Northern Africa’s gold: Oil
From: pacific shipper
Petroleum and byproducts spur most of the region’s wealth. Shipping executive says U.S. companies should grab opportunities created by dollar’s decline.
October 8, 2007
Richard Knee
The United States has relatively little merchandise trade with Africa’s northern-most countries, and veteran shipping executive Peter Schauer thinks that’s a big mistake.
The dollar’s continuing decline against the euro — the latter was slightly above $1.41 as this story was filed in late September — is opening opportunities that U.S. companies are missing, said Schauer, president of Orion Marine Co., U.S. agent for ConFlo Lines.
It’s a tough market, partly because of language, culture and politics, and partly because the region is poor, he said. Morocco, Tunisia and Algeria retain their strong ties with France, and U.S. relations with Libya began to thaw just three years ago.
U.S. government data show that Libya is the only country on Africa’s northern coast with a per-capita gross domestic product in five figures — $12,300 in 2006, which is still low compared with those in developed countries. Next on the list were Tunisia at $8,900, Algeria at $7,600, Morocco at $4,600 and Egypt at $4,200.
The chief revenue source for the region is oil, with Algeria head and shoulders above the rest, in dollar terms, as a vendor to the United States. From January to July this year, Algeria sold $10.82 billion worth of merchandise to the United States, and oil and related products accounted for $10.81 billion of it.
Oil also represented $1.77 billion of the $1.85 billion worth of goods that Libya sold to the U.S. during the period. Egypt’s exports to the U.S. totaled $1.72 billion, of which oil sales amounted to $872.21 million. Oil was a less significant factor for Morocco and Tunisia, whose total merchandise exports to the U.S. were $383.4 million and $306.3 million.
Goods moving through the Port of Agadir, Morocco are more likely to be trade with France than the U.S.
Except for oil and gas, not much volume comes from the region and the trade overall has been static for the past 20 years, though Libya is opening up, Schauer said. Morocco, Tunisia and Algeria export fruit to Europe, mostly France, though Tunisia is strong in textiles and phosphate production, he said. “Otherwise, they’re living on the tourist trade,” he said.
Algeria’s oil-production prowess isn’t paying off for U.S. equipment suppliers because European companies have well-established connections there, he said. “We’ve lost markets. With the weak dollar, we should be bringing business in, but right now I don’t see it,” Schauer said.
Libya’s agricultural sector is becoming stronger, and the country is importing farm tractors and irrigation equipment as well as oil-drilling equipment from the U.S., he said. Imports of consumer products such as clothing and furniture also are increasing, but those are coming from the Far East, he said.
Egypt is northern Africa’s largest economy in terms of raw GDP — it was $334.4 billion in 2006 — and Pacific Shipper’s weekly shipping report shows Mediterranean Shipping Co. is the premier carrier to Alexandria, by far the country’s busiest port.
As with the other northern African countries, the volume balance in Egypt’s trade with the U.S. is tilted eastward, according to Allen Clifford, executive vice president at MSC’s North American headquarters in New York. The commodity mix is pretty much the same in both directions — building supplies and materials, foodstuffs, household goods and personal effects, Clifford said.
Schauer said moving goods to interior points in Morocco, Tunisia, Algeria and Libya is slow for the most part. The transportation infrastructure “is just lumbering on,” he said. “They’re replacing trains here and there, but it’s just a patchwork. There are no roads. You need more camels there than anything else.”
Africa’s northern coast is not a viable gateway into Sudan and other adjacent countries to the south, he said. Port Sudan, on the Red Sea, is the best way into Sudan, and Mombasa, Kenya, is the preferred route to Sudan’s Darfur region, he said.
Clifford said MSC’s office in Alexandria handles intermodal shipments for some customers and has never encountered any major problems. But a World Bank report published last February said the country’s railroad system needs significant renewal and modernization.
The Egyptian National Railways system “accounts for only 12 percent of the freight transport countrywide,” the report states. “Freight services are likely profitable but stagnating due to management by the same organization as passenger services, with little or no commercial initiatives and priority given to passengers on operational matters.”
Among the five countries, Tunisia ranks highest on the World Bank’s list of the best places to do business. But Egypt was “the top reformer in the world,” according to the organization’s annual “Doing Business” report released in September. (The report is available online at www.doingbusiness.org.)
Tunisia dropped to the 88th spot this year from 80th in 2006, while Algeria fell to 125th from 116th, Egypt jumped to 126th from 165th, and Morocco plunged to 129th from 115th. Libya is not on the list.
“Egypt . . . improved in five of the 10 areas studied by Doing Business, and considerably improved its overall position in the aggregate rankings,” the report states. “Egypt’s reforms went deep. Egypt cut the minimum capital required to start a business from 50,000 Egyptian pounds (about $9,020) to EGP1,000, and halved start-up time and cost. Egypt also reduced the cost of registering property from 3 percent of the property value to a low fixed fee. New one-stop shops were launched for traders at the ports, cutting the time to import by seven days and the time to export by five. Egypt also reduced the cost of dealing with licenses.”
Algeria, by contrast, “resisted the national trend and made it more difficult for entrepreneurs to do business,” the report states. “Algeria increased the level of uncoordinated inspections, causing additional delays to the customs clearance process and an increase in the time needed to cross-border trade by two days for export and one day for import.”