Trade In The Time Of Ebola
For Peter Radtke, CEO and co-founder of Cary, N.C.-based JustNeem, visiting the company’s field office represents a bit more than a quick change of scenery.
Radtke’s meetings with his on-the-ground team in the Sub-Saharan nation of Mauritania require 15 hours in the air, with four separate legs between Raleigh-Durham International Airport and wheels down in Nouakchott, the capital of the mostly flat, mostly arid former French colony.
Disembarking from an air-conditioned plane into a brick wall of desert heat last fall, Radtke was met at the bottom of the stairs by a white-coated official who placed an infrared thermometer gun at the forehead of each passenger.
“People just paused a bit, the temperature was taken and then they moved on,” recalls the biochemist-turned-entrepreneur. “A nod from him indicated that I was okay and I began to follow the crowd toward the airport building.”
Working his way through the throng, Radtke met his contact and began a 260-mile taxi ride to his final destination, the village of Kaédi.
Like 51 of the 54 countries in Africa, Mauritania is Ebola-free but taking precautions to keep the virus at bay and continue commerce as usual. “Nobody talked about it; there was not noticeable concern with anyone I met,” Radtke says.
He has made this trip nine times since he and his wife, Magda, founded JustNeem in 2007 after learning about the anti-fungal, anti-viral and anti-bacterial properties of the oil in the leaves, bark and seeds of the 80,000 neem trees that dot the Mauritanian landscape.
Helping each tree strengthen its immune system in a harsh climate, neem oil also cleanses human skin, treats acne and athlete’s foot and repels pesky insects. JustNeem’s lotion, soap, lip balm, face masks and mosquito repellant are manufactured in Cary using dried leaves flown in from Nouakchott in northwest Africa. These leaves are brewed and combined with other ingredients to create soaps, pastes, creams and liquids that are sold at retail stores like Whole Foods and spas across the U.S. and in South Korea.
“When I first heard about neem and its properties and everything that it does, it sounded like snake oil,” admits Dr. Radtke, a former Bayer researcher who’s now a true believer in the benefits of neem and in what it can do to kick-start microenterprise in West Africa.
During his November trip, Radtke conferred with a Mauritanian native and his American wife, who are test-marketing JustNeem’s products around the country through a network of locals, expats and government officials, with hopes of selling in Senegal and Morocco as well.
Radtke also met with Ken, his main contact on the ground in Africa who oversees the neem orchard that Peter and his wife established seven years ago.
With four other villagers, Ken built a well and water tower and has emerged as the go-to guy for the Radtkes for JustNeem’s local projects. More than 1,000 neem trees now provide the raw ingredients for the company’s products while fruit from the orchard’s mango trees offers nutrition and income for some villagers.
“Five to 10 trees can support a whole family just from the sale of the fruit,” says Radtke, who adds that his wife has also taught some of the women in the village how to make soap. Their handiwork is for sale at a market in Nouakchott.
“In terms of resources, there are no issues,” Dr. Radtke says of working in Mauritania.
The key, he says, is forging the right long-term relationships.
Bribery and corruption remain significant business concerns in Africa, so choosing the appropriate partners and including a larger Western organization in the supply chain is advisable, Radtke says.
“We have half a ton [of neem] sitting in Nouakchott now,” and JustNeem is looking at shifting from air cargo to using Maersk Line’s sea containers, he says.
“They’re so massive that people really cannot bribe them,” Radtke says of multinationals like Maersk. “They just force their values on the system.”
EBOLA: AT A TURNING POINT
South of Mauritania, The Maersk Group and its independent division, APM Terminals, continue to operate in Ebola’s footprint.
Working to keep cargo moving and crews and civilians safe in the midst of the outbreak, Maersk has forged alliances with shippers and governing bodies.
Liberia’s port authority continues to forbid shore passes and requires three layers of screening for workers boarding vessels. Mandatory temperature checks, constant use of chlorine and other sanitizers and the immediate isolation of anyone displaying Ebola-like symptoms are in force.
“We have thus far not had one single day of downtime due to the effects of the Ebola outbreak,” says Peder Sondergaard, head of the Africa-Middle East Region for APM Terminals, which operates APM Terminals Monrovia.
Since acquiring the Monrovia operation, APM Terminals has invested about $100 million to bring a “completely obsolete” terminal up to international standards as part of a privatization agreement, Sondergaard says, and the company has committed an additional $34 million for upgrades to the yard, gate, buildings and handling equipment, now on hold due to the current emergency.
“[Ebola] just makes it more cumbersome” to engage in trade in the region right now, Sondergaard says. “The cost of logistics goes up.”
APM Terminals and its parent company are battling Ebola through partnerships. The Maersk Group has made a $1 million contribution to the fight.
“It’s an offer in the course of our usual business to provide support,” Sondergaard says about Maersk waving fees, providing shipping and transport services and letting partners borrow equipment and manpower, with the company providing services or absorbing costs.
APM Terminals has also erected a medical station for Liberia’s health ministry, and it has reduced the price of handling imports of rice—a staple of the Liberian diet—as abandoned farms and panic buying have spiked food prices. To keep trade moving in the face of docking restrictions imposed by some nearby countries, Maersk Line has created a weekly loop of vessels from Tangier that call on the three Ebola-affected countries exclusively.
If Ebola is contained in early 2015, GDP loss for West Africa will stand at $2.2 billion for 2014 and $1.6 billion in the coming year, the World Bank estimates.
MICROENTERPRISE TAKES ROOT
While Ebola has slowed trade in parts of West Africa, the continent at large remains attractive to businesses such as Static Control Components, a North Carolina firm that bills itself as the world’s largest manufacturer of components for the toner cartridge aftermarket.
Although Static Control has seen a drop in shipments into Liberia by its trader in Nigeria, the company remains bullish on Africa and, like JustNeem, has developed a niche business model that helps foster scalable microenterprise for locals.
At its headquarters in Sanford, 40 minutes down the road from JustNeem, Static Control employs about 1,000 workers who produce, market and ship components to 168 countries, including more than 30 in Africa.
The company entered the cartridge niche in the mid-1980s, after laser printing gained widespread consumer acceptance. In Africa, that development opened the door for curbside and in-office remanufacturers (“remans”) who could feed the continent’s increasing appetite for cost-effective cartridges. Remans, which cost 30 to 60 percent less than originals on a cost-per-copy basis, can be reused up to three times before they must be recycled.
Static Control’s buyers range from a “one-man band, say, sitting on a street corner” who refills one or two cartridges a day with the company’s parts to more sophisticated shops that cobble together thousands of units daily, “very much the way you would do in the United States,” says Stuart Lacey, the firm’s sales director for the Middle East and Africa, based in Johannesburg. Remans sell to “everybody and anybody” including friends, home offices and village schools, he explains, with larger remanufacturers providing cartridges to government offices, mining companies and other corporate concerns.
Even the one-man bands can prime the pump of microenterprise, Lacey says. A street-corner peddler can turn over anywhere from 100 to 2,000 cartridges a month with the help of a neighborhood crew. “For every job that is created, it supports 10 people financially,” says Lacey, citing World Bank data. “It’s a very labor-intensive business.”
The company provides remanufacturers with written instructions, videos and personal advice to help them succeed. But to build a market across three dozen countries, travel is essential.
“You have to have face-to-face,” insists Lacey, a British expat who built safari camps and managed a trucking operation in Uganda before joining Static Control. “It’s a lot of footwork … a day’s drive through some pretty rough places.”
Newly produced components are shipped from Sanford to Durban, South Africa, via the ports of Charleston, Norfolk and Wilmington, N.C. The company apportions container shipments among the three ports as long as transit time is comparable and rates are competitive, says Erwin Pijpers, senior vice president for Worldwide Sales and Business Development. “We keep replenishing inventory all the time,” he says.
From Durban, the company relies on inland networks, which are taking off around Africa and reducing time to market. Lacey points to several Chinese-financed railway projects in East Africa as prime vehicles for reducing supply-chain headaches.
In Africa and elsewhere, the remanufacturing of cartridges is proving beneficial environmentally. Static Control estimates there are 38,000 remans around the globe who save nearly 15,000 tons of waste from landfills each month.
“It’s not organized waste disposal here, it’s thrown on the street,” Lacey laments from his perch in Africa. Supplying quality components to smaller remans reduces the plastic, metal and rubber cast aside in villages.
Lacey says larger corporations whose cartridges are wearing down “have shown us warehouses where they have the empties stacked because they don’t know what to do with them,” so he and his colleagues work with them to find a remanufacturer who can extend their use.
At present, Static Control Components’ share of worldwide sales in Africa is “relatively small,” says Lacey, but “tremendous growth opportunities” are taking root and will make the continent a “significant contributor” to future revenues, he believes.
For traders, Africa has always represented a precarious balance of risk and reward. While conditions vary from country to country, there are increasing signs that the balance is tipping toward the latter, even in the time of Ebola.
Traditional concerns like administrative hassles and travel time remain but are slowly being offset by bureaucratic reforms and improved infrastructure. Non-tariff measures potentially onerous to trade are being scrutinized and new rail is being laid. Technology is changing, too, with mobile money now de rigueur in Kenya, for instance.
While one-man rule is not out, it is down. And though cronyism persists, leaders like Ellen Johnson Sirleaf of Liberia and Paul Kagame of Rwanda are viewed by reformers as welcome scolds. “He’s (Kagame) taken the country by the scruff of the neck. … You can open a company in two hours online,” reports Static Control’s Lacey.
“South Africa is almost a different continent,” he adds. The country’s black middle class more than doubled from 2004 to 2012, according to the Unilever Institute, and its broadband networks are continually strengthening. In Nigeria, the middle class has mushroomed 600 percent over the past 14 years, according to Standard Bank.
“The growth of the middle class is driving and will be driving consumption,” says APM Terminals’ Sondergaard. And that, he says, means more demand for consumer items as well as project-based supplies like machinery and building materials.
APM Terminals is seeing steady growth in the containerized trade that it assists in Africa—about 10 percent a year on average.
Africa is now home to six of the 10 fastest-growing economies in the world, says the U.S. Commerce Department. Across the continent, real income has increased more than 30 percent, reversing two decades of decline, and GDP is projected to rise 6 percent a year over the next decade. U.S. merchandise exports to the continent are up, increasing 58 percent from 2009 to 2013.
While total American exports of goods and services to Africa reached $50.2 billion in 2013, business there represents just 1.5 percent of the country’s total global exports and there’s plenty of room for U.S. companies to get advice, do their homework, partner up and take on the continent.
With a compound annual growth rate of 114 percent over the past seven years, JustNeem continues to work with the North Carolina Department of Commerce, the Raleigh office of the U.S. Commercial Service and a local Small Business and Technology Development Center.
In the company’s early years, the trio arranged for a grant to attend a trade show, set up conference calls with prospects, provided export documents and suggested how much to request up-front when first selling overseas. “They appeared as one company to us,” Magda Radtke says of the three agencies. With more countries wanting to do business with JustNeem and with its partners in West Africa shaking the right trees, the future looks promising both in Cary and Kaédi.
“People who live in extreme poverty are giving something of value to the world instead of being on the receiving end,” says Dr. Radtke about helping Africans build microenterprises rather than relying on top-down foreign aid. “That idea is fascinating to me.”
For the Radtkes and others doing business in Africa, a balance of corporate stewardship and profitability and a more prosperous, post-Ebola continent go hand in hand.
13 Logistics Industry Thought Leaders