Bolloré resilient but reduced trade poses threat

So far, the Covid-19 crisis has not impacted heavily on major logistics operator Bolloré, but the downturn in world trade makes for an uncertain future, as Tom Collins reports

Shortly after Kenya announced its first Covid-19 case, middle class customers rushed to upmarket supermarkets to panic-buy large quantities of rice, flour, tinned goods and cooking oil. As shelves were emptied, the eager shoppers were driven by the fear that the pandemic would wreak havoc on supply chains and undermine food security.

For a continent which still imports large quantities of basic foodstuffs, the overreliance on external trading partners and the lack of domestic production is a significant concern. However, global supply chains have shown resilience over the course of the pandemic. Many countries around the world have begun to ease goods restrictions, which suggests that Africa has weathered the worst of its import concerns. 

As one of the largest logistics operators in Africa, with a presence in 46 countries, the Paris-listed Bolloré Group has only reported a small decrease in activity. Revenue from its global transportation and logistics business fell by 5% in the first quarter compared to the same period last year, decreasing from €1,468m ($1,568m) to €1,394m.

Including its communications and electricity storage activities and stakes in Universal Music Group and broadcaster Canal+, the diversified firm’s overall revenue in the first quarter was up 1% to €5,966m.

“At this stage, the impact of the Covid-19 crisis on Bolloré Group activities remains limited,” the group writes in a press release.

“In the context of air and sea freight markets, which have been difficult since the second half of 2019, the transportation and logistics activities are currently benefiting from exceptional transport of freight related to the health crisis, which partly offsets the slowdown in the usual flows.”

Air freight and trucking impacted

The logistics method most impacted by Covid-19 in Africa is air freight, Stanislas de Saint Louvent, deputy chief executive of Bolloré Ports, tells African Business.

Most African governments moved quickly to ban international flights, which led to a decrease in cargo flights and an increase in costs for exporters.

Reduced air freight spelled disaster for a number of export-led sectors which rely on the fast movement of perishable goods. Kenya’s cut-flower industry is one example, although exports are beginning to rebound as European demand increases and regional airlines like Ethiopian Airlines convert commercial planes into cargo carriers. 

The second most impacted logistics method is the trucking business. Land borders have been impacted by regulatory constraints as governments seek to minimise the spread of the virus between neighbours.

After registering a spike in the number of cases imported by lorry drivers, Uganda introduced mandatory testing at its Kenyan border, which has reportedly delayed the delivery of goods by up to 72 hours.

In West Africa, Nigerian lorry drivers must carry specific papers as they move around the country, which often leads to lengthy delays as drivers are stopped by police and harassed.

Maritime operations less affected

In contrast, Bolloré’s maritime business has seen little of the disruption witnessed in aviation and trucking.

“Globally the maritime and sea trade business is still operating,” says Saint Louvent. “Most of the shipping lines are maintaining their operations.”

The only downsides are longer clearing times at ports due to increased Covid-19 screening and reduced operational capacity due to dawn-to-dusk curfews in certain countries, he says.

One setback for the company has been its failure to renew the 2015 contract to manage the deep-water port in Douala, Cameroon. The loss of this contract and the fall in air traffic volumes are the primary reasons behind the decrease in revenue from the same period last year.

Yet excluding Douala, Bolloré’s port management business continues to grow throughout its mainly West African assets in Nigeria, Guinea, Sierra Leone and Côte d’Ivoire.

However, the volume of goods passing through the entry points to Africa has fallen as the pandemic weighs on consumer and corporate demand. Bolloré has witnessed a big slowdown in the export of commodities, says Jérôme Petit, CEO for Africa at Bolloré Logistics.

Miners have been hit with reduced operational capacity due to Covid-19 measures and global demand has plunged. Export volumes for many of Africa’s minerals including copper, cobalt, manganese and nickel have fallen. Export volumes of soft commodities like cashew nuts and cocoa in West Africa have also fallen as labour and distribution networks are disrupted.

“We see the oil and gas industry particularly hit across all of Africa,” adds Petit. “The existing production will be maintained but exploration is going down. Most of the drilling programmes are being stopped. There is not much incentive to export crude at such a low price.”

The low oil price has also created a foreign-exchange shortage in exporters like Nigeria, preventing many manufacturers from importing raw materials.

Uncertain future

As a demand-driven business, logistics can adapt to changes in the market. The structures to move goods around Africa remain in place, so any danger to Bolloré’s bottom line comes from reduced trade volumes, not the capacity to transport the goods themselves.

“Our teams in the ports will deal with the volume of business which comes from the market so we don’t see any revenue decrease being linked to the capacity of the ports, rather it is linked to the global economy,” says Saint Louvent.

“Of course we will be dependent in the next weeks and months on the evolution of the trade situation, which you can read in the papers, and the forecast is that global trade will decrease sharply. The question now is when will it grow back and at which speed.”

World merchandise trade is set to plummet by between 13 and 32% in 2020 due to the pandemic, according to the World Trade Organisation (WTO). Nearly all regions will suffer double-digit declines in trade volumes in 2020, with exports from North America and Asia hit hardest. A 2021 recovery in trade is expected, but remains dependent on the duration of the outbreak and the effectiveness of the policy responses, says the WTO.

In the face of reduced volumes for commercial goods, many logistics operators in Africa have switched to transporting humanitarian aid, which makes up some of the shortfall.

Bolloré has similarly benefited from the “exceptional transport of freight related to the health crisis”.  

“We are able to operate even in those countries which have decided on a full lockdown,” says Petit.

“But our activity will be impacted by the fact that the economy in these countries will be globally impacted rather than being affected by the logistics sector.”