According to Euromonitor, Africa will have the world’s fastest expanding economies by 2030. As a result, the continent is poised to become the next major e-commerce market.
As this positive narrative continues to position Africa as a top investment destination, the demand for modern logistics systems is unavoidable.
The expansion of e-commerce will rely heavily on the quality and effectiveness of logistical networks, ranging from intra and cross-border trade to financial activities in the payment of goods and services.
When covering the African e-commerce story, I frequently seize the opportunity to focus solely on the continent’s amazing achievements. Nonetheless, serious hurdles remain, particularly in logistics, a critical component of the sector.
In its 2019 African Economic Outlook, the African Development Bank states that “trade costs attributable to poorly functioning logistics markets may be a higher barrier to trade than tariffs and nontariff obstacles.”
This side of the story needs to be told as well if we want to find long-term answers to what could be the key to Africa’s e-commerce growing by leaps and bounds.
Inadequate National Address Systems And Transportation Infrastructure
The lack of effective national address systems in most African countries is one of the industry’s most significant logistical challenges. This, along with weak road networks, makes it even more difficult to deliver products to clients. As a result, businesses have had to rely on somewhat descriptive locations and landmarks provided by clients throughout the early phases of the online transaction process. When delivering products, delivery personnel must also maintain continual touch with clients in order to get further directions while en route.
While Africa’s infrastructure generally lags behind that of its peers such as America and Europe, it is important to realize that each country has its own value proposition. According to the World Bank’s Logistics Performance Index, South Africa, Kenya, Rwanda, and Côte d’Ivoire were the top four best-performing African countries in 2018, while Somalia, Sierra Leone, Eritrea, and Zimbabwe were the bottom four.
In most African countries, poor road infrastructure causes massive traffic jams, which cause delayed delivery, canceled orders for on-demand services, and, as a result, income loss. Alternative modes of transportation have also emerged in some areas, such as Kenya and Nigeria, with the use of simple motorcycles known as Bodabodas. With over 1.2 million motorcycles in the passenger transport business, Kenyan e-commerce companies have attempted to enter this market by utilizing Bodabodas to quickly deliver merchandise, particularly within congested towns.
“There are significant prospects for logistics to promote e-commerce, but the market has few established companies,” says Apoorva Kumar, Jumia’s SVP of Logistics. Jumia, which operates in 14 African nations, is one of the e-commerce businesses developing logistics and fulfillment infrastructure to facilitate product delivery to consumers via trucks and bodabodas.
Technology, thankfully, has been a benefit to the logistics business. Jumia operates a well-established system based on Machine Learning in Nigeria and Kenya, relying on GPS-enabled delivery apps. The coordinates obtained during the initial delivery are then registered and used to create a logistics network for future transport.
Companies like Zipline are leading the way in commercial image drone delivery in Rwanda.
While initially focused on delivering blood to rural health centers that are normally impossible to access quickly due to Rwanda’s hilly terrain, Zipline’s drones are likely to be used in other industries in the future, including e-commerce.
Back in Kenya, Astral Aerial Solutions uses drones for last-mile delivery, among other things. According to the corporation, its goal is to “open up Kenya’s hard-to-reach regions to new and exciting economic prospects.”
I think the potential for a better future in logistics is limitless! And, as Apoorva emphasizes, companies cannot rely simply on logistics to be successful.
“It necessitates the integration of diverse systems and partners to develop a large enough network to service the expanding needs of e-commerce consumers,” he says, urging private and governmental cooperation in this quest. So, what does the future hold?
According to data from logistics consulting firm Knight Frank, the cost of transportation accounts for 50% to 75% of the retail price of the items. This alone supports the need for long-term solutions to Africa’s logistics difficulties.
The repercussions are being felt across the board, from delayed deliveries between local destinations to sluggish development in cross-border trade.
Modern internet shopping is moving toward pre-orders, which necessitates sophisticated infrastructure for both small and medium-sized firms.
This will aid in meeting the requirements for packing, storage, distribution, freight, and last-mile delivery. Despite its difficulties, Africa is a region rich in commercial prospects, prompting international investors to compete for a piece of the pie.
As a result, more tech-enabled handshakes between diverse service providers across markets are required for African e-commerce enterprises to achieve sustained bottom-line development.
Governments must develop one-window rules that enable digital payment solutions as well as logistics infrastructure such as road networks, air cargo handling systems, and warehouses, among other things.
Similarly, e-commerce and logistics behemoths like Jumia should make a commitment to empowering more aspiring businesses. They must also use their positions of leadership to continue paving the path for African economic unity.
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