The Hidden Goldmine in Africa’s Logistics and Supply-chain Sector

Africa’s logistics and supply chain sector is an industry with so much potential waiting to be unearthed by entrepreneurs willing to take the plunge into the deep.

Tobi Ojomu is a young farmer who has his farm on the outskirts of Ibadan, southwest Nigeria. At the end of each harvest season, he notes that one major battle he has to surmount is transporting the produce from the farm to the city centre, where those who would resell it can then get it and begin further distribution to the hinterlands.

Helen is an entrepreneur located in Agbara, Ogun state who sells sneakers via the online marketplace Jiji.ng. According to her, a major headache she constantly has to deal with is how to get her products delivered to customers who order online. 

One thing both Tobi and Helen agree on is that Nigeria’s logistics and supply chain need a lot of innovation and players who can spot this gap, plugin, and in turn reap bountiful rewards for themselves.

The Statistics Africa’s logistics and supply chain sector

Africa’s population is expected to hit 1.7 billion by the year 2030, with more than half of this number residing in seven major countries, namely: Nigeria, Ethiopia, the Democratic Republic of Congo, Egypt, Tanzania, Kenya, and South Africa.

From this lot, it is expected that the continent will have a combined consumer and business spending total of $6.77 trillion, and a significant portion of this is projected to happen within the informal market.

Of this amount, a significant portion will be spent by companies, e-commerce platforms, as well as small businesses on delivery and logistics as consumers’ appetites increase and demands are placed via online platforms.

This, in turn, is expected to open up more opportunities within the ecosystem.

According to Statista’s Logistics Performance Index (LPI), South Africa has the highest trade logistics performance in Africa. In 2018, the country obtained an LPI score of 3.38 points.

Côte d’Ivoire and Rwanda followed, with the LPI scoring 3.08 and 2.97 points, respectively. On the other hand, Angola, Burundi, and Niger registered the lowest trade logistics performance on the continent.

In Nigeria specifically, the 2018 Logistics and Supply Chain Industry Report states that the logistics sector is one of the fastest-growing industries in Nigeria even though it is still at a nascent stage.

Also, as of 2018, the value of Nigeria’s logistics sector was estimated to be 250 billion naira ($696 million), a rise of 50 billion naira ($140 million) from 2017 figures. 

Nigeria was equally ranked 145 out of 190 countries in its Ease of Doing Business and 112 in its Logistics Performance Index. This essentially means that there are quite a number of bottlenecks faced by businesses in Nigeria. A large part of this can be traced to the issue of logistics.

The opportunities within Africa’s logistics and supply chain sector

No doubt, Africa’s economy is growing with huge potential, and as a result, the logistics and supply chain sectors are major goldmines that remain to be unlocked across the continent.

It is critical that e-commerce companies looking to increase profit and expand must also consider creative ways to invest heavily in logistics, not just for themselves, but for other small businesses at scale. 

New players must tap into the goldmine by first understanding the terrain and dynamics of the area they intend to cover.

The logistics sector needs a well-blended digitization process, which will include enhanced tracking systems, a digitised flow of information, artificial intelligence, and automation.

Truth be told, despite the opportunities that abound, it is really not an easy road for anyone to trudge on. Several factors stand out as constraints for players in this sector.

Challenges Specific to Different African Regions

Different challenges are specific to the different African regions. For example, South Africa is noted to have the most developed logistics infrastructure in Africa, and this largely rests on the background of the country’s intermodal transportation system. This enables goods to be transported via multiple modes, but the country’s cost of transportation has continued to be on the rise.

In East Africa, Kenya and Tanzania have a well-structured transport network that enables logistics to be easily handled. However, forex fluctuation and a lack of transparency pose a big challenge.

The challenges and barriers to the sector’s growth in Nigeria include a massive infrastructure deficit, a poor road network, unstable or nearly unavailable electricity supply, multiple taxations, and inconsistent policies that undermine the ease of doing business.

This results in local industry players’ inability to meet financial obligations. This in turn necessitates that cost is transferred to end-users, making them uncompetitive.

As a result, foreign-owned operators with the financial muscle to absorb these challenges are better positioned to survive.

Brands forge on despite challenges

Regardless of the challenges, some players are forging on. The likes of GIG, Gokada, and NIPOST in Nigeria come to the fore here.

Following the death of the company’s founder, Edwin Ajaere, in March 2009, his son took over and must have spotted the big gap and possibility. A rebrand followed, with the name changed from God Is Good Motors to GIGM which was more encompassing.

An overhaul of its processes was also done, and logistics came up as a core and dominant part of its offerings. Technology was also heavily deployed in its operations, and new buses were introduced into the company’s fleet. Today, GIGM is a notable name within the logistics industry.

Gokada is another notable brand deepening its foothold in the logistics and last-mile delivery business.

The start-up, which initially started off as a ride-hailing brand, had its business model badly shaken when the Lagos state government placed a ban on motorcycles on major highways.

It subsequently delved into last-mile delivery and logistics businesses, providing e-commerce and food delivery across the state via its app.

Yet another outfit worthy of mention here is Nigeria’s national postal outfit, NIPOST. 

The outfit has recently been working on innovations to make a comeback. to become profitable and competitive once more. 

Its recently launched POSTAGY, a mobile solution platform that enables the fulfilment of both offline and online purchases of merchandise, is a notable effort in this regard.

While ‘Postagy’ is the app that enables users to order, track, and pay for a preferred vehicle, its ‘Postagy Captain’ app is for the vehicle drivers where orders are received and fulfilled. 

NIPOST holds a lot of aces in this regard. Given its national spread and foothold, it holds quite an enormous advantage in providing last-mile delivery and logistics services to brands and companies.

Other notable e-commerce platforms like Jumia and Konga also have some form of logistics delivery arm.

With these few players, however, the surface is yet to be scratched as the opportunities still abound for both intrastate and inter-state companies as well as across the continent. 

It is expected that with the implementation of the Africa Continental Free Trade Area (AfCFTA) which is designed to facilitate the free movement of goods, people, and investments across Africa, this will be further eased. For entrepreneurs looking to take a dive into Africa’s logistics and supply chain sector, now is the best time to take that plunge. 

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