E-commerce logistics: Africa's growth frontier

Africa's e-commerce sector is experiencing rapid growth, transforming logistics across the continent. With rising internet access and smartphone adoption, online shopping demand surges, presenting unique challenges and opportunities for logistics innovation.

The African continent has witnessed a rapid growth in e-commerce over the past decade, with the sector experiencing an unprecedented boom during and after the Covid-19 pandemic. As more Africans gain access to the internet and smartphones, the demand for online shopping has surged, presenting both opportunities and challenges for e-commerce logistics. According to data published in FedEx Business Insights, there are likely to be 438 million mobile broadband users in Africa by 2030, which will enable greater access to digital payments and the benefits of e-commerce. Additionally, McKinsey has predicted that online spending in Africa may reach $75 billion by 2025 as digital payments spread through developing economies.

Africa's e-commerce landscape reflects its rich cultural and economic diversity. In some nations, digital adoption is just beginning, while in others, online marketplaces are experiencing swift growth. There are other factors also fueling this growth, such as a youthful population keen on adopting technology and an expanding middle class with increasing disposable income. Additionally rapid urbanisation in many African countries has also created concentrated markets for e-commerce services.

Today numerous e-commerce platforms have entered the African market, achieving varying levels of success. Leading companies like Jumia, Takealot, Konga have demonstrated the viability of e-commerce in the region. Simultaneously, many startups are bringing innovative approaches to tailor the e-commerce model to local needs.

Jumia for example is working as a powerhouse in African e-commerce, operating as a one-stop shop for online shopping in Africa. Founded in 2012, this Pan-African tech company connects over 100,000 sellers with consumers across 11 African countries.

Jumia has an integrated logistics network harnessing local partners. These partnerships are crucial for future success of e-commerce in Africa.”
Abdesslam Benzitouni, Jumia

“The burgeoning e-commerce landscape in Africa is significantly shaping the future of logistics. Consumers are increasingly demanding speed and convenience, necessitating investments in technology and infrastructure to optimise delivery routes and explore solutions like same-day delivery. With Africa's high mobile phone penetration rate, logistics solutions need to be mobile-friendly, enabling real-time tracking, flexible scheduling, and potential mobile payment options at delivery. Additionally, while digital payments are on the rise, cash remains a prevalent preference. Thus, the future of logistics must cater to both payment methods, offering a seamless omnichannel experience,’’ says Abdesslam Benzitouni, VP - Global Head of Communication and Public Relation at Jumia.

Kuehne+Nagel has a significant presence in Africa, having been active there for nearly 70 years since opening its first office in Johannesburg in 1954. They provide a full range of logistics services across Africa, including sea freight, air freight, road and rail logistics, and contract logistics.

“The development of e-commerce drives the supporting industries. New transportation companies are emerging across Africa to facilitate deliveries. Existing and new airlines provide enhanced services at competitive rates. E-payment methods and finance institutions offer convenient and affordable solutions, from credit cards to e-wallets,” says Bert Bloem, Managing Director South Africa at Kuehne+Nagel.

“The untapped potential of inter-Africa e-commerce trade presents a promising opportunity for new players. With the right elements in place, such as improved infrastructure and streamlined trade regulations, the future of cross-border trade in Africa is bright.”

Our offices and warehouses in Kenya are powered by the solar energy generated by the photovoltaic panels installed on the roofs.”
Bert Bloem, Kuehne+Nagel

Despite the growth in e-commerce, logistics remains a significant challenge for businesses operating in Africa. The continent's logistics performance lags behind global averages, with the World Bank's Logistics Performance Index (LPI) ranking most African countries in the bottom half globally. The biggest hurdle is that poorly maintained road networks and a fragmented transport system create challenges in delivering goods efficiently, especially in remote areas. Furthermore, the lack of standardised national addressing systems makes relying on landmarks and descriptions a norm, leading to errors and delays. These infrastructural issues, combined with a market dominated by small players, inflate delivery costs for both businesses and consumers.

“The infrastructure must be updated to the latest standards to support growing quantities of cargo, either imported or exported to the country. Currently, many seaports and airports need more technology and automation, which creates congestion and delays delivery. Roads and rail networks also play a crucial role in the transportation of goods and ideally would provide a reliable connection between the countries. Without significant infrastructure updates, the e-commerce industry's growth may be compromised due to unreliable transportation options,” says Bloem of Kuehne+Nagel.

“Poor infrastructure poses challenges in many markets in Africa. An innovative example where we have counteracted the effect of congestion is in Lagos, Nigeria, where we now have two DHL boats connecting the mainland to Victoria Island - effectively leveraging the waterway to speed up connectivity. We also use different modes of transport, depending on the country, for example, motorbikes in highly congested areas, as well as customer drop off points located conveniently across each country,” says Hennie Heymans, CEO, DHL Express Sub Saharan Africa (SSA).

“There are challenges that African consumers face also when shopping online. “There are various areas to consider when shopping online in Africa, but I would say that understanding the customs landscape can be challenging, considering the rules and regulations differ quite vastly by country. For example, there are varying de minimis values per country (which is the threshold after which VAT and duties will apply). Some customers don't take this into account when buying items from overseas merchants, and then they get unexpected customs charges at destination which perhaps were not factored into their buying decision. It's therefore important to work with trusted partners who can advise consumers on what charges to expect, what items are prohibited/restricted, etc.”

Additionally, there is a prevalence of cash-on-delivery that actually hinders the smooth flow of e-commerce transactions.

I believe the future is bright for African e-commerce logistics - both inbound and outbound.”
Hennie Heymans, DHL Express SSA

“Jumia understands the prevalence of cash-on-delivery (COD) as a preferred payment method in Africa. While we encourage the adoption of secure digital payment options through JumiaPay, which offers bank transfers, mobile money, and more, we recognise the importance of flexibility. JumiaPay, our integrated platform, allows cash-on-delivery orders to be paid for electronically upon receiving the items, eliminating the need to carry cash and ensuring a smoother transaction. Additionally, our Buy Now, Pay Later (BNPL) option in Egypt and Nigeria provides customers with convenient payment flexibility, further reducing dependence on COD. To navigate fragmented infrastructure, we've implemented several solutions, including leveraging local partnerships. We collaborate with third-party logistics providers who possess a deep understanding of local contexts and infrastructure, enabling us to reach even remote areas with efficient deliveries,” says Benzitouni of Jumia.

Technology is playing an increasingly crucial role in addressing the logistical challenges of e-commerce in Africa. Innovative solutions are being implemented across the continent to improve efficiency, reduce costs, and enhance the customer experience.

In the realm of last-mile delivery, companies like MAX.ng in Nigeria have transformed the landscape using motorbikes and mobile apps. This tech-driven approach allows for faster navigation through congested urban areas and provides real-time tracking for customers.

CEVA Logistics offers another example of how technology is transforming the sector. Antonio Muñoz, MEA Regional Head of Contract Logistics, CEVA Logistics, explains: “CEVA Logistics offers tested solutions for last-mile delivery challenges in Africa by leveraging advanced technology and strategic partnerships. Our use of sophisticated routing and tracking software ensures efficient delivery, even in areas with poor infrastructure. CEVA’s flexibility to collaborate with local delivery providers allows us to adapt to regional requirements and overcome logistical hurdles. Additionally, CEVA's integration of mobile technology facilitates real-time communication and coordination, improving delivery accuracy and customer satisfaction. By combining technological innovation with strong local partnerships, CEVA effectively addresses the diverse last-mile delivery challenges across different African regions.”

“Technology is the driving force behind e-commerce, enabling businesses to reach more customers, quicker and easier than before. When e-commerce was in its infancy, customers were happy to wait days for deliveries - and now customers want to choose their delivery windows and select delivery options that suit them best. The rise of marketplaces has also opened up a world of access and opportunities, particularly to businesses who don't have the means to invest in full-scale operations. We see consumers integrating payment gateways like M-Pesa, Paypal, and more on e-commerce platforms to enable smooth and secure cross-border transactions. These payment solutions are trusted by customers in first-world countries and offer convenience and buyer protection. These various digital payments are becoming more widespread in African countries, which is certainly a key aspect of e-commerce and mobile money allows a customer to receive, store, and spend money using a mobile phone providing the security and safety required by consumers,” mentions Heymans of DHL Express SSA.

CEVA Logistics offers tested solutions for last-mile delivery challenges in Africa by leveraging advanced technology and strategic partnerships.”
Antonio Muñoz, CEVA Logistics

Warehousing and fulfilment have seen significant advancements as well. Jumia recently announced the opening of its latest warehouse in Bouskoura, south of Casablanca, Morocco which can accommodate over 300,000 products. Additionally, Jumia has launched a new integrated warehouse and logistics network facility in Isolo, Lagos, Nigeria, spanning 30,000 square metres, with over 17,000 square metres of covered storage.

Partnerships and collaborations are becoming increasingly common as companies seek to navigate the complex African market. E-commerce platforms are forming alliances with local logistics providers to improve last-mile delivery, while international logistics companies are entering into joint ventures with local firms to benefit from their market knowledge and networks.

“CEVA's logistics services will contribute to support quality job creation and partnerships with local African businesses by investing in community, supporting people development. Initiatives like the book club, schooling fee assistance, and talent nurturing programmes exemplify their commitment. These efforts not only create jobs but also foster skills development, enhancing the local workforce. By partnering with local businesses for logistics operations, CEVA helps build a robust supply chain ecosystem, driving economic growth and creating sustainable opportunities in the regions CEVA serves,” says Muñoz of CEVA Logistics.

Environmental concerns are expected to drive a greater focus on sustainable logistics in African logistics. Companies are exploring the use of electric vehicles and solar-powered warehouses to reduce costs and environmental impact. “Our offices and warehouses in Kenya are powered by the solar energy generated by the photovoltaic panels installed on the roofs. Kuehne+Nagel in Kenya leads the transformation to e-vehicles, supported by the established network of charging stations and maintenance centres. Employees use e-bikes to commute between locations. Office and warehouse waste is also segregated and either collected for recycling (e-parts are used to create new items, such as watches and even modern art) or compost,” says Bloem of Kuehne+Nagel.

“DHL Express has prioritised sustainable practices in its operations, through our GoGreen Plus service, we provide our customers with a solution that enables them to control their carbon footprint as a result of their shipments through the use of sustainable aviation fuel (SAF),” notes Heymans of DHL Express SSA.

Government policies play a crucial role in the growth of e-commerce. Regulations that support digital entrepreneurship, protect consumers, and encourage investment are essential for the sector’s development.

“The complexity of trade regulations in each country slows the development of the e-commerce industry on the regional and continental levels. Currently, several organisations, such as the East African Community (EAC) and the African Union, aim to create a single trading market,’’ states Heymans of DHL Express SSA.

The continued implementation of the African Continental Free Trade Area (AfCFTA) is expected to boost cross-border e-commerce, leading to increased investment in cross-border logistics infrastructure.

As Africa's e-commerce market matures, logistics will be crucial to the success of online businesses. Bloem of Kuehne+Nagel states that “the e-commerce market in Africa is predicted to reach USD 50 billion by 2027 and USD 180 billion by 2050.” Companies that effectively navigate the unique challenges of the African market, while leveraging technology and local knowledge, will be well-positioned to capitalise on the continent's e-commerce boom.