According to the company’s website news release on February 16, 2023, so far, the 2020s have been both uniquely challenging and exciting, with unprecedented shocks and rapid developments that open new opportunities. In comparison to the first three years of this decade, 2023 appears to be somewhat more 'normal,' as the world regains its footing following the prolonged effects of the Covid-19 pandemic.
As with any other industry, several trends are expected to shape Africa's transport and logistics industry through 2023, and we highlight a few of them here.
Africa integrated services: expecting the unexpected
According to UNCTAD’s Review of Maritime Transport 2022, international maritime trade resumed in earnest in 2021 following the hard-hitting shocks of the Covid-19 pandemic reaching a total of 11 billion tons, which was still lower than pre-pandemic levels. Despite many countries relaxing their Covid-19 control protocols in 2022, the year was characterized by high levels of uncertainty with geopolitical unrest, rising energy costs, and rising inflation.
All of this points to an increasingly uncertain market that may be unprepared for any additional shocks, such as internal conflicts, further geopolitical unrest, a resurgence of the Covid-19 pandemic, or adverse weather conditions that disrupt movement.
Supply chains will continue to face various challenges and issues, just as they have in the past. Maintaining visibility of potential threats to their business, agility to pivot in the face of challenges, and resilience to weather the storm will be critical for logistics industry.
Infrastructure investment and economic uncertainty
Ports in Africa have recently undergone massive upgrades as the continent prepares to play a larger role in global trade. For the shipping industry, this indicates a potential increase in volumes to and from the continent. Their effectiveness in contributing to regional development will be limited unless intra-continental logistics infrastructure is developed.
Infrastructure development across the continent continues as part of the operationalization of the Africa Continental Free Trade Area (AfCFTA), with large-scale private and public sector investment. In the last six years, the Africa Development Bank has invested approximately USD 44 billion in African infrastructure.
Unfortunately, global economic uncertainty may come to negatively impact infrastructure investment on the continent. The World Bank foresees a slight acceleration in sub-Saharan Africa’s growth to 3.6% this year, up from 3.4% in 2022. The global economic slowdown isn’t likely to spare the continent, however, as the predictions of income growth are expected to be slower than inflation and rising cost of living. Per capita income growth in SSA will be at 1.2%, according to the World Bank.
Slowing infrastructure development is likely to have a significant impact on freight forwarders by slowing growth potential across the continent and negatively impacting demand. Visibility and agility will be critical for the industry as players attempt to weather short-term turbulence while also collaborating with policymakers to implement the AfCFTA vision.
Increased focus on digital transformation
Digital transformation is sweeping the continent and affecting every industry, including freight forwarding. Technology in freight forwarding is used to coordinate and control the transportation of goods.
A McKinsey Survey reported that 90% of supply chain leaders have been investing in digital supply chain management technology since 2021, and 80% expect to continue well into 2023 and beyond.
Africa is currently pursuing cross-cutting digital transformation as envisioned by the African Union in its 2020-2030 strategy. As a key economic enabler, the sector will join the rest of the continent in adopting digital technology to help deal with uncertainty and build resilience within the industry.
Digital transport and logistics players are looking to capitalize on strengths such as increased ability to predict and meet demand, opportunities to improve efficiency, increased opportunities to centralize and analyze data, and automation of routine tasks.
Sustainability is not just a buzzword
Africa is increasingly taking up more space in the global sustainability debate as the continent that contributes the least but is most affected by climate change. The continent hosted last year's global climate change conference, COP27, which highlighted shipping's contribution to greenhouse gas emissions. The International Maritime Organization took the opportunity to underscore the industry’s commitment to cutting greenhouse gas emissions by half by 2050.
McKinsey estimates that shipping contributes about 3% of global CO2 emissions which might rise by half by 2050. Transport and logistics sector players wield considerable power to be more deliberate about Environment, Social and Governance (ESG) initiatives and offer customers a competitive edge as well as tangible actions. These programs will in turn help accelerate the transition to a more sustainable logistics industry by choosing more environmentally friendly transportation products. Furthermore, as digitally enabled visibility of emissions pain points becomes more prevalent, they will be able to collaborate with partners that will support their carbon emission reduction targets and remain competitive.
Potential for evolution through integrated logistics
The logistics industry has always weathered storms to emerge stronger and more agile on the other side; 2023 will be no exception. According to the Sea Intelligence Consultancy, if no further unexpected disruptions occur, the industry will return to normalcy by March 2023. However, the nature of unexpected challenges is that they are unexpected. As the logistics industry evolves to meet new challenges, the goal is to remain agile, flexible, and resilient through 2023.
In conclusion, integrated logistics that streamlines processes and resources in ways that improve supply chain visibility, flexibility and collaboration will be key for businesses as they deal with uncertainty. By better understanding the entire supply chain, they can quickly identify potential challenges and make informed decisions to mitigate the impact of unexpected shocks.
