Local supply channels - An opportunity for Mediterranean countries

 

The Anima Investment Network was present in numbers at the Mediterranean Worlds Forum held in Marseille on 7th-8th February last. In partnership with the Provence-Alpes-Côte d'Azur Region Aix-Marseille-Provence Metropolitan Authority, Aix-Marseille-Provence CCI and Africalink, the network organised a morning of business networking around the theme of the revival of business exchanges in the Mediterranean in the wake of the pandemic. For Anima president Tarak Chérif, ongoing supply problems, compounded by the need to combat climate change, require “a new vision” that prioritizes “local supply channels. Freight costs between China and Europe have increased five-fold. Many companies are now seeing the limits of their subcontracting work to Asia. We need to work to bring part of this business back to the Mediterranean.” A “difficult” objective for the Anima’s general delegate Emmanuel Noutary, but an “achievable” one.
 
The CMI (Centre for Mediterranean Integration) has identified “400 to 500 products and services that could be manufactured or supplied in and from Southern Mediterranean countries,” according to its director Blanca Moreno Dobson. “The potential is there, but it requires investment and an improvement in the economic environment, logistics and regulation…” When compared with southern countries, labour costs no longer favour China. And the north has the technology. “Developing a circular economy could create 24 million jobs in the Mediterranean,” points out Rasha Tantawy, head of entrepreneurship support at the ITIDA (Information Technology Industry Development Agency).

For the managing director of Altea Packaging, Slim Zeghal, “The South suffers from a lack of stability and integration.” For political reasons, the Maghreb and Machriq do not form a single market. This lack of homogeneity, this fragmentation, penalises the countries concerned. Zeghal also points out “a lack of confidence in the intermediaries’ reliability. This issue of communication and marketing needs to be resolved.”
 
Jihen Boutiba, managing director of Business France, regrets the “major stumbling blocks in the southern countries. Whence the need for structural reforms to remove the many barriers faced by start-up entrepreneurs. Reforms are in place, but they are seldom applied on the ground.”
 
Investment across the two shores of the Mediterranean can occur both ways. Business France’s North Africa director Michel Banza has noticed “a new but pronounced trend that has seen corporate heads on the southern shore also set up in Europe. As Walid Mzoughi, founder of the start-up Winshot, confirms, “For us, opening a branch in Marseille was a response to something that to us was obvious, a necessity for hyper-growth and to take on the Moroccan market. It was a matter of survival, in particular due to the over-complicated regulations hampering us in Tunisia.”
 
North-south, south-north, east-west, west-east, has the time for regionalisation come? Today, the world’s shipping fleet is running at 99% of capacity. This record figure has seen load factors go through the roof. According to managing director of CMA CGM Agencies France Sami Fouadh, “These are not expected to fall before 2023.” Foaudh adds, “China remains the world’s factory. Our clients are undecided. They’re looking towards Turkey and Egypt. But any changes in strategy remain marginal for the moment.”
 
Relocations are underway, however. Electrosteel intends building a decarbonated production facility for ductile iron pipes in Arles, an investment of €60M. “At the moment, manufacturing is done in India,” says export sales manager Philippe Neri. “The impact of transport on the cost price has gone from 5% to 35% in just a few months, calling into question our competitiveness.”
 
The Mediterranean has a limited launch window. It must ensure it does not miss it.

According to Sami Agli, managing director of the Agli Group and president of the Algerian Confederation of Citizen Employers (CAPC), Algeria is already on that path. “We have put major reforms in place that are bringing investors back. This is producing results, for example in the steel sector, with Turkish investment capital. In the services sector, mining, tourism, agribusiness and pharmaceuticals, relocations are possible.”
 
These views are moderated slightly by Jean-Christophe Ragni, managing director of the Ragni Group. “We have never been happy with a thirty-day transport time. And if the costs skyrocket as well…But relocating can’t be done at the drop of a hat. We invested in Algeria only for the government to do a U-turn with regulations. So, we left. Presently, we are looking at Morocco and sub-Saharan Africa. This entails huge investment, and trust. So, we’re taking things slowly. As an example, we intend sourcing lighting poles in Senegal for a contract we have in Africa.”
 
Blanca Moreno Dobson agrees. “Price, risk-spreading and environmental cost are important, but there are other factors that come into play. There needs to be more political and fiscal stability, a reduction in non-tariff trade costs and a renegotiation of free trade agreements with Europe, to include agriculture. The EU has raised its ambitions with regard to the Mediterranean, with a neighbourhood policy backed by considerable funding.”