Bolloré, MSC and the shake-up of maritime logistics in Africa

In depth
This article is part of the dossier: Logistics in Africa

By Olivier Caslin
Posted on Monday, 3 January 2022 07:27, updated on Wednesday, 27 April 2022 11:02

Vincent Bolloré (Vincent Fournier/JA)

The negotiations for the purchase of Bolloré Africa Logistics comes at a time when the cards in logistics - from the seas to port infrastructures - have been shuffled by the Covid-19 crisis. The change has been accelerated by the significant capital gains made by the giants in the sector. It is up to Africa to take advantage of this.

For two years now, global shipping has been navigating waters troubled by the outbreak of Covid-19. In face of the pandemic, operators had to quickly review their plans and keep a mindful eye on their compasses to stay on course, avoid sinking, and now, to avoid overheating the engine room. Far from having subsided, the Covid-19 storm continues to disrupt the smooth running of world trade and is putting ever greater strain on supply chains.

The latter are already under pressure due to the desynchronisation of national economies, which open and close according to the capricious waves of the virus, and due to the disorganisation of a maritime sector plunged into a sea of uncertainty, from which wild stories emerge from between the reefs.

It is in this context that on 15 October, at 9:52 am to be exact, a rumour caused shudders at African port terminals. According to Le Monde, the Bolloré group is ready to sell its transport and logistics activities on the continent.

It was said to have commissioned investment bank Morgan Stanley to discreetly evaluate market interest and identify buyers interested in taking over Bolloré Transport & Logistics (BTL), created in 2018 from the ashes of Bolloré Africa Logistics (BAL). The announcement seemed to take everyone by surprise, even within the company itself, where staff swore they had not seen it coming and did not comment further.

MSC fleet vessel at the Port of Abidjan container terminal in Côte d’Ivoire, managed by Bolloré.Port of Abidjan © Jacques Torregano for JA

Vertical integration costing hundreds of millions

However, there is no doubt, for many observers of the case, that the leak was orchestrated from the upper echelons of the Puteaux headquarters. “A way of testing the waters,” says one of them. Vincent Bolloré is an investor. He looks at the bids and sees if there is a good deal to be had. The Breton businessman has never hesitated to sell off his assets – even the most traditional ones, such as plantations – to finance the expansion of his group and, in recent years, his diversification into the media world.

On 20 December 2021, without prior notice, as revealed by Africa Business +, the Bolloré group confirmed the opening of exclusive negotiations with the Italian-Swiss group Mediterranean Shipping Company (MSC) for the purchase of Bolloré Africa Logistics, for an enterprise value of €5.7bn (net of minority interests). The details of the assets included in the transaction, as well as the timing and reasons for the deal, are being debated.

Is it a way for the leader of port handling in Africa to get rid of old activities within BAL, which after having been the group’s cash machine for a long time, have become a source of troubles and legal problems following the eviction of BTL from the Douala terminal in 2020?

If this is Bolloré’s intention, then the financial loss would indeed be considerable for the group, whose African port assets, plus three railway concessions, are currently valued at between €2bn ($2.3bn) to €3bn ($3.4bn).

Vincent Bolloré (L) and his son Cyrille Bolloré (R), CEO of the Bolloré group, arrive to attend the Vivendi general meeting on April 19, 2018 in Paris. © ERIC PIERMONT/AFP

A few months before his retirement, set for 17 February 2022 – the date of the bicentenary of the creation of the family business – is the 69-year-old billionaire thinking of removing himself from Africa or from all of his transport and logistics activities? Since taking the reins in 2017, his son Cyrille – the designated successor – has not shown any real interest either.

Whatever the scenario, should a sale materialise in the next few months (MSC has until March 2022 to ‘submit a promise to purchase’), the network of infrastructure and services – patiently built up by Bolloré over the decades across the continent – is likely to attract interest. This is particularly true of shipping companies, which, with their pockets full thanks to the surge in freight rates since the beginning of 2021, are looking to get their hands on various links in the transport chain: on land, at sea and in the air.

Several maritime transport giants have launched ‘vertical integration’ drives worth hundreds of millions of dollars in a bid to better cover supply lines across air, sea and land.

Denmark’s Maersk, the world’s largest shipowner, has just spent $550m to strengthen its air transport business; the Italian-Swiss MSC is surging forwards with the development of its land-based subsidiary Terminal Investment Limited (TIL) across Africa and the world; the Chinese Cosco is multiplying the number of terminals it has taken over in northern European after having made Piraeus its hub in the Mediterranean; while the French CMA-CGM is also getting into air freight after investing €1.8bn ($2bn) at the end of 2019, to take over the Swiss Ceva, one of the world’s top ten logistics companies.

A project being followed closely by the Elysée Palace

Everyone is potentially interested in a possible acquisition of Bolloré’s port and land facilities in Africa. So much so that the matter is being followed very closely by the Élysée Palace. The announcement of exclusive negotiations with MSC came as a surprise, as President Emmanuel Macron seems reluctant to see one of France’s main industrial activities, a key player on the continent in a very strategic sector, fly under another flag other than CMA-CGM’s. The Marseille-based operator had been quick with a helping hand, after recently having saved Brittany Ferries company in September.

CAPTION : Emmanuel Macron, president of the French Republic. © François Grivelet for JA

However, in the case of Bolloré’s port assets, there is no one to save and therefore no urgency to sell. The transport and logistics branch was still announcing a 34% increase in turnover for the third quarter of 2021, with a net profit of €1.9bn ($2.1bn), notably “thanks to the performance recorded on the African terminals”, the group stated in a press release dated 21 October, less than a week after the revelations from the French press. “The company continues to earn money and do business,” says Armand Hounto, maritime consultant at International Trade Partners.

This is the case for all major shipping and port companies, which have amassed colossal wealth over the past year since the tremendous rebound in global consumption. If the shipowners initially had no choice but to anchor nearly 30% of their transport capacity in the Norwegian fjords, the demand for goods, boosted by the various recovery plans and the rise of e-commerce, quickly forced them to take off at full steam again.

In Africa, the most expensive services in the world

After having fallen by 3.8% in 2020, a first since the 2009 crisis, maritime activity should grow again by 4.3% this year, according to the latest study on maritime transport published by the United Nations Conference on Trade and Development (UNCTAD) on 18 November, and the trend is set to continue, at least for the few years needed to rebalance services. The pandemic caused complete ‘technical chaos’ throughout the maritime world, which the recovery, as strong as it was sudden, has only amplified.

They have shown exceptional resilience, knowing how to show great flexibility in terms of capacity during the health crisis.

In July, nearly 10% of the world’s entire container fleet was tied up in more than 100 congested ports, with 60% of shipments delayed. The acute shortage of containers on the market, due to poor positioning and a shortage of aluminum from major Chinese producers, combined with various bottlenecks, caused an unprecedented surge in freight rates on major shipping lanes.

Between Asia and North America, fares have more than doubled in a year, while they have tripled from Asia to Europe. Africa, too, has seen prices rise as a result of the East-West repositioning of the large ships that have served the continent in recent years. The routes from Shanghai to Lagos and Durban are now among the most expensive services on offer worldwide.

The years of hardship for shipping companies that have long been forced to survive in oceans of overcapacity have come to an end. Rather than launching into a trade war – as in 2009 – from which only the strongest survive, the shipowners, most of whom were heavily indebted, have this time focused on profitability.

“They have shown exceptional resilience, knowing how to show great flexibility in terms of capacity during the health crisis,” says Yann Alix, consultant and general delegate to the Sefacil Foundation, based in Le Havre, and now they are reaping the rewards.

Diego Aponte, CEO of MSC (Mediterranean Shipping Company S.A.). Geneva, November 2016. © Fred Merz/lundi 13 for JA

Decarbonising the world fleet

Still weighed down in 2019 by a global debt estimated at $95bn, maritime operators should share a record profit of $100bn at the end of this year, according to the British firm Drewry. This will be enough to pay off their debts, invest in the development of new businesses or in the renewal of the world fleet, while accelerating the digital revolution, as well as the energy and environmental transition. To comply with the standards issued by the International Maritime Organisation (IMO) and the commitment to zero-carbon shipping by 2040, companies are already having to spend a fortune. “Freight rates will not soon return to their pre-pandemic levels,” says Yann Alix.

The days of ‘happy ultra-globalisation’, facilitated by transport costs that did not exceed 2% of the final price of a product, seem to be over. According to UNCTAD, the impact of higher freight rates on consumers could reach 11% for electronics and computers, and 10% for textiles and furniture. Such rates will both challenge existing supply chains, which have already been severely hampered by Covid-19, and redefine the typology of containerised products.

There is uncertainty as to whether Africa – or South America – have enough 20-foot equivalent units (TEUs) at current prices to continue exporting timber and agricultural products in boxes, as has been the practice in recent years.

Despite its economic development, the continent still represents only 4% of international freight traffic, and the trend will not be reversed in the immediate future if shipowners transfer their capacities to other regions. Subjected to the same uncertainties, and faced with the possible relocation of certain productions, Africa may finally have an opportunity to seize by inserting itself into the famous value chains that are supposed to strengthen its industrial and economic development.

Looking towards Europe, even Asia, but above all else towards its own domestic market, which, with the arrival of the AfCFTA (African Continental Free Trade Area), will have nearly 1.3 billion consumers by 2030.

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