Logistics drive Africa’s trade and economic transformation

Logistics drive Africa’s trade and economic transformation

The Africa Day 2023 celebrations provided an opportune time to reflect on the continent’s progress and potential for growth.

Globally, trade has emerged as a robust economic growth and recovery driver, despite rising inflation and supply constraints, and Africa is no exception.

The DHL Trade Growth Atlas 2022 predicts that Sub-Saharan Africa (SSA) will have the third-fastest trade growth among major world regions through 2026.

However, while Africa’s economic awakening is not new, it has yet to harness its immense potential fully.

The Economic Development in Africa Report 2022, compiled by the United Nations Conference on Trade and Development (UNCTAD), sheds light on the underlying reasons for this perceived shortfall.

According to the report, the lack of export diversification has significantly hindered trade growth in Africa for the past 20 years.

During this period, Africa ranked as the world’s second least export-diversified trade region.

Fortunately, positive signs are emerging, providing compelling reasons to believe that unique opportunities await many business sectors.

So, what’s different this time?

Policymakers are moving beyond mere grand announcements and taking concrete steps to improve import and export processes and infrastructure.

They’re also embracing technology advancements at an accelerated rate and creating opportunities for mobility and connectivity.

With nearly two-thirds (60%) of Africa’s 1.4 billion population under 25, there is a significant surge in demand for goods and services.

Moreover, the accessibility of mobile money has reached unprecedented levels, further amplifying the ingredients for growth.

The business world has taken notice of these favourable conditions and is investing heavily in the region.

For instance, Volkswagen (VW) has built assembly lines in Ghana and manufacturing plants in Rwanda in addition to their existing production plants in Morocco and South Africa.

In the first half of 2022, African startups secured $3.5 billion in venture capital investment, showcasing the growing confidence and support for entrepreneurship in the region.

Additionally, the African Continental Free Trade Agreement (AfCFTA) has significantly boosted long-term prospects, fostering increased trade and economic cooperation among African nations. Furthermore, establishing over 200 special economic zones (SEZs) across the continent has attracted substantial foreign direct investment (FDI), driving economic growth in several countries.

Logistics as the key driver

Logistics is a critical driving force behind the anticipated surge in trade across Africa. It plays a pivotal role in connecting nations, facilitating trade, and propelling economic growth.

Logistics companies like DHL Global Forwarding (DGF) are well positioned to accelerate the continent’s GDP and trade growth.

DGF recently unveiled a transhipment hub in South Africa, comprising a 10,000 m2 warehouse and adjacent offices. The facility offers transport, logistics, warehouse solutions and international freight expertise for various industries to accelerate supply chain transformation.

The relationship between exports and economic recovery

African exports of goods and services have seen their fastest growth in the past decade, yet it still only makes up three percent of global trade.

To drive impactful export diversification, UNCTAD recommends implementing policies that promote inclusive access to innovative financing technologies for businesses of all sizes.

Introducing a new trade policy framework will help expand and diversify access to export markets while strengthening intra-regional trade.

AfCFTA holds the potential to reduce customs barriers between African countries, ultimately accelerating much-needed socio-economic growth. The development of multimodal corridors across the continent will also help unlock the benefits of the trade agreement, enhancing trade connectivity and facilitating efficient transportation of goods.

Challenges as a source of hope

The Ukrainian conflict and China’s travel restrictions in the past three years have fuelled the desire for African countries to become self-reliant.

For example, restrictions on agricultural produce like rice from India compelled African nations to focus on domestic production to meet their demands.

Conversely, gas shortages in the EU led to a shift towards Africa for assistance.

The EU’s demand for gas tripled, prompting Senegal and Mauritania to experience a tenfold increase in gas production, creating opportunities for higher returns.

Additionally, the increased need for affordable electricity resulted in manufacturers previously reliant on China turning to Africa to mitigate risk.

The future of Africa is in Africa

Promoting intra-African trade will undoubtedly bring stability and prosperity to the continent.

The pivotal role of the logistics sector cannot be overstated, as it possesses the means to unlock Africa’s abundant resources and facilitate seamless trade within and beyond its borders.

This time, the prospects for progress and prosperity are real, and by leveraging the logistics sector’s capabilities, Africa can establish robust trade networks and finally unleash its economic potential.

By Clement Blanc

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