The logistics market in Africa has experienced significant growth over the past few years. This advancement is driving more and more companies beyond megacities to explore strategies to connect rural communities to regional supply chains.
Head of Communications, Oluwaseun Adebola is Head of Global Marketing. In this interview with Ventures Afric, he talks about how technology is at the heart of advancements in the logistics market and highlights the key growth drivers for the industry in Africa.
How would you describe the logistics market in Africa over the past decade?
The global logistics market size was estimated at USD 8.6 billion in 2020, with Africa accounting for USD 344.56 billion or 4%. Not bad considering Africa’s vulnerability and exposure to external shocks.
While there have been oversights and setbacks in the planning and coordination of resources and services in Africa from source to consumption, certain milestones have been recorded and some progress has been made. The market has faced dramatic changes over the past few years due to the COVID-19 pandemic, but is also expected to grow exponentially by the end of 2021, driven by rising middle class and consumer spending.
Like other markets, the pandemic has had a knock-on effect on the logistics market in Africa. A series of blockades have caused significant disruption to human activity and resulted in restrictions on movement, food shortages and the immobility of goods and people. However, when the conflict in Eastern Europe erupted, the global economy was on a clear path to recovery, sparking panic and leading to a global energy crisis, production shortages and supply shortages.
In Africa today, with a growing middle class and consumers demanding superior service and faster delivery times, other players in the ecosystem are innovating to meet or exceed these expectations. Manufacturers are improving distribution models, and digital logistics companies are using technology to reduce errors and inefficiencies. The future is bright.
How has your experience enhanced your role as a global marketing leader, especially in driving Africa’s technology and innovation story?
I started my career in marketing communications as a copywriter and social media executive. When you’re in a role like this at an advertising agency, media company, and financial services company, it puts you on the right track and acquires transferable skills, one of which is telling compelling stories and owning your narrative.
Although Africa has the world’s oldest record of human technological achievement, the story we are most familiar with so far is the colonization, decolonization, poverty and scarcity of Europe. Our innovative developments and technological advancements have not received similar attention in recent years.
Africa has achieved a lot and continues to challenge the world trend. African startups raised $4B in 2021, with $1.3B coming from Nigeria. The venture capital fund was raised by determined founders and their partners determined to solve the continent’s toughest pain points through technology.
As a marketing leader, I am committed to driving a new narrative for Africa; a story of resilience, innovation and astronomical growth.
Which trends do you see as the main growth drivers for the logistics industry in Africa?
African Free Trade Area
AfCFTA, the world’s largest free trade area since the WTO, is expected to significantly boost intra-African trade and drive growth in the region. Since its establishment in 2018, the African Continental Free Trade Area is a framework agreement that connects African countries and cities for the integration of regional value chains, covering 55 countries, 1.3 billion people, and a total GDP of $3.4 trillion, increasing cooperation and investment opportunities.
This integration will increase cross-border trade, boost incomes, reduce unemployment and boost investment by cutting border tariffs and making the movement of goods between African countries more seamless.
Digitizing
Another key growth driver is the digitization of logistics in Africa. With transport costs in African countries very high compared to the world average, reducing transport costs, errors and delays is a priority due to their fragmentation, inadequate infrastructure and high tariffs across borders.
Delays in matching trips are the first inefficiency encountered by shippers, who can wait days for trucks to deliver their products. Digitization is helping to increase the efficiency needed to connect the missing pieces, by creating a market filled with thousands of fleet owners and manufacturers who want to move goods fast.
Digitization has also improved the delivery of services received by shippers and truck owners. Cargo owners have full visibility into their cargo and transaction transparency at all times, and fleet owners can manage their business more efficiently.
blockchain
Blockchain is one of the most popular innovations in African logistics, enabling smooth and integrated communications, financial and logistics services, and greater data collaboration among stakeholders.
The integrity of any supply chain is built on trust, transparency and accountability, which can be challenging to achieve. Supply chain ecosystems in Africa are beginning to explore the reliability, security and traceability offered by blockchain.
The future of the African logistics market is certainly digital, and blockchain may just be at the center of it all.
What challenges are the African logistics industry currently facing and how are they affecting the growth of the industry?
The World Bank’s 2018 International LPI, an interactive benchmarking tool designed to help countries identify the challenges and opportunities they face in their trade logistics performance, and what they can do to improve performance, shows Germany ranks first and most efficient Logistics system with an LPI score of 4.20. Germany is followed by Sweden and Belgium with 4.05 and 4.04 respectively.
Out of 160 countries, the highest-ranked African country is South Africa at 33rdrd Spot and 3.38 LPI. Kenya and Benin ranked 68th and 78th with 2.81 and 2.75 LPI respectively, while Ghana and Nigeria ranked 106th and 110th respectivelyth points, 2.57 and 2.53 LPI, respectively.
LPI is calculated by combining and evaluating certain capabilities or parameters, such as customs, infrastructure, international freight, logistics capabilities, tracking, traceability and timeliness. Judging by the data, infrastructure, customs and logistics capabilities appear to be the most profound challenges facing the African market.
In addition to the fragmented nature of logistics and supply chains in Africa, trucking inefficiencies also pose a huge challenge. According to TechSciResearch, the used truck market in Africa was worth more than $2 billion in 2019. According to FRSC, 90% of trucks in Nigeria are over 30 years old, leading to low market transparency and unwarranted waiting times, as well as inefficient logistics. But it’s also a result of the high cost of acquiring new trucks and weak African currencies. To mitigate this, fleet owners will need to adopt new truck financing solutions and increase penetration in Africa. This might solve the problems that come with using old and unworthy trucks on African roads.
What is the relationship between logistics and international trade, and how can the logistics industry help improve African economies?
Logistics is the backbone of the global economy and international trade. Therefore, the strength of any economy depends on its logistics industry. The safe, efficient and timely coordination and transportation of products has a direct impact on the most important economic sectors, without which nothing would happen. Imagine raw materials that can’t be moved to the point of production, or finished products that can’t reach customers a mile away. Now, the more efficient the process, the more successful the global economic record.
As a diverse continent, Africa from 54 countries contributes about $2.7 trillion to the global economy, accounting for 2.84% of world GDP in nominal terms. This contribution is expected to grow by 3.9% and 4.2% in 2023 and 2024, respectively.
What determines this, however, is the quality of African logistics services over the next two years. All initially mentioned challenges such as infrastructure deficits, capital gaps, technology adoption and energy crises must be addressed.