By Peter Egwuatu

The Group Chief Executive Officer, Deutsche Post DHL Group, Frank Appel visited Nigeria to demonstrate the importance of the emerging markets in the company’s strategic 2020 growth focus. In this interview with Vanguard, he spoke on DHL’s commitment to Sub-Saharan Africa and how the company is well-positioned to tap the potential of the region, its financial position and the challenges of globalisation in logistic business, amongst others.

Excerpts:

How do you see the emerging market and Nigeria market in particular?

You should note that today, emerging market revenues contribute over 20 percent to Deutsche Post DHL Group’s revenues, but by 2020 the Group expects this figure to climb to 30 percent. Therefore, we will continue to concentrate on organic growth by investing into promising present and future markets.

Managing Director, DHL Group, Frank Appel

DHL already has a strong footprint in Africa, but we see some excellent opportunities to further increase our presence in the Sub-Saharan region. South Africa’s exceptional geographic location as the gateway to Africa, and Nigeria’s growing gross domestic product (GDP) and diversifying markets are only two of the many important indicators for this.

As a Group look for opportunities to continue to grow organically and expansion into new territories and new innovative solutions to target new segments of the market are key drivers of our global strategy.

How important is Nigeria and Sub Saharan Africa to the Group and how much are you committing into Nigeria market?

For a group with a strong network business and a global footprint of over 220 countries and territories, having a strong presence across the globe is essential for us to provide services to our customers, facilitating trade around the world. We have been present in Africa for some 40 years, and have consistently invested in the infrastructure to bolster our infrastructure.

In our Express division, we have a planned investment of EUR 20 million in 2015.  The business has been expanding its footprint and now has over 3,500 service points. In addition to facility upgrades, Express now has a number of vehicle and technology upgrades in 2015, along with ongoing employee and Small Medium Scale Enterprise, SME development programmes.

What are DHL’s expectations for Africa region in terms of trade and infrastructure development?

We believe in the long term growth and there is huge opportunity in the region. With good legislation , ease of doing business, good infrastructure, finance sector on world-class level, significant amount of resources, excellent science skills in part and reliable, and independent legal system. We are best performer in Africa for trade facilitation logistics. So we need open trade policy and comparatively strong domestic market. We should note that more than 75 per cent of manufacturing firms export to African countries

Our logistics performance outperforms regional peers (excellent infrastructure of airports, extensive rail network (14th largest in the world), the longest road network of any African country).  For Nigeria, it is a new economic giant / strongest economy in Africa (South Africa moved to 2nd place). It is 21st largest economy worldwide and has huge, young and urbanised population; large oil and gas reserve and increasingly diversified economy.

Given the attractions of e-commerce market in Nigeria, how is DHL prepared to take advantage of the future growth? 

We are prepared to tap from the growth of e-commerce, so we are investing heavily in Nigeria .e-commerce creates significant opportunity for us. We are not a manufacturing company but we are in the business of supply.  So we are ready to benefit from e-commerce growth in Nigeria. South Africa has the second largest number of potential online shoppers (70 per cent ), compared to Nigeria (89 per cent ) and Kenya (60 per cent ). South African e-commerce sites are popular destinations for shoppers from Nigeria.

Research shows 30 per cent of Nigerian cross-border shoppers (online shoppers who have made purchases online from another country) have purchased goods from South Africa in the past 12 months. There is huge potential for e-commerce in the region, compared to emerging markets, e-retailing in Africa is still in its infancy.

A recent retailing study2 conducted by Urban Studies on behalf of South African Council of Shopping Centres (SACSC), revealed that Africa and the Middle East’s share of global e-commerce in 2015 is just 2 per cent, but that it shows high potential. This is supported by a recent report by McKinsey & Company, which revealed e-commerce could account for 10 per cent of retail sales in Africa’s largest economies by 2025. Google also predicts that a massive e-commerce market will emerge in Africa by 2017 as the continent becomes more familiar with technological advances.

How is DHL financial performance like, especially in the first half of 2015?

After the successful execution of Strategy 2015, the current year represents a year of transition. In the second quarter we worked very hard and took important steps towards the successful implementation of our Strategy 2020. With that, we want to ensure the long-term, profitable growth of the Group. To achieve this, we have recorded some short-term impact on our results. At the same time, we are convinced that these measures will contribute to accelerated earnings growth in the next year and enable us to achieve all our targets set for 2016 and beyond.

The second quarter saw a year-on-year revenue increase of 7.3 per cent , or EUR 1 billion, to EUR 14.7 billion (2014: EUR 13.7 billion). The DHL divisions grew by 9.1 per cent and the PeP division by 1.9 per cent. Adjusted for currency effects, Group revenues increased by 0.6 per cent with lower fuel surcharges limiting stronger growth. In the first half of the year, Group revenue increased by 8.1 per cent , or approximately EUR 2.2 billion, to EUR 29.5 billion (2014: EUR 27.3 billion). Adjusted for positive currency effects, revenues increased 1.3 per cent over the prior year period.