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IFC talks to the CEO of Imperial Logistics, Mohammed Akoojee, about the challenges of the logistics sector in Africa and why investment in tech solutions is so vital for the evolution of the industry. Akoojee also dives into the potential of the new African Continental Free Trade Area (AfCFTA), and his advice to investors who are thinking about investing in Africa.
For more info on new trends in the logistics sector in Africa, see:
- En Route to Investment
- The African Continental Free Trade Area
- The Impact of COVID-19 on Logistics
- Investment Opportunities in Temperature-Controlled Logistics (TCL)
Transcript:
Jasmin Bauomy (host): How do you get food, your medicine, your latest mobile phone, or your kid’s diapers? You get it through the power of logistics.
If you think about it, logistics is at the heart of an entire economy. And it has a huge impact on how much you pay for the things you want and need, particularly in Africa.
Mohammed Akoojee (CEO of Imperial Logistics): If you look at just the cost of a product in Africa, on average, up to 75 percent of the cost is in logistics. Whereas in more developed markets it is 6 percent. Now, what does it mean? It means that an African consumer is at a disadvantage of getting a product. And our whole job is to get the product to the consumer.
JB: And it also means that you, as a consumer, are paying the additional price of inefficient logistics.
You're listening to Creating Markets and I'm Jasmin Bauomy, your host.
Today’s episode is a little bit special because it’s part one of two parts. In part one, we’re putting our finger on the pulse of an evolution. And in part two, we’ll be taking on a really hot topic, which is the logistical challenges of distributing a COVID vaccine across the African continent.
You just heard the voice of Mohammed Akoojee in South Africa.
MA: I'm Mohammed Akoojee. I'm the CEO of Imperial.
JB: He’s leading Imperial Logistics at a really pivotal time.
It's a time where technology comes to play even in the most hardened and traditional private sector, businesses, like logistics, for example.
MA: I think, the coolest part of our business is our ability to have data that nobody has. And we’re investing significantly in that because my view is that the best logistics company is going to be the one with the best information and data.
JB: Here’s the thing: Imperial doesn’t only have access to truck data, like traffic and driver behavior. But it also has consumer data because it offers market access.
MA: What we do is we take that information to be able to tell our clients what will sell at what price points.
And that's where I believe we're changing the narrative. If we invest in these type of digital initiatives in innovation and technology, we transform the business from a walls and wheels business to a business that's far more valuable in terms of IP and data and information.
I believe, as a logistics company, if we use the technology cleverly, we can also be in that position where we understand , consumer markets. We understand logistics at a very, very different level--it is not based on gut feelings based on actual data.
JB: Do you have the feeling that right now it's still based on gut feeling?
MA: Yeah, because we have not been an organization that thought about investing in these things.
So I think, the way we have evolved is, we've gone through a phase of the company where we've invested heavily in terms of our scale, from an infrastructure perspective, in a distribution perspective, and a geographic perspective. Now put technology on top of it and you take it completely to the next level.
JB: All this talk about “increasing efficiency” is just a little bit too abstract for my taste. So, I wanted to know what are the factors in the supply chain that need the most fixing?
MA: The biggest pain point is the infrastructure is poor. The road network, rail network, is very underdeveloped in many parts of Africa. And a lot of times you find product moving on road that should move on rail.
Rail transport is a lot cheaper than road transport, but because our rail networks are not as well developed as they should be, lots of products that should be on rail, ends up on road.
So that's the one thing is the poor infrastructure makes it a lot more expensive to move product around. You get a lot of times your truck stopped at a border for sometimes a week because there's not enough people or the systems are not efficient to move product through or to get trucks through the border posts quickly.
And if things take longer in logistics in the supply chain, the cost is higher.
JB: But there is light on the horizon in terms of the border issues and tariffs, because as of the beginning of this year...
News clip: It could be the start of something big. It's called the African Continental Free Trade Area.
JB: … the world's largest free trade area will start to come into effect.
News clip: The African Union agreed last year to create a free trade zone on the continent, the largest since the World Trade Organization was formed.
JB: It’s one of the biggest free trade agreements in the world right now with a potential market of 1.3 billion people and a gross domestic product of roughly two and a half-trillion dollars.
MA: It will be a game-changer in terms of trade flow between countries in Africa. I think it will stimulate our manufacturing sectors, which is much needed for job creation, which will make us less reliant on imports from all over the world.
And it will make us less of a continent dependent on commodities.
We tend to rely on commodities to stimulate or drive our economic growth. If we can become more competitive in manufacturing, create jobs, and a big part of it is logistics, because if you can make the borders borderless and allow for free trade without all the duties and the inefficiencies at border posts, we'll be a very competitive manufacturing continent because then we can compete with direct imports from other parts of the world.
JB: The new African free trade area will likely make it faster and cheaper to get items from point A to point B, and that will make it less expensive for people to buy those things.
However, Mohammed pointed out that there's another challenge that data-driven logistics would be able to solve: the lack of insight into informal markets.
MA: Now in a formal retail setup. The consumer goods companies know their customer very, very well because they do merchandising, they do brand promotions to understand their consumers better. How do you do it in an informal setup?
Lots of multinationals fail because they underestimate who the consumer is in Africa.
JB: What do you mean when you say they underestimate it? In which way do they underestimate the African consumers?
MA: They assume everybody will like what the Europeans like and what the Americans like and what the Western world likes. But that's not to say that that is what Africans like.
You can't assume that what you’re selling in other parts of the world is going to sell in Africa. And, a lot of them have got it right. So, I'm not saying that—I'm making a generalization—but I think, because of the complexity of the route to market and the lack of visibility in the supply chain, often brand owners don't actually know their consumers.
And that's a problem that, that we can solve.
JB: And there’s another problem Imperial is trying to solve.It is making the most out of the fleet of trucks they and their partners have across Africa. And so Mohammed has been particularly interested in a concept called digital freight exchange, which basically works like a shared taxi, but for transported goods. And so you could book the deliveries through an app or an online platform.
By doing that, you wouldn’t just do yourself or the logistics company a favor, you’d also be doing the environment a favor. And to start making it a reality, Imperial has recently invested in a startup called Lori based in Kenya.
News clip: Jean-Claude Homawoo, the co-founder chief product officer of Lori systems Kenya.
News clip: What Lori does is facilitate and add efficiency to the transportation of cargo on the continent.
News clip: Lori is the Kenyan term for a truck. Right. Yeah. I don't know when, when coming up with Lori, that was the idea behind it, transporting things from one point to another. What is the idea behind Lori? The idea behind Lori is...
MA: We now have got access to the technology to expand their technology in Southern Africa.
But at the same time, Imperial has got clients. We've got volumes. We've got loads that we can move. And we've got trucks that we could put onto the platform to do the actual delivery.
So we've now entered that space as a transport business. I believe it's the right thing. I think it differentiates us in the market and I'm quite excited by those kinds of developments. But that's the approach we will take in terms of investing in that.
We will find partners that have got the clever technologies and for me, it's a win-win. They've got the technology. They understand that world. We've got the legitimacy because we are a big player from a traditional transport perspective and the combination should be one plus one equals five. And that's our thinking on that.
JB: It's not just the access to innovative technology that Imperial is after when it makes those types of investments. What's also attractive is the access to people with entrepreneurial hunger and their technical skillset, and of course their creative approach.
MA: For us to employ those kinds of people, they think out of the box and they’ve got that different way of thinking. We don't have that. We’re corporate.
Yes, we obviously drive innovation and all of that, but the amount of cost to employ people like that.
And I think it's a combination. You have to employ people that think differently, but then you also have got to be open to those kinds of opportunities where you can take a stake in a startup.
It's a great idea. You put some money behind it, you put some capital behind it and you put some legitimacy and volume behind it. It can be a great business.
JB: To help push the logistics sector forward and its evolutionary path, and of course itself, along with it, Imperial has set up an innovation fund worth $20 million, and Mohammed sees great value in investing in African enterprises. But he does have a few tips for other investors who are looking to do the same.
MA: I think the trick to investing in Africa is you’ve got to be patient. Okay. You can't expect to overnight conquer Africa. It is not going to work. Forget about it. It's a long game.
So just think about the amount of commodities and amount of agricultural products in the amount of fertilizer, et cetera, that trades through this continent, you know, it's got masses of opportunity and potential. And it's coming, right? I'm really, what's the right word, positive on the long-term prospects of Africa, but I'm not taking a one-year or two-year view on that.
You know, we're taking a multi-decade view on the potential on the continent. And if you're not prepared to deal with the complexity and the volatility, then you shouldn't be in Africa.
And the other trick is diversification. So, as an investor, you have to be diversified in Africa.
So, people often ask me: You know, there's going to be a, there's this military regime. Or there's this terrorist movement that's operating this country or there's a risk that this government will be overthrown. You know, there's all of that call it volatility in the markets we operate in.
You can't predict that. You can't model for that in a spreadsheet. And the way I deal with it is diversification.
You can't have your eggs in one basket. You have to have investments in West Africa, East Africa, Southern Africa, North Africa. Because one day there will be a problem in West Africa, but East Africa will be fine.
One day, it will be in East Africa, West Africa will be fine. And that's the way you can deal with the complexity of that, through diversification.
It’s a lot of work and a lot of effort, but I believe the return on effort is there.
What more do you need? You know, to be a successful business, you need people, which Africa's got.
You need, you know, to be rich in commodities and I think there are, like I said. You know, there's the Africa trade agreement and all these positive things—those show good intent in terms of the efforts, the African countries getting their act together. Then you combine all of that, then you can sort of say, “There's a good opportunity.”
JB: Now, if this isn't a positive note to end on, then I don't know what it is.
That was it for part one of the interview with Mohammed Akoojee.
JB: Keep an eye out for the upcoming episode, in which we’ll be talking about how Mohammed and Imperial are involved in trying to figure out the distribution of a COVID vaccine across the African continent.
Thank you so much for listening. If you liked it, you would make us so happy if you told your friends and family about it and share it on social media.
If you want to learn more about Imperial and developments in the African logistics sector, particularly in e-logistics, I'll leave a link in the show notes, my colleagues have done some great work about that.
Also, if you're curious about the African Continental Free Trade Area, I'll link to some info too. Thank you so much to Mohammed Akoojee for taking the time to talk.
Creating Markets is a production of the IFC comms team.
Nicholas Alexander was the sound editor for this episode. And I'm your host, Jasmin Bauomy. And I'll talk to you again soon.