A Review of Africa and the Middle East Logistics Industry

Why Kwikpik?

The ability to economically and accurately move, track, and trace goods in a global economy focused on e-commerce is critical. Bricks-and-mortar businesses and even local and multinational businesses, must find effective solutions for delivering goods.

Regionally and internationally, few enterprise-grade and retail pure logistics providers accommodate/explore:

• The full range of delivery solutions for all sizes of packages

• Enterprise integration that enables corporate entities to quickly and economically ramp up a delivery solution

• Existing logistics service providers to earn revenue from excess or underutilized capacity

• Web3 technology to bring order, security, and accuracy to a, currently largely, informal and ad hoc local delivery sector

• Opportunities for financial inclusion by providing a framework for independent riders and vehicle owners to obtain and be paid for client deliveries

• Greenhouse gas emissions reduction by ensuring the right-sized shipping solution for the package to be shipped

• Gender equality and financial inclusion by facilitating ownership and management of vehicles that can be employed for profit within the Kwikpik ecosystem

Kwikpik is a logistics-focused solution that provides for all of the above.

This is the first section of our Logistics expose, and it provides an overview of the logistics industry with particular emphasis on Africa and the Middle East.

Logistics Defined

The concept of "logistics" is widely known as the process of coordinating and moving resources, such as equipment, food, liquids, inventory, materials, people, etc., from one location to the storage of the desired destination. It is the management of the flow of goods from one point of origin to the point of consumption, to meet the requirements of customers.

Africa

The essence of logistics is ensuring that products are delivered in the right quantities, to the correct location, in a cost-effective manner, and at the right time.

As seamless as this may sound, statistics have shown that between 47% - 67% of deliveries do not meet the above definition in Nigeria and other parts of the world.

This could be attributed to the global evolution of the traditional logistics structure and management framework, which has had little or no impact on the African market (e.g. tracking and real-time reporting).

It can also be argued that certain factors have hampered digitization in the supply chain.

They include infrastructural issues, network challenges, poor regulation, and ineffective digital solutions both in Africa and the global environment.

Hence, the long-awaited disruption in the logistics and supply sector has not been able to revolutionize the logistics industry, particularly in Africa and the Middle East.

According to a study carried out in 2019, the critical challenges for logistics operations in Africa include visibility, infrastructural decay, increasing customer demand dynamics, risk management, insecurity, and cost optimization.

The competitiveness of logistics operations is determined by many different factors including attention to networks, knowledge management, and environment. These components are either internal or external to the supply chain.

They can be classified as belonging to the following realms of contributors to the functioning of the supply chain: Suppliers, Customers, Labour, and Finance.

For instance, Nigeria's logistics companies migrate goods and services across the entire nation; this is because each geopolitical zone specializes in a specific product due to the obvious climate differences across all regions.

Despite the importance of the logistics industry in the Nigerian economy, the focus on this sector is still insignificant. With the ever-growing demand, there is a limited number of robust IT and data-powered logistics companies like Kwikpik that can meet these demands.

In most cases, logistic businesses lack the right technology and efficient transportation infrastructure in place to serve their users creating or exacerbating the problems of delivery delays, and missing or damaged goods/items.

According to Euromonitor, the world’s fastest-growing economy by 2030 will be in Africa.

This consequently makes the continent the next big e-commerce market.

And as this positive narrative continues to place Africa as a top investment destination, the need for advanced logistics systems has become inevitable.

The growth of e-commerce will significantly depend on the quality and efficiency of logistics networks; from intra and cross-trade to financial transactions in payment of goods and services.

When writing the African e-commerce story, it's important to often seize the opportunity to focus solely on the continent's enviable achievements.

Nonetheless, formidable problems persist, particularly in logistics and supply chain, a critical component of the e-commerce industry.

In its 2019 African Economic Outlook, the African Development Bank notes that trade costs due to poorly functioning logistics markets may be a greater barrier to trade than tariffs and non-tariff barriers.

In most African countries, some of the biggest logistics hurdles holding back the industry are the lack of proper national address systems, and poor road networks, making it even harder to conveniently deliver products to customers.

Consequently, companies have had to rely on fairly descriptive addresses and landmarks provided by the customers during the initial stages of the online purchase process.

The delivery persons are also required to keep in constant contact with clients when delivering products, to receive further directions while en route.

While generally, Africa's infrastructure lags, that of its counterparts including the Americas, Europe, and the Middle East has its peculiarities. Hence, it is worth noting that each country has its value proposition.

In 2018, the World Bank's Logistics Performance Index placed South Africa, Kenya, Rwanda, and Côte d'Ivoire as the top 4 best performing countries in Africa, while Somalia, Sierra Leone, Eritrea, and Zimbabwe were in the bottom 4.

The result of the poor road infrastructure in most African countries is heavy traffic jams that often lead to delayed deliveries, canceled orders for on-demand services, and subsequently loss of revenue.

Alternative modes of transport have therefore come into play in some markets like Kenya and Nigeria, with the use of easy-to-navigate motorcycles, popularly known as ‘Bodabodas' in Kenya and 'Okada' in Nigeria.

With about 1.2 million motorcycles in the passenger transport business. Kenya and Nigeria logistics companies have strived to tap into this market by using Bodabodas and Okada to swiftly deliver products, especially within busy cities.

Technology in African Logistics

Fortunately, technology has been beneficial to the logistics industry.

Delivery companies like Jumia operate a well-established system based on Machine Learning in Nigeria and Kenya, relying on GPS-enabled delivery apps. The coordinates collected during the initial delivery are then registered and used to create a logistics network for future transport.

Unfortunately, Jumia cannot serve 10% of the industry as its logistics company is primarily focused on the delivery business for its e-commerce platform.

In the case of Rwanda, companies like Zipline are leading the way in commercial drone deliveries. While initially focused on delivering blood to remote health centres that are difficult to reach fast due to Rwanda’s hilly terrain; it is expected that Zipline’s drones will in future be used in other sectors including e-commerce.

Back in Kenya, Astral Aerial Solutions is using drones for last-mile deliveries among other services.

Data by logistics consulting firm Knight Frank shows that the cost of transportation represents 50% to 75% of the retail price of the goods.

This alone, underpins the demand for long-term strategies to the logistics challenges in Africa. From delayed deliveries between local destinations to sluggish growth of cross-border trade, the effects are being felt across the board.

Modern online retailing is headed towards pre-orders, requiring mature infrastructure for both small and medium businesses, to help meet the packaging, storage, distribution, freight, and last-mile-delivery requirements.

The Middle East

Similarly, in the Middle East, one of the industries that the governments have focused on growing in their bid to diversify the economies is the logistics industry, especially in Saudi Arabia in line with its ambitious vision for 2030. This move has presented the industry with huge opportunities.

The Middle East is an oil-based economy region; however recent changes have led to its shift of focus to other sectors. Despite the recent transformation, the Oil & Gas industry still is by far the largest contributor to the logistics market as it requires huge logistic support for its movement.

The logistics sector in the Middle East receives immense support from the governments in this region. This is done through investments in infrastructure (road, rail, maritime, airports, and logistics zones), creating a healthy logistics ecosystem by introducing new rules & regulations for involved stakeholders.

These efforts leave no room for grey areas when it comes to contractual obligation & increase the level of quality of service.

Saudi Arabia

Saudi Arabia’s strategic location gives them access to a wide range of global customers.

Statistics indicate that more than 50% of the world can access one of the countries in less than five hours by freight. Therefore, the strategic location of Saudi Arabia and the Gulf countries connects the logistics and transport industry to more than 3.5 billion global potential clients.

This geographic benefit speaks to the potential that the industry has.

Logistics in Saudi Arabia is valued at $ 18 billion and ranked as one of the most attractive emerging markets in the GCC, according to a report by warehousing and transport firm Saudi Bulk.

Logistics revenue in the kingdom is expected to grow at a compound annual growth rate of 6.7% between 2020 and 20225, in line with the government’s strategy to develop the sector, according to a report by data firm Ken Research.

The rapid growth of e-commerce has been the driving tool and has led to the last leg of the delivery chain, i.e. Last-Mile Delivery, assuming even greater importance since it is directly responsible for Customer Satisfaction, fulfillment, and, ultimately, profitability.

United Arab Emirates

In the UAE, Logistics and Last Mile Delivery providers are seeing an opportunity that is largely fueled by the growth of a rapid shift to online buying.

According to Statista, the value of e-commerce in the Middle East in 2020 amounted to around $17 billion with $5.5 billion in Saudi Arabia and $4.5 billion in the UAE market. The value of e-commerce in the Middle East is expected to exceed $27 billion by 2025.

Venture capitalist firm Mavericks, reports that last-mile delivery failure rates range between 15% in the UAE to 40% in Saudi Arabia leading to poor customer satisfaction and lost revenue in a country where most customers pay cash on delivery.

Saudi Arabia and the UAE are moving quickly to diversify their economies away from oil. It aims to become the go-to logistics hub, efficiently connecting trade across three continents: Asia, Europe, and Africa.

To improve the quality, safety, and efficiency of its transportation network, a new integrated infrastructure master plan has been developed.

With a road network of 211,096 km, as of 2017, road transport is the most important mode of freight and passenger transportation in Saudi Arabia.

However, even with these large-scale initiatives, there is still a concern for delivery services in the Middle East.

Customers in the Middle East do not usually write precise addresses. Most address locations are not completely fleshed out which means delivery personnel waste valuable time searching for the right delivery locations.

Sometimes, addresses also contain a mix of Arabic and English text making it tougher to decipher.

The address system became so critical that the governments had to step in to bring in some level of consistency.

For example, the Kingdom of Saudi Arabia’s government-run postal service, Saudi Post, came up with a national address system. Also, Dubai implemented a Makani address system. A Makani number is a unique 10-digit code that can help locate a building.

Cash-on-delivery (COD) is the major mode of transaction in the Middle East. According to a 2019 report titled ‘E-commerce in MENA-Opportunity beyond the hype’ by Bain&Company and Google, it says “Today, around 62% of MENA online shoppers prefer COD as a payment method when buying online, compared with less than 5% in the UK and France. COD is prevalent even in the UAE, where credit card penetration is at 57%, which is higher than in the UK and France.”

The heavy dependence on COD is mainly due to the lack of trust in both last-mile delivery and online payments. This also translates to higher last-minute cancellations and returns. But for the business, it is a loss, as they’ve already spent money and resources to reach the customer.

The vastness of the countries coupled with the density of orders from certain areas makes dividing territories among delivery executives a tedious task.

Also, for last-mile logistics to be successful in the Middle East, one needs to not just know the routes, but also understand the daily lives of the people. For example, businesses in the Kingdom of Saudi Arabia are completely shut during Salat. It is therefore only practical to not plan any transactions at those times.

The Promise of Logistics

The possibilities for a better future in logistics in the world, in our view, are endless! Companies cannot solely build a successful logistics system. It requires integrating various systems and partners to create a big enough network to serve the growing needs of e-commerce consumers worldwide.

The Case for Kwikpik

The case for Kwikpik is simple. Kwikpik is leveraging the latest technology to deploy a logistics solution optimized to the following fundamental values:

1. Right-Sized Point-to-Point Shipping: Optimize the delivery capacity of the logistics industry by offering a right-sized mobile ready point-to-point logistics solution that is scalable and deployable across a range of global markets

2. Emissions Reduced Logistics: Provide a logistics solution that emphasizes flexible capacity for individuals, SMEs, large enterprises, and governments alike in a matter that tracks, traces, and minimizes logistics greenhouse gas emissions and carbon footprint.

3. Opportunities for Financial Inclusion: Create an income-generating market for individual logistics providers and small and medium enterprises thereby enhancing income inclusion within our launch of emerging economies.

4. Utilize Excess Capacity: Solve the problem of excess capacity whilst accelerating greenhouse gas emission reduction in the logistics industry by providing a mechanism for absorbing excess shipment transportation capacity of any sized logistics operation in a just-in-time manner.

5. Logistics Vehicle Acquisition: Provide easily administered and readily accessible financial instruments to enable willing entities to acquire vehicles and generate revenue through active participation in the Kwikpik ecosystem

6. Asset and Driver Management: Provide enterprise-grade logistics vehicle asset and driver management and administration portal for individuals, SMEs, and large enterprises via a SaaS model

7. Stable and Secure Payments: Leverage decentralized ledger technology to create a token-based asset-backed inflation-resistant financial transaction platform that enables the store and transfer of value across a range of markets - emerging and developed - and provides a stable and secure payment infrastructure, a low-cost framework for shipment insurance, and internal driver bond system.

Download our app| Become a rider| Become a business partner| Visit our social channels