The African Development Bank (AfDB) was willing to carry out a pre-feasibility study for the development of a logistics platform and a Special Economic Zone (SEZ) in an African island nation.
In this context, ALG conducted a comprehensive analysis of the current situation of the logistic sector, including maritime, road and air transport in the region for identifying the opportunities and a conceptual proposal for the logistics area with the economic and financial models, including analysis of PPP options.
Objectives, goals and purposes
The main objective of the project is to assess the pre-feasibility of developing a commercial logistics platform, potentially in the legal form of a Special Economic Zone (SEZ), at the most suitable port in the country.
The other objectives of the project were:
- Advise on the most suitable type of logistics platform based on a competition analysis
- Identify priority sectors and define the value proposition of the platform
- Estimate associated demand
- Propose an initial design of the logistics platform, including the selection of a specific location
- Size the logistics platform and define preliminary development plans
- Evaluate the impact of implementing the logistics platform on maritime traffic
- Estimate the necessary investment costs
- Analyze the project from an economic perspective
- Identify possible mechanisms for private sector participation and select the most appropriate Public-Private Partnership (PPP)
- Develop a high-level business plan for the selected PPP option
- Identify the key project risks
Study methodology and activities
The methodology followed a three-stage approach, with each stage entailing a set of activities, as detailed below:
Market assessment in order to understand the context of the logistic sector, its needs and the opportunities:
- Regional macroeconomics
- Current trade and flow dynamics in the region
- Logistic analysis in the country
- Identify and review the main SEZs in the region and inland logistics facilities in the hinterland: warehouses, logistics parks, etc
Conceptual proposal for the logistic platform based on the value proposition:
- Logistic platform’s demand estimation according to target industries/sectors
- Impact on the port traffic demand for the following 30 years considering different demand scenarios
- Definition of the potential products/sectors for the logistic platform
- Value proposition for the logistic platform adapted to the competitive landscape
- Concept design and CapEx assessment
Financial and economic prefeasibility assessment:
- Economic study with the identification of the main externalities and wider economic benefits of the project
- Financial model including balance sheet, income statement and cash flow and revenues forecast based on product mix and positioning for a 25-year period
- Sensitivity according to different pricing strategy and demand scenario
- Assessment of PSP/PPP options
- Internal and external risks assessment with the associated mitigation measures
Key findings and recommendations
The high-level analysis for the establishment of the logistics zone includes a comprehensive market study that has defined the opportunities and challenges of the platform, as well as its competitive positioning.
ALG identified the most competitive location, priority sectors, and associated branches of activity among the opportunities for the logistics platform. These activity branches mainly encompassed the development of facilities and services to produce locally, provision of infrastructure to enhance export value, and optimization of import logistics.
Additionally, the study proposes a set of recommendations to address challenges and reduce project risks. The recommendations cover the type of management model, the implementation of the logistics area, the stimulation of various catalysts, the optimization of the financial model, and finally, the most suitable contract typology for its implementation.
Success and outcomes
ALG successfully presented the final pre-feasibility study report to various members of the respective Ministries of the National Government. Based on our analysis, the AfDB and the Government initiated discussions to explore how both institutions could collaborate to continue the analysis of the logistics platform and define a path for the implementation of the project.