Category Risk Management

Rising transport risks in Africa highlight the need for business owners to have effective risk management strategies in place

06 October 2011 Aon South Africa (Pty) Ltd
Jeffry Butt Business Unit Head of Marine at Aon South Africa (Pty) Ltd

Jeffry Butt Business Unit Head of Marine at Aon South Africa (Pty) Ltd

The huge rise in demand in Africa for consumer goods, such as mobile phones, has resulted in an increased risk of hijackings of trucks carrying these items.

According to Jeffry Butt, Business Unit Head of Marine at Aon South Africa (Pty) Ltd, these increased risks highlight the need for business owners transporting goods across the continent to have more stringent and holistic measures in place to protect valuable cargo.

“Risk management strategies need to be adopted when transporting goods in Africa due to the commercial motive of the actual product, which can be resold at a lower price on the black market. This is particularly prevalent in Africa due to the high levels of corruption and bribery between borders,” says Butt.

Butt adds that if high value goods are hijacked without a recovery plan or proper insurance in place, it can result in substantial losses to owners. “Knowing what to do when a carrier is hijacked is the first step to ensuring you have a better chance of recovering stolen goods,” says Butt.

He says that business owners should take it a step further and adopt holistic risk management strategies that have proven to be effective. “Business owners need to understand all the risks involved when transporting goods in Africa in order to have correct risk mitigation methods in place. This means evaluating the entire risk profile of the areas the goods pass when in transit. These factors include the history of a country, political instability, socio-economic conditions, volatility and terrorism, to name a few,” says Butt.

He says trucks carrying mobile phones are amongst the items at greatest risk of being hijacked. Africa has the largest growth rate of mobile subscribers in the world, with African markets expanding twice as fast as Asian markets. Recent statistics show an increase from 448 million subscribers in 2009 to approximately 509 million subscribers in 2010, reflecting an 11.8% growth or 60.5 million new subscribers. “This has created a huge demand in the black market for mobile phones, airtime vouchers and sim cards.”

Butt says that businesses transporting fuel, copper and cigarettes also face increasing threats. “Hijackings in the copper industry are on an upward trend as copper is easily sold to scrap dealers, while fuel is an expensive and scarce commodity. Cigarettes, which have incredibly high duties, are also high risk items.”

He adds that even if hijacked goods are insured, high excesses will be absorbed by the cargo owner. “For example if the total value of goods lost was R1 000000, the insurer will pay out R900000 and the other R100000 would need to be absorbed by the business.

“Insurers do however offer lower excesses to businesses that can prove they have effective risk management measures in place. If a business can show that they have spent money on managing risk effectively, the insurer has an incentive to be more lenient,” says Butt.

“Speaking to a risk management specialist is an effective way to understand exposure to risk and can save a business from substantial profit loss,” concludes Butt.

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