The Unique Challenge of Shipping Tobacco from Southern Africa''s Landlocked Sourcing Areas

Source from:  Tobacco Reporter  07/23/2013

Trucking tobacco from landlocked African countries to port—and then shipping it to cigarette manufacturing compa-nies around the world—is no small logist ical challenge. In many cases, the obstacles faced by transportation companies in southern  Africa and the strategies they employ to overcome those challenges feels like a cross between a movie set and a board game. They must deal with poor infrastructure, red tape and, too often, corruption. But shipping tobacco isn't just a thrilling enter-prise; it's big business, and slip-ups have costly consequences.

Johannesburg-headquartered transportation company Aquarius Shipping knows firsthand what's required to run a successful business in the politically charged sub-Saharan African countries. Robert Poverello, the company's CEO, explains why planning, communication and experience are critical in balancing risk management with service to its customers' needs.

Importance of planning

A transportation company's job starts when its trucks (mean-ing the subcontracted trucks responsible for getting the tobacco from point A to point B) arrive at the manufacturing facility. These facilities stand in landlocked countries such as Zambia, Malawi or Zimbabwe—regions that share an overarching characteristic: The political climate can turn on a dime.

"You can't relax," says Poverello. "Every year, at least one of the countries will throw you a curveball. When former Malawi President Mutharika died last April, their country was in a very bad economic position," he continues. "They have a new president now and have managed to turn things around this year. Zimbabwe is always on the edge, and South Africa, while stable for the past few years, has weakened and faces instability with regard to labor laws and government intervention that can undermine our sector."

According to Poverello, government instability plays an indi-rect role in transportation companies' success because it impacts the quantity of their cargo. "For instance, two years ago, Malawi had a crop of over 230 million kilograms," he says. "Last year's crop was only about 80 million."

When crop sizes diminish, service providers, such as subcon-tracted trucking companies, temporarily move their business to other regions. "Transporters may decide to pull out of Zimbabwe, for example, and run their trucks from Zambia instead," Poverello says. "That affects us by taking away our available transportation."   

While shipping companies can't predict a government's rise or fall, they can plan for the unexpected and manage their resources and vendor relationships wisely. Poverello explains that Aquarius has contracts with transporters to iron out the details ahead of time, such as the anticipated volume of tobacco and the time frame in which that tobacco will be shipped.

"When you have a big tobacco crop and a big cotton crop, and both have to be trucked to port, there can be fighting among transportation companies as to who gets the bulk of the vehicles," Poverello says. "Having these conversations and negotiating contracts with transporters ahead of time is the key to getting first crack in the busy period when the stakes are high and the trucks are limited."

Constant communication

Just as communicating with vendors is an important aspect of the planning process, seamless internal communications are critical to keeping the trucks and ships running smoothly and on time.

Border delays present the biggest challenge for Aquarius. As a general rule, travel time for a truck moving from Malawi to Johannesburg is seven to 10 days, three of which might be spent at a border crossing. But trucks have been known to wait up to  14 days at a border post. "It causes a bit of a chain reaction through to the end. If problems don't get resolved, shipping lines will fall through because there's less cargo to pick up," Poverello says. 

Aquarius works with the various stakeholders to try to assist in getting problems resolved so that trucks can cross the borders. "That means working with the port authorities or even talking to the departments of trade and industry. We try to get everybody involved," says Poverello. "Right now, we're meeting with the Malawi and Mozambique governments to iron out border prob-lems because it's bad for the economies of both countries."

Even when the countries' governments have the best of intentions with regard to customs regulations, their weak infrastructures make plans harder to implement. "This year, Mozambique's customs has new regulations concerning the movement of cargo. They've said it needs to be covered, and carry a guarantee that covers the duty and the VAT," Poverello explains. "These things are already in place in South Africa, and it works really well. But in Mozambique, it's creating havoc. In the border posts, they seldom have electricity, or if they do, their Internet connection is bad."

Poverello says that "while new high-tech regulatory systems work well in 'first-world' African countries, other countries like Mozambique do not have the infrastructure required to support these systems." Delays caused by holdups such as these make shipping companies' internal communication all the more important.

Experience above all

Aquarius maintains strong, non-negotiable guidelines when it comes to avoiding the corruption that tempts other businesses within the region. "Corruption is there," says Poverello. "And the companies who do choose to participate have an advantage because they can buy their way through certain challenges."

When honest companies witness this sort of corruption, their only recourse is to inform the authorities. "It's a constant fight to level the playing field and try to get it cleaned up as best we can," Poverello says.

From years of industry experience, Poverello knows that all the carefully laid systems and communications plans in the world cannot prevent some roadblocks. It's just the nature of the beast, he says. Whether it's a political strike or a regulation a govern-ment wants to pass, a system could be working well for decades before an unexpected decision is made to change it.

"We call it 'the African problem,'" says Poverello. "But it's something we have to work around. In Europe, things tend to work like clockwork. Everything is regulated. In Africa, things just change at the drop of a hat. You don't expect things to run smoothly; you expect the opposite. We almost complain if there aren't unexpected mishaps." Enditem