Free trade: get set to deliver a golden African era
THE FREIGHT logistics industry is huge. By 2025, the global market is expected to reach more than $15 trillion (R202trln), and so far, the global logistics industry has seemed almost immune to disruption.
Companies have certainly leveraged IT to make their internal operations more efficient, but for your average consumer or small business, comparing quotes is still a very opaque process. However, as online shopping and taxi apps continue to change consumer expectations, businesses are unlikely to put up with inefficient service providers for much longer.
Over the past five years or so, the transport industry has seen many innovative start-ups launch into that space. These ventures have aimed to deliver everything from private taxi and public transport services to take-out and grocery drops, and even sought to provide seamless freight logistics solutions for ferrying goods large and small.
As Africa’s ambitious Continental Free Trade Agreement (CFTA) comes into effect, we might do well to review some of the continent’s most promising start-ups in the logistics space.
The CFTA might finally usher-in a golden era of intra-African trade, with some economists expecting volumes to grow from 34.9 million tons in 2009 to 120 million tons in 2030. As the largest and most developed logistics industry on the continent, South Africa potentially has much to gain from adding their signature to the agreement. Improved logistics leads to lower costs and thus more accessible pricing for consumers.
Higher truck and rail utilisation means less carbon emissions for the environment, and it also means that SME’s that may have been previously priced out of economic participation might now enter the fray.
From hype to hard cash
Logistics start-ups have been trendy participants at start-up pitching competitions for a while now, and a few notable ones have succeeded in landing the attention of investors. Case in point, the cargo-transport logistics platform Lori Systems (Kenya) grabbed headlines for winning last year’s Start-up Battlefield Africa, and Twiga Foods (Kenya) won the grand prize at the 1776 Global Challenge Cup.
Before you dismiss the hype of those wins completely, it’s worth noting that last July, Twiga Foods raised an impressive $10.3 million (R138.7m) in series A funding. More recently, the on-demand delivery service Sendy (Kenya) attracted $3m in investment; while direct-to-retail distribution web platform TradeDepot (Nigeria) secured and fleet tracking platform Kobo360 (Nigeria) pulled in $3m and $1.2m, respectively.
Each of these start-ups has very different business models and competitive advantages. After all, even the most basic cross-border shipment can involve dozens of brokers, truckers, customs agents, and delivery personnel. Thus, a dynamic ecosystem of innovators is required.
In South Africa, a number of last-mile delivery start-ups have emerged – including Zulzi, Picup, Rush and, most notably, WumDrop, which Makro acquired last year. FastVan has launched a SAAS (software as a service) platform for in-house logistics, while LineBooker and EmptyTrips now offer online marketplaces optimised trucking utilisation services.
What this means for us all
Aspiring truck owner-drivers might do well to root for platforms like Senga (Kenya) which aspires to becoming the “Taxify of trucking”. Meanwhile, clearing agents might benefit from signing up with Bifasor (Ivory Coast), Africa’s first social networking platform focused entirely on logistics professionals.
Shop owners operating in informal markets might find value in solutions like Spazapp (South Africa) which help streamline day-to-day operations.
Regardless of the market segment, success in logistics requires both customisation to local conditions, and specialisation to a specific niche of buyers and sellers. It is, therefore, no surprise that the largest capital raise referenced in this piece, Twiga Foods, is widely considered an agritech start-up because it focuses specifically on solving logistics issues for rural farmers delivering fresh produce to urban markets.
Similarly, Mastercard’s niche agri-app 2Kuze (Kenya) – launched earlier this year – aims to co-ordinate sales, payments, and logistics for small-scale farmers looking to sell their crops more efficiently. Meanwhile Zipline (US) has chosen to specialise in delivering blood parcels via drones to difficult-to-reach parts of countries like Rwanda and Tanzania, while LifeBank (Nigeria) has opted to do the same via motorcycles. Sendy started out doing lastmile motorcycle parcel deliveries, but now also performs deliveries via minivans.
There will likely be consolidation among these start-ups in the coming years. In some markets, this has already begun. For instance, in 2016, the Nigerian B2B lastmile delivery platform MAX, acquired the take-out delivery app, Easyappetite.
While the continent might be several years away from realising the full potential of the CFTA, if Louis Pasteur’s maxim, “Fortune favours the prepared…” holds true, now might be a good time to start backing African logistics start-ups with some serious cash.
The freight logistics industry is huge. Over the past five years or so, the transport industry has seen many innovative start-ups launch into the space.