C O M P A N YO V E R V I E W

Maersk Line East Africa emerging as a jewel in the company crown Written by: Sam Jermy Produced by: Dennis Morales

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Maersk Line East Africa emerging as a jewel in the company crown Written by: Sam Jermy Produced by: Dennis Morales

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MAERSK L INE EAST AFRICA

T he East African containerised market is enjoying an exciting phase in its development, as it closes in on one

million twenty-foot equivalent units (TEU’S) in both shipping directions with the level growth outpacing many other markets.

Maersk Line acts as a facilitator of trade within a region it only began operating in during the 1980’s, and since then has directly and indirectly created thousands of jobs within East Africa. Thirty years later, and Maersk Line East Africa is now the leading container carrier in the area, with up to seven weekly port calls.

The business unit’s scope comprises Kenya, with the regional headquarters in Nairobi, Uganda, Tanzania, Rwanda, Burundi and South Sudan, extending to the eastern DRC and also serving customers as far away as Zambia and Malawi.

Steve Felder, Managing Director of Maersk Line East Africa, said: “The shipping industry, and of course our business, plays a significant role in enabling trade in the region by connecting East African importers and exporters to a global trade network. We focus almost exclusively on port-to-port shipping, which is a critical element in our customers’ supply chains. We offer reliable weekly sailings to and from literally hundreds of ports around the globe.

“The market in East Africa is now approximately one million TEU in both directions and is growing at around 10 percent per year, which is more than double the global containerised growth on average.

The East Africa region of Maersk Line has gained top-level attention as the rate of growth surpasses many of the economies of the western world

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container cargo

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MAERSK L INE EAST AFRICA

So relatively speaking we are a high growth region, and so it’s taking on more prominence in our company. Our Maersk Group CEO and members of the executive board visit quite regularly, so it is definitely a priority area for us.

“In East Africa we directly employ about 150 colleagues. Over the years, we have also offshored some non-location-specific tasks to our shared services centres in India, China and the Philippines, in order to enable us to get more of a focus on the customers locally.”

Progression and challengesTrade essentially works in two corridors in East Africa. The northern corridor originates from Mombasa and services the whole of Kenya,

Steve Felder, Managing Director - East Africa

“The shipping industry, and of course our business, plays a significant role in enabling trade in the region, by connecting East African importers and exporters to a global trade network”

– Steve Felder, MD of Maersk Line East Africa

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MAERSK L INE EAST AFRICA

Uganda, South Sudan and parts of Rwanda. The central corridor starts in Dar Es Salaam and services Tanzania, parts of Rwanda, Burundi and parts of Zambia, Malawi and eastern DRC.

Felder points out that although Mombasa and Dar Es Salaam are the two main gateways and critical trade corridors, Maersk also has an office in Kampala, making it the only shipping line with a comprehensive full-service set-up in Uganda, with services including sales, customer relation management and documentation to collections. This positions the company well to service its customers in

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“Currently, it often costs far less to ship a container from China to East Africa than it does to truck that same container to its final destination in the region”

– Steve Felder

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MAERSK L INE EAST AFRICA

this important inland market, which has also emerged as a trading hub for South Sudan.

The firm has also recently implemented a customer CARE programme, where larger customers receive a highly personalised after-sales service anchored with a dedicated point of contact.

Felder said: “The growth is pleasing, but at the same time the infrastructure has to keep up with it. The capacity on the rail network is currently insufficient, and only three percent of cargo moves on rail, so the remaining 97 percent moves on road, which adds to the deterioration of the road network. The ports are also stretched for capacity, and productivity is rather low compared to developed markets.

“Like many emerging markets, East Africa is characterised by a high import dominance. For every four containers being imported full, only one is getting exported full. This means there is a lot of open capacity on the backhaul route, creating a massive trade imbalance and also a large repositioning cost for us.

“Of course our hope is that over time there will be greater proliferation of industrial and production activity in the region, in order to address this imbalance. Over time we also hope the inland logistics cost will go down too. Currently, it often costs far less to ship a container from China to East Africa than it does to truck that same container to its final destination in the region.”

Maersk cargo

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MAERSK L INE EAST AFRICA

Future strategic plansContainerised trade and the economy in the East African region is growing at faster than developed markets. Economic growth in the region ranges from +4.5 to +7 percent rise in GDP (Gross Domestic Product) and the population is 160 million, around half of the USA.

Although there is immense potential in the market going forward, there are still challenges. These include the cost of electricity, large trade deficits, insecurity, bureaucracy and over-reliance on agriculture. But the ongoing political stability, high population growth, growing middle-class, increasing foreign investment, and new Oil & Gas discoveries means the region is clearly poised for more growth.

Felder added: “Infrastructure development is very high on all the governments’ agenda in the region. There are plans to improve ports, develop a standard gauge railway between Mombasa, Kampala and possibly extending to Kigali, and to rehabilitate the railway from Da El Salaam to the hinterland countries, so infrastructure as an enabler to growth is at the forefront of everyone’s minds.”

Maersk Line has also made a concerted effort to localise many management positions previously held by expats. For example, it recently hired a local CFO for its Tanzanian agency who replaces an expatriate. Despite this, Maersk is a global company, and expatriation is still used as a vehicle for

“The market in East Africa is now approximately one million TEU in both directions and is growing at around 10 percent per year, which is more than double the global containerised growth on average”– Steve Felder

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development of high-potential employees.The Africa region boasts an African Leadership

Development Programme, where 40-50 emerging leaders from the African market are trained in a variety of skills, in order to ensure it is building a strong foundation for the future.

The other focus of investments is largely upgrading vessel sizes to accommodate growth. Maersk Line has during 2014 upgraded the capacity of its services from the Middle East and the Indian sub-continent into East Africa, and will continue to upgrade capacity as and when warranted by market growth. The East African ports currently have a mix of ship-to-shore

“Infrastructure development is very high on all the governments’ agenda in the region. There are plans to improve ports and develop a standard railway between Mombasa and Kampala.”

– Steve Felder

Safmarine container ship

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MAERSK L INE EAST AFRICA

cranes and also make use of onboard vessel gear. Maersk Line is the only shipping line with two dedicated berths at the Port of Mombasa, facilitating unmatched reliability to its customers.

Controlled atmosphere reefer containers have the ability to extend the shelf-life of sensitive agricultural and horticultural products, which has opened up a realm of new opportunities.

For example, Maersk Line ran a project to convert some of the avocado exports from air freight to sea freight. It was very successful, and today it moves approximately 30 percent of avocado exports in reefer containers, enabling the fruit to reach European markets at a lower cost and with a substantially lower carbon footprint.

Exports from East Africa are mainly commodities such as soda ash, tea, coffee, minerals and tobacco. There is also a fairly robust trade of fruit and vegetables, and a niche trade of garments to the USA under the AGOA agreement. Imports are generally finished goods such as motor vehicles, plastics and consumer goods, with Asia being a large origin, along with the UAE as a key redistribution centre.

Customers can transact with Maersk Line in East Africa almost entirely via its suite of e-commerce tools, and can make payments via mobile money, which is very prolific in the region. With the financial strength and global expertise Maersk Line possesses, it is clear that the East Africa region is set for a prosperous period into the future.

Company Information

I N D U S T RY

Supply Chain

H E A D Q U A RT E R S

Nairobi, Kenya

F O U N D E D

1984

E M P L O Y E E S

150

R E V E N U E

Not Disclosed

P R O D U C T S /

S E R V I C E S

Container shipping

MAERSK LINE EAST AFRICA

Address: DTB Centre, Mombasa Road, Nairobi, Kenya. P.O Box 43986 - 00100 GPO

Tel. + 254 700 333 204 Fax. +254 20 828921

kencsimng@maersk.com www.maersk.com