Intra-African trade has long faced challenges due to the continent’s inadequate logistics and freight sector. However, with the implementation of the African Continental Free Trade Area (AfCFTA) agreement, there is expected to be a significant influx of investment in the logistics and freight industry to support the continent’s economic expansion.
A recent report by the World Economic Forum titled “AfCFTA: A New Era for Global Business and Investment in Africa” explores how logistics companies are responding to the opportunities presented by the free trade agreement.
The logistics sector in Africa has struggled to keep up with the continent’s growing population and dynamic private sector. The AfCFTA aims to address these challenges by promoting frictionless trade among African countries. This agreement is expected to boost investment in the continent’s logistics sector, leading to transformative benefits for the overall economy.
Currently, African countries import approximately $36.8 billion worth of freight and logistics goods annually. With the implementation of AfCFTA, this amount is projected to increase significantly. The World Economic Forum predicts a 28% rise in intra-African freight demand by 2030, resulting in the need for almost 2 million trucks, 100,000 rail wagons, 250 aircraft, and over 100 vessels.
Maritime trade is also expected to see a substantial increase, with projections indicating a rise from 58 million to 132 million tonnes by 2030. This growth will particularly benefit the agro-processing trade sector.
The AfCFTA presents a major opportunity for African companies and individuals to benefit from the expansion of the logistics and freight industry. As the demand for logistics services increases, especially with the removal of trade barriers and reduced commodity prices, African manufacturers and the mobility sector stand to gain significantly.
The rise of digital logistics companies that offer cost-effective solutions and promote sustainability is also expected to revolutionize the industry. Furthermore, initiatives to bridge the urban-rural divide and improve infrastructure, such as cargo drones and inland waterways, are set to integrate rural communities into the growing economic system.
Large logistics companies have traditionally been expensive for African businesses to engage with, but the emergence of digital solutions is making logistics services more accessible and efficient. Business-to-business (B2B) logistics is expected to dominate the sector in the short- to medium-term, with significant growth opportunities for companies providing B2B services.
Case studies of global companies successful in Africa highlight the importance of leveraging macroeconomic trends and key enablers to capitalize on the opportunities presented by AfCFTA. Companies like Agility Logistics, Menzies Aviation, DP World, and the African Finance Corporation have strategically invested in infrastructure and services to align with the growth potential of intra-African trade.
In conclusion, the AfCFTA is reshaping the future of the transport and logistics sector in Africa. New investors in this high-potential industry can look to these success stories as guideposts for navigating the opportunities presented by the free trade agreement.
