Joe Monaghan, CEO of Worldwide Logistics Group.
Despite Africa’s 11.7 million square miles across 54 countries, its vast agricultural scope and its abundance of raw materials, its supply chain is often neglected. In the World Bank’s “Ease of doing business” rankings, just two African countries showed up in the top 50: Mauritius (13) and Rwanda (38).
According to the United Nations, “it holds 65% of the world’s total arable land, 30% of the world’s mineral reserves, 8% of the world’s natural gas and 12% of the world’s oil reserves.” That includes “40% of the world’s gold” and the “largest reserves of diamonds, cobalt, platinum and uranium” on the planet. Compound that with a population of 1.4 billion people, with many people soon entering the workforce (the median age is 19), and it seems like Africa should be a major part of the global supply chain. But that’s still a work in progress.
Let’s dive into Africa’s current logistics landscape to understand the challenges that leave it neglected globally, as well as the industries it should be leaning into to become a bigger player on the global stage.
The Current Challenges
Africa’s most significant roadblock is its lack of physical infrastructure. Poor road networks and storage facilities, as well as dated infrastructure, hinder its businesses’ efficiency and ability to work with foreign nations that have more advanced capabilities.
Researchers from the World Bank found that $93 billion is needed to invest in new infrastructure projects and maintain old ones, but less than half of that ($45 billion) is currently being used. Africa relies heavily on trading raw materials and intermediate products because of low industrialization, preventing the continent from fully tapping into its resources.
The lack of infrastructure leads to high levels of supply chain fragmentation and multiple layers of intermediaries, leading to slow deliveries and inefficiencies. The Democratic Republic of the Congo’s national route, for example, requires the unloading and loading of goods eight times—from rails to waterways—to travel across the country. Transportation costs hurt, too. For some countries, those costs equal 35% of the value of exports and more than 45% of the value of imports. Furthermore, Africa’s higher tariffs prevent supply chain investments because the cost to the final consumer ends up increasing exponentially.
Nearly 83% of jobs in Africa operate in the informal sector and through unofficial channels, making government tracking and regulation inefficient. That raises concern for both counterfeit products and fraudulent activities, as noted by the Institute for Security Studies. Meanwhile, trucking protests have shut down its few major highway corridors, causing even more supply chain delays.
Industry Opportunities
Despite logistical challenges, there are four industries with great potential to scale in Africa in the short term.
1. Construction: The continent is going through a construction boom due to urbanization. Africa recognizes its need to revamp dated infrastructure, creating the vast potential to modernize facilities. Researchers estimate the industry will grow nearly 6% annually through 2027. Construction supplies are in demand, too, including steel, timber, glass, paints, plumbing, roofing materials and electrical supplies. An African businessman just made a deal with China to construct a 6-million-ton cement plant in Nigeria to expand outputs and exports.
2. Technology: Africa is a “tech hub on the rise,” namely in Ghana, Kenya, Nigeria and South Africa, which made headlines when scientists were able to replicate Moderna’s Covid-19 vaccine. These hubs have been dubbed Africa’s “Silicon Valley,” and the World Economic Forum recognized six African startups that are transforming healthcare, retail and other fields in its 2022 Technology Pioneers list. There’s an opportunity to innovate within Africa’s technology space and trade with outside countries.
3. Retail, Fashion And Beauty: According to the African Development Bank Group, Africa has doubled the number of cities on the continent from 3,300 to 7,600 since 1990. Now, organized shopping malls and online stores are replacing informal trading in open markets to follow those urbanization trends. The beauty market is also expanding rapidly due to Africa’s overwhelmingly young population. South Africa, for example, is poised to grow its beauty and personal care market by 53% from 2020 to 2025.
4. Agriculture: Africa’s food and agriculture industry is projected to be a trillion-dollar business by 2030. It already “makes up 35% of Africa’s GDP and employs about half of its people,” but with over 1 billion people to feed, there’s still enormous potential for entrepreneurs in the space. One Nigerian startup is revamping Africa’s agricultural supply chain efficiency to bring profits to local producers.
Intra-African trade is essential for taking its supply chain to the next level. The African Continental Free Trade Area (AfCFTA), which has been signed by all 54 nations as of March 2023, is a step in the right direction for boosting cooperation and improving Africa’s position in the global market.
Addressing the lack of infrastructure is another crucial focus, and leaders in Africa should fill in air freight routes, establish new rail routes and develop industrial parks to modernize it. With its abundance of raw materials, leaders must also enhance Africa’s manufacturing capabilities to turn those materials into final products and increase storage capacities to then trade globally. They should also determine value chains beyond raw materials to increase its market competitiveness.
An entrepreneurial Africa that’s able to solve challenges from within, instead of outsourcing, can provide new business ventures and increase employment. Business leaders in Africa should also consider adopting digitalization and software tools to foster a shorter and smarter supply chain and invest in the appropriate technical human resources for a successful and efficient transformation.
This change is necessary for Africa’s supply chain not only to survive but remain resilient in the long term. By turning its previous vulnerabilities into new strengths, leaders can position Africa in the spotlight and help it become the global supply chain player it has the potential to be.
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