Africa is embracing digital transformation as a key enabler of economic growth and development. The African Union (AU) recognizes digital technology as a critical tool for driving socioeconomic growth and development across the continent. The AU outlined its vision for cross-cutting digital transformation in Africa in the Digital Transformation Strategy for Africa 2020-2030. The strategy aims to use digital technology to create a digitally driven, knowledge-based economy that is innovative, competitive, and inclusive.
Given the importance of the logistics sector in supporting businesses, digital transformation will be critical to enabling increased economic growth and development. However, the sector has faced challenges such as poor infrastructure, a lack of end-to-end visibility, and inefficient processes, which have slowed its progress.
The continent has nevertheless recorded considerable progress in internet usage, which is one of the indicators of Africa's digital growth . According to the World Bank, the continent has grown from a reported penetration of 1% in 2000 to 29% of the population actively using the internet today.
It is however important to note that internet penetration has not increased uniformly across the continent. For example, only 1% of Eritrea's population uses the internet on a regular basis, whereas Seychelles and South Africa have penetration rates of more than 70%. This provides an opportunity for countries with limited internet access to build the most advanced systems possible while others revamp existing infrastructure.
For the logistics industry, regions with high internet penetration and broadband access are primed for the incorporation of emerging internet-based technologies such as cloud computing to support supply chain management. Countries that are just beginning to strengthen their internet access, on the other hand, present an opportunity for logistics players to build relevant solutions as critical infrastructure is laid out.
Digital supply chain management: Cloud computing and AI
Cloud computing is one of the emerging technologies that is being used to improve the efficiency of the logistics industry. The on-demand services, computer networks, storage, applications, and resources made available by cloud-based solutions via the internet enable scalability, capacity, and functionality in previously unimaginable ways.
According to Intelligent CIO reports, Africa accounts for only 1% of the global public cloud market, with a cloud penetration of only 15%. However, the market was expected to more than double between 2020 and 2023, with a compound annual growth rate (CAGR) of 17%-20%.
Cloud computing enables real-time data collection, collation, and analysis, which assists businesses in making better decisions. When combined with artificial intelligence, cloud computing creates a new world of end-to-end visibility on supply chains. Logistics providers can use the real-time reporting capabilities to track and locate products throughout the supply chain.
Although the future is promising, Africa still has a lot of room to grow in the artificial intelligence space. According to Oxford Insights, Africa had the lowest average score in AI readiness. Agility will thus be the name of the game for logistics providers looking to capitalize on the tech trends that are expected to shape Africa's supply chain environment in the future.
Changing consumer needs and opportunities for SMEs
It is also critical to highlight the opportunities for Small and Medium Enterprises (SMEs) because of their critical role in driving Africa's growth and transformation. According to the International Finance Corporation, SMEs account for 90% of all businesses and 38% of Africa's GDP. It goes without saying therefore that the success of the sector is crucial to the continent's continuous prosperity.
For this sector, digital transformation of the logistics industry not only allows for cost reductions in the supply chain, but it also democratizes the industry and allows them to move goods that are critical to their operations.
Consumers want faster gratification from the businesses they buy from as the speed of their lives accelerates. Same-day and next-day delivery are quickly becoming the norm for many Africans, with SMEs scrambling to keep up with new customer expectations. Digital logistics and delivery platforms enable small businesses to connect with their markets even when they lack the capital required to build an end-to-end delivery system.
Businesses and their supply chain partners must therefore embrace digitalisation in order to meet changing customer needs. Digital transformation will also give them the ability to collect and use data to improve their agility in the face of a rapidly changing continent.
Unlocking the barriers of Africa‘s Supply chain
While the continent has made substantial progress in adoption of technology, there are significant challenges that must be addressed to accelerate even more growth in the continent.
- Data Security: As the logistics industry becomes increasingly digitized, more sensitive data will be transmitted and stored electronically thus creating an opportunity for cyber-attacks and data breaches. It will be essential to implement robust data security measures to protect against these developing risks.
- Digitalisation of the logistics industry in Africa will require alignment with existing regulations, as well as the development of new regulatory frameworks that address the unique challenges and opportunities of digital logistics.
- Skilling and reskilling the workforce to meet the developing workplace demands cannot be ignored. As digital technologies are implemented in the logistics industry, new skill sets will be required to operate and manage these systems effectively.