The Rapid Growth Of The Supply Chain, Logistics Industry In Africa
Where civilisation starts, so does trade.
The African continent is the birthplace of mankind, and it was here that the very first trade occurred. However, now it’s 2019, and we have come a very long way from the barter system of yore to the dynamic online and offline commerce that the world engages in. Today, Africa is able to sell a variety of her products and services to foreign lands thanks to the robust supply chain & logistics system on the continent.
In this article, we’ll look at how the African supply chain & logistics system has grown, and we’ll try to gain insights into logistics in Africa. We’ll also identify the future prospects of logistics & supply chain in Africa, which will make the continent a powerful economy to contend with.
A blossoming industry
The African supply chain & logistics market is growing tremendously. Driven by internal physical & e-commerce trade and overseas competition, the transport and logistics industry is expected to grow into a multi-billion industry.
According to the 2016 Logistics Performance Index (a tool designed by the World Bank to help countries evaluate the strength and efficiency of their supply chain & logistics system), South Africa came out on top, possessing the best transport and logistics system in sub-Saharan Africa. This was followed by Kenya, Botswana, Uganda, and Tanzania. Of these, Kenya has seen significant growth in logistics revenues, bringing in over R131 billion in 2015. This was a 13% increase in CAGR compared to 2010.
But it isn’t only sub-Saharan Africa that’s performing so well in the logistics sector. Even Angola in Southern Africa experienced an increase of 18% in CAGR, earning R156 billion in logistics and supply chain revenue. Angolan supply chain company, Antonio J. Silva Transport and Logistics, doubled its revenue by 50% between 2016 & 2018; evidence to Angola’s potential.
Then there’s North Africa. According to experts, Algeria is one country which has excellent future prospects of logistics & supply chain in Africa. The country, with its burgeoning middle-class population, has a large market of educated and globally aware individuals who have begun demanding for quality, world-class products and services. They have shown themselves as active, both online and offline. Existing logistics companies, like the GEFCO Group, have vouched for this through their highly profitable balance sheets, two years running.
In fact, as a testament to the lucrative prospects of the Algerian supply chain & logistics industry, the Algerian Government approved the R46 million El Hamdania port project in 2017 to support the massive volumes North Africa has started to trade in.
The hand behind the success – booming retail
Research by PwC and Econometrix showed that one of the primary reasons for such high growth in the logistics and supply chain industry in Africa was the growth of retail. The study included the ten biggest African economies – South Africa, Egypt, Congo, Algeria, Angola, Kenya, Ghana, Nigeria, Tanzania, and Mozambique.
It was observed that the biggest users and the biggest beneficiaries of the supply chain & logistics industry in these countries, between 2010 and 2015, were retailers and wholesalers. It was a time when the African retail industry was on its upward trajectory. Massive demand for indigenous raw materials (like oil, gas, minerals, and agricultural products) helped ancillary industries like supply chain grow too. Now, with reputed western brands like Carrefour, Aldo, Zara, and UCB entering the African economy, experts believe this growth will continue, and the retail sector will grow by at least 34% by 2021. Additionally, Africa is expected to see a humongous increase in demand for cereals & processed food by 51 million tons by 2028. This would mean that more supply chain & logistics players will be needed to meet these growing demands.
Developmental challenges persist
Despite these promising figures, the future prospects of logistics & supply chain in Africa still remain uncertain. This is predominantly because of the challenges which are common to all developing economies.
Supply chain infrastructure remains to this day a key challenge in the African continent. Poorly maintained roads, low investment in logistics equipment & technology, and poorly trained people lead to inefficiency in the supply chain system. Extremely great distances between villages, cities, and countries increase the time and cost involved in logistics.
Then there are the political risks in countries like Nigeria, which pose extensive bureaucratic challenges to those looking to set up supply chain & logistics businesses. Counterfeit imports & black market goods and the resultant restrictive trade laws also make the business environment unconducive. Even basic amenities like electricity and water are challenges in some countries like Guinea, where a generator serves as the primary source of power.
Finally, the lack of expertise and professionalism in the locally-run 3PL’s, poorly designed and managed warehouses and high employee turnover all plague the African supply chain & logistics industry today.
But there’s still hope
The world’s top economies have today recognized Africa for what it is – a global, burgeoning economy that has a massive logistics industry geared to be highly profitable. This is why countries like the US and China are actively investing in Africa and its supply chain industry.
The Connect Africa Initiative by the Overseas Private Investment Corporation (OPIC) sees the US Government investing $1 billion in African infrastructure and communication. This can add very high value to the supply chain.
The Belt & Road Initiative by the Chinese Government offers not just financial support but also political and cultural support to Africa in an effort to meet economic objectives in a mutually beneficial manner. So far, over 20 African nations have joined the Belt & Road Initiative.
Then there are up and coming local players like Jumia, which is one of the biggest online marketplaces in Africa, supporting over 50,000 local companies. Jumia works with local logistics providers and has built a fleet that is estimated to be larger than DHL’s. They also offer Click & Collect facility in 12 African nations, in addition to COD door delivery, which reduces the burden on the company’s logistics system.
These insights into logistics in the African supply chain & logistics industry show how opportunities and talent are both in excess on the continent. It’s safe to say that the African supply chain & logistics market will grow brilliantly in the next few years, bringing massive revenues and employment to the continent.