Imperial Logistics CFO George de Beer reveals the costs of cross-continental trade


George explains that the largest part of product to market costs is the cost of logistics.

Imperial Logistics, which transports and distributes healthcare and consumer goods across more than 20 countries in Africa, recently launched a feature that delves into the African Continental Free Trade Area Agreement (AfCFTA) and its goal of seamless trade, travel and transport, and a single African passport for all African Union member nations.

The objective of the agreement is to phase out tariffs on 90 percent of goods within 10 years and to create a continent-wide single market for goods and services with free movement of business, people and investments.

“As one of the leading logistics and market access players on the continent, and with logistics being integral to facilitating trade, Imperial believes that the AfCFTA will play an important role from a logistics and transport perspective as countries start embedding trade links,” says Imperial CFO George de Beer.

On the back of a successful Visionary CFO Series in 2021 and 2022, A2X has once again partnered with CFO South Africa to bring you a series of interviews highlighting South Africa’s best and brightest CFOs, their insights and challenges. Find out how they help lead some of South Africa’s most successful companies in this bi-weekly interview series.

Read all about the Visionary CFOs here.

The cost of trading inefficiencies
But while there certainly is a case to make for the importance of the logistics industry in Africa, the cost thereof currently exceeds its global peers. “The largest part of product-to-market costs is the cost of logistics, not the cost of manufacturing,” George explains, adding that there are many challenges, some of which include poor infrastructure and long lead times at borders on the continent. Global supply chain disruptions and bottlenecks are further exasperating the high cost of logistics on the continent.

“I’ve been in the road transportation industry in Africa for over 13 years and since I started doing cross border transport, very little has improved,” he says. “There’s always been talk about creating 24-hour border posts and fast lanes, but it’s not happening in Africa.”

George explains that a trip from the port of Durban to the southern part of the DRC, which should only take Imperial’s drivers a week to complete, takes two weeks. This is because all the border crossings they pass on their way to the destination have their own nuances and issues that delay the trip.

The time for containers to pass through the Durban port, which is the largest port on the continent and with the most volume throughput, compared to global peers is more than double,” he adds

Additionally, he says that Africa has a massive amount of landlocked countries (16 countries in total), like Botswana, Zimbabwe, Zambia and Uganda, where the only mode of transportation to get product into those territories is via the poor road infrastructure. Not only is it far, but the poor roads also make the journey longer.

“In transport operations, farther distances and longer times equal higher costs,” George explains. “If the cost of the trip is higher, the manufacturers are charged more, and the manufacturers then increase their prices to the consumers. If you reduce the supply chain costs, these products will become more affordable to the consumer.”

He adds that facilitating cheaper products across the African regions will add to Imperial’s relevance in those territories.

In order for the cost of logistics to improve in Africa, Imperial needs to become part of the conversation to come up with a solution for the inefficiencies that the logistics industry is experiencing. “Part of this will be creating public and private partnership with the government to increase investment into infrastructure,” George says. “However, the political will to get this done is going to be the largest challenge across so many countries.”

George adds that another important aspect of the agreement is boosting local manufacturing to enhance cross-border trade across the continent. In addition, the digitisation of supply chains is a global theme that will also be a critical element of this agreement.

He hopes that, if the AfCFTA manages to facilitate seamless trade across the country, it will promote foreign direct investments.

In the meantime, Imperial has its own plans to improve the supply chain costs associated with delivering goods. “We are looking at expanding into some of the key trade corridors, like the North-South corridor, Mozambique to Zambia corridor and various others through our acquisition of the J&J Group, which is still subject to outstanding approvals. This will bring us a lot closer to some of the landlocked countries in Africa,” George says.

The cost of insecurities
Inefficient border crossing and poor road infrastructure are, however, not the only challenges Imperial faces. “One of the challenges of the free trade agreement is dealing with some of the insecurities in quite a number of countries, like the unrest in northern Mozambique and South Africa,” George explains.

When security risks like the protests in KwaZulu-Natal and Johannesburg or attacks in Mozambique and Nigeria arise, Imperial has to prioritise the safety of its drivers and pull them out of those areas. “Fortunately, we operate locally in each country and our local management gives us intel around these scenarios so we can manage it in real time accordingly,” he adds.

Imperial also has to juggle international challenges, like Brexit creating a driver shortage in its European operations, or the semiconductor shortage worldwide, which has severely impacted the global automotive industry.

“These are all out of our control,” George says. “But we can make sure that our financial metrics remain sound. And I think we’ve done an exceptionally good job throughout all these challenges.”

He explains that having a portfolio across the continent stood Imperial in good stead. “Having a wide and diverse portfolio gives you that natural headroom if things go a bit pear-shaped in one of the territories.”

A truckload of changes
Over the last two years, the logistics industry has seen many changes. The Covid-19 pandemic has increased local manufacturing of consumer and healthcare goods across Africa because of disruptions in global supply chains. It has also increased the adoption of technology for both organisations and consumers, and clients, principals and customers now want more visibility of supply chains.

“Our digital strategy is key to transforming Imperial, enabling growth and strategy by providing coherent processes and systems that support core business and strategic delivery, and by facilitating access to new value propositions and revenue streams,” George says. “It also enables us to build partnerships across our ecosystem, and to identify, pre-empt, integrate and own potentially disruptive technologies and business.”

Because of this, Imperial has launched digital capacity and control towers, as well as digital freight platforms.

Imperial has also entered into the ecommerce industry.

“Consumer markets are one of the fastest growing markets in the world,” George says. “We have increased consumerism and urbanisation, as well as a growing middle class. Experts predict a population of 1.5 billion by 2025 on the African continent alone, which means spending is expected to increase as well.”

As a result, there will be greater demand for healthcare and consumer goods.

“The global third-party logistics (3PL) market will also continue to grow, so we are expanding our 3PL across the continent as we grow our Market Access business,” he adds. “With increased trade flows, global 3PL capabilities will have to increase to facilitate the moving of products. That’s where we see the biggest benefits.”

Related articles

CFO Jan Hofmeyr shares his blueprint for technological transformation

Passionate about the opportunity technology can bring, 2023 Finance & Technology Award winner Jan Hofmeyr has been breaking the CFO mould at OUTsurance by driving the transformation of its finance department so it remains relevant in an increasingly digital future. He reveals how this change has affected the entire business.

CFO Raisibe Morathi explores the nexus of connectivity

CFO Raisibe Morathi, CFO of the Year 2023 and winner of the Strategy Execution Award as well as the High-Performance Team Award, reveals how she balances technology and people to foster the ultimate digital, financial and cultural inclusion, as Vodacom Group transforms to become part of the digital revolution.

Bringing Joy to Discovery Health Medical Scheme as CFO

Discovery Health Medical Scheme CFO Joy Malete says that her rapid career progression has been the result of “divine orchestration”. Just 34, her success is rooted in curiosity, talent, and a true passion for what she does.