Sub-Saharan Africa: Obstacles & Opportunities

Old and new Africa hands know the potential pitfalls of doing business in the sub-Sahara, with the exception of South Africa, are myriad. Regulations can be dangerously murky, cultural differences can be confusing and even dangerous, business methods can be maddeningly inefficient, and infrastructure can be shockingly inadequate.

But Africa’s extraordinary potential as a source of commodities and materials and as a developing market for project, breakbulk and consumer goods continues to attract investors and shippers, forwarders and carriers. To get business done, they demystify regulations in the Democratic Republic of the Congo, find ways to import materials safely into Nigeria, avoid dangerous bridges, inadequate roads and other hazards, and occasionally operate in war zones and under kidnapping threats.

Bertling Logistics, for example, registered in the DRC in January 2008 because it was working with investors establishing mines there. Bertling quickly discovered there was no specific set of go-to information about how imports should be brought into the country.

“We compared information from clearing agencies and could not find similarities. We went to customers and said, ‘Show us how you get in.’ Customers had had very different experiences,” said Marc Schweiger, regional managing director for F.H. Bertling Logistics in South Africa.

The questions were straightforward: What are the actual duties and other charges for bringing imports into the DRC? Answering them, however, was surprisingly challenging.

“You’d ask a question and get three different answers, even from government officials. The situation opens up potential for abuse. We were operating in a market that had no evidence of duly charged fees,” Schweiger said.

Bertling’s task became finding the best and most reliable agents to resolve the import question, establish the actual requirements and develop a reliable set of information for customers, “a manual, if you like,” Schweiger said.

Nigeria also can be a complicated place to do business, to put it mildly. The country is “exploding” because of the oil and gas industry, and Nigerians are becoming more involved in international commerce, said Janette Marlowe, president and chief operating officer of Houston-based forwarder Jaemar International, which ships project cargo to Nigeria, Sierra Leone and South Africa.

While business is no longer driven only by U.S. or international companies, it means “it is more complicated. You have to be dedicated to respecting the culture of the country. You can’t go in there and force the American way of doing business,” she said.

Cargo moving to Nigeria includes equipment such as forklifts, backloaders, drill pipe, safety equipment and supplies, hardhats and boots, and firefighting equipment, Marlowe said.

Local businesspeople “are not bringing in their own land-based drilling rigs, but they are building up a very good (support base). They supply the material, the stuff that goes along with what Shell needs and what Chevron needs,” she said.

To make their process run smoothly, Jaemar partners with Nigeria-based Rescon USA and Rescon Oil Services. “We feel very comfortable with Rescon’s ability to negotiate the cultural ins and outs of doing business there,” Marlowe said. “They interview our partners and the companies we are going to do business with. They handle payments in Nigerian dollars for us. We pay in U.S. dollars to our agent here. That’s one of the major problems, handling the finances down there.

“When we were approached, we looked at different ways to accommodate everyone involved without bending the rules,” she said. “We absolutely do not break any rules whatsoever.”

Jaemar typically gives Rescon a list of issues to be addressed with a given shipment. “They go into the community and find a local security company, a local trucking company, people that have an interest in making the transaction successful. Then we can get real quotations on what it is going to cost,” Marlowe said. “We pay our agents and they distribute the money there. Our partners have ethics and are interested in making the business work.”

Originally a pipeline repair company in the Niger Delta, Rescon now also supplies repair materials to the region, assists other shippers and forwarders such as Jaemar, and handles machinery and construction equipment.

“If you ship products (to Nigeria) and don’t have someone to take care of them, your product is at the mercy of whoever is at the other end. So since we ship so much, I set up a company that would go to the site. It’s a safety measure,” said Emeka Emecheta, an engineer who worked in the oil and gas industry in Houston and is now CEO of Rescon USA and a partner in Rescon Oil Services. “Shippers had had some problems with discrepancies such as orders not tallying, so Rescon put people on the ground in Nigeria.

“We don’t clear, but we work with approved clearing agents,” Emecheta said. “We are there as the ship is unloaded. We take pictures and send reports back well ahead of time. It works for us. We do it for companies like Jaemar and also for ourselves, just to make sure that what we shipped is what we receive.”

Every country has its own issues, Emecheta said. Frustration is often based on unrealistic expectations. A slower pace of business and bureaucratic red tape can frustrate people used to doing business in the U.S. or Europe.

“There is a lot of scrutiny. They are trying to protect against money laundering. If you are not Nigerian, you may not understand,” he said.

Bertling typically creates partnerships with established agents in destination countries and inserts senior staff and managers. “We find a suitable partner that we can have a relationship with, one that will adopt our methods, procedures and standards and manage in conjunction with existing resources,” Schweiger said. “That is the way to handle very challenging environments. Dealing with local authorities can be very challenging. We also consider opening our own offices, but we like to go along with existing companies.”

Moving cargo over land in Africa can present another set of extraordinary challenges. What appears to be the shortest route on the map often is not the most suitable one, Schweiger and Marlowe said. There may be no established roads. Bridges can be from the colonial era, 50 or more years old, with no plans or up-to-date assessments available. For example, to get project cargo into north-central Mozambique, Bertling often has to route from South Africa.

Schweiger’s South African office is “basically the Bertling head office for sub-Saharan Africa,” he said. “We work on project work and logistics works, greenfield and brownfield projects in the sub-Sahara. We don’t really say no to any destination.”

When assessing the route to a given project location, “We establish ‘window frames,’ ” Schweiger said. “What sort of items can be taken to a particular location? What is necessary to increase that window, to make more movements possible?”

In Mozambique, one mining project Bertling is involved in is accessible by a bridge over the Zambezi River that can bear only about a 30-ton payload. The project, however, will require deliveries weighing 50 tons to more than 200 tons. So Bertling has established an alternative route that adds 750 miles and is restricted by a bridge that can handle up to 65 tons. Rigging heavy loads off the trailer and skidding them on rails across the bridge will increase the permissible payload to as much as 110 metric tons, Schweiger said.

However roundabout, the alternative cuts costs for the customer, he said, because the only other choice would be a very expensive air charter. Ultimately, the heaviest pieces will have to be barged across the Zambezi.

Africa’s challenges also can edge toward the stuff of thrillers and war novels. “Wherever you set up shop, it’s always good to involve the locals,” Emecheta said. “It’s a lot safer. If there is any kind of unrest, the locals are unlikely to destroy (your facility) if families are working there. If you come to a place and set up shop with a great amount of foreigners, if you don’t give the locals a chance, they have nothing to lose. They have nothing at stake.”

Some sections of Nigeria suffer from what Emecheta describes as “internal” piracy, where locals kidnap staff from Western companies and hold them for ransom. Hostage-taking can be a risk in Nigeria’s southwest, agreed Haakon Rostad, managing director for South Africa-based carrier UAL-SA.

“Ships go in convoys in and out of the ports. It is a real concern, and has been tremendous fuel for the security industry,” he said. In some regions, “our ships have to sail with war-risk insurance. But we have been there for 27 years, so we know what to do.”

More prosaically, some West and Central African ports are congested and inefficient. “You have to know each port and know the governments,” Rostad said. “We go to the oil bases with immediate berthing.”

The rivers can be difficult to navigate — some with shallow drafts — and corrupt officials make life difficult. Documentation must be completely correct, he said. Even minute errors can serve as reasons to hold up or derail transactions.

“You have to be compliant in a not-always-compliant environment,” Rostad said. “That’s the American compliancy issue enforced by the Securities and Exchange Commission. There is zero tolerance of corruption. We go in as foreign companies to West Africa and behave in a totally compliant manner.”

Some African countries are trying hard to become genuinely compliant, Rostad said. “They have the intentions and the policies. At a grassroots level, they must understand that if they are not corrupt, they will have a better life. This is for all of Africa — there is nothing new in this. But it is a challenge. There are many challenges.”

The economic slump has had little effect in West Africa, Rostad said. “The oil and gas theater in West Africa is still booming. We have been running full ships all through the crisis.”

Contact Janet Nodar at jcnodar@bellsouth.net.