Ecommerce surge fuels demand for warehousing

The Covid-19 crisis has led to a clear shift in consumer behaviour towards online shopping. To cater to the demand following the increasing surge in ecommerce, both logistics and ecommerce providers are tapping new opportunities for high quality Grade A warehouses, logistics parks, clearing and distribution centres in key markets that will store, sort, transport and distribute goods to consumers across the continent.

The pandemic-induced lockdown and movement curbs has marked an inflection point for ecommerce across nations in the African continent, pushing demand to record highs and nudging new buyers as well as sellers onto digital platforms, and holding out the promise of lasting growth for players.

Before the pandemic hit, the demand for quality industrial and logistics space was estimated at over 15 million square metres in Africa’s highest-potential markets. But now, with the pandemic, ecommerce has become the key driver of warehousing and logistics demand in Africa- with Nigeria, Kenya and South Africa leading the charge. According to a McKinsey report, ecommerce across the continent has projected annual sales of $75billion by the year 2025. Retailers are trying to tap into the 400 million connected internet user base in Africa, a market second only to China. Global analysts maintain that ecommerce sales growth will continue even in a tough economy, driving a need for logistics fulfilment and warehousing capabilities to serve this supply chain.

Leading logistics and ecommerce players are now investing heavily and expanding their infrastructure to tap into these opportunities. Recently, global logistics and warehouse provider, Agility, opened a new Agility Logistics Park in Maputo, Mozambique, adding to its growing network of international-standard warehouse parks serving key African markets. The new 290,000 sqm Agility park, located on the new Maputo ring road in the Marracuene-Chiongo district, provides easy access to the burgeoning Maputo market and road connections to the major highways leading to large markets in the north of Mozambique and to South Africa. The 32,000 sqm of Agility warehousing constructed for the first phase of the development provides ready-built, secure, international-standard facilities that are available to lease by both local companies and multinationals. Tenants can lease the warehouses for storage, distribution, packaging, processing, assembly and light manufacturing.The Agility Logistics Park in Maputo is part of an expanding network of quality warehouse parks that Agility is funding and developing in key markets across Africa to support the development of domestic and regional trade. Other Agility Logistics Parks are located in Ghana, Cote D’Ivoire and Nigeria, respectively.

Geoffrey White, CEO Agility Africa, said in a press statement, “We believe that the provision of international-standard warehouses in Africa for storage, distribution and light manufacturing is one of the fundamental building blocks necessary for economic growth. The Agility Logistics Parks enable companies, whether multinationals or small and medium local enterprises, to access quality infrastructure easily, quickly and cost-effectively, enabling growth and prosperity.”

We believe that the provision of international-standard warehouses in Africa for storage, distribution and light manufacturing is one of the fundamental building blocks necessary for economic growth. The Agility Logistics Parks enable companies, whether multinationals or small and medium local enterprises, to access quality infrastructure easily, quickly and cost-effectively, thereby enabling growth and prosperity

Geoffrey White, Agility

Meanwhile, the DACHSER group had opened earlier a new warehouse in Morocco’s Tanger-Med port complex, which is the leading container port in the Mediterranean region and Africa, this April. The global logistics leader has decided to expand its network in Morocco due to a growing demand among its customers. The 5,500 sqm new warehouse can accommodate more than 7,000 pallets, offering customers across all industries storage solutions with better connections and optimum transit times.

“The objective behind this new facility is to provide customers across all industries with a bespoke warehouse solution that also offers excellent connections and optimum transit times through the DACHSER network,” the group said. The company announced that the new warehouse hub was operational in March.

“The launch of this new site supports the development of our business. It allows us to enhance our logistical capabilities to respond to growing demand from our customers,” Mathieu Brouard, sales manager of DACHSERMorocco said on the launch of the warehouse hub. “This new site will boost development in a region that is already experiencing the benefits of a solid industrial fabric.”

In another development, online retailer Takealot has taken up 20,000 square metres of speculative warehousing at Fortress Logistics’ Eastport Logistics Park in Kempton Park, Gauteng. Fortress REIT's logistics park development portfolio concluded an agreement with the online retailer and operations would kick off in July 2021. "The Eastport Logistics Park is centrally located which will enable Takealot to improve customer service and enable them to respond to market demands much quicker," Fortress Logistics said. The Eastport Logistics Park warehouse also houses Pick n Pay in a new 36-hectare inland distribution centre - one of the largest in Africa.

Furthermore, Konga.com, a marketplace where pharmaceutical companies can list health products like medicines, is starting to build warehouses and logistics assets to enable the company to reach out to every corner of Nigeria. Apart from fulfilling orders to individuals, Konga is aiming to work on bulk orders between pharmacies and businesses or government agencies. For this purpose, Konga will require some investments on infrastructure for cold distribution that will ensure warehouses are maintained at the right temperature.

Meanwhile, DHL has expanded its capabilities in South Africa by investing in a new 10,000 sqm warehouse offering pharma facilities, near the Johannesburg Airport. With an investment of 126.5 million Rand ($8.3 million), this facility is expected to be twice the size of its current set-up. Located at the Skyparks Business Estate near OR Tambo International Airport, the hub will have cold chain warehousing with three temperature-controlled refrigerators capable of supporting incoming and outgoing temperature-sensitive pharma goods.The warehouse will also support other value added services including cross-docking, storage for air, ocean and road freight services, and a platform for breakbulk cargo.

Also, last October, Africa Logistics Properties (ALP) unveiled $6 million warehousing facility for small businesses in Kenya. Since its inception, ALP has raised $150 million to fulfil its purpose of constructing modern grade A warehouse facilities in East Africa with $50 million of this reportedly already invested in Kenya. The company’s project ALP West will measure more than 1 million square feet post completion. The ALP West facility sits on an expansive 49 acres that comprise of seven phases. Currently, phase I is already 20 percent pre-leased and is targeting small to medium-sized enterprises (SMEs) seeking modern storage facilities with a minimum let of 5,300 square feet. The rest of the phases will be dedicated to larger enterprises who will operate from grade A warehouses that will allow users to operate logistics at international standards, which is on demand by both local, regional and international companies.

The launch of this new site (5,500 sqm new warehouse in Morocco) supports the development of our business. It allows us to enhance our logistical capabilities to respond to the growing demand from our customers

Mathieu Brouard, DACHSER Morocco

According to McKinsey, 75 percent of growth in Africa will come from small- and medium-sized enterprises. This obviously means that warehousing needs to be flexible enough to cater to a variety of businesses. This has opened a window of opportunity to those offering flexible warehouse options with a common technology platform to give these businesses an easier entry to quality warehouses that meet the standards required by international customers.

However, distribution continues to be a roadblock in different parts of the continent. This has madelast-mile warehousing with local service provision a very important component. The fact that ecommerce fulfilment can necessitate four times the warehouse capacity in the destination market compared to traditional logistics models only means that companies may need to stock more inventory which translates into a demand for more space. Therefore, given the strong demand for logistics space, from massive storage hubs to micro-last mile fulfilment centres across different locations, this space has immense potential to grow.

As the African continent continues to adapt to a ‘new normal’ characterised by restrictions on movement and soaring ecommerce, the potential for growth in logistics and warehousing is clear. With a winning formula of localisation and global best practices, success can be achieved - and the time to act is now!