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New report shows growing interest for Africa for investments by the logistics industry

The recently issued Agility Emerging Markets Logistics Index report 2024 shows that logistics businesses are looking at the massive population growth and trade expansion spurred by the African Continental Free Trade Area (AfCFTA) for increasing their logistics investments in the continent. Despite the speed and ease of doing business in Africa is improving via investment promotion agencies and one-stop shop solutions, improved governance, growing transparency, improved rule of law, and stronger protections for property rights, the report also notes that infrastructure gaps and high logistics costs are still a challenge in the continent that need to be urgently addressed. We highlighted the potential of Africa for attracting investment in logistics services in this post on our blog.

The Agility Emerging Markets Logistics Index report is prepared yearly based on a survey of supply chain executives from every part of the globe. Published since 2009, the Index aims at providing a snapshot of sentiments about the markets that are deemed to have the highest potential for growth, based on the analysis of the complexity, connectedness and opportunities that each of them offers.

The Index ranks countries based on 4 main key areas: 1) domestic logistics opportunities, 2) international logistics opportunities; 3) business climate and 4) digital readiness. Indeed, these factors are considered as the main areas to look at when making investments in a country, especially by logistics providers, freight forwarders, and air and ocean carriers. These areas of analysis on which the Agility Emerging Markets Logistics Index report is focused provide an important lesson for African countries: if they aim at becoming logistics poles, they need to introduce improvements in each of these four areas.

Concerning the logistics costs, 71.7% of survey respondents stated that in 2023 they were higher compared to 2022 in a measure that varies from 1 to 15%, while another 32.1% reported increases between 15%-40%. It is interestingly to note that shippers expect to reduce in future these cost by increasing use of digital freight forwarding (or e-logistics) solutions from 37.8% today to 52% in the next five years. These solutions, which are spreading also in Africa, are believed capable of reduce cost, improving invoicing and payment procedures and customer service/account management.

Despite about 50% of the sample is quite pessimistic regard the 2024 economic prospects, believing that this year will be characterized by a global recession, there is a general optimism regarding Africa, as most of supply chain executives realize that this is the continent where to invest and expand their brands.

In this regard, the countries that are judged more interesting are: Egypt, Morocco, South Africa and Kenya. In terms of international logistics opportunities (and indicator that measures internal and external demand for trade intensive logistics services and the capacity of individual emerging markets to facilitate cross-border logistics operations), Morocco, Egypt, Kenya and Ghana are on the top of the list for what regards African countries. The ranking of these countries has been calculated on the basis of 4 factors: 1) size & growth of their international logistics markets; 2) size & growth of logistics intensive trade; 3) Infrastructure quality and connectedness; 4) time & cost of border procedures. With regard to this indicator, a negative ranking is given instead to Ethiopia and Uganda, which are indicated as losing grounds in international logistics opportunities.

Kenya, on the other hand, is deemed the Africa’s most digitally-ready country and generally it is ranked high in any of the four 4 key areas analyzed in the report.

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