BUSINESS MAVERICK 168 ANALYSIS
Imperial Logistics takes bold steps to change course, because Africa’s time is now
Imperial Logistics was a global business with investments on almost every continent. Its new(ish) CEO has overseen a bold about-turn that will see the company focus entirely on Africa.
First published in the Daily Maverick 168 weekly newspaper.
India could have lessened its Covid-19 disaster if the government had not been so determined to manage the procurement and distribution of vaccines centrally, says Mohammed Akoojee, CEO of Imperial Logistics. The fact that the country is in the grip of a severe third wave is an added tragedy, considering one of the vaccines is manufactured there, he says. But the process has now been opened up to the private sector, a fact that warrants the attention of governments around the world.
“Is centralised procurement and distribution really the right way to go? The pace at which we are vaccinating people in South Africa is not where it should be – just 340,000 medical professionals have been vaccinated, out of a possible 1.5 million. And we need to cover 65% of the population? Do the maths. We need to vaccinate 250,000 people a day, as they did in the US and UK.”
Imperial has won a small portion of the government’s tender to import and distribute the Pfizer/BioNTech vaccine – the importation and clearing side of things. Warehousing and distribution will be handled by DSV Healthcare in partnership with the Biovac Institute, a public-private partnership.
For Imperial, it is a R130-million contract that will not move the revenue needle – after all, Imperial turns over R55-billion annually. But this is not the point, Akoojee says.
“Government needs to open this process up. The private sector has the capacity and the credibility to play a role. We can reach 6,000 points of distribution, that is not an issue. The issue is on the front end – one needs to ensure the people are there to receive it. There are 10 doses in a vial. They need to be administered quickly or they will be wasted.”
Akoojee is refreshingly candid, but perhaps one shouldn’t be surprised. He oversaw a 180º shift in the company’s strategy, transforming it from a global logistics operator to one focused entirely on Africa.
In June 2018, Imperial Holdings unbundled into Imperial Logistics, at the time a global logistics operator with businesses around the world, and Motus, a vehicle value-chain business. In February 2019, Akoojee was appointed CEO of Imperial Logistics. At the time he was CFO.
“I had to shift my thinking from numbers to thinking about strategy, and with this comes the responsibility to make bold decisions,” he says.
The bold decision means the firm exits all its international operations to focus entirely on its “Gateway to Africa” strategy.
“I believe in focus… I kept coming back to the question, how do we compete and win? Yes, we were an international logistics player but this requires huge capital and scale. We asked ourselves: Where can we compete and win? And it was clearly our Africa footprint.”
Highlighting Imperial’s differentiated DNA, it’s worth noting that the company operates across 20 African countries and has access to 50,000 points of sale in Nigeria and 4,000 in Kenya – market access that is currently unrivalled.
This side of the business has grown rapidly too. In 2009 Imperial had no business on the continent outside South Africa. Results for the first six months to December 2020 show the region delivered 25% of revenues and 31% of group operating profit.
“Africa’s time is now. Our global counterparts don’t understand the complexities and challenges, and we have an opportunity to scale that side of our business and connect Africa to the world.”
With limited infrastructure, poor roads, ports and rail, logistics will be a high-growth sector that will grow at 10% to 12% over the next five years as bottlenecks are removed.
“Every organisation has to stand for something and have a clear purpose,” he says.
Implementing this strategy has seen Imperial sell its South American and European shipping businesses.
Other businesses within the international logistics business, which generated 41% of group revenue and 28% of group operating profit in the six months to December, are in the process of being sold. Although this is a big chunk of the business, revenue from the sales will pay off debt and support the balance sheet.
Another bold change from Akoojee is the shift to the “One Imperial” policy. This will see the company transform from a portfolio of regional businesses into an integrated, end-to-end market access and logistics business.
“This business was built on acquisitions and was very decentralised. As long as you made money we left you alone. Now we are integrating the businesses, and in the process removing the duplicates and triplicates. Costs will come down dramatically.”
As if those changes were not enough, Akoojee has also overseen the decision to invest $20-million in an innovation fund – a rare action these days.
“There are interesting startups around that are a threat to our business model. For instance, digital freight exchanges. We want to be proactive and so we have chosen to see these threats as an opportunity. We can add value to them and help them scale. In the process, we bring new innovation into our business. If you don’t have a venture capital fund approach, you don’t see what is out there.” DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.