The logistics and fulfilment sector in Africa is a critical aspect of the continent's economic development. The sector plays a crucial role in facilitating the movement of goods across the continent and beyond. It is a sector that offers immense opportunities for growth and development, not only for African businesses but also for international companies looking to expand their operations in the region.
In recent years, the sector has experienced rapid growth, driven by the increasing demand for efficient and reliable delivery services. However, despite this growth, the sector still faces numerous challenges.
According to a report by the World Bank, the logistics performance of African countries remains significantly below that of other regions. The report showed that Africa's logistics performance index (LPI) score in 2018 was 2.80, compared to a global average of 3.25. This indicates that there is a significant opportunity for improvement in the sector. However, despite these challenges, there are several opportunities for growth.
One of the most significant opportunities in the sector is the rapid growth of e-commerce in Africa. According to a report by McKinsey, the e-commerce market in Africa is expected to grow to over $75 billion by 2025. This growth presents a significant opportunity for logistics and fulfilment companies to facilitate the movement of goods between buyers and sellers.
The growth of e-commerce is also driving the development of last-mile delivery solutions in Africa. The development of last-mile delivery solutions is critical for the success of e-commerce companies, as it helps to ensure the timely and efficient delivery of goods to customers. This presents an opportunity for logistics and fulfilment companies to develop innovative last-mile delivery solutions to support the growth of e-commerce in Africa.
Another significant opportunity for growth in African logistics is the development of regional trade. The African Continental Free Trade Area (AfCFTA) agreement, which came into effect on January 1, 2021, aims to create a single market for goods and services in Africa, to boost intra-African trade. The AfCFTA agreement presents a significant opportunity for logistics and fulfilment companies to facilitate the movement of goods between African countries, thereby promoting regional trade and economic development.
In addition to the opportunities presented by e-commerce and regional trade, there is also significant potential for growth in the African logistics and fulfilment sector through the development of infrastructure. According to a report by the African Development Bank, the continent needs to invest an estimated $130 billion per year in infrastructure to support economic development.
Despite these opportunities for growth and development, several challenges must be addressed to ensure the success of the African logistics and fulfilment sector. One of the most significant challenges is inadequate infrastructure, particularly in rural areas. Many rural areas in Africa lack basic infrastructure such as roads, electricity, and water, which makes it difficult for logistics and fulfilment companies to operate efficiently. This can be addressed through investment in infrastructure development by governments or jointly with the private sector through public-private partnerships
Another significant challenge facing the African logistics and fulfilment sector is the high cost of transportation. The World Bank estimates that transportation costs in Africa are among the highest in the world, accounting sometimes for up to 50% of the cost of goods. This is unsustainable. This challenge can be addressed through the development of more efficient transportation systems, but more easily through the use of technology to optimize logistics and fulfilment operations.
Several companies are today offering cutting-edge technology to support logistics across the continent. Sendy, a tech company, provides a way for businesses of any size to move goods, thus empowering them by making it easier to trade. Investing in technology and innovation can create a more efficient and reliable logistics and fulfilment ecosystem that benefits the African continent as a whole. Such companies have an important role to play in facilitating the movement of goods and helping businesses of all sizes to drive efficiency and growth.
Technology has the potential to play a significant role in supporting the growth and development of Africa's logistics. This will help businesses to improve efficiency, reduce costs, and help to facilitate economic development in the region.
The logistics and fulfilment sector presents immense opportunities for growth and development, particularly in the areas of e-commerce, regional trade, and infrastructure development. However, several challenges must be addressed, including inadequate infrastructure in rural areas and high transportation costs. With the right approach and investment, the African logistics and fulfilment sector can play a crucial role in facilitating economic development and growth on the continent.
The writer, Don Okoth, is the General Manager of Sendy, Kenya