Namibia: Logistics Outperformer


Namibia is BMI's logistics outperformer out of the seven sub-Saharan African countries (the others are Angola, Botswana, Ghana, Kenya, Nigeria and Tanzania) which we have identified as offering strong opportunities to the automotives sector. Automotive firms breaking into or expanding in Namibia benefit from a relatively developed transport network, direct access to the sea and a comparatively quick and easy bureaucratic process, thereby ensuring a quicker and cheaper trade option when compared to the other six sub-Saharan African states. Currently, automotive shippers' primary concern is imports into Namibia, but BMI believes export-logistics needs will come to the fore, as Namibia increases its role in the re-export sector and develops its auto manufacturing industry. As the automotive sector's trade demands diversify, companies will benefit from the fact that it is quicker and cheaper to export out of Namibia than it is to import.

Key Take-Aways

  • Namibia a regional logistics outperformer;

  • Lining itself up for greater transit role;

  • Well-developed international and domestic supply chain;

  • Continued investment in transport network will ensure Namibia retains its outperformer status and can keep pace with demand growth;

  • Quick import supply chain and competitive bureaucracy, but cost of imports needs to be brought down;

  • Relatively cheaper and quicker to export compared to import, offering a benefit for automotive firms as they potentially develop a manufacturing sector in Africa;

  • Namibia's export sector is however not so competitive when viewed regionally.

Network: Namibia Well Connected Internationally And Domestically

Namibia boasts strong international transport links outperforming the seven sub-Saharan Africa countries which we are analysing for their logistics potential to meet the growing demand stemming from the automotive sector.

BMI highlights that Namibia's ports are well developed. They cater not only for the country's domestic demand, but also function as an entry point for the landlocked states of Botswana and Zambia. This becomes significant considering Botswana is another of our favoured markets in terms of demand potential. Investment continues to be made in Namibia's port sector to ensure that its facilities can keep pace with increasing demand.

Namibia's two key ports are Walvis Bay and the port of Lüderitz. Both have seen strong growth, with container throughput at Walvis Bay increasing by 482% between 2002/03 to 2010/11 from 37,185 twenty foot equivalent units (TEUs) to 220,178 TEUs. Containers are traditionally used for the transport of automotive parts, but Namibia's ports also cater for the import of fully built vehicles and this area is also witnessing robust growth. In 2012 the port of Walvis Bay recorded its vehicle imports doubled, to a value of NAD150mn (US$15.2). BMI projects this strong growth to continue, aided by the macroeconomic outlook and the fact that growth is expanding from a relatively low base.

Boxes Stacking Up
Sub: Port of Walvis Bay Container Throughput (TEU)

Namibia's growth story has attracted the attention of container shipping lines, with the rapid increase in throughput at the country's ports being matched with increases in liner connectivity. Box lines have steadily increased their calls at Namibia's ports and although the country lags behind its southerly neighbour, South Africa, in terms of liner connectivity as measured by the UNCTADstat Liner Connectivity Index, Namibia outperforms its northern neighbour, Angola, in a comparison of the number of container line services calling into the two country's ports.

Well Connected
LHC: Namibia Liner Connectivity. RHC: UNCTADstat Regional Liner Connectivity Ranking

According to the UNCTADstat Liner Connectivity Index Namibia is ranked second out of the seven Sub-Saharan African logistics markets we are comparing, with Nigeria taking first place. Namibia's comparatively strong liner connections will be a key consideration for automotive firms when they develop their Africa supply chains. Strong box shipping links ensure better reliability, more transport options for shippers and cost competitiveness.

The increase in container line connections at Namibia's ports, while driven by demand, has been aided by the relatively developed nature of Namibia's port sector. According to data from the Global Competitiveness Report of the World Economic Forum, Namibia's port infrastructure ranks first out of its seven sub-Saharan Africa peers.

Developed
Global Competitiveness Report Port Infrastructure Rankings

Namibia looks set to retain its lead in terms of port development, with investment and modernisation plans in place for the country's maritime sector over the medium term. The Namibian Ports Authority (Namport) is developing the port of Walvis Bay, with a total of NAD240mn (US$26.88mn) so far invested in the facility, in order to increase its capacity to 1mn TEUs by 2020.

In May 2012 Namport stated it would bring forward plans to construct a new port at Walvis Bay, enabling the facility to cater for the projected rise in container traffic and other goods. The plan is for this new facility to make Walvis Bay the premier port in the region, with the project reported to have attracted the attention of the Chinese government, who are considering funding the development.

The plans entail dredging of a deep entrance channel and digging the land in order to make way for the new deepwater basin as well as 10km of quayside to enable larger ships to berth. We note that ensuring a deeper draught is essential to any port looking to compete either globally or regionally, as the trend of ever larger container ships across all shipping routes has required facilities dredge and expand in order to accommodate them.

The potential for larger box ships to ply routes between Asia and Africa offers shippers the possibility to benefit from larger shipment capacities to keep pace with growing demand, but also the economies of scale, which larger vessels offer, thereby offering the potential to cut transport costs.

A country's port sector is just the beginning of a nation's domestic supply chain. Often BMI has witnessed investment being centred upon developing a nation's ports, with investment into the country's road and railway network an afterthought. The complete package of transport must be well developed and just as vital as getting goods in and out of ports is also getting goods to and from the ports in the first place.

Namibia's internal supply chain network is also comparatively well developed. According to data in the Global Competitiveness Report from the World Economic Forum, Namibia's road and railway infrastructure are the outperformers in comparison with the other six sub-Saharan Africa states that we are analysing. The country's road and railway networks not only cater for domestic demand, but also function as conduits to link landlocked African states to the sea, via Namibia's ports.

Strong Internal Transport Links
LHC: Global Competitiveness Report Road Infrastructure Rankings. RHC: Global Competitiveness Report Rail Infrastructure Rankings

Namibia has been promoting itself as an entry point for the hinterland countries and has developed a number of transport corridors, such as the TransKalahari, TransCaprivi and TransCunene Corridors. These offer fast and effective links from Walvis Bay to other SADC markets.

Increasing the volume of cargo handled in Namibia is a stated aim of the government; it has launched its fourth New Development Plan which is intended to double the country's volume of cargo traffic by 2017, and these transport corridors are key to achieving this aim.

The Walvis Bay Corridors Group has been sending delegations to countries as far afield as Brazil, promoting the use of its ports as alternatives to those in South Africa. The result for companies operating in Namibia is that considerable investment is being made in country in developing its transport network further, which will make shipping goods easier.

Namibia is ensuring its internal transport network keeps pace with demand growth by investing in its transport network. In terms of developing rail links, the governments of Namibia and Botswana plan to sign a bilateral trade agreement in order to develop the Trans-Kalahari Railway (TKR).

The Trans-Kalahari Railway is expected to cost around US$11.7-14.7bn and will follow the Trans-Kalahari road corridor via Gobabis to Walvis Bay. The link is being developed with the aim of catering for Botswana's vast coal resources, positioning Walvis Bay as the port of choice over South African facilities. The project highlights that inter regional transport projects are at the forefront of development projects and so there exists the potential for the development of other railway links between Namibia and its landlocked neighbours. BMI also highlights that the development of the coal specific railway will ensure the commodity's transport needs are met, without impeding on Namibia's national railway network, thereby decreasing the likelihood of cargos such as containers having to fight for space on the country's railway network.

High demand growth and a relatively well developed transport network are attracting big name logistics players to the Namibia market. In May 2012 the German logistics company DB Schenker Logistics launched its new company Schenker Namibia in Namibia following a 100% ownership acquisition of its Namibian partner Desert Logistics. The entry of global logistics giants such as DB Schenker offers benefits to shippers in Namibia, as they bring with them their expertise garnered from global exposure as well as their remit to make efficiencies and push for reliability. The company's entry can also be read as an indicator of a growing consumer base in the country, which is also reflected in our forecast for average vehicle sales growth of 13% over the next five years to 2017.

Imports: Transport Network Boosts Import Speed, But Cost Needs To Be Reduced

Africa's automotive sector trade needs are heavily weighted toward the import sector, with both parts, kits and complete vehicles being brought in to meet growing consumer demand and with it car ownership. The ease by which to import goods is vital for the automotive sector and once again Namibia is a strong performer, increasing its chances to further develop its role in the automotive supply chain.

Namibia's imports benefit from comparative speed. According to data from the World Bank it takes on average just 3 days' lead time to import goods (a measurement of how long it takes goods from the port of discharge to arrive at the consignee). This places Namibia in first place, out of its seven sub-Saharan Africa peers, outpacing second-placed Nigeria, where it takes an average of four days' lead time for goods imports.

Quick Supply Chain And Bureaucratically Competitive
LHC: Lead Time To Import (Median Case Days). RHC: Documents To Import (Number)

The speed by which imports clear Namibia's ports is also aided by the relative competitiveness of the country's bureaucracy. A total of seven documents are needed for imports into Namibia, the same number as is required in Botswana, Ghana and Kenya, while in Angola eight documents are needed and in Nigeria and Tanzania, 10 articles are required.

Despite the relative speed of imports and the competitive nature of Namibia's import bureaucracy the country's ease of imports is let down on the cost front. The World Bank records that it costs to import, on average US$1,905 per container. This places Namibia above the global average of US$1,747 per container (measured across 184 countries) and also makes it less competitive regionally. Out of the seven sub-Saharan states that we are analysing the cost to import a container places Namibia in fourth place, with the cost to import a container cheaper in Ghana, Nigeria and Tanzania.

Cost Competitiveness Needs To Be Assessed
Cost to Import (US$ Per Container) and Global Average

BMI believes that if Namibia is to develop and expand its role in the automotive supply chain it is this level of import cost that must be addressed. The country's plans to invest in its transport network will ensure that Namibia's speed of imports will continue to outperform, but importers could be discouraged if transport costs remain comparatively high.

Exports: Easier To Export Than Import, But Regionally Lacking Competiveness

The potential for the development of auto manufacturing in sub-Saharan Africa will likely start to adjust companies' focus toward export options, at least on a regional basis, with a longer term goal for sub-Saharan states, being joining the global automotive supply chain.

When this time happens, companies will benefit from the fact that Namibia's trade sector is even more geared to ease of exports, than ease of imports. Export time is even quicker than that of imports, with one day shaved off, as Namibia's export lead time average stands at just two days.

Exports Quicker, But More Documents Needed
LHC: Namibia Lead Time To Export and Import (Median Case Days). RHC: Namibia Documents to Export and Import (Number)

The drawback is the increased number of documents required to export goods, nine over the seven required to import, suggesting a more rigorous bureaucracy associated with exports.

Despite this it remains cheaper to export a container, than it does to import at a cost of US$1,800 per container, as opposed to the import cost of US$1,905 per container.

Exports Cheaper Than Imports, But...
Namibia Cost to Export and Import Container (US$ per Container)

Firms may find it easier to export than to import goods into Namibia, but while the country is an outperformer regionally on the import front, in terms of ease of exports it will face competition.

Namibia's comparatively developed transport network ensures it remains competitive with the country's lead time for exports of two days, placing it in joint first position with Ghana and Kenya.

...Regionally Not Cost Competitive
Cost To Export (US$ per Container)

The country's relatively higher level of bureaucracy connected with exports makes Namibia less competitive, with the country's requirement for nine documents for export ranking it fourth out of its seven peers and also reducing the cost competitiveness of Namibia's export sector, as although it is cheaper to export a container from Namibia than to import it, the average export cost of US$1,800 per container out of Namibia ranks it fifth in terms of price comparison out of the seven sub-Saharan African states that we are analysing.

This article is tagged to:
Sector: Autos, Freight Transport, Shipping
Geography: Namibia, Namibia, Namibia, Namibia

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