FIFI PETERS: While most South African companies are pulling out of the rest of Africa, Imperial Logistics is staying put, citing pockets of opportunity for its business. The company released its annual results today, September 7, and we have the CEO, Mohammed Akoojee, joining the show. Mohammed, thanks so much for your time. Why are you still crazy about Africa from a business perspective?
MOHAMMED AKOOJEE: Hi, Fifi. Thanks. Africa for me is the last major emerging market with great opportunity. It is a continent with a lot of people. It is a continent with young people who have aspirations.
Our business in Africa is focused on consumers and healthcare, which are excellent industries to be in, and we see the benefits of being in these industries from a resilience perspective. But also logistics in Africa is going to be one of the fastest growing sectors. The logistics market is expected to grow for the next five years at a compound annual growth rate of over 12% and Imperial has got scale, has significant capability and has got a fantastic distribution platform and networks across about 20 markets now. We see it as a competitive advantage and they want to leverage our capabilities scale to take advantage of the growth potential.
FIFI PETERS: What does the exit of some of the South African companies from the rest of the continent mean for your logistics business? You were talking about the opportunity in the consumer side of the business. We have Shoprite on the show and I think the number of countries in the continent that they have been pulling out from is well known.
MOHAMMED AKOOJEE: Our major activity on the African continent is our market access business, where we actually provide a sales and marketing service to our principals to get the product to the consumer, and obviously we built logistics capabilities around transport, warehousing to support that service into the last mile.
For example, in a market like Nigeria, we take product to about 40 000 to 50 000 points of sale in the healthcare sector. Because most of the consumption in many of the big markets in Africa is informal, they require that kind of service and activity. Our client base is not necessarily the same client base we’d have in South Africa, and our strategy of entering Africa in my mind was very different to how we expanded our South African business. We looked at where in the supply chain we could make a real difference, where we could add most value to principals, and then use that to then build other services around that.
FIFI PETERS: Just going back to the numbers that you have reported today, it looks at business has been great for the group, despite the pandemic. Your numbers show that you did benefit from being an essential goods provider, and even now a distributor of Covid-19 vaccines. What were some of the highlights and lowlights in the year that was?
MOHAMMED AKOOJEE: For me the key highlights were our strong contract renewal rate, which was the highest it has been in the last three or four years, at 88%. We had new business revenue of about R6 billion. For me those are very important indicators of the health of our business, because it means we are relevant to our clients and adding value to their business and we are price competitive. So, despite a difficult economic environment we were able to rise above that and add new business. That was a key feature.
I also think the point I made earlier on, the tougher some of these markets get in terms of getting product to consumers, plays in our hands because there’s more outsourced opportunities that come from that. Imperial’s end-to-end capability in terms of our being able to offer virtually solutions from road-based transport to warehousing right to last-mile distribution, and even acting as a sales organisation for our consumers in healthcare principles, creates a stickiness and gives us a lot of opportunity for growth.
Our cash regeneration was excellent. So we grew our revenue, converted that into profit, but very importantly generated cash.
And then we made a lot of great strategic progress. You know, we exited shipping businesses and got R4.7 billion in from that process, which gives us capital to expand in our core focus areas, being Logistics Africa and market access. We recently announced two acquisitions in that area.
FIFI PETERS: I remember when the conversations about the distribution of the vaccine started there was a whole lot of concern as to whether we’d be able to get our vaccines out throughout the country on time, at the right temperatures before they expired and the like. Just how has that process of vaccine distribution been for Imperial here in South Africa? I don’t know how much of the work you are also doing in the rest of the continent.
MOHAMMED AKOOJEE: Our work in South Africa is very specific to importation of the vaccines. We obviously do not play a role in the distribution of the vaccine into the vaccination centres. The fact that government through its procurement and through its supply chain, wants to obviously regulate and control the distribution of the vaccine means our role is quite limited.
I think that will change in time. I think that this vaccine is not a once-off and it will be an ongoing thing.
Companies like Imperial that have got the capability across the different disciplines and supply chain capabilities to do vaccine distribution like we do in other areas will be relevant. So I believe the government with their service providers has done an incredible job. Certainly in recent times we are getting to 250 000 vaccines a day now, and it is really being well managed.
I always said that in terms of the warehousing and the infrastructure to support the vaccine roll-out there would be no issue with that, because there [are] very well established players in the South African market that can keep vaccines at the right temperatures and allow for seamless distribution to the vaccine centres. Our challenge was to create enough points of vaccination so that we could get a … batch of patients down. It was never a supply issue for me in a logistics capability that was a concern, it was always on the demand side of it: will we be able to get to vaccination scale? It took us a while to get there, but I think we’ve now turned the corner on that, which is great.
FIFI PETERS: You’re talking about the possibility of Imperial playing a more expanded role in the vaccine roll-out. The thought that came to my mind was whether Imperial would still be around, because right now you’re at the centre of an over-R12 billion takeover by Dubai Ports World (DP World).
MOHAMMED AKOOJEE: Yes, that’s right. But Dubai Ports will be buying Imperial because of our capability in the areas I’ve mentioned, particularly our strong ability to get product to consumers. So from a strategic perspective and an opportunity perspective, that’s not going to change. We are just getting a different shareholder.
FIFI PETERS: And how is that deal progressing?
MOHAMMED AKOOJEE: It’s going well and it’s on track. We’ve got two major outstanding conditions – one being shareholder approval. The meeting is next week Friday, and then we’ve got regulatory approvals, which we anticipate to get completed by the end of this calendar year or early next year, and we are quite positive about concluding this transaction.
FIFI PETERS: And why will this transaction be good for your shareholders? But, more importantly, be good for your workers, Mohammed?
MOHAMMED AKOOJEE: Look, obviously the offer price is at a significant premium to where Imperial is trading, and our board followed a very professional process in assessing the offer price before recommending it to shareholders, and that process was very well managed with advisors and recommended our shareholders support the offer. So shareholders will get a good price.
I think for me, for the rest of our stakeholders, including employees, DP World are very excited about Africa. They have a number of ports, and they’ve invested in a number of port projects across the continent and want to expand their Africa presence; and Imperial ticks that block in terms of giving one a very strong distribution network across the country, across many markets in Africa.
I believe the DP World transaction from a strategic perspective and for our employees can accelerate a lot of what we want to create as a gateway to Africa; and having a shareholder like that with global networks, a global presence, significant capital resources, will advance our aspirations.
That could be good for employees and for our company and our clients in principle.
FIFI PETERS: In the meantime, while we wait for approval from the different stakeholders, what do you plan to keep yourself busy with as a group?
MOHAMMED AKOOJEE: Well, it’s business as usual in terms of our continuing to run the business well and, as I said, focusing on our delivery to our clients’ principles, and continuing with our strategy as I said. The DP World approach or buyout is buying Imperial for its Africa presence for its networks across the continent, which we are now focused on. We’ll continue building our business on the continent and delivering on our financial and strategic objectives as this process continues.
FIFI PETERS: Mohammed, I remember when the deal was announced it was a testament that South African companies can really be shining stars to elicit such a huge offer from a foreign investor, and I look forward to seeing how this pans out. In the meantime, I look forward to the conversations that we may still have until then. But we’ll leave it there for now, sir.
That was the CEO of Imperial Logistics, Mohammed Akoojee.