [of Africa]. I mean it’s very simple, let’s make it an easier place to do business and the rest will take care of itself,” he says.

As the conversation ended, it all came back to one issue. You can have the best ports, the best cranes, but the low-hanging fruit is trade simplification. “It’s costless,” he concludes, “and it’s the easiest way to get a multiplier today.”

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Written by African Business Magazine

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