Navigating Africa’s New Logistics Landscape

December 15, 2020

By Alison Buckholtz
With additional reporting by Anurika Azubuike, Moussoukoro Diop, and Devon Maylie

In the middle of the night, when Nigeria’s roads are dark and the late hour offers freedom from his constantly-chiming phone, Alli Jemil, a 34-year-old long-haul truck driver, feels the stress of the day lift.

“It’s so peaceful,” he said. “It’s the best time to be in my truck.”

He didn’t always feel that way. For many years, driving through Nigeria past sunset worried him because a flat tire or breakdown left him stranded until morning, when he could flag down a rescue crew. Late stretches also made him vulnerable to attacks from thieves—and since he lacked insurance, he was responsible for the cost of his cargo if he was robbed. He and his fellow drivers were accountable not only for their personal safety and the security of their goods, but also for finding round-trip jobs, paying middlemen, collecting payments from cargo clients, and remitting money for leased vehicles. There was never enough cash.

That changed when Jemil signed up to drive with Kobo360, an African tech-enabled logistics company whose app matches truck owners and drivers looking for work with companies whose cargo needs to be moved. Jemil now uses a single digital platform to handle every stage of a job, from scheduling to payment. “My money is safe in the app, and I feel much more secure because I know when I go to pick up a load, it will be there,” he said. “No more empty runs.” The steady cash flow allows him to pay his seven-year-old son’s school fees and help his brother’s children with necessities.

Matching drivers’ availability to cargo companies’ needs limits “empty runs”—which is key to keeping logistics costs down, said Obi Ozor, CEO and cofounder of Kobo360. That’s important because in Africa, the cost of logistics as a percentage of GDP is almost double what it is in North America, according to data from logistics consulting firm Armstrong & Associates. “The big global logistics companies are too expensive for African firms, and that’s one of the reasons that basic goods, even diapers and soap, aren’t available to consumers,” Ozor said. He and cofounder Ife Oyedele II launched Kobo360 four years ago to offer companies a less expensive way to move goods across Africa; the company’s fleet of 30,000 trucks now operates throughout Burkina Faso, Côte d'Ivoire, Ghana, Kenya, Nigeria, Togo, and Uganda.

Kobo360 is part of a new wave of start-ups trying to make it cheaper for companies to operate in Africa.
Kobo360 is part of a new wave of start-ups trying to make it cheaper for companies to operate in Africa. Photo by Tom Saater/IFC

Why logistics matters

The challenge of moving goods around Africa is not a new problem. “Everyone from local business owners to multinationals knows that Africa’s supply chain is broken,” said Samakab Hashi, a Nairobi-based partner at Lateral Capital, which invests in early-stage and growth ventures in sub-Saharan Africa.

The World Bank’s Logistics Performance Index has for several years ranked many African countries low on indicators such as cross-border clearance processes, quality of trade, infrastructure, inconsistent tax regimes, and consignments’ track and trace mechanisms. Enactment of the AfCFTA confronts these challenges by creating a single market for goods and services, laying a foundation for the establishment of a continental customs union.

This approach to intra-regional trade “will be a great boon to logistics,” said Gaurav Biswas, CEO and cofounder of Trukker, an intercity and long-haul e-logistics company whose tech platform matches the supply of trucks with the demand for transportation by cargo owners. The company expanded from the UAE and Saudi Arabia to Egypt in early 2020 because the Egyptian logistics market “is the gateway to Africa,” Biswas said. “The Middle East and North Africa do so much trade between them, and Egypt opens up those markets.”

Unlocking intra-regional trade is central to African economic growth because low levels of intra-regional trade limit trade diversification—a situation with far-reaching implications. Intra-African trade, defined as the average of intra-African exports and imports, was around 2 percent during the period 2015–2017, while comparative figures for America, Asia, Europe, and Oceania [the East Asia/Pacific region] were, respectively, 47 percent, 61 percent, 67 percent and 7 percent, according to the United Nations Conference on Trade and Development (UNCTAD).

Increasing trade diversification would allow more small and medium enterprises to participate in international trade. An uncountable number of these companies can benefit from an investment in a logistics provider that streamlines the process, acknowledged Hashi, from Lateral Capital: “The new zone will make the pie bigger for everybody.”

TruKKer expanded to Egypt in early 2020. Photo by Amr Ossama/Trukker

Technology developed by start-up logistics companies like Kobo360 eases some of the obstacles that have kept logistics costs high, and the African Continental Free Trade Area (AfCFTA), targeted to open January 1, has the potential to eventually jump-start the entire sector. The AfCFTA aims to reduce tariffs on 90 percent of all goods and facilitate free movement of goods, services, capital, and people  . It promises to unite a market of 1.3 billion people and a combined GDP of $2.6 trillion, according to a joint study by IFC and Google.

African e-logistics companies play a key role in AfCFTA by “reducing transport costs and delays, and improving the quality of service along transport corridors,” said Vera Songwe, Executive Secretary of the United Nations Economic Commission for Africa and a senior fellow in the Africa Growth Initiative at the Brookings Institution.

Click on the infographic to download it.

The new wave of e-logistics start-ups has sparked interest among investors  , according to Adedoyin Amosun, a Nigeria-based Business and Industry analyst at PwC. With the free trade zone within sight, investors are especially interested in logistics technology that promotes sustainability. Private investment in transport and logistics start-ups signals “a significant shift from investing in financial services and digitally-focused start-ups and may point to the opportunity to solve the problems bedeviling the logistics sector,” she said.

Nurturing new markets

Biswas, from Trukker, has seen firsthand the potential of technology to transform the logistics and road freight sector, where little has changed for decades. “In an era of blockchain, there are still companies that are still faxing a gate pass. In some cases, you still need a dispatcher who physically hands paperwork to the driver,” he said. ““But you can now digitize all these transactions via a smart phone…[and] if you can standardize and digitize document processing, you build immense commercial advantage based on improved asset utilization and improved working conditions.”

Reducing this sort of red tape is a step in the right direction. Of the $450 billion in expected income gains from AfCFTA, $292 billion would come from trade facilitation measures that simplify customs procedures, the World Bank noted in a report on AfCFTA.

The emerging sector’s use of technology to solve challenges is appealing as IFC deepens its mission to create the right conditions in countries to attract private sector investment. As of November 2020, IFC had invested over $82 million of early-stage equity in the global e-logistics sector, including Kobo360 and Trukker. Other investments in Africa’s agricultural supply chain space are Twiga Foods and TradeDepot. In the e-logistics sector, IFC also helps create a market for venture capital (VC) funding because the lack of commercial sources of VC funding limits the pace of innovation in many developing countries.

Investments in Africa’s e-logistics sector support workers’ families and communities as well as the companies. For example, when a driver like Alli Jemil earns a dependable income and uses the Kobo360 app to save enough money to send his son to school, he is participating in and helping to expand a market that used to be inaccessible to him—while laying a foundation for the next generation to succeed.

How to keep food flowing

Education may nourish the minds of the next generation, but a sustainable, dependable source of food is equally essential—and COVID-19 threatens food security in African nations that can least afford it. Since the pandemic hit, African logistics companies, especially those focused on last-mile delivery, have revved up to alleviate supply chain bottlenecks and facilitate clearances when the pandemic shut down much of society.

Kenya-based Twiga has over 4,000 suppliers and 35,000 vendors. Photo by Mwangi Kirubi

A recent IFC study notes that closer collaboration between governments and third-party logistics companies has been necessary to designate ports, shipping, and trucking services as essential businesses that are exempt from lockdown measures. That was the case for Twiga, a mobile-based food distribution company in Kenya named an essential business during the pandemic. Because Twiga connects rural farmers to informal retail vendors in the cities, it helped the agricultural sector stay open during COVID-19-related curfews and closures. Similarly, TradeDepot, an e-logistics platform that simplifies and digitizes micro retail distribution for tens of thousands of small-scale retailers in Ghana, Nigeria, and South Africa, partnered with the Lagos State Government and became part of the state’s emergency food response strategy.

Concerns about food security in Senegal prompted the Ministry of Commerce and small and medium last-mile logistics companies like Dakar-based Paps to partner with bakers, said Gaëlle Tall, Paps’ Director of Sales. Together, the government and businesses created a new online sales platform for bread called Jaayma Mburu (“Sell me bread” in Wolof). Paps and other partners coordinated contactless bread deliveries to people across the country who were under lockdown orders. “We responded to a real need, and that’s why Paps was founded,” Tall said.

A Paps driver delivers supplies in Dakar.
A Paps driver delivers supplies in Dakar. Photo by Ricci Shryock/IFC

Keeping food supply chains flowing is especially important amid fears of possible disruptions in food systems and food markets across Africa. Recent World Food Programme (WFP) estimates show that an increase in food insecurity in this region could be more devastating than the health impacts of the COVID-19 virus itself. Worldwide, the large majority of countries at risk of food insecurity are in Africa, according to WFP.

Inadequate logistics contributes to high food losses in emerging markets, a continuing challenge in normal times as well as times of crisis. Emerging markets experience food losses of 30 to 40 percent compared to losses of 10 to 15 percent in OECD countries due to logistics failures, IFC found. This contributes to food insecurity as well as landfill emissions.

No more digital doubters

Many experts have observed that the urgency of the pandemic—the threat of disruptions to the food supply chain as well as to individual lives and livelihoods—accelerated changes to Africa’s logistics sector that were overdue, prompting companies and people who had not before used digital platforms to give them a try.

Blessing Chibueze is one of those people. Chibueze runs a small neighborhood shop in the Oshodi area of Lagos, and she has always traveled in person to markets that supply the dairy products, toiletries, cleaning supplies, and other items her customers ask for. But as the pandemic tightened its grip, quarantine restrictions prohibited travel—and most of those markets were closed, anyway.

Without the daily necessities that kept customers walking through the door, Chibueze worried about how she would support her family. But TradeDepot bridged the supply chain gap: Instead of having to navigate a fragmented network of distributors and wholesalers, she and other small-scale traders connected directly to consumer goods companies via TradeDepot’s phone app. “[TradeDepot] made it much easier for me to stock my store without leaving my location,” Chibueze says. “There was no need for me to go to the market and their prices are good.”

Tall has observed the same feelings among retailers in Senegal who are rebuilding their business models using the Paps digital infrastructure. “People have gained more confidence in digital tools,” she said. “The workers and people who are younger are used to digital products. Even our informal customers have changed their way of working and got more organized by using online platforms. They call it the ‘COVID opportunity.’”

Paps delivery drivers in Dakar are responding to an uptick in demand since the pandemic began.
Paps delivery drivers in Dakar are responding to an uptick in demand since the pandemic began. Photo by Ricci Shryock/IFC

Even for the most tech-reticent, “Covid has made digital mainstream  ,” Ozor said. Among Kobo360 truck owners used to analog operations, for example, e-invoicing was adopted immediately after the pandemic hit so they could avoid exchanging paperwork with shippers and maintain social distancing. Use of the platform’s automated proof of delivery system has resulted in a 15 to 20 percent optimization “just because we are now able to move everything digitally,” said Ozor. He estimates the company saved customers about 7.1 percent on logistics costs in 2019, and that drivers are making 27 percent more through optimization and increased utilization of their vehicles. Widely-adopted automation post-COVID-19 will strengthen these numbers despite the problems the pandemic presents to the logistics industry, he believes.

Biswas, the Trukker cofounder and CEO, has also noticed widespread openness to digitization since COVID-19 tightened its grip—and he believes that’s the one “blessing in disguise” brought on by so much upheaval. “This change in processes is not rocket science; it just requires initiative,” he said. “The pandemic provided that.”

Initiative, yes—but also a digital infrastructure that offers Internet access across Africa. Widespread digitization requires access to broadband connectivity, points out Linda Munyengeterwa, IFC’s Regional Industry Director for Infrastructure in the Middle East and Africa. “With COVID-19 disrupting trade and business activity in an unprecedented fashion, building a strong Internet infrastructure in Africa is more important than ever,” she said.

IFC’s recent $20 million loan to the West Indian Ocean Cable Company Ltd. – part of IFC’s global $8 billion fast-track COVID-19 response facility—is intended to support the company as it expands and improves affordable Internet connectivity to over 30 countries in Africa.

“Logistics is human”

Regional economic integration, and the digitization of the logistics sector, may lay the groundwork for large-scale benefits to Africa, research company Briter Bridges concluded in 2019. But even as digital logistics platforms establish themselves as connective tissue vital to Africa’s economic health, significant challenges remain. Infrastructure is at the top of the list.

“Like most frontier markets, we need better roads,” said Ozor. “This is one of the things that keeps me up at night, even though there’s nothing a start-up like ours can do about this.” A 1,000 kilometer journey normally takes about six days in Africa, in contrast to 48 hours in other parts of the world, he said.

Kobo360 cofounder and CEO Obi Ozor.
Kobo360 cofounder and CEO Obi Ozor. Photo by Dominic Chavez/IFC

The enormity of the infrastructure problem has prompted him to come up with original solutions. “We’re looking into cargo drones, we’re looking at inland waterways and ports that haven’t been used since the colonial days,” Ozor said. The company has already acquired a license to use barges for some cargo transfers.

Although Ozor believes government regulatory policy and sector-wide reform would build investor confidence, he’s not waiting for someone else to construct a sturdier logistics sector for Africa. He’s fleshed out a proposal for a national Transportation Trust Fund, whereby a small percentage of each trip would staff rescue operations, develop intermodal transport options, and build national driver training academies. Including drivers’ well-being and job satisfaction in his strategy is essential because “logistics is human,” he says.

Alli Jemil, the long-haul driver in Nigeria, isn’t thinking about drones, or barges, or driver academies—he’s laser-focused on saving enough money to purchase his second truck and build a small fleet of his own. With reliable round-trip jobs and Kobo360’s suite of driver-focused benefits such as insurance, discounted diesel, and access to a 24-hour rescue team, he’s almost there.

“Most of the things that give me problems have been solved,” Jemil said. “It makes me feel very secure.”

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Published in December 2020