Africa is big and resourceful, but it has ironically been unable to transform that into wealth, and there lies one of its biggest challenges. In a recent piece, I did a supply chain analysis of Africa’s new free trade agreement to show what the continent must do to create an efficient supply chain infrastructure, which is often the backbone of prosperous free trade areas.
Here, we will look at how Africa can play a pivotal role in the global value chain and use it as a springboard to achieve economic prosperity for its fifty-four nations. The time has come for Africa to stop holding a peripheral role in the global supply chain.
The state of Africa’s supply chain
In simple terms, a supply chain refers to the network of processes involved in producing, distributing, and delivering goods to a consumer. With this in mind, it becomes easy to see how underdeveloped the African supply chain is, from production to logistics, communication systems to utilities, and payments. These factors make supply chain management in Africa tedious and below international standards.
Infrastructure deficits are the bane of African countries’ logistics and supply chain management. The e-Conomy’s 2020 report revealed that the shortfall in African infrastructure investments is between $67–$107 billion annually, with 600 million Africans lacking access to the electricity grid
With rich natural resources and sixty-five percent of the world’s arable land and mineral reserves, many African countries have varied resources required to produce critical products that the world needs. This makes Africa valuable to the global supply chain. However, there is a gap in the infrastructure needed to boost trade within and between Africa and the rest of the world.
Infrastructure deficits are the bane of African countries’ logistics and supply chain management. The e-Conomy’s 2020 report revealed that the shortfall in African infrastructure investments is between $67–$107 billion annually, with 600 million Africans lacking access to the electricity grid.
Road transportation is poor and insecure because of insecurity in some areas and unpaved roads in others. Air travel within the continent is one of the most expensive in the world, yet Africa’s rail transport is below 20 percent of total freight transport volume. Also, transportation through the waterways is about 40–60 percent higher than the global average despite being surrounded by the world’s longest waterways.
Aside from infrastructure, which is a lifelong challenge of the African supply chain, policy changes, lack of data, and technological advancement affect trade within the continent. Despite the above situation and recurring challenges, African countries remain critical in the global trade supply chain. The recent post-pandemic outlook shows a tremendous benefit if Africa takes up the opportunity to create prosperity through its supply chain network.
Opportunities to create prosperity through supply chain infrastructure
Africa’s poor infrastructure network affects its supply chain and trading activities. For instance, there are inadequate road networks in the sixteen landlocked nations in Africa. Asides from that, poor port administration and lack of railway networks hurts the continent too.
Although, the African Union’s (AU) Agenda 2063 has several flagship projects to boost infrastructure investments. One is the connection of African capital cities and commercial centres through a high-speed train network. This aims to facilitate the movement of goods, services, and people. Also, to reduce air freight expenses, Agenda 2023 has proposed the Single African Air-Transport Market (SAATM) to increase market access to freight air services.
I firmly believe that these problems are opportunities in disguise, which, when rightly fixed, has the potential to create prosperity for Africans, especially those in the rural areas whose goods can now be easily transported to cities. And also, with a connected high-speed train network and a single African air transport market, there will be more jobs for young Africans, thereby reducing the unemployment rate.
Nigeria’s Maradi rail line connects Kano (Nigeria) to Maradi (Niger republic), and China’s One Belt One Road (OBOR) project that plans to join 20 African countries are some of the required infrastructures that will transform logistics and supply chain activities in Africa.
Manufacturing imports into Africa are still greater than their exports to other countries. Hence, Africa needs to improve its manufacturing output to meet its large market size and contribute more to the global supply chain. To realize this, Agenda 2063 proposed the Continental Commodities Strategy to promote intra-African trade and manufacturing.
Read also: The impact of e-commerce on supply chain
The strategy articulates that African countries create more value additions for their products within the regional value chain by trading more with each other. Also, African nations should be able to streamline agricultural production and transportation of raw materials to manufacturing plants within the continent and automate the distribution of finished goods to African consumers.
African leaders need to create a business environment and policy that encourages investors to bring capital and entrepreneurs to start up production in every corner of the continent.
Storage and distribution
Demand for the best warehouses continues to eclipse supply across most African cities. For instance, the Nigerian market has a long-term scarcity of quality warehousing, which remains unfulfilled. In Kenya, the market is more responsive to the demands for prime and quality warehouses. When the African continent figures out its warehousing problems, it will enhance agricultural value chains and reduce food production losses.
With eCommerce booming in Africa, with a projected annual sales of $75 billion by 2025. Africa’s distribution channel must become fully automated, and factors like payments, data, and customs regulations must aid and not hinder the logistics sector.
Africa’s rapidly growing population shows that it will become one of the biggest employers of labour in the near future. The continent is steadily becoming an attractive labour hub for trade and, more recently, through tech startups and SMEs. According to McKinsey, seventy-five percent of the growth in Africa will come from small and medium-sized enterprises (SMEs).
With the African Continental Free Trade Area (AfCFTA,) creating a single, borderless African market can be realized when stakeholders commit to building an efficient supply chain infrastructure. This implies that African regulators and governments must make policies to favour doing business, attract investment for its teeming youth population, and hone the political will to improve its supply chain system.
Evidence has shown that Africa is the new “bride” of many developed nations and international businesses. Still, it has a lot of work to eradicate poverty and create economic prosperity for its people. Its most significant opportunity is developing its supply chain systems, from fixing its lagging infrastructure to creating an enabling environment for manufacturers to thrive to attracting the investment needed to build storage and distribution channels that ensure the free flow of goods within and from Africa to the world.