Seeds of Opportunity: The African Growth Series

In this week's issue, you will learn more about:

Pockets of Excellence in South Africa's Logistics and Transport Industry

Global supply chains have been under immense strain in the last two years due to the COVID-19 pandemic and the subsequent conflict in Eastern Europe. Fortune observed that 94% of Fortune 1,000 companies had experienced supply chain disruptions at the start of the pandemic. In August 2022, the Global Supply Chain Pressure Index showed that the pressure for goods and trade remained high while delivery times had reduced in the previous four months. This left the value chain vulnerable to disruption or even fluctuations in seasonal demand.

In South Africa, the transport and logistics sector has faced several challenges concerning reliability, efficiency, lack of policy and increased organised crime. As discussed in the Think Tank hosted by Frost & Sullivan, the lack of infrastructure maintenance is one of the main challenges affecting South Africa’s logistics industry.

“The lack of infrastructure adds to the challenges the industry is already experiencing, said Speaker Lars Veul. However, “the use of technology and centralisation in the future is likely to drive growth,” said Friedel Spies.

Deploying technology-enabled solutions such as drone technology, data, planning, digitalisation, and re-evaluating routes to market are some of the ways South Africa can bolster and redefine its logistics and transport sectors.

Incase you missed the Think Tank last week, you can watch the recording here - https://www.brighttalk.com/webcast/5562/565051

Kiana Steyn

Author, Frost & Sullivan Africa

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Global Population Growth: The Rise of Tech Infrastructure in Africa

As of the 15th of November, the United States estimates that the global population has reached 8 billion (from 7 billion in 2011). However, despite the exponential rate at which the population has increased, experts indicate that going forward, fertility rates may decrease in the Global North and become more concentrated in countries with more youthful structures, such as sub-Saharan Africa (SSA). More specifically, by 2100, it is estimated that the African population will grow to 3.9 billion (from 1.4 billion in 2022). While the population of Asia will still be the largest, at 4.6 billion – it has been forecasted to decrease by 100 million by the year 2100. The African population is speculated to not only increase threefold but to be the only region in the world where the population will continue to increase by more than 150 million between 2022 and 2100.

While the lack of current infrastructure in the continent is a constraint, analysts argue that for rising economies, the innovation economy is of crucial importance to ensure that socioeconomic needs are met as well as to accelerate the achievement of sustainable development goals. Throughout Africa, there are multiple indicators of growth in this space, such as current monthly service subscription figures, which have been forecasted to reach 615 million users by 2025 in SSA alone. Nigeria is a key figure in this market, growing by 1 million users between July and August 2022, with a teledensity figure of 109%. In addition to this growing demand for tech-based infrastructure, the tech ecosystem in the continent is rapidly growing. This is clear in the venture capital (VC) funding secured across Africa in 2022 (USD 1.5 billion) in comparison to 2016 (USD 400 million).

Last-mile delivery: Growing Opportunity Storm in Africa

Creating Strong African Economies on the Back of Efficient Transport Solutions and Investments

Well-functioning transport networks are the heartbeat for many nations, bringing with them several social and economic opportunities, at the city, regional, and country levels. For Africa, the home to 1.3 billion people and 2 billion by 2050, last-mile delivery is a growing opportunity storm transport sector. What gave rise to the storm, who will ride or sink and where are the highest areas with potential? African cities are seeing extraordinary growth, with over 60% of Africans expected to live in cities by 2030. With this comes higher demands for efficient supply chains for growing urban areas and the remaining rural space to avoid expansion of the rural-urban divide. 2020 highlighted the extent of this crack in many local supply chains, but also accelerated the growing e-commerce in Africa. Now two years down the line, there are lessons learned and several opportunities tapped evident by the rise in transport start-ups. In 2021 alone, 21 transport start-ups were established in Africa, addressing digitisation, last-mile delivery solutions, increasing safety, etc.

The African last-mile delivery market was valued at USD 1.14 Billion in 2021. By 2030 this is expected to reach USD 2.35 Billion growing at 8.45% CAGR between 2022-2030 (Figure 2). The industry can be segmented into categories by, Product, Industry, Sales Channel, Delivery Type, Service Speed, and Geography. Based on current trends, players with the fastest turnaround times across all categories will enjoy the largest growth. The waiting time for consumers has been cut from the previous 5-6 days to one-day or same-day delivery services. The shift has created ripple opportunities for establishing efficient sales channels. Digital communication platforms that allow for easy returns, exchanges, and increased connectedness between client and vendor are also gaining ground, with highlights seen in Figure 1, including the likes of Kobo360, WumDrop, and Pargo, etc. Aside from newer entrants, even larger industry giants are also creating innovative models to reduce shipping costs and ride this opportunity wave. Region expansions of both newer entrants and established players are in Egypt, South Africa, Nigeria, Ivory Coast, Tunisia, Ghana, Ethiopia, Zambia, Kenya, and other markets. With most of the regions, the growth needs to be met by additional investments in key infrastructure (physical and digital) to ensure long-term solutions.

Overall, the high-potential areas by segments in the next decade are expected to be through growth in B2C models (by product type), e-commerce (industry), the distributor segment (by sales channel), and parcel services (by delivery type). In South Africa alone, the projected revenue generated by eCommerce is USD 7.07 Bn for 2022, with expansion to USD 14.90 Bn by 2027 (at a CAGR of 16.09% between 2022-2027). User penetration is expected to rise from 45.1% in 2022 to 58.1% by 2027. This trend is compared to changes in the global market, but Africa has the potential to leapfrog failures from its predecessors. In Figure 2, with the growth in global funding for last-mile delivery solutions, Africa is not without examples to learn from. This beautiful storm could however be cut short if challenges in supporting infrastructure and restraints like corruption (delivery sector) are not addressed.

Africa is open and hungry for business and has taken strides in showing this. With key frameworks like the AfCFTA in place (targeting to increase intra-trade), efficient delivery solutions are here to stay and last-mile delivery is one of those.

Discover the latest infrastructure opportunities in Southern Africa on Thursday 1 December at 11h00 SAST where Hendrik Malan, Africa CEO for Frost & Sullivan Africa explores key findings from its latest report launched at COP27, Showcasing Africa’s Investable Infrastructure Opportunities.

You will discover:

Register here to attend this free webinar: https://lnkd.in/d588HpMw.

If you would like a free copy of this report, please send a mail to rebecca.mabika@frost.com.

AFRICA’S BEST PRIVATE CAPITAL EVENT COMES HOME!

Join industry experts at SuperReturn Africa’s Infrastructure Summit on 5 December as Frost & Sullivan Africa's CEO Hendrik Malan moderates the panel ‘Bridging the financing gap’ at 09h50 SAST.

 Panellists include:

 They will unpack:

SuperReturn Africa is a 3-day event taking at The Westin Cape Town from 5 – 7 December.

Take advantage of the discounts and get your ticket today: https://lnkd.in/dkPkxyxD

To find out more about opportunities in Africa, please contact Lynne Martin.

Lynne Martin

Sales Contact, Frost & Sullivan Africa

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lynne.martin@frost.com+27 21 680 3260