About gertsaaiman

21 years old, I am currently studying to become a Chartered Accountant in South Africa. The last few months I've been taking bigger and bigger steps to starting my own logistical company. This is my story

Risks associated with logistical services in Africa

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Following the identified sectors in which possible clients are trading, risks need to be acknowledged.

A logistical company being heavily dependent on its assets to deliver the services, most risks can be located around this aspect. That being said, the risks are even higher because of trading in Africa. Going through news topics, one will easily see the number of countries in Africa where unrest is a day to day thing (Libya, Kenya, CAR, Cote D’Ivoire, etc) http://goafrica.about.com/od/healthandsafety/a/travelwarnings.htm

So obviously, asset damage is a huge risk. Traveling through countries where civil wars are taking place can be avoided to a certain extent, but the chance is still there that a truck could be stolen or damaged. A parallel risk is damage to customer property. Luckily both risks can be covered by insurance. What can’t be undone is the damage to reputation and the relationship between you as company and the customer.

Then there is the risk of your employees health and safety when driving through these countries. From another side, there is also risk of strikes in the labour sector. Especially the last few years in South Africa, the tendency for strikes have been on the rise.

The above bring about an extra risk which is keeping up with delivery schedules. If the truck experiences any resistance, be it from locals of border crossings, the ETA is drastically affected.

Another risk identified are fluctuations in fuel prices. This makes it difficult from an accounting aspect to accurately budget for these cost, which could cause other problems in the future. In the same boat, there is the compliance with other countries taxation laws and legislation. Not being up to date in these areas could lead to over paying tax or even fraudulent activities which could cause damage to the company, if not close it down. Trading in foreign currencies is also a risk that needs to be tended to. Companies are at serious risk of being underpaid if foreign transactions aren’t done with precision and proper knowledge.

Before any progress is made in establishing the company, there should firstly be looked at how all the above risks can be cancelled out or lowered to an acceptable level.

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Identifying potential needs of clients.

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Identifying the needs and where you as a service provider can fulfill that need.

Looking at my own situation, this is how far I’ve come.

I’ve known for a long time that I am going to start my own logistics company when I’m good and ready. The first question that I needed to ask myself was “Where is there a need that I can satisfy as a logistics company?”

I currently live in South Africa and one thing that is clear is the scale of mining in our country as well as in other parts of the continent. The opportunities that are presenting themselves are endless!

So doing some research on the sector I’ve discovered that currently there are at least 465 mining companies operating in Africa, the most being in SA itself and Tanzania. Minerals ranging from gold to diamonds to just about anything you can think of.

So the next step would be to look closer at the mining process. Seeing where the mining company have needs for transportation. This can vary from the transport of mining equipment to perishable goods or even the movement of mineral excavations.

My second question was “In what other sectors are there needs that are parallel to the ones of mining?” (With mining being so volatile in Africa, it would be stupid to put all your eggs in one basket) I came across a major opportunity called the China Africa Project. The arrangement works as follows: Chinese companies get the backing from their banks to come to Africa. Here they build roads, hospitals, schools etc. in return for primary goods such as minerals, timber and agricultural productions as payment. Right there is a great opportunity for companies looking to do business overseas but who don’t have the means to do so.

If one was to start providing logistical services to a Chinese company in Africa and hold the relationship, chances are good that ones reputation would increase amongst their inner networking circles and with that the chance to do more business with more companies.

The next step will be to address the risks attached to doing business in Africa. More on that later.