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Africa gearing up – future prospects in Africa for the transportation & logistics industry, according to PwC report

While South Africa tops the list for having the most developed transport and logistics sector in Sub-Saharan Africa placing it on a par with some of the world's industrialised countries, logistics companies are looking to the rest of Africa for investment opportunities.

South Africa is also regarded the best performer in Africa when it comes to trade facilitation logistics and among the best in terms of transport infrastructure. These are some of the findings of PwC's 'Africa gearing up: 'Future prospects in Africa for the transportation & logistics industry report issued today.

"As Africa has risen to prominence as an investment destination over the past few years, so the role of transportation and logistics has taken on greater significance.

"Whether moving resources off the continent or bringing goods and services into its burgeoning economies, Africa's future growth and development will depend on the quality of its infrastructure and the efficiency of its transport networks," says Klaus-Dieter Ruske, PwC Transportation & Logistics Global Leader.

The research was carried out by PwC together with Econometrix, South Africa's leading economic consultants. The report focuses on 10 of Africa's leading developing nations: Algeria, Angola, the Democratic Republic of Congo (DRC), Egypt, Ghana, Kenya, Mozambique, Nigeria, South Africa and Tanzania. The countries were chosen based on their economic significance, strong growth in recent years and their potential as transportation and logistics gateways.

The report aims to give investors and other interested stakeholders an insight into the key economic regions in Africa. Interviews were carried out with executives from African, European and Asian companies that operate in Africa.

Growth sectors drive demand for transportation and logistics services

"There is a fast growing demand for the vast raw commodities available on the African continent. Africa has an abundance of oil, gas, and mineral resources and significant opportunities for agricultural expansion. For logistics companies prospects in the retail and manufacturing sectors are also significant and lead from a period of sustained growth experienced by many African countries," says Andrew Shaw, PwC Transport & Logistics Leader for South Africa. Observers expect that African retail markets will grow substantially over the next decade.

Africa's transport and logistics infrastructure

On the whole, Africa's infrastructure lags well behind the rest of the world, according to the report. There are substantial differences between the regions. Although South Africa continues to show strong infrastructure capability it has the lowest projected annual growth at 3% for the period 2012 – 2017 of the ten economies surveyed, according to International Monetary Fund (IMF) statistics. On the other hand, Nigeria and Kenya have the highest projected rates at 6.8%.and 6.2%, respectively.

"While none of the African countries we analysed comes close to the US and China, South Africa's overall transport infrastructure scores almost identically to India's, and better than Indonesia's, lauded by many as one of the next economies to watch," says Shaw. South Africa is also ranked the best logistics performer on the continent, according to the 2013 Logistics Performance Index.

"Logistics strategists can't afford to ignore the African market of the future. The global transportation and logistics industry can play a vital role in Africa's efforts to gear up – building its infrastructure, enabling supply chains and distribution networks, providing mobility – and ultimately helping create jobs for its people."

Intra-trade in Africa tends to be low in comparison to its global counterparts because of poor infrastructure and because most economies continue to be resource based. Currently only about 11% of Africa's trade is with other African trading partners, compared to Asia where half the trade is between the countries in that region. There are infrastructure barriers to trade. It takes a substantial amount of time and money to cross borders and trade because of the poor logistics and transport infrastructure. Trade agreements are an imperative. African free trade zones and the removal of tariff barriers are key.

The Chinese government and State-Owned Enterprises are also looking to Africa for hydrocarbons and some raw materials. In return they are financing massive infrastructure projects in the sub-Saharan region. For example, China is supporting a host of infrastructure projects in South Africa, Tanzania, Ghana and Mozambique.

Gateways to connect Africa to the rest of the world are also important. There aren't enough ports to handle existing traffic. However, this is set to change, with plans in motion to build or expand five major ports: in the west at Barra do Dande and Lobito in Angola, and Lekki in Nigeria, and in the east at Musoma in Tanzania and Lamu in Kenya.

Many companies looking to expand into East Africa are looking at Kenya as their preferred entry point. Kenya is still one of the easier African countries in which to do business – it has flexible labour regulations and investment laws that allow foreign investors to receive the same treatment as local ones. But Kenya's current transport infrastructure is inadequate to meet the country's needs and significant improvement is required in the sector.

A lot of companies expanding into West Africa see Nigeria as a gateway into the region. The country ranks as the world's fourth fastest growing economy, largely driven by oil exports. Nigeria is the largest market in the region, being home to almost 170 million of the 250 million people living in West Africa. Fifty percent of the population is urbanised and the middle class is growing rapidly. This makes it extremely attractive for the retail and consumer sectors.

With its Vision 20:2020, Nigeria aims to be among the world's top 20 economies by 2020. However, obstacles to the ambitious target remain in the form of inadequate infrastructure. "Notwithstanding these challenges, we believe that Nigeria will continue to be a leading destination for international investors and that this, in turn will generate strong potential for transportation and logistics providers."

Ghana is also making strides to establish itself an important gateway to the West African market. Ghana has a favourable business environment. Trade and economic factors also favour growth.

The Organisation for Economic Co-Operation and Development expects Mozambique will become the fourth largest exporter of liquefied natural gas globally and second-largest in Africa after Nigeria. However, Mozambique's growth potential remains constrained by poor transport infrastructure.

Shaw says: "Each country in Africa has its own value proposition. There is a strong need for the road, rail, air and ports transport networks in some economies to be improved. Transport and logistics infrastructure has the potential to unlock the economic growth value of the continent. It can also provide businesses with great opportunities for growth and creation of employment."

Ruske concludes: "Smart investing in Africa means investors need to understand key regions and local markets.

"If they make the decision to expand in Africa, they will need a solid long-term strategy. The continent needs better transport infrastructure, more connectivity across borders, and an improved business environment to reach its potential."

Contact us

 Rianté Padayachee

Rianté Padayachee

Media and Communications Specialist, PwC South Africa

Tel: +27 11 797 5727

Verena Pillay

Verena Pillay

Integrated Content Lead, PwC South Africa

Tel: +27 (0) 11 797 4873

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