Siva Shipping’s Saravana Sivasankaran looked worryingly young to have his own shipping company, and he comes with another key difference: he is an outsider, with a finance and business background but no preconceptions about what shipping should and shouldn’t be.
What it should be, he explained at Nor-Shipping 2011, is better organised and operated, with far deeper connections into the country – or in his case continent – of opportunity. He is not alone in calling Africa the ‘next BRIC’ but Sivasankaran’s method seemed disarmingly simple.
“Africa is young and evolving [in trade terms], regulation is light, ports are underdeveloped, though there are issues of security and piracy,” he said. Sound like anything familiar? It sounds a little like south-east Asia 20 years ago and nobody’s laughing about that now.
Over the last decade, the rise of China has forced ship owners to accommodate change in their business model. Now Africa represents another possible ‘China in the making’. For the first time, he said, India and China are able to afford high commodity prices and would seek new sources from new markets.
What that implies for shipping is trade lane growth for crude and product tankers, bulk carriers hauling ore and coal, high specification chemtankers carrying fertilizer and palm oil and ultimately more container movements as living standards began to rise.
If his manifesto is correct then trading patterns will shift over time: tonne-mile demand will alter and new shipping services will emerge. At the moment, this development is centred mostly around commodity-rich West and South Africa, but he said the potential is clearly bigger than two regions.
Sivasankaran’s manifesto for success is simple: align with stakeholders, control under-developed port infrastructure, work with governments and understand their foreign investment strategy. And there was twist. “You must do due diligence on your clients, you need to verify their plans too.”
Africa, like India, is a new vista of opportunity with new rules. As such, risk management must be tailored to each project, but there is an inflection point in trade growth that might only be recognised in retrospect.
He admitted that African growth was a ‘nice to have’ compared to the nearer term bet on Chinese economic development, but ideally the two would complement each other, given China’s interest in controlling commodities in Africa.
He said the opportunity for shipping lay in getting back to its industrial routes; “Shipping needs to be more old school, we need to get the speculators out. This is not just about investment projects; it’s about commercial focus on better operations. People ask me: do I have to buy a farm to get a gallon of milk? No, not if you only want one, but if you are buying truckloads, then yes, buy the farm.”