Investing in a sustainable freight and logistics industry in Africa
The infrastructure gap in Africa is hindering the continent’s projected growth in terms of commerce and development. As the world’s second largest and second most-populous continent, major investment is required to ensure efficient transport, freight and logistics systems in this untapped market.
According to the World Bank, Africa’s lack of efficient infrastructure cuts roughly 2.6% off its average per-capita growth rate, which according to Sub-Saharan Africa Economist at Rand Merchant Bank and speaker at the upcoming FIATA (the International Federation of Freight Forwarders’ Association) World Congress, Celeste Fauconnier, places significant strain on development.
“The annual infrastructure need is US$130 billion to US$170 billion annually and the continent’s available capital is not enough to achieve this. In short, the lack of efficient infrastructure is one of the highest hurdles to business in Africa.”
“This obstacle, however, presents an opportunity to businesses involved in the development or financing of infrastructure projects,” she adds. “Developing infrastructure is synonymous with developing Africa and has the potential to unlock enormous growth.”
The United Nations (UN) predicts that the African population will increase by 1.3 billion, by the year 2050 – more than 50% of the world’s population growth.
FIATA Logistics Academy Chairman, Issa Baluch, sees Africa as a prominent destination due to its young citizens making up 70% of the population, which amounts to about 1.1 billion people.
“Along with this, 60% of land which is arable globally is sitting in Africa, coupled with just 15% of water usage on the entire continent and an abundance of minerals - these are the main drivers for investments.”
He says that the continent has a lot to learn from countries in East Asia.
“Countries that have placed logistics and freight at the top of their agenda include UAE, Singapore, China and India. The right policies focussing on supporting this sector has greased the “wheel of commerce” for inbound/outbound commerce.”
“Open sky policies, single window, currency digitisation and freedom of movement of people, cargo and currency will bolster the economy on the continent.”
There are, however, some key challenges in securing investments in Africa.
Baluch states that while the Africa Free Trade Zone (AFTZ) is a game changer, the challenge is to match its political drive to practical implementation across the continent. “There are 54 countries on the continent, each with varying trade policies.”
Fauconnier adds, “The challenges to infrastructure development, as a whole, are weak legal, regulatory and institutional frameworks, poor infrastructure planning and project preparation, ineffective governance, and corruption. One of the consequences of this is limited private-sector involvement. The key to building well-targeted infrastructure connecting African economies to global value chains is governments dedicated to the task.”
Baluch is confident that the benefits for investors considering investing in Africa’s freight and logistics industry are plenty. “As the lion economy awakes, early starters to this sleeping giant have an opportunity to derive long lasting benefits.”
According to Stephen Morris, Acting Director General of FIATA, securing investment will be critical to increase logistics and freight forwarding capacity. “This is vital in order to build a solid infrastructure, while ensuring industrialisation is inclusive and sustainable. The future of the continent, in terms of growth and economics, is dependent on this.”