Africa’s logistics market has experienced significant growth in the last few years. This advancement is pushing more and more companies to look beyond megacities, and explore strategies to connect even rural communities to regional supply chains.
Communications Leader, Oluwaseun Adebola is Global Marketing Lead. In this interview with Ventures Afric, he speaks about how technology is at the centre of progress for the Logistics Market, highlighting key growth drivers for the industry in Africa.
How would you describe the logistics market in Africa in the last decade?
The Global logistics market size was estimated at $ 8.6 Tn in 2020, and Africa accounted for $344.56 Bn, representing 4%. That’s not bad considering Africa’s vulnerability and exposure to external shocks.
Though the process of planning and coordinating resources and services from the point of origin to the point of consumption in Africa has had its own share of neglect and setbacks, it has also recorded certain milestones and made some progress. In the past few years, the market confronted vast changes due to the COVID-19 pandemic but also grew exponentially towards the end of 2021, driven by growing middle-class and consumer spending.
The pandemic had a ripple effect on Africa’s logistics market just like other markets. The series of lockdowns brought major disruption to human activities and led to movement restrictions, food scarcity, and the immobility of goods and people. However, the global economy was on a clear path to recovery when the eastern Europe conflict struck, creating panic and leading to a worldwide energy crisis, shortfall in production, and scarcity of supplies.
In Africa today, the middle class keeps growing, and consumers are demanding quality service and faster delivery times, while other players within the ecosystem are innovating in order 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 as it concerns pushing the stories of technology and innovation in Africa?
I started my career in Marketing Communications as a copywriter and a social media executive. When you function in such capacities across advertising agencies, media houses, and financial service companies, it gets you started on the right foot and earns you transferable skills, one of which is telling compelling stories and owning your narrative.
Even though Africa has the world’s oldest record of human technological achievement, our most familiar stories to date are that of European colonization, decolonization, poverty and shortage. Our innovative exploits and technological advancements in recent years have not received similar attention.
Africa has achieved a lot and keeps defying global trends. In 2021, African startups raised $4B, of which $1.3B was raised in Nigeria. The VC funds were raised by resolute founders and their partners, who are determined to solve the continent’s most arduous pain points through technology.
As a marketing leader, I am dedicated to pushing Africa’s new narrative; a story of resilience, innovation and astronomical growth.
What trends would you identify as key growth drivers for the African logistics industry?
AfCFTA is the world’s largest free trade area since WTO and is expected to significantly boost intra-Africa trade and drive growth in the region. Since its establishment in 2018, The African Continental Free Trade Area, a framework agreement connecting African countries and cities for regional value chain integration embraces 55 countries with 1.3 billion people and a combined GDP of US$3.4 trillion, has enhanced collaboration and investment opportunities.
This integration would increase cross-border trade, lift incomes, reduce unemployment, and catalyze investments by slashing border tariffs and making the movement of goods across African countries more seamless.
Another key growth driver is the digitalization of logistics in Africa. Due to the very high shipping cost across African countries compared to the world’s average, caused by its fragmented nature, infrastructure deficit and high tariffs cross-boarders, the reduction of shipping costs, errors and delays became top priority.
Delays in matching trips are the first inefficiency experienced by cargo owners, who may wait for days before getting trucks to move their products. Digitization is helping to drive the efficiency required to connect the missing pieces by creating a marketplace filled with thousands of fleet owners who are standing by to move goods and manufacturers who want to move goods quickly.
Digitalization also improves service delivery received by cargo owners and truck owners. Cargo owners can have complete visibility of their cargo and transaction transparency at all times, and fleet owners can manage their business more effectively.
Blockchain is one of the most trendy innovations in Africa’s logistics sector, capable of delivering smooth and integrated communication, financial and logistics services and greater data collaboration between stakeholders.
The integrity of any supply chain is built on trust, transparency and accountability, and can be challenging to achieve. Africa’s supply chain ecosystem is beginning to explore the reliability, security and traceability that blockchain provides.
Africa’s logistics market future is surely digital, and blockchain might just be at the centre of it all.
What are some of the challenges that the African logistics industry faces presently, and how have they impacted the growth of the sector?
International 2018 LPI by the World Bank, an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance, indicates that Germany ranks number 1 and has the most efficient logistics system with an LPI score of 4.20. Germany is closely followed by Sweden and Belgium with 4.05 and 4.04 respectively.
Out of 160 countries, the highest-ranking African nation is South Africa, at 33rd spot and 3.38 LPI. Kenya and Benin rank 68 and 78 with 2.81 and 2.75 LPI respectively, while Ghana and Nigeria took 106th and 110th spots, with 2.57 and 2.53 LPI respectively.
The LPI is calculated by combining and evaluating certain competencies or parameters such as customs, infrastructure, international shipments, logistics competence, tracking, tracing and timeliness. From the data, infrastructure, customs and logistics competence seem to be the most profound challenges in African markets.
Apart from the fragmented nature of logistics and supply chains in Africa, trucking inefficiencies also pose a great challenge. According to TechSciResearch, Africa’s used truck market was valued at more than $ 2 billion in 2019. In Nigeria, 90% of trucks on the roads are more than 30 years according to the FRSC, leading to low market transparency and unwarranted wait times, and making logistics inefficient. But this is also a result of the high cost of acquiring new trucks and the struggling nature of African currencies. To mitigate this, fleet owners will need to embrace new truck financing solutions in Africa and increase penetration. This may solve the problems that accompany the use of old and unworthy trucks on African roads.
What is the relationship between logistics and international trade and how is the logistics industry helping to improve the African economy?
Logistics is the backbone of the global economy and international trade. Thus, any economy is only as strong as its logistics industry. The coordination and movement of products safely, effectively and timely have a direct impact on the most vital economic sectors and nothing works without it. Imagine raw materials can’t be moved to production spots, or finished products can’t reach the mile customer. Now, the more efficient the process is the more successful the global economy records.
Africa as a diverse continent contributes around US$2.7 trillion to the global economy from 54 countries, that’s 2.84% of the world GDP in nominal terms. This contribution has been projected to grow at 3.9% and 4.2% in 2023 and 2024 respectively.
However, it is the quality of logistics services in Africa in the next two years that will determine this. All initially mentioned challenges such as infrastructure deficit, capital gap, technology adoption and energy crises have to be resolved.