Vital to Africa’s economic modernization are logistics and transportation partnerships. Per the African Development Bank, ~$130-170B in infrastructure investment is needed annually to meet the 2025 agenda. Africa is logistically inefficient with its largest market Nigeria having 3X longer auto part import times and 5X higher transport costs than the US.
Strategically a cross continental logistics and transportation network is required to reach the desired integration of each countries supply chain (SC) to relieve key bottlenecks and build-out cost-effective capabilities. Strong networks innovatively integrate where possible and implement, as necessary. China, for example, leveraged the physical and financial infrastructure when building its ecosystem. US and European companies used the national postal systems and companies, like FedEx and UPS, to offer a portfolio of transportation, e-commerce, and business services in partnership with a far-reaching credit-card network.
Smaller markets pop-up when integrations are insufficient and disruptive red tape is met when crossing borders. Africa faces unique challenges such as unreliable roads, street signs, untrusted networks, with only a 10% bank card usage. Therefore, investments may be impacted as the implementation of 1st time solutions are a real need.
Integrated inter- and intra-country network build out reduces the cost of doing business while offering a competitive advantage. The African Continental Free Trade Agreement (AfCFTA), designed to tackle border tariffs, is on target to produce the world’s largest free trade area since the WTO. Like China, the entrepreneur and multinational alliances are constructing a backbone vital to a strong economy. As of February 2023, 54 union member states signed AfCFTA where partnerships are pivotal for the transformation.
A lithium and battery SC example simply articulates Africa’s integrated network. The global lithium market is valued at $15+B by 2028, at a CAGR of 11.75%. Prior to Covid-19, Africa was forecasted to be a world leader in lithium with 50% of the Global Value Chain (GVC) in mining, petroleum, minerals and a combined 4.38M tons of the resources. Processing and manufacturing are known gaps. Connecting rural communities to regional SCs while investing to develop the processing and refining industries definitely accelerates the critical path integrations.
AfCFTA and Regional Comprehensive Economic Partnership initiatives, known as bankable projects, should be launched to connect the countries’ economies, build platforms that match supply to demand, create online access and best practices by removing burdensome operational processes. Competitive advantage initiatives are strategically fundamental like when aligning Africa’s talent pool, average age of 18, to future labor skills, in comparison to China’s at ~37 and the EU’s at ~43.
Research Links:
- https://cleantechnica.com/2023/01/30/eu-could-end-reliance-on-chinese-battery-supply-chain-by-2030-says-te/
- https://www.miningweekly.com/article/south-africa-urged-to-consider-its-contribution-to-the-global-battery-value-chain-2022-08-26/rep_id:3650
- https://link.springer.com/article/10.1007/s11027-020-09911-8
- https://www.esi-africa.com/southern-africa/opportunities-to-develop-lithium-ion-battery-value-chain-in-south-africa/
- https://thirdbridge.com/lithium-value-chain-demand-growth-and-supply-chain-bottlenecks/
- https://oecd-development-matters.org/2022/02/22/value-chains-in-africa-what-role-for-regional-trade/
- https://www.theafricareport.com/18341/the-3-trends-shaping-the-future-of-logistics-in-african-markets/
- https://www.worldbank.org/en/publication/wdr2020/brief/world-development-report-2020-data
- https://ec.europa.eu/commission/presscorner/detail/en/IP_22_4547
- https://www.news24.com/news24/africa/news/africa-could-rescue-us-as-lithium-demand-projected-to-surge-42-times-20230208
- https://rfxcel.com/africa-supply-chain-1/
- https://rfxcel.com/supply-chain-africa-2/
- https://www.dw.com/en/africa-begins-to-emerge-as-car-industry-hub/a-59500532
- https://efaidnbmnnnibpcajpcglclefindmkaj/https://nora.nerc.ac.uk/id/eprint/530698/1/Lithium_in_Africa_Report.pdf
- Closing Africa’s Infrastructure Gap – Africa.com (www.africa.com)
- Over $130bn needed annually to bridge Africa’s infrastructural gap – Bawumia (citinewsroom.com)
- Investing in African logistics: Unpacking the opportunities (howwemadeitinafrica.com)
- https://www.weforum.org/agenda/2019/09/economic-growth-sub-saharan-africa-challenges-risks/