Sustainable logistics - a key conduit for trade in Africa

According to the International Monetary Fund World Economic Outlook (October 2021), the African economy, comprising 54 countries, in 2021 was projected around $2.7 trillion in nominal terms, $296 billion more than in 2020, calculated by taking figures from the IMF. Essentially Africa accounts for 2.84% of the world GDP in nominal terms.

Yet owing to its many infrastructural and systemic challenges, Africa is yet to be integrated into the global value chains and realize its true economic potential as the continent also suffers from low regional integration in trade and movement of goods and a broken supply chain.

Many African nations are currently struggling with high inflation, political instability, debt burdens, an ongoing food crisis, natural disasters, and mitigating the risks of climate change.

The Covid-19 pandemic brought further disruption to global supply chains, bringing with it huge input costs and increased demand followed by a dip in consumer demand and inflation after lockdowns were lifted globally in mid-2021 and after the Russia-Ukraine war began in 2022.

As per the April release from the International Monetary Fund (IMF), growth in sub-Saharan Africa (SSA) is expected to slow to 3.6 percent as a “big funding squeeze”, tied to the drying up of aid and access to private finance, hits the region. This is reportedly the second consecutive year of an aggregate decline in SSA growth.

The logistics sector is a vital backbone that carries a nation’s economy and delivers on its trade potential. There is a growing belief that the digitalization of logistics and adherence to sustainable practices will be the driving force behind how the African markets will grow.

The logistics sector is a vital backbone that carries a nation’s economy and delivers on its trade potential. There is a growing belief that the digitalization of logistics and adherence to sustainable practices will be the driving force behind how the African markets will grow.

Professor Issa Baluch, who is the advisory board member of neutral air cargo solutions provider Aero Africa said, “​​I see great challenges in the area of sustainability yet there exist tangible opportunities! Africa has the least amount of infrastructure for transportation in all modes. The population continues to grow with projected estimates indicating 2.5 billion people by 2050 and the transport systems will not be able to cope. According to forecasts (by SLOCAT) this would amount to an excess of 1 gigaton of CO2 in 2050 considering the transport sector alone. The tragedy here is just as in the case of Covid there is little evidence that those in leadership roles are preparing in any form or shape to tackle this challenge which needs to be addressed continent-wide.”

Digital platforms are needed for the delivery of trade while a conducive regulatory framework with incentives for compliance should drive initial sustainability efforts by businesses in African nations. Sustainability built into supply chains coupled with compliance and regulations can help in decarbonization and reduce pollution.

Sustainable logistics shows the way
The adoption of ‘sustainable logistics’ is slowly gaining ground and it involves prioritizing sustainability and a reduced environmental footprint and minimized impact of logistics activities when it comes to freight, logistics, and supply chain practices. While logistics in Africa is in a recovery mode post the pandemic, two factors that will shape its future is the digitization of logistics, the embracing of new technology, and sustainable logistics in African markets.

As more and more countries aim to become Net Zero by 2050, there is all the more need for sustainable supply chains and adopting sustainable logistics.

In Africa, sustainability is particularly important due to the continent's vulnerability to climate change and the need to address environmental challenges such as deforestation, desertification, and soil degradation. Sustainability can help to improve access to goods and services in underserved areas, support economic development, and enhance social well-being.

Abdesslam Benzitouni, Group Head of Communication & Public Relations at Jumia told the publication, “Some of the top trends driving sustainable logistics in Africa include the adoption of alternative fuels and energy-efficient technologies, the development of multimodal transportation systems, the use of data analytics and artificial intelligence to optimize logistics operations, and the implementation of circular economy models that promote resource recovery and waste reduction. Additionally, there is an increasing emphasis on collaboration and partnerships among logistics stakeholders, including governments, businesses, and communities, to promote sustainability and reduce the environmental impact of logistics activities.”

Digitalization - a key growth driver for African logistics
It is well known that the relative cost of moving goods in Africa is among the highest in the world, with up to 75% of product costs going to logistics (compared to say 6% in the US).

However, digitization brings ease of booking freight, e-documentation, shipment tracking, and online payments and allows companies to optimize their systems and lead times and serve their customer better.

Digitalization has been making significant inroads into Africa be it in minimizing physical documentation through digitization of systems or using AI in improving the efficiency of supply chains for prediction, route planning, and managing warehouses and combining it with transportation and fleet management, or using cloud technology or using the Internet of Things to track temperature and track shipments in transit, digitalization is key.

Further technologies like Blockchain can enable business transactions, make use of smart contracts and automate many business processes in a safe manner.

A large share of logistics services across the African continent leverage informal suppliers and networks. Trucking inefficiencies also form a part of the fragmented nature of logistics and supply chains in Africa.

In this ecosystem, a new wave of e-logistics start-ups in African nations is changing the game when it comes to plugging the gaps existing in the traditional African logistics ecosystem across road, sea, and air freight modes through digitalization.

Nigerian tech-enabled logistics company Kobo360 has come up with an app that matches truck owners and drivers looking with customers or companies whose cargo needs to be moved and it also helps drivers limit “empty runs”.

Similarly, Google has invested in Nairobi-based Lori Systems, an e-logistics company that digitizes haulage and provides shippers with solutions to efficiently manage cargo and transporters. This new investment is the third from Google's Africa Investment Fund worth $50 million that was announced in October 2021 and is targeted at the continent's early and growth-stage startups.

Lori Systems CEO Uche Ogboi told a technology publication that technology has a crucial role to play in solving Africa’s logistics woes: “Innovation, and the ability to scale it, is the key to unlocking the region’s potential. Data visibility, interactive software, IoT (internet of things) devices, all these inventions will play a part in bringing the African supply chain into the 21st century.”

A new wave of e-logistics start-ups in African nations is changing the game when it comes to plugging the gaps existing in the traditional African logistics ecosystem across road, sea, and air freight modes through digitalization.

Last year saw Senegalese start-up Yobante Express which is an online marketplace that connects local couriers with local commerce to optimize domestic, cross-border, and last-mile delivery, ink an MoU with Kenyan company MPost, an innovative start-up that converts mobile phones into postal addresses. With MPost, Yobante Express can simplify addresses allowing both entities to enter a larger African market at scale and deliver parcels efficiently in the last mile.

“This joint collaboration will help get your package efficiently delivered in Kenya at your MPost mapped address with your phone number in a few days and for cheap. Yobante carriers will route it via selected and AI-optimised hubs from our resilient mesh network of relay points all over your package journey,” Oumar Basse, the co-founder and chief executive of Yobante Express told a leading news outlet.

In fact, this February saw leading software development company Awery roll out the open-access version of its online booking and quoting portal CargoBooking across South Africa, Switzerland, and Spain.

Tristan Koch, Chief Commercial Officer, Awery told delegates at the Air Cargo Africa conference in Johannesburg, South Africa, “The air cargo market across Africa is full of potential and stakeholders here will benefit hugely from a digital approach. We believe in an air cargo digital democracy, and by offering an open access version of our CargoBooking platform, we can help drive that transformation to the benefit of all players in the industry."

Sam Quintelier, Cargo Business Development Manager, Brussels Airport told the publication, “If we are still asking the question of “why” is this important, then we are missing the point. Overall, digitalization has played a critical role in enabling sustainable logistics practices, from optimizing transport routes to improving supply chain transparency and reducing waste. These practices can help mitigate the environmental impact of logistics operations while also improving efficiency and reducing costs. The only thing missing is a wider use and adoption of the e-phyto or a digital phytosanitary document throughout Africa as this would further increase the impt of digitalization.”

‘Port’ing it right
The International Maritime Organization's Facilitation Committee has adopted amendments to the Facilitation (FAL) Convention (adopted in 1965) which will make the single window for data exchange mandatory in ports around the world, marking a significant step in the acceleration of digitalization in shipping.

In line with this, last year saw Kale Logistics Solutions (Kale) join as an associate member of the Port Management Association of Eastern & Southern Africa (PMAESA), which is the industry voice for port authorities, terminal operators, and port and maritime stakeholders from the region. Kale is slated to bring its vast experience in supply chain digitalization to best practice discussions concerning competitiveness, safety, security, and environmental protection in regional port operations.

“It is my firm belief that Kale’s global IT experience in the global ports and maritime sector will bring invaluable lessons to the sector in the Eastern & Southern Africa region and our members will stand to benefit as they embrace the digitization of their respective ports ecosystems,” said PMAESA Secretary General, Colonel Andre Ciseau on the development.

“Acceleration in the uptake of IT systems, automation, and digitalization in the sector is a key indication of the region’s priorities as it aims to improve efficiencies in maritime gateways and increase port competitiveness, thereby attracting more shipping lines,” Ciseau added.

Rise of e-commerce
The rapid urbanization of African cities into megacities, availability of mobile phones, high internet penetration, and growth of fintech has also ensured the rise of urban logistics and trade leading to the growth of e-commerce and on-demand services or consumer logistics in Africa.

This has also channeled into the proliferation of supply chain management platforms and advanced technologies like robots for warehouse optimization and clean energy for warehouses and cold storage and drones for delivery or instant logistics.

As consumer buying patterns and digital technology adoption underwent a dramatic shift post the Covid-19 pandemic, B2B commerce also underwent a transformation in Africa and also secured investors’ interest. According to leading research and intelligence company, Briter Bridges’s The Product Insight Series (fourth edition) which examines Afirca’s leading B2B commerce start-ups, Africa's consumer spending is on the rise with the size of the market having reached $1.4 trillion.

Briter data also showed that 28 African startups offering B2B commerce as a product have collectively raised over $470 million in funding since 2008, with 90% of this amount raised between 2021 and 2022 alone. The funding is shared among seven geographies from the most to the least funded: Kenya, Nigeria, Egypt, Morocco, Senegal, South Africa, and Ghana.

Briter data also showed that 28 African startups offering B2B commerce as a product have collectively raised over $470 million in funding since 2008, with 90% of this amount raised between 2021 and 2022 alone. 

“Africa’s innovative B2B commerce startups are differentiating themselves through localized payment and delivery solutions to their customers, which are not offered by global social platforms,” the report cites.

Speaking about good practices in sustainable logistics where technology has played an important role, Benzitouni said, “One of the examples is the use of real-time tracking and tracing systems, which allows logistics companies to monitor their supply chain in real-time and optimize routes to reduce fuel consumption and emissions. This technology helps to promote efficient transportation practices and reduce the environmental impact of logistics operations. Another example is the use of blockchain technology, which can help to increase transparency and traceability in the supply chain. This technology can be used to track the movement of goods and ensure that they are transported in a sustainable and ethical manner, with minimal environmental impact. The use of data analytics and machine learning can help logistics companies to optimize their operations and reduce their environmental impact. By analyzing data on transportation patterns, fuel consumption, and other key metrics, logistics companies can identify areas for improvement and implement sustainable practices that reduce their carbon footprint and improve their overall efficiency.”

Sustainability- futureproofing the value chain
Sustainability is important in logistics because it plays a critical role in reducing the environmental impact of transportation, which is a major contributor to greenhouse gas emissions. By adopting sustainable practices, logistics companies can reduce their carbon footprint and improve operational efficiency, which can ultimately result in cost savings and increased profitability.

Outlining how Jumia has implemented sustainability in their operations, Benzitouni shared, “One of the key initiatives we have implemented is the use of electric vehicles for last-mile deliveries, such as e-vans and e-bikes in Kenya, Ghana or Sénégal. Furthermore, we also use bicycles in some countries to make deliveries. This helps to reduce our carbon footprint and promote sustainable transportation practices. In addition to using electric vehicles, we started to promote sustainable packaging practices by reducing the amount of packaging materials we use. This helps to reduce waste while ensuring that our products are delivered safely and securely. To further reduce our carbon footprint, we have established a network of pickup stations across Africa, where customers can collect their orders instead of having them delivered to their homes or offices. This helps to reduce the number of individual deliveries, which in turn reduces our transportation emissions and fuel consumption.

Among some other initiatives taken up by Jumia to promote sustainable logistics practices in Africa Benzitouni cites that in 2021, 21% of packages were picked up by customers from Jumia's pickup locations, reducing the need for individual deliveries and minimizing fuel consumption. Additionally, Jumia has implemented a programme to reduce reverse shipments by allowing qualifying customers to keep certain items they wish to return, thereby avoiding unnecessary transportation of goods. This initiative helped Jumia avoid shipping 16,800 and 28,000 packages in 2020 and 2021, respectively, equivalent to 5.2 tonnes and 6.6 tonnes of CO2e avoided. Furthermore, Jumia has reduced fuel consumption per package shipped by 24% from 138ml in 2020 to 105ml in 2021, through sustainable fulfillment practices. Jumia has also sold 8,472 refurbished phones in 2021 through its marketplace, promoting responsible consumption and encouraging customers to select more sustainable alternatives.

Giving the perspective of an exporter transporting highly perishable cargo is Raphael Kiptis, Head of Finance at Sian Roses in Kenya which is one of the leading producers of fresh cut flowers that exports all their products to various markets across Europe, Dubai, the UK, Australia, and Africa.

With 2500 employees across four farms, the firm produces 120-130 million stems a year in a highly competitive market and is also the single largest producer of spray roses in the world.

Kiptis told the publication, “For us to build sustainability, we need to reduce the cost of production. The cost of power in Kenya is quite high, so last year we implemented 1.7 MW solar in all our farms. The aim is to reduce the cost of power by 35 to 40%, which we have done. We are now making our own biofertilizer by using worms where we use worm juice to supplement the fertilizer. We recycle around 80% of our water by implementing good digital technology, measuring humidity and temperature inside the greenhouse before we irrigate the plants. Basically, we use a lot of technological bio-solutions that can reduce our cost.”

Speaking about cleaner modes of transportation that can be used to ferry cargo, Christos Spyrou, CEO, Founder of Aero Africa says, “Africa has a chance to get ahead of the curve, some countries are leading the way, for example, Kenya which introduced electric buses, though nowhere near at scale yet. Others like Ethiopia are further along the road, having bequeathed the continent its first fully electric cross-border railway line, connecting Addis to Djibouti. It is important to recognize that there have also been broad initiatives in different sub-regions of the continent to enhance non-motorized transport, which falls within the agenda of a greener, more sustainable transport infrastructure. There have been talks on this topic but it’s important to ask how far does it trickle down? This is the question and one would need to see evidence of moving beyond words into action if it exists!”

Can policy reforms prompt progress?
The Sustainable Energy Fund for Africa (SEFA) which is a multi-donor Special Fund of The African Development Bank Group (AfDB), announced that it will provide a $1 million technical assistance grant to the Green Mobility Facility for Africa (GMFA) in January.

GMFA provides technical assistance and investment capital to accelerate and expand private sector investments in sustainable transport solutions in Kenya, Morocco, Nigeria, Rwanda, Senegal, Sierra Leone, and South Africa.

Calling it an encouraging sign, Baluch said, “The fund aims to catalyze private sector investment, recognizing that without the private sector’s commitment and sustainability’s DNA firmly implanted into the sector, the future will simply resemble the past, with fragmented, underutilized transport infrastructure on the continent and weak implementation of projects, which are always good on paper, but not where it matters most, on the ground.”

The highly touted economic reform for the continent which is the African Continental Free Trade Area (AfCFTA), established in 2018, is also expected to generate $21.9 billion in untapped trade potential across the region, according to company leaders. It is aimed at connecting African countries and cities for regional value chain integration by embracing 55 countries with 1.3 billion people and a combined GDP of $3.4 trillion and also has enhanced collaboration and investment opportunities.

The highly touted economic reform for the continent which is the African Continental Free Trade Area (AfCFTA), established in 2018, is also expected to generate $21.9 billion in untapped trade potential across the region, according to company leaders. 

As the AfCFTA agreement kicks in, the freight and logistics sector in particular is expected to see an influx of investment to cater to a wider economic expansion on the continent. Seamless cross border, income augmentation, reduction in unemployment, slashing of border tariffs, and ease in movement of goods across African nations are also expected as outcomes of this policy.

According to Briter’s report titled ‘Digitising Logistics in Africa - How Technology Companies Are Improving Africa’s Supply Chain and Goods Delivery’ released in September 2019, the report cites, “The fragmentation characterizing African countries lies at the core of widespread inefficiencies such as burdensome border crossing or disproportionately high prices of transport compared to the value of the goods. Recent pan-African initiatives such as the AfCFTA, which came into force in July 2019 after hitting the minimum threshold of 22 ratifications, have great potential to integrate the continent’s value chain and promote intra-Africa trade, as well as facilitate more efficient cross-border processes and cohesive regulatory frameworks.”