Struggling intra-continental logistics to be boosted by AfCFTA

Trucks transporting goods.

By Khulile Thwala

The World Economic Forum (WEF) says frictionless trade between African signatories will be introduced by the African Free Trade Agreement (AfCTFA).

In its latest report, WEF says as the largest continent in the world, and with a partially struggling intra-continental logistics network, AfCFTA presents a major opportunity to invest in logistics and transport services at a growth inflexion point.

Intra-continental logistics and freight has been largely struggling due to high custom delay periods at border gates, shortages of paved roads, and loss of goods due to limited cold chains.

It is suggested that an overwhelming demand and need for logistics and transport services will only increase as the AfCFTA is implemented, intra-African trade increases, and more small and medium-sized enterprises require logistics providers to connect to larger markets.

If commodity prices decrease, as they are projected to due to the removal of trade barriers and import costs, consumption and demand will increase, benefitting African manufacturers and the mobility sector.

Read More: Transnet strike: Acute shortage of basic commodities including food and fuel to hit Eswatini

According to WEF, large logistics companies have historically been too expensive for African companies to use, but a rise of new digital logistics companies that reduce costs was being witnessed and it can improve the quality of services while also promoting sustainability.

“Closing the urban-rural divide will also yield significant opportunities. Rural areas are naturally more reliant on regional supply chains than urban dwellers, but inadequate road infrastructure too often leaves them isolated and economically excluded,” reports the Forum.

It further states that start-ups have already begun to address these issues, proposing innovative solutions to integrate rural and city markets.
Infrastructure gaps, especially those that take a long time to fix, such as road issues, have spurred companies to turn to novel solutions in different parts of Africa, including cargo drones, inland waterways and ports, and other means of transport to reach rural communities and bring them into growing economic system.

Business-to-business logistics, already a major component of Africa’s logistics economy, is expected to dominate the sector in the short-to-medium term.

African companies spent E47 trillion (US$2.6 trillion) on B2B services in 2015 and are expected to spend another E18.1 trillion (US$1 trillion) by 2025 – and the AfCFTA will only accelerate opportunities for companies providing B2B services.

A B2B or business-to-business service is one where there are one or more commercial transactions between two businesses, as opposed to goods being delivered directly to the end-user or customer.

Business-to-consumer logistics will also continue to increase as consumer spending rises, e-commerce becomes more prevalent and urbanisation continues.

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