For several years, the logistics industry in Africa has grappled with the challenge of accommodating the rising population and the dynamic private sector within the country. However, new research indicates that a profound transformation is on the horizon, one that promises to have far-reaching benefits for the independent freight forwarders and the broader African economy.
This transformation is attributed to the African Continental Free Trade Area (AfCFTA) agreement, which paves the way for seamless trade among its signatory nations. Concluded in February 2021 and currently in the process of implementation, the AfCFTA is poised to serve as a driving force behind substantial investments and the rapid expansion of Africa’s emerging logistics industry. Just like any other sector, Africa’s transportation and logistics industry is set to be influenced by several trends in the coming months.
How the AfCFTA can boost the African logistics industry in the coming years
The African Continental Free Trade Agreement (AfCFTA) holds the promise of ushering in a new era of economic prosperity across Africa. This historic agreement will establish the world’s largest free trade area since the inception of the WTO. Nonetheless, the transformative potential of AfCFTA hinges on the seamless movement of goods across borders, a challenge that can be effectively addressed by the transportation and logistics industry. Both independent freight forwarders and logistics multinationals have long complained about the fragmented state of logistics and supply chains throughout the continent.
While AfCFTA will undoubtedly alleviate the burdens for logistics companies engaged in cross-border trade by reducing border tariffs, the persisting $130-170 billion infrastructure deficit on the continent remains a formidable barrier to driving down logistics expenses. Nevertheless, within these complex challenges lie tremendous opportunities, with hundreds of African logistics companies actively addressing the logistics issues in the region. There are three notable trends that could shape the future of logistics in African markets- bridging the urban-rural divide, the digital transformation of logistics, and the ongoing ascent of business-to-business (B2B) logistics companies.
Development of logistics infrastructure in Africa
African ports have recently undergone extensive upgrades as the continent readies itself to assume a more substantial role in global trade. This signals the potential for increased trade volumes to and from Africa. Nevertheless, the capacity of these ports to boost regional development will remain restricted without the simultaneous development of logistics infrastructure within the continent.
Continental infrastructure enhancement persists as a crucial component of actualizing the African Continental Free Trade Area (AfCFTA), driven by substantial investments from both the private and public sectors. In the last six years, the African Development Bank has channelled approximately USD 44 billion into African infrastructure projects.
Regrettably, the prevailing global economic uncertainty may cast a shadow on infrastructure investments on the continent. The World Bank anticipates a modest uptick in sub-Saharan Africa’s growth to 3.6% this year, up from 3.4% in 2022. Nevertheless, the global economic slowdown is likely to affect the continent, particularly in terms of income growth that is projected to lag behind inflation and the rising cost of living. According to the World Bank, per capita income growth in sub-Saharan Africa is anticipated to be at a mere 1.2%.
The deceleration of infrastructure development could significantly impact freight forwarders by impeding growth opportunities and reducing demand. Maintaining visibility and adaptability will be imperative for the transportation and logistics industry as it navigates short-term disruptions and collaborates with policymakers to realize the objectives of AfCFTA.
Emphasis on digital transformation
Digitization is reshaping every sector in the continent, and the freight forwarding sector is no exception. Technology is being harnessed in freight forwarding to streamline and oversee the movement of goods. According to a McKinsey Survey, a striking 90% of top logistics companies have been channeling investments into digital supply chain management technology since 2021, and a resounding 80% anticipate continuing these investments in the coming years.
Africa is actively pursuing a comprehensive digital transformation strategy, in line with the African Union’s 2020-2030 vision. As a major economic facilitator, the transportation and logistics sector is aligning itself with the broader continental trend, adopting digital technologies to confront uncertainty and reinforce resilience within the industry. The independent freight forwarders who have adopted digitization are keen on leveraging their strengths, which encompass an enhanced capacity to predict and meet demand, opportunities for efficiency enhancements, the ability to centralize and analyze data, and the automation of routine tasks.
How to get more businesses as a freight forwarder in Africa
It has become abundantly clear that the logistics companies in Africa need to work on several factors and optimize several processes:
Join a reliable international network
Small and mid-sized freight forwarders should consider gaining international traction by becoming a member of a reputed freight forwarding network. Becoming a part of one of the best logistics networks like The Cooperative Logistics Network will allow the company to get an international foothold, bolster its brand name, obtain new partners and get new businesses.
As a Coop member forwarders will be able to:
Provide truly international door-to-door service
As a Coop member freight forwarders will be able to expand their outreach. They will get to provide a truly global door-to-door service by partnering with members across 342 agents in 132 countries.
Receive inwards business from all the corners of the world
All Coop members are obliged to share a portion of their shipments with other members. This ensures that all members receive news projects and sales leads from the entire network. Nevertheless, members can always work with their existing logistics partners outside of the network.
Make business with more than 250 reliable partners, audited by Dun & Bradstreet
As a member, you do not need to bother about the problems of working with unreliable or unproductive partners since all members are carefully vetted before being granted membership
Become a Digital Freight Forwarder, being able to create online quotes 24/7
The Coop allows the members to operate like a digital freight forwarder by providing a range of free online tools. For example, The Coop’s member exclusive tool FreightViewer offers a digital infrastructure that helps you generate quotes within seconds. In other words this program helps the agents of the network to stay a step ahead of their competitors.
Freight forwarders need to spend a considerable time on networking with their partners. This will help them to build strong relationships that would positively affect the bottom line of their companies. Independent freight forwarders who don’t take the power of networking seriously run the risk of falling behind in the competition.
In conclusion, it can be said that independent freight forwarders from countries across Africa need to embrace digitization, get an international presence and upskill their workforce in order to survive in today’s competitive market. The first step towards this is to become a part of a reputed logistics network.