Africa: Why logistics will fuel the export potential of AfCFTA and e-commerce in Africa
Africa is the second largest continent in the world, with around 1.3 billion people. Its combined gross domestic product (GDP) was $ 2.6 trillion in 2020, and the African Development Bank (AfDB) projects a growth rate of 3.4% by the end of 2021.
This modest forecast could be ambitious given the staggering effects of Covid-19 on business activities. It has left international borders closed for much of last year, resulted in a significant currency devaluation, an estimated loss of production of $ 115 billion, according to World Bank findings, and continues to restrict travel. regional and international.
This dire situation may have catalyzed an increase in consumer e-commerce spending across the continent amid mixed year-end results. For e-commerce giant Jumia, headquartered in Nigeria with a presence in around 11 countries in the region, COVID-19 has had an overall net negative effect on business in 2020.
According to the brand’s 2020 financial report, “Due to the limited use of nationwide blocks across its footprint, the pandemic has not resulted in a drastic change in consumer behavior or a significant acceleration of consumer adoption of e-commerce in a Pan-African country. level “. Conversely, despite one-off pandemic-based investments and strict lockdown regulations, South Africa’s largest e-trader Takealot saw significant growth in the six-month period ended September 30, 2020. According to the consolidated financial statements of Naspers, its R6. The gross value of goods (GMV) of $ 26 billion grew 85% year-on-year, while owner and third-party companies grew by 69% and 119% respectively.
Despite the contradictory results of Covid-19, e-commerce in Africa remains on a trajectory of strong innovation and strong growth, due to the convergence of key indicators: the demography of the continent, the potential for Internet and mobile penetration, the digital transformation and ecosystem maturity. The rapidly evolving e-commerce landscape in Africa offers mobile-first solutions developed in-house. Mobile money continues to drive value and efficiency for the continent’s growing digital consumers, with “pay-on-arrival” options widely adopted.
Like their global counterparts, the logistical components of the e-commerce funnel have continued to disrupt and innovate, both in response to the pandemic and in an effort to charter access to new markets. driven by changing consumer trends and purchasing behavior.
While e-commerce retailing in Africa accounts for only 1% of its total retail performance, its potential to harness the benefits of the African Continental Free Trade Area (AfCFTA) is enormous, especially at the light of its rapid digital transformation highlighted so far. The deal, led by an economic bloc of 54 members seeking to reduce tariffs on 90% of goods and liberalize trade across Africa, could very well be the catalyst for new opportunities for cross-border growth in the region. The arguments in favor of the AfCFA are compelling.
In 2017, the percentage of intra-African exports to total African exports was only 17%, compared to levels in Europe (69%), Asia (59%) and North America (31% ). This implies that Africa must urgently align with the AfCFTA mandate and trade with itself to facilitate the exchange of manufactured goods, knowledge transfer and overall economic diversification. The continent has what it takes to become a regional trade hub. Data from Euromonitor International puts the market for clothing and footwear in sub-Saharan Africa alone at US $ 31 billion.
From a supply chain perspective, removing and consolidating tariffs has immense benefits for manufacturing players in the region; in beauty, fashion, home and gallantry, sectors still largely dependent on imports. Removing bottlenecks will nonetheless improve competitiveness, enabling the region to meet its own needs for finished products, while improving its viability as a global sourcing destination.
Africa’s opportunity for “new” export growth will depend on its competitiveness as a sourcing destination for both value-added products and direct consumer goods. Beyond “cost of goods” considerations, buyers around the world will be looking for well-priced, timely and efficient logistics solutions with minimal disruption.
Indigenous small and medium-sized businesses, while benefiting from an expanded retail landscape, will seek flexible logistics solutions that create breakthroughs in global warehousing, fast delivery times and reduced lead time for order fulfillment. . These items are not negotiable if they have a chance to play a real role in the highly competitive global retail scene. Ethiopia has a garment supply industry of $ 145 million per year and is poised to increase its exports to $ 30 billion per year by 2030. Textiles also account for 15% of the country’s GDP. Moroccan economy, but its main export partner is Europe, not Africa. Rwanda’s promise is based on technology.
In 2019, his Mara group launched two indigenous smartphones – the Mara X and the Mara Z – the first set made entirely in Africa. It’s no wonder that the Brookings Institution report predicts that if the AfCFTA is fully implemented, it will boost manufacturing and increase continental trade to 50% by 2040.
The AfCFTA couldn’t be more timely. Its expected impact on manufacturing and intra-regional trade potentials converges with its rapid digital transformation, providing a real opportunity for African e-commerce and local brands to compete at the inflection point of global logistics and supply chains, as evidenced by relocation and offshoring strategies are adopted globally, as the competitive dynamics of China as a sourcing destination evolve. Globally, digital transformation is helping new business models capture emerging sales channels.
Omnichannels are widely adopted to ensure that modern shoppers are able to make purchases and returns by combining online and offline alternatives. The convergence of wholesale and retail is driven by the increase in manufacturer-consumer models. According to the Logistyx 2021 Manufacturing Trends Report, omnichannel strategies require a range of dynamic logistics alternatives; localized storage, next day delivery and smaller packages. Delivery locations are also increasing, leading to increased demand for flexibility and alternative shipping approaches.
Evidence of the continent’s digital logistics innovations is widely visible in major e-commerce markets. The DHL Africa e-Shop, a market introduction in 2019, is live in over 34 African countries. The shipping giant is also building partnerships in the continent’s small and medium-sized business landscape, leveraging small communities. Likewise, local digital order fulfillment companies have started to hybridize storage and logistics services.
Kenya-based Africa Logistics Properties claims to have developed over 1.5 million square meters of warehouse space available for lease in emerging markets over the past 10 years.
ACT Logistics in South Africa offers multimodal freight services, a la carte warehousing and export services, and export services combining transportation, customs clearance and warehousing in its range of services. Jumia introduced its third-party logistics services in 2020, while Kenyan start-up Sote launched software that aims to consolidate customs clearance and shipping processes on a single platform, with the aim of helping owners of freight to track shipments, payment status and estimated arrivals of their shipments. These innovations will democratize access to flexible and efficient logistics solutions, creating the critical ecosystem necessary for Africa’s advancement in intra-regional and global exports.
The AfCFTA mandate requires more than just 54 countries to put pen to paper. A combination of private and public sector efforts is needed to accumulate the potential benefits. Policy action and adoption must be swift, governments must remain open to working with the drivers of innovation to remove process and bureaucratic constraints.
Blockchain technology is available to help with decentralized ledger systems and smart contracts for faster clearance processes at checkpoints. Automated warehousing can speed up the processing of large-scale bulky goods and optimize the use of floor space. Artificial intelligence can help forecast demand to reduce bad inventory, assess risk, and automate back-office processes in logistics.
In July 2019, Nigeria joined other African countries to sign the AfCFTA agreement. This is commendable, given the country’s influence on the rest of the continent. Africa is expected to benefit from the convergence of factors driving its digital adoption and e-commerce, but achieving this feat requires that all hands be on deck to optimize critical success factors, including manufacturing capabilities and delivery. logistical framework. Thereupon, our collective will will always find its way.
Izin is a Lagos-based fashion and logistics entrepreneur