Logistics in Africa: Opportunities and Challenges

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Logistics in Africa: Opportunities and Challenges

The logistics performance is a strategic factor that indicates the competitiveness of economies and businesses, and a catalyst for job creation and growth of the economy. The increased use of digital information technology in logistics management has resulted in enhanced competitiveness on a global scale. It involves enhancing the flow of information, planning, inventory control, packaging/handling, and transportation.

Factors such as expanded operations across wider complex markets, changing business environments and customer requirements, faster speed of entry into the market for new products, and the need for responsiveness have made supply chains more economically vital, as well as volatile.

Research on African markets shows that the continent is emerging strategically as an important trading bloc, particularly for Asia and parts of Europe. Based on its vast resources, growing wealth, and larger middle class with higher purchasing power. In this article, we show you the logistics opportunity in Africa as well as the challenges it has.

Opportunities

  • To begin with, African logistics companies are going beyond megacities and are looking to connect Africa’s rural communities to regional supply chains.
  • While megacities attracting millions of young Africans are growing across the country, Africa’s population remains predominantly rural.
  • Also, a sparse population and lack of adequate road infrastructure in rural areas leave a substantial portion of the population disconnected from supply chains. Closing this urban-rural divide is one of the next frontiers of African logistics.
  • Two firms that are actively developing services for rural communities include Twiga Foods in Kenya and InspiraFarms which operates in Kenya, Rwanda, and South Africa.
  • Solutions like the ones provided by these firms will continue to integrate the rural and city markets making regional logistics more efficient.
  • Furthermore, most innovative logistics companies in African markets are developing digital platforms to deliver efficient and cost-effective logistics capabilities.
  • The innovation lies in the development of digital platforms that match supply to demand, whether it be courier apps that deliver groceries or platforms that coordinate freight delivery.
  • Firms like Trella in Egypt and Kobo360 in Nigeria recently closed a $20 million fundraising round led by Goldman Sachs. It found success by matching existing trucking capacity with demand by using digital platforms.
  • Additionally, growing internet penetration across the continent is increasing market connectivity by putting more customers online and allowing businesses to use cloud services.
  • Lastly, these trends will continue to drive innovation in the logistics sector as African startups find ways to cut out intermediaries, remove burdensome operational processes, and optimize supply chains.
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Challenges

In 2020, e-commerce experienced unprecedented growth. Global e-commerce traffic hit 22 billion visits in June. For many retailers and manufacturers, e-commerce has become a primary method of conducting business.

However, Africa trails the rest of the world in e-commerce. Lack of widespread broadband access, cybercrime, underdeveloped postal systems, and other challenges confront businesses trying to sell online.

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