Digital logistics start-ups are formalizing sub-Saharan Africa’s (SSAs) logistics industry, potentially stimulating demand for new commercial vehicles sales in the region, Fitch Solutions indicates.
According to the research firm, the emergence of e-logistics start-ups have come at an opportune time. This is amidst positive developments of further strengthening regional trade such as the African Continental Free Trade Area (AfCFTA).
“Digital logistics start-ups and rising M&A activity will be key in the development of tech-enabled freight and logistics solutions across Sub Saharan Africa (SSAs).
“We believe that this will drive growth in new commercial vehicles sales in the region.”
Fitch Solutions
That said, Fitch Solutions indicates that lower transportation costs across the region will support new commercial vehicles demand. Also, new demand will emerge from increased transparency and transport efficiency gains for cargo owners while increasing revenues for fleet owners through higher trade levels.
Tailwinds from digital solutions will stimulate trade and develop a sizable commercial vehicle market. Considering SSAs relatively low commercial vehicle ownership rate, the growth potential is evident, Fitch Solutions suggests.
In 2010, commercial vehicle sales reached 264,000 units in the region and Fitch Solutions forecast sales to reach around 310,000 by 2025. In 2021, the forecast value for SSAs commercial vehicle market is estimated at 263,911 units.
Moreover, compared to other regions, sales in Asia will reach 9.2million units, Europe 2.9million and North America 15.3million.
As such, the growth of e-commerce in SSA enabled by rising internet penetration among the region’s young adult population rates will drive demand for light commercial vehicles. Also, internet penetration rates have been steadily rising in the region enabling the growth of the digital economy.
Internet penetration in SSA
According to the World Bank statistics cited by Fitch Solutions, SSA’s young growing population with access to the internet rose to 18.7 percent in 2017.
In addition, the growth of e-logistics platforms that aggregate transport service providers and analyze data will save costs and result in efficiency gains in the regions logistics industry.
Thus, this enables cargo owners to acquire the services of road haulage companies faster and less costly. This therefore results in a ripple effect reducing transport costs for consumers.
Furthermore, the processing of documentation in an online platform allows for quicker administrative procedures of logistics services such as filling in necessary paperwork while improving transparency.
Moreover, cargo tracking capabilities allows cargo owners to keep track of their goods while simultaneously keeping an eye on the performance of the fleet owners.
Fitch Solutions contends that the trend towards zero-emission transportation will also be a top issue in the region as companies embrace ESG considerations.
E-logistics firms will be at the forefront of purchasing electric vehicles as income gained from transportation services rendered cover purchasing costs. According to Fitch Solutions, this development is crucial due to the highly priced electric vehicles compared to internal combustion engine vehicles.
Rising demand of new commercial vehicles can offset diesel particulate matter in cities across SSA caused by an ageing vehicle fleet. That said, emission standards across the region remain well below international standards and old used imported commercial vehicles have been a major contributor to growing CO2 emissions.
Fitch Solutions believes that there is potential for the adoption of electric vehicles in Africa although current challenges such as infrastructure network and power constraints may tend to minimize adoption.
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