Tech-enabled freight and delivery services are attracting attention from investors.
Where does a freight truck go after it delivers its cargo?
In much of the world, logistics companies use technology to match available vehicles with shippers that need to move goods, ensuring that every mile is paid for. But automating freight management has been difficult in Africa, where drivers are typically solo operators scheduling their own jobs. The process regularly results in “empty runs” – trucks with no cargo for the return route, forcing drivers to idle for days.
That’s part of what makes logistics costs in Africa almost double that of North America, according to data from supply chain firm Armstrong & Associates. The high price holds back trade and raises costs for consumers, making basic necessities like diapers, soap, and food unaffordable for many.
Africa’s supply chain is broken.
But technology created by African e-logistics companies is beginning to patch the supply chain gaps.
e-logistics companies are becoming well positioned to meet a projected increase in intra-regional trade when the African Continental Free Trade Area (AfCFTA) opens in 2021.
Digital platforms like Twende, africa’s first superapp, aggregate and then connect truck owners and drivers with enterprise clients who would have previously not have access to each other. By navigating scheduling, customs requirements, and payment via phone apps, these firms appear to be lowering the cost of doing business.
There is increasingly more investor interest in African e-logistics companies.
“A bigger pie”
E-logistics is the most promising area for immediate investment opportunities that involve AI [artificial intelligence] applications in emerging markets.
According to the African Tech Startups Funding Report, the total annual funding in this sector has jumped 6,746% since 2016.
Digitisation matching trucks and shippers saved customers about 7.1% on logistics costs in 2019 and helped drivers earn 27% more through optimisation and increased utilisation of their vehicles.
Widely adopted automation after the pandemic will lower the cost of logistics even further.
Companies with robust digital capabilities that allow them to provide cargo visibility/traceability and do business online are at an advantage during lockdowns and their aftermath.
Technology customised for Africa is important because the continent’s logistics sector is fragmented, with standards, requirements, and costs that vary country by country.
Enactment of the Africa free trade agreement aims to confront these challenges by creating a single market for goods and services, laying a foundation for the establishment of a continental customs union. The trade agreement aims to reduce tariffs on 90% of all goods and facilitate free movement of goods, services, capital, and people. It promises to unite a market of 1.3 billion people and a combined GDP of $2.6 trillion.
A large number of African companies can benefit from the combination of tech-enabled logistics and a continent-wide, streamlined trade process. The new zone will make the pie bigger for everybody.
Automating the logistics process can protect the drivers. E-invoicing assures that they will be paid on time, digital signatures limit their exposure to Covid-19, and other technology helps drivers with insurance, fuel cards, vehicle maintenance, and saving money to eventually purchase their own trucks instead of leasing them.
After all, they’re entrepreneurs.
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