Improvements in logistics performance are considered to be a significant driver of economic growth. Digitalization in logistics, which includes enhanced tracking systems, digitized flows of information, artificial intelligence and automation, has further enabled globalized trade. However, Sub-Saharan African (SSA) economies, majorly export-commodity-dependent, still lag behind, grappling with inadequate policy frameworks, huge infrastructure deficits and trade barriers which result in a broken supply chain that negatively impacts growth. Improvements in logistics performance are considered to be a significant driver of economic growth. Digitalization in logistics, which includes enhanced tracking systems, digitized flows of information, artificial intelligence and automation, has further enabled globalized trade. However, Sub-Saharan African (SSA) economies, majorly export-commodity-dependent, still lag behind, grappling with inadequate policy frameworks, huge infrastructure deficits and trade barriers which result in a broken supply chain that negatively impacts growth.

This study aims to investigate existing challenges in Sub-Saharan Africa, the potentials for the region to leapfrog traditional supply chain practices and adopt digital technologies, by evaluating previous findings in a systematic manner and augmenting these findings through semi-structured interviews. Systematic literature analysis conducted on published academic literature within a specific period and based on predefined criteria resulted in 287 articles being used for the final analysis. The most common logistics challenges and potential solutions have been identified. Semi-structured interviews with logistics service providers in the region have been conducted to establish the findings highlighted in the systematic literature review. The interviews showed that human capital training is a major factor when adopting digital technologies, and a focus on infrastructure investments, regulatory and institutional framework improvements will boost economic growth in Sub-Saharan Africa.

Introduction

Logistics performance is a strategic factor which indicates competitiveness of economies and businesses, and a catalyst for job creation and growth of the economy. The increased use of digital information technology in logistics management has resulted in enhanced competitiveness on global scales, by enhancing flow of information, planning, inventory control, packaging/handling, and transportation. Factors such as expanded operations across wider complex markets, changing business environments and customer requirements, faster speed of entry into market for new products and the need for responsiveness have made supply chains more economically vital, as well as volatile. Demand for digital solutions has been on the rise as the role of distributed ledger technologies, Industry 4.0 technologies and IoT-based cyber-physical systems (CPS) architecture to achieve sustainable productivity, profitability and performance is increasingly being embraced by organizations. This has resulted in concepts such as digital supply chains (DSC) and Logistics 4.0 which are very dynamic and continuously evolve in their configuration, coordination and management they have better visibility, higher consumer responsiveness and increased flexibility.

Research on African markets shows that the continent is emerging strategically as an important trading bloc particularly for Asia and parts of Europe, based on its vast resources, growing wealth and larger middle class with higher purchasing power, Freight transport in SSA faces many infrastructural and social challenges such as low intra-African collaboration/trade, bottle-necked port operations, expensive yet poor inland road quality, inadequate rail capacity, political and security instability, slow development in transportation and trade technology, and cultural differences. ICT implementation in several parts of Sub-Saharan Africa (SSA) is still considerably low, compared to international standards, as there exists a digital divide with large numbers of Africans in rural areas living with limited access to make a basic telephone call, while other regions (urban) are saturated with fast internet access and advanced digital telecommunication systems. This gap is more readily pronounced in the wake of humanitarian crises, such as the COVID-19 pandemic, where inadequate access to digital tools has limited capacity for operational activities and humanitarian aid. These challenges have made Africa a difficult terrain for logistics business and limited the participation of big international companies by forcing them to adapt to local circumstances of informal economy, use costlier air transport instead of sea freight (to avoid the excessive port delays and reach landlocked countries with poor road networks) or maintain higher inventory volumes than anywhere else globally.

Outlook and Challenges

Africa is a continent with over 900 million people across 54 countries. Africa’s merchandise export contribution to the global market has steadily declined since 1948 from 7.3% to about 2.2% in 2016, which is remarkably poor considering the wealth of natural resources and agricultural products which are abundant in the continent. There are two main regions in Africa, the Middle East and North Africa, and secondly, Sub-Saharan Africa (SSA). SSA is endowed with vast amounts of resources including diamonds, crude oil, gold and agricultural products; yet it is the only region with a dramatic increase in the world’s poorest population.

Two reasons are highlighted for this low trade performance, firstly, a predominant focus on international export of a few commodities (fuel, agricultural produce and mining products); secondly, supply chain and logistics difficulties across the region. A number of multinational firms that have been expanding into other emerging markets have found it difficult to penetrate SSA as the supply chain and logistics costs are too high. Thus, it is a strategic competitive priority for organizations that do, or wish to do business in Africa, to understand the present condition of logistics and SCM practices in Africa and identify the challenges and opportunities to succeed.

Economic fragmentation is high in Africa and intra-regional trade is significantly higher in other regions, 67% in Europe, 58% in Asia, 48% in North America and Latin America, 20% in the Caribbean, 16% in Africa. This low trade has been attributed to several factors including excessive tariffs, non-tariff barriers, regional conflict, corruption, poor logistical infrastructure and so on. Non-tariff barriers include measures such as price control (multiple exchange rates, foreign exchange allocation), monopolies, customs procedures and regulations, quotas, subsidies, anti-dumping or countervailing measures Studies have shown that spatial inequality has a tangible consequence on economic development, and the urban agglomeration of economic activity in a country determines the country’s economic development pattern; however, many African countries rely heavily on single commodities as their main export (e.g., Crude oil in Nigeria, Platinum in Zimbabwe, etc.). Several studies have shown that while exports are good for growth, the important factor is not how much goods are exported, but the type of goods which are exported. Regions in developing countries with lesser specialization and a wider diversification of exports have been found to experience increased GDP per capita and higher rates of economic growth.

Stiff regulatory environments are also very common in sub-Saharan African countries as most of them not having enabling regulations or policies for customs processes, logistic infrastructure, transportation, business practice. A transport policy review focused on road, port and maritime traffic, rail and corridor transit conducted across six countries in SSA revealed that the little progress recorded across these regions over the past two decades was still due to policies made in the 1990s. The Nigerian Government in 2019 decided to close its land borders with neighboring countries including Benin, Cameroon, Niger and Chad, in a bid to curb smuggling which is already prevalent due to import restrictions, thereby effectively blocking the legal movement of goods. After significant increase in inflation due to food prices, and without any tangible proof of effective results the government had to partially lift the closure in December 2020. Industrialization in Africa over the past 50 years has been very disappointing. Average share of manufacturing in GDP across sub-Saharan Africa in the 1970s was 10 percent and as of 2010 remained unchanged, while the share of global manufacturing has fallen from about 3 percent in 1970 to less than 2 percent in 2010, yet transport prices in SSA are very high compared with other regions, particularly for landlocked countries in Africa which have expensive transport costs. One study estimated that road transport was up to 40 percent higher in Cameroon, Mali and Cote d’Ivoire than in France (which has higher labor rates) and up to six times more expensive than it is in Pakistan. .

Logistics infrastructure suffers significantly across sub-Saharan African regions, limiting the smooth and efficient flow of cargo between different countries. Several logistics challenges still exist in SSA making the region lag significantly behind many parts of the world. While some countries are performing relatively strong, such as South Africa, which is rated to have a better transport infrastructure systems than some other fast-developing economies such as Indonesia, other countries in the region are not performing nearly as strong. The demand for Africa’s raw commodities and its expanding markets show that the continent cannot be ignored any longer, and the supply chain and logistics market is growing at a fast pace. With the recently commenced African Continental Free Trade Area (AfCFTA) agreement, which seeks to create a single market for goods and services across Africa by providing a mutually beneficial and comprehensive agreement among the member states, the opportunities for the logistics industry across Sub-Saharan Africa are massive. By lowering the trade barriers and facilitating more intra-regional trade, more and more logistics companies and service providers will seek to participate in the market, which has huge opportunities for growth and revenue. Capital investments flow will therefore see a significant increase as more and more investors will be willing to participate in the single largest free trade area in the world. .

There are still so many underserved communities in SSA and therefore lots of room for expansion. Foreign governments and State-Owned Enterprises have been investing financially in massive projects, particularly, in SSA in exchange for raw materials and commodities. Several ports are being constructed or expanded to serve as gateways that will connect Africa to the rest of the world. Five of these include Lekki in Nigeria, Musoma in Tanzania, Lamu in Kenya, Lobito and Barra do Dande in Angola. Countries like Ghana, Nigeria and Kenya are favorite entries into the African market for international investors as they have large markets with a rapidly increasing middle-class. Retail growth is driving much of the growth in SSA, which is subsequently developing the transport and logistics industry. Moreover, as a result of the pandemic, digital shopping has significantly increased within many African countries with increased percentage share of consumers shopping online of up to 81%, 79% and 72% in Nigeria, Kenya and Tanzania, respectively. The logistics industry is already in an upward trend and is expected to grow significantly over the next decade. Leapfrog development does indeed pose great potential especially for Africa, with several countries proving to be more open to new technologies and being innovative. In terms of drone usage, for example, African countries are leading the way, using drones in tourism, e-commerce and health services. A good example is the case of the first commercial drone delivery service in the world, Zipline, which began its operations in Rwanda and now delivers blood by drone to almost half of all the blood transfusion centers in Rwanda using orders made online via text, phone or WhatsApp.

Conclusion

Digitalization in logistics is going to play a very notable role in the facilitation of trade and logistics expansion and penetration across Sub-Saharan Africa. Technologies such as drones, mobile banking, tracker systems, digitized trucks for efficient transport and cold chain, digital platforms for supplier collaboration, robots, AR and VR for educational and operational purposes will boost the gains made by AfCFTA and support the proper servicing of the entire African market. Some technologies have already been tested, are in use and are successful, such as mobile payments (M-PESA), drone deliveries (Zipline), big data for end-to-end haulage (Kobo360) and so on. Digitalization will also facilitate automation across several parts of the supply chain, eliminating routine, low skill tasks, and will create new and advanced job opportunities across training and development, skilled workforce and new market openings, which will require a skilled workforce with higher pay, better conditions and an improved standard of living.

There will also be lots of jobs created and work skills trainings available over the next few years to fill the existing gaps in logistics created by the expanding markets. Several companies operating in SSA are already focusing on training and skills development for workers across the region.

References:

Adewole, A.; John, J.S. Logistics and Global Value Chains in Africa: The Impact on Trade and Development; Palgrave Macmillan: London, UK, 2019 Souza, G.R.; Valamede, L.S.; Akkari, A.C.S. Characterization of Digital Supply Chain. In Brazilian Technology Symposium; Springer International Publishing: Cham, Switzerland, 2020.

Muogboh, O.S.; Ojadi, F. Indigenous logistics and supply chain management practice in Africa. In Indigenous Management Practices in Africa; Advanced Series in Management; Emerald Publishing Limited: Bingley, UK, 2018; Volume 20.