New Captain To Steet Safmarine Through Seas - African Business Magazine
New Captain To Steet Safmarine Through Seas

New Captain To Steet Safmarine Through Seas

Although Safmarine has now moved its home port from Cape Town to Copenhagen, it still remains Africa’s most significant shipping line. Tom Nevin discusses maritime matters with the company’s top brass as shipping adjusts to the world’s new realities.

Although Safmarine flies its flag these days from Copenhagen as its home port, the South African-pedigreed merchant shipping line is still regarded with pride and nostalgia by Africans as a product of Africa. “The image of Safmarine’s dazzling white hulls in Cape Town’s Table Bay will never fade for me,” says one Capetonian.

The fact of the matter is that even though Safmarine has been a member of the giant Danish AP MØller-Mærsk shipping group for over a decade, its familiar vessels are seen in greater numbers in African and other ports around the world than ever before. Established in South Africa in 1946, the line grew quickly, first acquiring CMBT, a Belgian company with over a century of rich history of activity in Africa, before joining the MMærsk  Container Business and AP MØller-Mærsk Group in 1999. Regarded as the African regional specialist, Safmarine is represented in 47 countries on the continent.

However, the marine mercantile seas are choppier today than they’ve been for some considerable time with profitability and growth at a low ebb. A measurement of the industry’s contrary business climate is that it costs about the same to ship a container these days as it did in 2005.

“Adjusting for inflation, this means we are actually getting less money per box today,” observes Safmarine’s new CEO, Grant Daly, appointed to lead the company in February this year.As a means of correcting such imbalances, the AP MØller-Mærsk parent introduced a series of restructurings. One of the more far-reaching saw the integration of the corporate and regional management activities of Safmarine into those of Mærsk Line, whilst retaining and growing a separate Safmarine brand and operating model. Safmarine’s traditional routes that ply the giant emerging market trade are a big part of the solution.

“A key,” notes Daly, “is to identify how we can add value and help our customers grow their businesses, particularly those trading with such fast-growing markets as the BRICS countries and the Africa, Middle East and the Indian sub-continent regions as a whole; regions we know well and where we have decades of experience and an extensive presence.”

Daly has been in the hot seat a scant few months, since shortly after the restructuring that redrew the group and radically changed Safmarine’s part in it. He joined Safmarine 17 years ago after graduating from South Africa’s University of Stellenbosch with a Bachelor of Economics degree.

He is immensely proud of Safmarine and its part in developing the South African shipping industry, and its subsequent value and contribution to the AP MØller-Mærsk group. However, driven by the challenges facing the global economy this year a decision, largely based on cost, was taken to integrate the corporate functions of Safmarine and Maersk Line. Encouragingly, customer feedback has been positive and despite the extensive overhaul, the Safmarine sales and customer services staff complement remains unchanged at 1,400 Safmariners in 130 countries.

“Even major restructuring need not bring the shock of sudden change,” observes Daly, “because what we have not changed is our common denominator – the focus on our people and our people’s focus on our customer. Growth-wise we’re focusing on three core regions – Africa, Middle East and the Indian subcontinent, the epicentres of inter-trade influenced by the BRICS countries and other regions that are outgrowing such traditionally dominant markets as Europe and the US.”

Reality check

Daly reports that the shipping industry must contend with a number of pressures in the trying economic times. For one thing, the industry is fragmented with the top 10 carrier companies accounting for about 60% of the goods moved “which in any economic model would have its challenges”, he says. For another, the skewed equilibrium of 10% supply and 5% demand is “not where we’d like it”.

It gets worse with costs analyses showing that it’s actually cheaper to ship a container now than it was seven years ago. Inflation has increased and freight rates have not. Fuel costs have heavily outpaced other input costs. Volume equilibrium is an ongoing challenge.

“In fact,” notes Cape Town-based Safmarine Southern Africa executive, Jonathan Horn, “South Africa, while still import dominant, has a more balanced trade profile than most other African countries. However, when you drop one layer into the detail you’ll find light, finished goods coming in and heavy commodity-type goods going out.

“That’s one of the big challenges of the industry, exacerbated by the fact that goods going out of South Africa tend to demand a higher proportion of 20-foot containers while the lighter imports arrive in 40-footers. Life would be simpler if we had 40-footers going both out and coming in, and that’s something we’re working on.”

Is South Africa’s membership of BRICS last year meeting the expectation of greater trade between the bloc’s component countries of Brazil, Russia, India, China and South Africa? Safmarine should be the ideal barometer to measure whether or not this is the case. “Those economies are growing faster and there’s a greater demand for goods, both import and export,” says Daly, “and we are seeing a greater trade flow relative to the performance of such mature markets as Europe and the US.”

This has not meant a switching of routes, or the withdrawal of capacity from one or the other although there is a constant review of deployments and the product on offer by the line. In other ways as well, South Africa’s maritime and mercantile profile appears headed for extensive change. In particular Durban, already the southern hemisphere’s busiest port, will offer dramatically extended container handling facilities once its new dug-out harbour is commissioned. The new Ngqura port and Coega industrial development zones (ICZ) near Port Elizabeth are finally beginning to attract a significant portfolio of manufacturing clients and a growing number of berthings.

Mine of maritime information

Safmarine’s long African pedigree makes the carrier a mine of information on matters maritime especially containerisation, its primary business.

“Involving all relevant role players in terms of strategic planning of port and associated infrastructure development would be a good thing,” says Horn. “If we look at the way we run our business, we think it’s important to consult with our customers about how we should grow and enhance our deployment and our services to meet their needs. For anyone who’s providing a service, it’s a good idea to have strategic discussions with key customers and understand their changing needs.”

Horn points out that if the freight sector is to be enhanced, consulting all relevant players can only be beneficial in terms of a longer-term goal of making supply chains in and out of Southern Africa competitive against other emerging markets.

“Import and export infrastructure are not only about ports and don’t stop there. That’s something Transnet (the parastatal owner of South Africa’s ports and railways), takes seriously,” he says. “In the long term, we must get more cargo off the roads and onto rail. By all reports, Transnet understands the need to get ahead of the curve and invest in ports and rail.”

As the African economy expands, countries in the region are creating their own maritime routes and portals and in the process shippers are adjusting as well.

“South Africa is an important gateway,” says Daly, “and will continue to be one but it would be naïve to consider itself the only gateway in the region. These days there are several. Other African ports are becoming more sophisticated accesses into Africa.

“South Africa has held the keys to the gateway into the SADC countries for a long time, but the ports of Walvis Bay, Maputo, Luanda and others are coming of age and realising the value of providing access into their hinterlands.”

Daly does not consider such trade facilitation a threat to South Africa seeing that growth in those economies will more than make up for the percentage shift in movement on the various transport corridors in the long run.

Rate this article

Author Thumbnail
Written by African Business Magazine

African Business and its award-winning team is widely respected for its editorial excellence. We provide the all important tools enabling you to maintain a critical edge in a continent that is changing the world. Our special reports profile a wide range of sectors and industries including Energy, Oil and Gas, Aviation, Agriculture to name but a few.

Related Posts

Join our mailing list

If you would like Independent, Informative and Invaluable news analysis on the African continent, delivered straight to your inbox, join our mailing list.

Help us deliver better content