Africa might be known as the “hopeless” continent by most, but is slowly changing that. Africa is now slowly catching up and becoming the second fastest-growing region after Asia. The continent is known by logistics operators as the land of opportunities and there are many ways that the continent is expected to advance in logistics in 2021.
What is Logistics
Logistics is the process of handling goods from acquiring them, storage and finally transporting them to their final destination. The logistics process includes material handling, the flow of information, production, inventory control, transportation, packaging and warehousing. In most instances, logistics looks at finding ways to reduce expenses while maximizing the efficiency of operations.
The main categories of logistics processes are inbound logistics and outbound logistics. Inbound logistics involves purchasing and handling the delivery as well as the storage of the materials that will be manufactured. Outbound logistics refers to moving and storing finished products to people and organizations that will be able to make use of them.
Logistics and Business Opportunities in Africa
Africa is proving itself to be a powerhouse with countless opportunities for growth. Here are some of the advancements that we can expect in the logistics industry for the continent.
Africa has the youngest population as 60% of the people in the continent are below the age of 25 years. This is a great advantage as the young adults are digitally-minded and they are constantly searching for digital solutions for businesses. There has been an increase in start-ups that are searching for more technological solutions that will overcome the many challenges that the continent faces.
There has been a rise in internet penetration that has allowed more customers to move online as well as enable businesses to make use of cloud services. This will create more startups in the logistics sector who will try to find more ways to eliminate intermediaries and inefficient processes and optimize supply chains.
2. eCommerce Growth
We will likely see a growth in e-commerce in Africa which is due to a growth in the middle class as well as growth in mobile and internet penetration. Africa is set to have US $2.1 trillion in consumer spending by the year 2025. This will have a major impact on its logistics sector as e-commerce plays a major role in driving logistics services.
There will be a rapid increase in e-hailing solutions that will address the continent’s systemic inefficiencies that could hinder the sector’s growth as e-hailing will organize transactions in order to improve costs and reduce data for the shippers and transporters.
There will also be steady growth in e-logistics as online orders will need to be consolidated in order for there to be visibility of products that are being moved from the start to the end.
3. Investment in Warehousing
The rise in technological advancements has increased the demand for warehouse management. In order to meet and optimize the supply chain capacity, there needs to be more warehouses. One of the businesses that is trying to increase warehouse space is Agility which plans to create a 100,000 square meter logistics park. The investment in warehouse space will be able to support the growing online retail and e-commerce sectors.
4. Growth in Free Trade
Another trend that will lead to the advancement of Africa’s logistics sector is continental free trade. This will lead to the continent’s growth as cargo owners and transporters throughout the continent will be able to trade freely. There will be expansion opportunities and a breakdown of bureaucracies which will be able to open up the markers. There will be no tariffs that will boost trade and in order for this trade to be effective there needs to be an improvement in border crossings, payment and documentation.
5. Investment in Transport Infrastructure
There has been more investments in Africa’s transportation infrastructure which will be able to boost Africa’s logistics sector. Most of Africa’s population lives in rural areas and they lack transport infrastructure. Most of the roads in the continent are not well developed and they will need to fix thousands of kilometers of roads that need attention.
Not having good roads makes it difficult to cross borders in Africa and leads to high transportation and logistics costs. There are countries that are showing an improvement in this area such as South Africa, Nigeria, Kenya and Ghana.
6. Business-to-business (B2B) focused startups
B2B startups have been predicted to influence the growth of Africa’s logistics sectors. A survey that was conducted for African logistics companies indicated that 87% of the respondents ran businesses that focused on B2B solutions while 5% focused on B2C (business to consumer) services. This is due to the fact that the business models are a lot simpler and it has strategies in place called just-in-case inventory where the business holds 3 to 4 days of additional inventory as the suppliers can be unreliable.
Another rise in B2B startups is due to the reduced demand for consumer goods as African markets have less purchasing power and B2B startups are able to meet these business needs. These B2B startups are also more likely to receive funding from investors than B2C startups.
Many advancements are likely to occur in Africa’s logistics sector, but in order for them to achieve long-term success and growth, there needs to be an improvement in some areas such as transport infrastructure and its connectivity across borders.