Trading in Africa has plenty of challenges left, right and center. Management trend flows of goods and services between origin point and consumption point to meet the needs of corporations, customers and consumers; particularly items like energy, petroleum, equipment, finished products, raw materials, and food etc. could be a devastating logistical experience for who want to step into the industry.
Physical items logistics consists of-
- Information flow integration
- Material Handling
Major Logistical Challenges in Africa
Africa is currently facing variety of challenges. Below are some of the major challenges-
Foreign Exchange Risk and Weak Financial System
Return on Investment is good in some countries but foreign exchange instability is the major risk. Such risk can affect the sold goods cost and create massive changes in the profitability. Lack of fund for investment and expansion also needs consideration.
Fiscal Policy inconsistency and Corruption
Inconsistency in Fiscal Policies is one of the biggest logistical challenges. Inconsistent interpretation of fiscal policies by several government agencies is responsible for unwanted delays and multiple taxations.
The best way to overcome such issues is to continuously monitor policies and the policy changes, and get all kinds of approval from customs and government regarding policies that can make an impact on your industry.
Poor Infrastructure and Utilities
Most of the countries in Africa are suffering with poor infrastructure issue. Poor infrastructure may result in-
- Poor tracing and tracking capabilities
- Bottleneck for overseas shipments
- Time delays etc.
- Customs clearance process inefficiency
- Poor quality of trade and transport
These industry risks raise questions on logistics growth in Africa. Rail, road, and sea network are not up to the international logistics business standards.
Most of the countries in Africa are poorly ranked in World Bank’s Logistics Performance Index.
Why better Logistics is crucial for Africa’s development
Freight and transportation costs in East Africa are among the highest in the world. Logistics can play a key role here. Agricultural investment is useless without a supply chain to get the produce to market. Medication will become ineffective if it is not transported in suitable conditions. Consumer goods can’t be used in improving people’s lives if their importing cost is too high.
Good Logistics can remove the above mentioned problems quite effectively. It focuses on the required mechanics of delivery. Transit time is also on higher side in East Africa. Therefore it will be a big challenge for logistics companies operating in East Africa.
Kenya…Favorable Climate for Labor and Investment
Plenty of companies are looking to expand into East Africa and planning to consider Kenya as their Entry Point.
Kenya is one of the most preferred countries in Africa to do business. Kenya is gradually establishing its trustworthy and profitable image on world map.
Kenya’s biggest trade partners have been the UK and other European countries. IMF strongly believes that Kenya will be able to produce commercial oil within 6-7 years.
Kenya has comparatively more conductive business climate than the other nations in Africa. It has highly flexible investment laws and labor regulations that draw the attention of foreign investors. This nation has the most developed financial sector in East and Central Africa.
Measures to Overcome Logistics Challenges
Things can’t change in mere 2-3 days. It is a constant process that requires precise planning and approach. Africa has all the needed attributes to experience social and economical transformation. Though, it needs to make certain improvements in infrastructure and trade policies to overcome logistics challenges.