International Finance
Logistics Magazine September-October 2019 Issue

Technology uptake drives African logistics innovation

African logistics companies are driving innovation using drones, mobile phone apps, and blockchain

The African logistics market, which is currently estimated at $150 billion, is seeing rapid innovation, especially in terms of automation and blockchain. This development, in the once traditional sector, is in part, because of the increasing smartphone penetration in the continent, according to Obi Ozor of Kobo360.

The CEO and cofounder of the Nigerian freight logistics startup, further told International Finance that the timing is right for logistics innovation in Africa considering the sector has witnessed tremendous growth over the last two years, thanks to the rising popularity of both ecommerce and technology that are enabling goods to be transported both locally and internationally.

Hennie Heymans, CEO, DHL Express Sub Saharan Africa too had similar views on the sector. He told International Finance that the Germany headquartered logistics giant is seeing positive growth in its Sub Saharan African (SSA) logisitics business because of various factors, the primary being, the rise in ecommerce popularity and increased mobile penetration. And to make the best of it, DHL, he said, is using the latest innovations from drones to mobile applications.

Drones, mobile applications, and blockchain lead innovation drive

While mobile apps are being used to support ecommerce growth in the region, DHL has piloted drone technology in Tanzania for medical deliveries. With regard to the former, Heymans said, that with a focus to embrace digitalisation, DHL has launched a new mobile app in eight African markets for logistics, with plans to launch this in a further 40 countries across Sub Saharan Africa by the end of 2020. The platform he explained, allows DHL customers to track and coordinate the delivery of their shipments with greater ease and convenience.

Additionally, it has also launched the DHL Africa eShop, a new mobile and desktop app, aimed at improving the online shopping experience for Africa-based consumers by allowing them to make purchases directly from more than 200 US and UK based online retailers, with all shipments delivered by DHL Express, to the shopper’s doorsteps. While this not only provides convenience, speed and access for online customers in Africa, it also allows them to get connected with global brands.

The third innovation by DHL in the region is related to mobile payments. DHL is leveraging the capabilities of mobile money platforms to enable for the development of a cashless trade environment which will in turn circumvent the challenges that cash presents, Heymans explained.

With regard to the use of drone technology, DHL has completed a pilot project in 2018 entitled ‘Deliver Future’ for transporting medical deliveries to 400,000 residents of the Ukerewe island district of Lake Victoria in Tanzania. Across six months, DHL’s drone made about 180 take-offs and landings, flying 2,200 kilometres to transport blood samples. This helped facilitate faster blood test processing and diagnosis.

Meanwhile, with regard to innovation at Kobo360, which uses big data and other technologies to aggregate end-to-end haulage operations and present it on an Uber like app, Ozor said, the startup offers various innovative features to both customers and truck drivers. While its customers have a tracking feature that provides 100 percent visibility, allowing them to view the journey of their cargo from the start till the end, its drivers have been provided with the option to use the app in multiple languages in order to suit the different backgrounds they come from. Additionally, it has also implemented a first of its kind bidding tool for both drivers and customers to assess the price of a trip before selection.

Such innovation, he said is helping reduce frictions that exist in the supply chain, by turning a disparate system devoid of order into a fully integrated one with deep visibility and transparency across all phases of operations. Kobo360 further claims that solving the serious disconnect between getting goods from one point to another, on time, with full visibility and product security, further empowers different sections of the society such as rural farmers to enhance their earnings by reducing farm wastages and various manufacturers by helping them find new markets.

In addition to these existing features, the startup, which recently raised $30 million from Goldman Sachs, Y Combinator and a few other companies, is in the process of building a Global Logistics Operating System (G-LOS), a blockchain enabled platform that will leverage technology to combine all activities in the lifecycle of the supply chain ecosystem into one robust system. This, Ozor said will allow Kobo360 to transition, more towards supply chain services, ensuring they work harder, smarter, and faster for all stakeholders on the Kobo platform.

With regard to the use of blockchain, Tmx Global seems to be a frontrunner in its implementation in the African logistics sector. The Kenyan company which provides solutions for the domestic, regional and international courier industry, has recently launched the TMX Global Coin. This is a decentralised system based on blockchain technologies that includes supply chain stakeholders from raw material, components and parts suppliers, to finished goods and supplies transporters, and finally to the customer.

It allows them to communicate with each other with the objective to reduce costs and increase shipping efficiencies by integrating information about shipments onto a secured platform, accessible to these users. Apart from transparency, it is expected to solve challenges such as delayed or inefficient deliveries, lack of accountability and poor tracking.
Meanwhile, another startup which is leveraging innovative applications in the growing logistics market is Ghana headquartered Aquantuo, which helps its customers to receive purchases made online to its doorstep.

In terms of the innovation it has deployed so far, an Aquantuo company representative told International Finance that it has applied GPS, instant messaging, online and mobile payments, mobile technology and sms notifications to logistics, all in a way, that any item anywhere in the world can be purchased and delivered to the doorsteps of its clients in Ghana.

In addition, Acquanto also allows for peer-to-peer logistics, where people travelling to or from Ghana, partner with the company and use their extra luggage space to transport a product either into the country or outside it. In both the cases, their technological solutions allow clients to, check the status of their package, track their request, communicate real time with Aquantuo or any of its transporters and finally make online payments.

A few other such African logistics startups that are leveraging technology to boost efficiencies include, Swiftly, a Ghana startup which allows its clients find the best freight quotes, Sendy, a Kenyan startup whose platform facilitates both ecommerce door to door deliveries and enterprise level logistics solutions, mzansigo, a South African on-demand logistics company which leverages technology to connect truck owners with people seeking to move equipment, furniture or other bulk materials within the city and Pargo, a South African smart logistics company that solves the challenges of last mile distribution by allowing consumers, companies and couriers to send and receive parcels at Pargo points located at convenient retail stores across Southern Africa.

High customs duty and other tariffs hamper growth

So while there are an abundant number of startups emerging in this space, there are a few challenges the sector, faces as a whole. According to DHL’s Heymans, these include export and import bans, variable import tariffs and quotas, restrictive rules of origin and price controls, poor internet and mobile penetration in certain areas, and finally, congestion and weak infrastructure in certain areas.

The Aquantuo representative meanwhile said one of the biggest challenges is the high customs duty charges for incoming goods into Africa, making it unattractive for businesses and individuals to import various products needed to run their businesses or to stay competitive.

Improved infrastructure and policies needed

The challenges that make products exorbitantly priced, the Aquanto representative said could be solved, if the government reduced these charges. With regard to challenges for logistics startups in particular, the representative said most of the financial support was being received from private equity firms and it would be beneficial to see such support from the governments as well.

Meanwhile, Kobo360’s Ozor said there was still a long way to go as Africa in terms of transport connections and infrastructural changes and that the government could play an active role in this department. “In order to make the industry work to its full potential, we need a working transportation system from rail to roads to sea transport, as well as favourable policies to aid movement of goods across African borders,” Ozor explained.

DHL’s Heymans added that the overall success of the logistics sector in Sub Saharan Africa lies in investing and building strong collaborative partnerships across government, business and communities. Citing research by Ecobank, he said that Africa rates amongst the lowest with regard to self-consumption of local produce, with less than 20 percent of what is produced staying within the region and 80 percent being exported, thus signifying the importance of logistics in Africa.

‘Brand Africa’ and AfCFTA could further boost sector

However, despite these setbacks, Heymans said the future potential of the sector was positive as the opportunities far outweighed the challenges. “As mobile penetration continues to grow, it provides greater opportunities to streamline logistics and increase visibility along the supply chain. Mobile money also presents huge opportunities to streamline transactions – while there are only a few countries that have stable mobile money solutions, it is gaining traction across the region and we see the immediate benefit of embracing this technology.”

He further added that with the popularity of ‘Brand Africa’ increasing exponentially in recent years, it provides great opportunities for businesses on the continent, making the time ripe for retailers to think beyond boundaries and open up their businesses to international trade.

Meanwhile Kobo360’s Ozor said the recently launched Africa Free Trade Continental Agreement (AfCFTA) could catalyse intra-African trade and that a proper execution of this trade agreement, between 27 African Union member states, could further boost the sector as it would help explore the untapped potential of African trade. He however concluded that while all efforts should be made to improve technology adoption in the continent, the best solution would be to ensure a continuation of innovation in this sector, as it would help make the sector stay relevant and further boost the economy.

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