African supply chains have never faced a challenge as great as the restrictions on movement amid the global COVID-19 pandemic. As a way to reduce infections, many governments imposed lockdowns that adversely affected businesses for the greater part of 2020.
The innovation around the supply chain, however, was a silver lining for many economies in the region, according to the International Finance Corporation report, E-Conomy Africa 2020.
“E-Logistics companies have implemented many creative solutions in response to the pandemic; overall, the industry is poised for rapid growth post-COVID-19, particularly as supply chains in sectors such as agriculture, manufacturing, and basic goods would be increasingly deemed critical,” the report said.
The challenges around supply chain management, including poor communications and transportation infrastructure, were a pain point for Africa’s trade scene even before the pandemic hit. In addition, lack of access to financial services often locked small businesses and individual producers of goods out of supply chains.
IFC sees the chaos in the informal business sector — which includes small-scale economic activity that often is not taxed or monitored by governments — being tamed with the rise of supply chain management platforms. More broadly, adoption of emerging technology is already changing marketplaces across Africa by bringing down the cost of trade.
Supply chain experts believe that the COVID-19 pandemic has fast-tracked the integration of digital supply chain management into business, which in turn could be a game-changer for African economies.
Supply chain inefficiencies raise costs
The state of infrastructure and inefficiency in doing business has increased the cost of economic activity in Africa. IFC estimates that there is a shortfall of infrastructure investment of between US$67 billion and US$107 billion which is imposing a 40% to 60% surcharge on the cost of goods.
Mark Mwangi, the CEO of Kenyan e-logistics platform Amitruck, agrees. “If you look at a product like toothpaste, 60% of its cost in Africa is transport. It is a huge, massive problem. A lot of that is to do with inefficiency,” he told CIO Africa.
E-Logistics companies are part of the bigger supply chain sector, providing procurement, maintenance and transportation services aided by digital tools. Amitruck uses big data analytics and an IoT network to offer a service that tracks vehicles and goods, and is supporting supply chain companies such as Twiga Foods, which supplies 8,000 vendors with produce from approximately 17,000 farmers.
Copia Global, a Kenya-based supply chain technology company, takes a different approach. Through its portal, customers can select the goods they would want to be sent to any part of the country and Copia delivers them to the nearest partner agent, where recipients can pick them up.
Copia has also engaged a fleet of transport trucks to ensure delivery. Through the portal, supplies can be tracked for both the partner agent and the recipient. Agents are individuals who earn a commission for providing pickup locations for the goods.
Cutting out middlemen in the supply chain has also benefited the goods market in Africa by ensuring a more direct supply of products to consumers.
In Morocco, Chari, which offers a business-to-business e-commerce app, has seen their business grow as they supply FMCG (fast-moving consumer goods) to small retailers across the country.
“We have seen a 60% growth over the past one year and are seeking to expand to Tunisia,” CEO and Co-founder Ismael Belkhayat said. The company seeks out small retailers and offers them an efficient way to order goods for their shops, he said.
And it is not only FMCG that are at the heart of these new supply chain platforms. Zaidi Technologies, an up-and-coming dairy supply chain company is creating demand for products such as milk from smallholder farmers in Kenya.
“Dairy farmers enter their daily milk litres on our digital platform. Zaidi Technologies then pays them for their milk, process it through third party processors and sell the milk through our milk ATMs,” CEO Graham Benton explained. Milk ATMs are milk vending machines located in business centres in major towns in Kenya.
“We help farmers who do not have access to cooperatives and we add value to their produce through providing market access,” he said. The company currently processes 800 to 900 litres daily with 90% of the proceeds going back to the farmer’s pocket.
Supply chain innovators provide financing
A major problem facing small retailers is lack of access to financing to build their businesses.
“Businesses in Africa’s informal sector face higher costs in dealing with suppliers or clients due to poor logistics, the multiplicity of middlemen, and the prevalence of cash transactions,” the IFC report states.
Zanifu, a company seeking to solve both the supply issue and financing for small traders, is already making headway in Kenya. It currently caters to nearly 5,000 retailers across the country. It works with multiple manufacturers and over 200 distributors via a single platform, designed to streamline business processes.
The company offers credit facilities to retailers, according to founders Steve Biko and Sebastian Kilimo. In their view, financing can enable the faster movement of goods while ensuring swift payments for the manufacturers and distributors.
“We play in the downstream section where we provide credit to players who can’t access any credit in the market,” Biko said. He explains that the need for collateral or financial records bars some of the small players from accessing credit and growing their business.
“We don’t give money directly to these retailers, we give them stock on credit,” Kilimo elaborates. The idea is that is way, manufacturers as well as retailers get to sell more goods in the market.
Payment for distribution services is also problematic, according to Mark Mwangi of Amitruck, as distributors often have to wait for 30 to 90 days for invoices to be paid. This kills business and increases the cost of deliveries. Amitruck seeks to offer to financing to drivers who deliver goods, to be paid immediately after the delivery is made.
Greater efficiencies in supply chain components including financing, distribution and sales, are showing promise in Africa, allowing small-scale farming or community shops to engage in different marketplaces and drive growth in their countries. As the digital platforms used by e-logistics and other supply-chain companies mature, this trend is likely to grow.