Investing in African logistics: Unpacking the opportunities
If economic and commercial opportunities were not enough motivation for investors to tackle the short-term constraints on e-commerce in Africa, the Covid-19 pandemic should be. Without more advanced logistics and infrastructure, the continent will struggle to deliver essential supplies safely.
As the Covid-19 crisis has escalated, stay-at-home orders have led to a surge in online purchases – of everything from groceries to medicines to household essentials – by consumers in the advanced economies. Africans facing similar movement restrictions will not enjoy the same convenience – or the safety it affords.
It has been widely noted that the social turmoil unfolding in the wake of George Floyd’s death may worsen the already-acute Covid-19 crisis. But the connection running in the other direction – from the pandemic to the demonstrations – has received far less attention.
Over the last decade, a growing middle class and rapid progress in mobile and internet penetration have supported the view that African countries are ripe for e-commerce success. Consumer spending across the continent is projected to reach $2.1 trillion by 2025, by which time mobile-phone penetration in sub-Saharan Africa is likely to stand at 50%.
Yet, so far, companies have largely failed to tap sub-Saharan Africa’s e-commerce potential owing to logistical challenges and inefficiencies. Nigeria, the continent’s largest market, ranks 110th out of 160 countries when it comes to logistical efficiency, according to the World Bank. It can take three times as long to import an auto part through Lagos, Nigeria, than through Durban, South Africa. And it can cost up to five times more to transport goods in sub-Saharan Africa than in the United States, based on 2015 estimates. Across the continent, a lack of integration means that companies face smaller markets and considerable red tape when crossing borders.