Hi Quartz Africa members,
Cargo transportation costs in east Africa are among the highest in the world. A 2021 survey by the Shippers Council of East Africa (SCEA) found that transporters using the Northern Corridor, a trucking route that serves Kenya, Uganda, Rwanda, Burundi, the DRC, and South Sudan, pay an estimated $1.8 per km per container, almost double the international norm of $1 per km per container.
Expensive and complicated logistics present some of the biggest challenges for African businesses, a situation exacerbated this year by record-high fuel prices in Kenya, Uganda, and elsewhere. Poor infrastructure in many parts of Africa, as well as tax requirements and inefficiency in clearing goods at ports and borders, add to the logistics woes.
These costs make basic commodities like food more expensive across the continent. One study suggests it costs up to five times more to move goods in some African countries, like Nigeria, than in the US. According to the African Development Bank (AfDB), high transport costs add 75% (pdf) to the price of African goods.
The pandemic, which had an impact on shipping and logistics globally, also highlighted a particular need to strengthen logistics markets in Africa. In 2020, border crossing times for cargo transporters in Kenya increased (pdf) from under 24 hours to over five days, and transporters experienced an estimated 48% increase (pdf) in costs.
On the flipside, the pandemic also accelerated adoption of technology at ports and borders in the region. At one container depot in Nairobi, for example, online submission of documents was credited with reducing the time cargo hang around at depots from seven days (pdf) to five.
Technology clearly has a big role to play. But transforming the logistics market requires concerted efforts from governments, regulators, and companies. Enter the startups finding success plugging gaps in Africa’s logistics market, offering a glimpse into the future of tech-enabled logistics and transportation on the continent.
Cheat Sheet
💡The opportunity: Cargo transportation across Africa is expensive and inefficient, allowing startups to plug gaps in the logistics market.
🤔The challenge: Fixing logistics in Africa requires action and collaboration from multiple stakeholders, including governments, tax agencies, and lenders.
🗺️The roadmap: Developing tech-enabled logistics solutions specifically designed for the African market and its complexities, and working with other stakeholders to fundamentally improve infrastructure and ease of trade, manufacturing, and logistics.
💰The stakeholders: Traders, startups, lenders, governments, regulators, tax agencies.
By The Digits
75%: How much transport costs add to the price of goods in Africa
$100 billion: Annual infrastructure funding gap in Africa
35%: The share of exports value in Central Africa that is represented by transport costs
45%: How much transport costs weigh on the overall value of imports in Central Africa
Case Study
Lori Systems
HQ: Nairobi, Kenya
Operating in: Kenya, Nigeria, Uganda
Lori Systems is a startup offering tech-enabled logistics solutions for cargo owners and transporters. Founded in Kenya in 2016, it also operates in Uganda and expanded to Nigeria in 2019.
Lori seeks to make goods cheaper in Africa by linking cargo owners with a pool of transporters, as well as offering geo-tracking, automatic invoicing, and data insights. The idea is for cargo owners to save money by not having to organize all their own transportation needs.
Transporters and fleet owners, meanwhile, can increase their sales and optimize truck space. Lori also offers to connect transporters with lenders if they need financing for fuel, spare parts, or maintenance.
According to Lori, 90% of transporters on its platform are small- to medium-size enterprises that would otherwise struggle to access financing. Lori’s data allows the startup to assess transporters’ risk profiles. Amid skyrocketing fuel prices this year, Lori gave drivers route suggestions to help them save fuel.
Google invested in Lori’s pre-Series B round, announced in August 2022, the third startup backed by Google’s $50 million African Investment Fund. Lori Systems was ranked as Africa’s seventh-fastest growing company earlier this year by the Financial Times, after increasing its revenue from $2.9 million in 2017 to $25 million in 2020.
Lori Systems CEO Uche Ogboi tells Quartz technology has a crucial role to play in solving Africa’s logistics woes: “Innovation, and the ability to scale it, is the key to unlocking the region’s potential. Data visibility, interactive software, IoT [internet of things] devices, all these inventions will play a part in bringing the African supply chain into the 21st century.”
Ogboi said improving efficiency and lowering costs using technology would be a way to give the logistics market an immediate boost as governments keep working on providing robust physical infrastructure.
In conversation with
🚘On the biggest driver of Lori Systems’ growth:
“There is such a need for supply chain innovation, not just in Africa but across all frontier markets, which means demand for the solutions we develop is very high.”
🤑On improving access to financing for cargo transporters:
“One of the key challenges in the space is access to affordable financing for working capital, parts, fleets, and services. 90% of these transporters, and small to mid-sized transporters, do not have access to structured financing that enables them to engage in a trip, leaving their trucks idle and thereby increasing prices. Our platform connects transporters with our financing partners, which allows them to fulfill a trip efficiently. Scaling these partnerships, so that every transporter can seamlessly engage, is critical and has been a focus area for us.”
🛣️On the impact of poor infrastructure on logistics in Africa:
“Limited high-quality roads, unsophisticated rail networks, and a lack of high-functioning harbors all contribute to the poor supply chain ecosystem on the continent. As Africa inevitably grows to become a global player in the world economy, governments need to take a more active role in investing in infrastructure to boost international trade and economic development.”
More logistics deals to watch
Two-wheeler ride-hailing service and aspiring super app SafeBoda was the first startup to receive backing from Google’s Africa Investment Fund, in December 2021. Beyond rides, it has expanded to offer parcel delivery, food, payments, and savings products among other services in Uganda and Nigeria.
B2B commerce and logistics startup Wasoko raised a $125 million Series B in March 2022 at a $625 million valuation. It targets informal retailers, allowing them to order goods and have them delivered for free to their stores, in addition to working capital financing.
CloudFret, a Moroccan cargo logistics and shipping startup, raised $1 million in May 2022 to fuel growth in African and European markets. The company says it uses AI to detect empty cargo containers traveling between Europe and Africa, and links them to extra goods requiring transportation.
More from Quartz Africa
🇪🇹 An Ethiopia-backed port is changing power dynamics in the Horn of Africa
🚢 How logistics startups could make Africa’s largest free trade area work
👭🏽 Female entrepreneurs are tackling Africa’s logistics problems
💸 Import costs into Lagos port are double those of Tema and Durban
This member brief was prepared while listening to “Ndani ya Cockpit III,” a new album by Wakadinali 🇰🇪. Have a great week!
—Martin Siele, Nairobi-based contributor
One 🤯 thing
Intra-African trade (trade between African countries) represented only 16.6% of total exports in 2017, compared with 68.1% within Europe, 59.4% within Asia and 55.0% within America.