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AfCFTA and opportunities for the provision of logistics and customs services in Africa

During the fifth Africa Business Forum held on Feb. 7, 2022, the United Nations Economic Commission for Africa (UNECA) released a report titled “Implications of the African Continental Free Trade Area for Demand for Transport Infrastructure and Services,” which argues that the implementation of the African Continental Free Trade Area (AfCFTA) will lead to an approximate 50-fold increase in demand for freight transport services in Africa. To address this upsurge in the future transport demand, it will be necessary not only to expand and modernize the continental logistics infrastructure and platforms, but also the supply of transportation services. An opportunity opens in Europe for those companies who will move first to Africa to offer logistics services and other ancillary activities, especially customs consultancy services.

Currently, 76.6 percent of intra-African trade moves by road, compared to 22.1 percent by sea, 0.9 percent by air and 0.3 percent by rail. According to the UNECA report, even after the full implementation of the AfCFTA, the road transport will continue to be used as the predominant mode of freight transport on the continent, with an even growing trend. A similar conclusion was reached by the World Economic Forum (WEF) at its recent annual meeting, held January 16-20, 2023, which identified the transport and logistics sector among the sectors of the economy that present the greatest opportunities for companies wishing to invest in Africa, along with the automotive industry, agriculture and agro-processing, and pharmaceuticals. As a result, tremendous opportunities will open up for those manufacturers of trucks and other transportation vehicles, as well as those that will move first into Africa to provide innovative, effective and efficient logistics and transportation solutions, taking advantage of the current scarcity of intra-continental transportation links. These opportunities also include the provision of ancillary activities, especially customs advisory services. 

According to World Bank development indicators, Africa has the lowest overall logistics performance index worldwide, rated at 2.46 percent on a scale from 1 to 5, while in the European Union and North America it is estimated at 3.5 percent. This means that African transportation firms are among the most inefficient and least competitive in the world, with freight delivery times that are longer, on average, than in other regional contexts. A joint report released in 2020 by the International Finance Corporation (IFC) and Google indicates that transportation costs, in Africa, increase the final price of goods to the end consumer on average by 40 to 60 percent.

An example of foresight in the logistics sector in Africa is offered by the MSC Group, which in 2022 completed the acquisition of Bolloré Africa Logistics, one of Africa’s transportation giants, which currently has a network of 250 branches and about 21,000 employees in 47 countries within the continent. 

However, this does not mean that the potential offered by the transportation sector in Africa is reserved to large groups, as even smallest companies can develop effective strategies to establish permanent presence in the African continent, either directly (by opening branches), or through the creation of joint ventures with local transportation firms or by developing platforms for coordinating the transportation services already offered by local providers. In fact, it should be kept in mind that a key problem of the transport and logistics sector in Africa is the fact that most transport firms operate within a specific compartment of the transport chain, offering services limited to a single mode (e.g., rail, air, river, sea or road), where instead integrated management of the different transport modes is often lacking. This offers further opportunities to develop multimodal architecture solutions, which are currently still uncommon in Africa, especially for the integration of combined road-rail services.

Further opportunities are also offered by the development of digital logistics (e-logistics) solutions. Indeed, these services are experiencing strong growth on the continent, given their ability to improve transportation costs, helping to solve the problem of the imbalanced trade flows between ports and the hinterland that plagues African trade. As a matter of fact, cargo movements from African ports to inland destinations are much higher than the demand for transportation in the opposite direction (sometimes reaching a 5:1 ratio), given the heavy import dependence of African economies. It thus happens that once a cargo arriving at a port is delivered to its destination – sometimes located in a State other than the coastal state of arrival – the transporter has to find a return shipment to take the vehicle back to the port to avoid going back empty. This obliges the transporter to charge the relevant cost to the importer who benefited from the transportation on the first leg of the transport. In the case of containerized cargo, the problem is even more complicated, because the container must be returned as soon as possible to the terminal or depot where the cargo was picked up to avoid the payment of prohibitive demurrages charges to the shipping company that provided it. Usually, to encourage shippers to return containers quickly, shipping companies set a grace period within which containers can be returned at no cost, charging detention fees for each additional day that exceeds that period. Consequently, identifying return cargoes for logistics companies is a particularly important operation in Africa, which must be carefully planned in advance in order to reduce transportation costs.

Today, e-logistics solutions are increasingly used by transport operators to optimize the use of their fleets, distributing them more efficiently across the territory so as to enable the reduction of empty trips. Indeed, such solutions make it possible to facilitate the matchmatching between the supply and demand of transport by aggregating freight movement requests from importers so that transport firms can access loads in a timely and direct manner, i.e., without intermediation. In addition to eliminating brokerage costs, these solutions enable carriers to better plan road usage or cargo transportation times.

E-logistics solution providers that are currently available in Africa include TAI+ and Sendy, active in Kenya; Lori Systems, a cloud platform launched in Kenya and Uganda and now used in 8 other African countries; Truckr in Ghana; Kobo360 in Nigeria; and Cloud-Fret in North Africa. All of these platforms allow logistics firms to receive transport requests (sometimes via an app to be installed on truck drivers’ phones) and to select the cargo to be transported based on its nature, volume, weight, and based on the proximity of their vehicles to the pickup and delivery locations of the goods.


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