Hub potential in Equatorial GuineaOctober 8, 2018
Nabil Beers, managing director of Akon Logistics Management, talks to TOGY about challenges and opportunities in Equatorial Guinea’s logistics sector, how the tendering process could be improved and how differing interpretations of the law create challenges. Akon’s core business consists of logistics, freight forwarding and Customs brokerage services, and it represents Switzerland-based Kuehne + Nagel in Equatorial Guinea.
• On hub potential: “Geographically, it is a fantastic location. In terms of regulations and Customs the government is trying to push, it could be a hub. If you compare the commercial port today to 10-15 years ago, it is like night and day. It is incredible: the trucks, cranes, quay-side berthing areas. Just on the island there is the commercial port, the K5 Freeport and the Luba Freeport.”
• On improving systems: “The new electronic system has a lot of glitches. It is not really fully functional yet. The tax ministry’s idea was to eventually roll it out to Customs brokerage agencies so that everything would be online. We are in favour of that. The amount of paperwork that we have to print out and carry from one desk to another is ridiculous.”
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Does the plan to make Equatorial Guinea a regional logistics hub seem achievable?
Geographically, it is a fantastic location. In terms of regulations and Customs the government is trying to push, it could be a hub. If you compare the commercial port today to 10-15 years ago, it is like night and day. It is incredible: the trucks, cranes, quay-side berthing areas. Just on the island there is the commercial port, the K5 Freeport and the Luba Freeport. It is tremendous, and the utilisation is maybe 10-20%.
You could put so many people to work and simplify everything. You could make it all go through a single agency and make it easy to do trans-shipments or transits. Vessels that call our ports often ask for crew change facilities, but we cannot do it because the process of getting someone a visa – even if they are just arriving at the airport, driving 3 kilometres to a port, then getting onto the boat and sailing off – takes three weeks of paperwork. No shipping company or vessel owner has that kind of time.
If they could facilitate all of these things, we would be getting business for the hotels, restaurants, buses, trucks and ports. It would increase traffic. It is a source of revenue that, until now, has remained untapped.
The infrastructure is there. We have hotels with empty rooms, highways everywhere and ports with nothing happening. We have airplanes coming in that are half empty. They used to have direct flights here, but now they just go through Nigeria or Cameroon.
There is huge potential logistics-wise in EG. It is just a matter of the government taking time to co-ordinate between agencies to find out what the market can bear in terms of transit and trans-shipment costs. I am not saying they should do it for free. They should charge what they want to charge, but make it easy on companies.
How could tendering be more effective?
They are starting to develop a system now, where companies can check what is required and plan accordingly. But the MMH [Ministry of Mines and Hydrocarbons] is starting to ask that all oil companies submit a request for import before they bring anything into the country. Most of the big companies have these big exoneration agreements under which they do not pay any Customs duties or taxes once goods come into the country, but the MMH law requires companies to try to source everything they can locally first.
They have just started implementing this in the past six months [as of August 2018]. It is their attempt to try to gather data to be able to see what types of things oil companies are bringing in and what they could possibly source locally.
What is the biggest challenge for companies such as Akon?
A lot of challenges come from the interpretation of laws. The law on official tariffs was published at the end of 2017, and it was just a couple hundred pages of lists of prices for everything. We get visits by a number of ministries regularly saying that we have to pay X and Y now because it is in the new law. It is just a list, and the descriptions on each tariff leave a lot up to interpretation. It makes it difficult to plan if we do not know what is and is not applicable to us. It even depends on who you talk to at the ministries.
The new electronic system has a lot of glitches. It is not really fully functional yet. The tax ministry’s idea was to eventually roll it out to Customs brokerage agencies so that everything would be online. We are in favour of that. The amount of paperwork that we have to print out and carry from one desk to another is ridiculous.
Part of the issue here is that EG is a small country. We do not have huge volumes of work to do, so it makes everything more expensive. In an economic downturn, our government compliance costs have not adjusted to compensate for our loss of revenue. If anything, they have gone up because the government is looking for additional sources of revenue. Unfortunately, it puts small businesses such as ours in a tricky position, where it is very difficult to plan ahead and figure out where our costs are going to be. We cannot go back and revise our contracts with customers in most cases.
After commercial oil was discovered, there was a 15-year period where the country’s economy grew 25% per year on average. I understand it is hard for a small country with limited resources to come into this huge windfall of resource profits. How do you manage all that, and how do you spread out the revenue to make it last? How do you invest it in lasting infrastructure that can build an actual economy around it? It is difficult, and I do not know of many countries that have been successful in doing that in such a short time. It is part of the resource curse.
How has Akon weather the crisis over the past couple of years?
In 2017-2018, there has been a downturn in activity, with virtually no drilling, and that is the biggest thing that affects logistics. There are fewer imports and exports and fewer vessels calling EG ports. Everything has dropped. Our revenue has gone down and our staff has been reduced, as have our customers and shipping volume, but it has not reached an unsustainable level. There is production that is ongoing, which means a steady stream of spare parts, bits and pieces.
On the other hand, we are trying to institute some structural changes within the Akon organisation. Since the owner of Akon is also the owner of DonLuis TDL, we are trying to find some synergies by merging the two companies together. That will reduce some of our overhead costs, and we can share some personnel. We are already sharing personnel, even though the two companies are not formally merged yet.
TDL is a Customs broker and Akon is a freight forwarder and agency for vessels. TDL has been our primary Customs brokerage provider as a subcontractor in the past. It is a natural merger. We have overlapping services. We think that will help going forward in two respects: It will allow us to offer better and more efficient services to customers, and it will help us provide more cost-effective services.
That has become more and more important to customers with the downturn. They are no longer as price insensitive as they once were.
Did you consider diversification?
We have thought about it. We have been studying the possibility of expanding into purchase operations, where we would buy and keep a certain amount of local stock that is in high demand and of use in the oil and gas industry. The Ministry of Mines and Hydrocarbons is supportive of this. They want the companies to be doing as much local purchasing as possible. Being as we are a local company, we would be supporting that design and idea.
The trick is doing this in times of economic downturn, when we are not cash rich and inventory ties up cash. Money is expensive here; interest rates are very high, so expanding is a difficult process. There is a lot that could be done to increase the ease of doing business. There are so many little costs that add up.
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