The African continent, with its vast resources and strategic geographic positioning, stands at the cusp of a logistical revolution that could redefine its role in global trade. The Logistics Performance Index (LPI), a detailed gauge developed by the World Bank, has chronicled Africa’s trade logistics landscape since 2007, offering a snapshot of its performance in customs efficiency, infrastructure, international shipments, and the overall quality of logistics services.
The LPI’s readings over the years have highlighted a continent on the move, making strides in some areas while facing persistent challenges in others. With the African Continental Free Trade Agreement (AfCFTA) poised to create the world’s largest free trade area, the spotlight intensifies on the necessity for logistical excellence.
As Africa confronts the twin tasks of advancing its blue economy and maximizing the AfCFTA’s potential, the LPI not only reflects past and present performance but also serves as a beacon for what could be achieved through sustained focus and development in logistics.
Historical performance analysis
Africa’s logistical journey has been characterized by a steady, although gradual, rise. The continent’s average rating, while still below the global median, has demonstrated incremental advancement – a testament to the persistent efforts in the face of infrastructural and bureaucratic headwinds.
For example, while countries like Singapore lead the global chart with an LPI score of 4.30, representing top-tier logistics efficiency, the highest-ranking African nation, South Africa, stands at a score of 3.70, exposing the gap that African nations still need to bridge.
However, the narrative is not merely one of stagnant landscapes, but rather of dynamic change. The continent’s average LPI score, which lingered around the lower 2s (range of 1-5) in 2007, has made significant advances, with several countries now breaking into the 3s bracket.
This growth in logistics performance reflects the growing awareness of trade’s importance in Africa’s developmental agenda. For instance, the improvement in customs efficiency alone speaks to the continent’s evolving trade environment.
According to World Bank data, between 2007 and 2023, the average customs score for African countries increased by nearly 10%, with the caveat that this increase was unevenly spread across the continent. The implications of these logistics advancements are far-reaching.
Efficient logistics are the backbone of the blue economy – a sector that the African Development Bank states could contribute up to $3.3 trillion to the global economy by 2030.
For African countries with coastal territories, the stakes are especially high. The quality of port infrastructure and the aptitude of maritime services are essential for capitalizing on the blue economy’s potential, which includes not only traditional seafaring activities but also nascent sectors like marine biotechnology and ocean energy.
Ghana’s logistics landscape anchoring regional trade
Ghana’s performance on the Logistics Performance Index (LPI) provides a lens through which to gauge its regional trade anchorage. Despite being a strategic gateway to West Africa, Ghana’s LPI ranking has fluctuated, reflecting both advancements and areas needing improvement. As of the last reporting period, Ghana stands at a rank that, while improved from years past, still signals significant room for growth in logistics efficiency.
This middle-tier positioning is indicative of the challenges faced by the country in areas such as customs efficiency, infrastructure quality, and logistical services competence. The World Bank’s LPI data paints a quantitative portrait of these challenges. For instance, Ghana’s rank in the customs component of the LPI suggests that, despite reforms, there are still considerable delays and red tape hindering fluid trade.
This is corroborated by the time-intensive processes and the apparent need for further technological integration in customs procedures. Additionally, Ghana’s infrastructure score, while reflecting some improvements through concerted investment, remains a sore point.
The country’s port infrastructure, crucial for its maritime trade, has seen significant investments, such as the expansion of the Tema Port, which is poised to increase container handling capacity. Yet, the full impact of these investments has yet to ripple through to the LPI rankings, suggesting a lag between development and operational efficiency.
Moreover, Ghana’s logistical services, despite a skilled workforce, have struggled to keep pace with the evolving demands of regional and international trade.
The competence and quality of logistics services, as measured by the LPI, show that while there is expertise, there is also a need for enhanced training and capacity building to meet international standards consistently.
Comparatively, within the Sub-Saharan African context, Ghana’s logistical capabilities stand out. However, when pitted against the more advanced logistics frameworks of countries like South Africa—often leading the continent’s LPI rankings—the gaps in efficiency and quality become evident.
For instance, South Africa’s lower LPI rank reflects a more streamlined customs environment and a robust infrastructure network, setting a benchmark for what Ghana could aspire to achieve.
Implications on trade and the blue economy
The blue economy, with its myriad of marine resources, stands as a new frontier for Africa’s economic transformation. With over 38,000 kilometers of coastline and some of the world’s busiest shipping routes, Africa is positioned to capitalize on its oceanic assets. Yet, the fulcrum upon which this potential pivot is logistics performance, which has shown to significantly influence trade dynamics and the economic vitality of the continent. According to the United Nations Economic Commission for Africa, the continent’s maritime-related activities could potentially contribute up to $13 billion to its economy. The blue economy’s burgeoning prospects are closely linked to the logistical proficiency of African nations.
According to UNCTAD, Africa’s maritime-related activities are currently estimated to be worth over $1 trillion, accounting for more than 90% of the continent’s imports and exports by volume. A minor 1% increase in the LPI rating could notably reduce shipping costs, broaden market access, and potentially boost the trade volume, catalyzing economic growth and sustainability.
However, this is contingent upon overcoming logistical bottlenecks that currently result in African ports being some of the least efficient globally. For instance, container ships spend an average of 20 days in African ports compared to 4 days in large international ports, as per World Bank data. This inefficiency not only inflates costs but also diminishes the competitive edge of African exports.
Furthermore, the African Development Bank has emphasized that a mere 10% improvement in Africa’s logistics performance could enhance GDP per capita by 2%. In the context of the blue economy, this could mean increased profitability for the fishing industry, expanded reach for coastal tourism, and more efficient exploitation of undersea minerals.
AfCFTA: The new trade wind
As the African Continental Free Trade Agreement (AfCFTA) unfurls its sails, it promises to chart a new course for trade across the rich wall hanging of African nations. In a historic consolidation effort, the AfCFTA aims to create the world’s largest free trade area by connecting 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at $3.4 trillion.
The initiative is not merely a signal of intent but a pragmatic move towards economic integration, with the United Nations Economic Commission for Africa estimating a potential increase in intra-African trade by more than 50% through the elimination of import duties alone. However, the robustness of this trade wind is inextricably linked to the continent’s logistics performance.
With varying LPI scores across the continent, the disparities in logistical readiness could either bolster the ambitious projections or dampen the collective momentum. For instance, while countries like South Africa and Egypt score above the African average with LPI scores of 3.70 and 3.10 respectively, indicating relatively efficient logistics frameworks, others remain far below, signaling the need for significant improvements to fully capitalize on the AfCFTA’s benefits. The pact could act as a catalyst for infrastructural development and policy reform, which are critical for logistics improvement.
It’s projected that, by harmonizing trade standards and streamlining border procedures, the AfCFTA can address some of the logistical inefficiencies that currently cost the region between 5% to 15% of its annual GDP, according to the African Development Bank. This improvement in logistics is not just a trade facilitator but a vital component for the blue economy’s growth, which is pegged to make substantial contributions to the continent’s GDP in the coming years.
Conclusion
The Logistics Performance Index (LPI) serves as a critical indicator for Africa’s trade and economic potential, particularly within the context of its burgeoning blue economy and the African Continental Free Trade Agreement (AfCFTA). While the continent has shown improvement in its LPI performance, a significant need for reform and modernization, especially through the adoption of technologies like AI, remains.
Higher LPI scores in countries like South Africa and Egypt demonstrate the benefits of focused logistic enhancements. However, the varied performance across the continent, as seen in countries like Ghana, highlights the need for more efficient logistics systems. The success of Africa’s blue economy is deeply intertwined with its logistical capabilities, emphasizing the importance of technological advancements and streamlined processes for sustainable economic growth and trade.
Albert Derrick Fiatui, is the Executive Director at the Centre for International Maritime Affairs, Ghana (CIMAG), an Advocacy, Research and Operational Policy Think- Tank, with focus on the Maritime Industry (Blue Economy) and general Ocean Governance.
E-mail: [email protected].
Dr. David King Boison is the CEO of Knowledge Web Centre, a prominent research and consulting firm.
