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Future of Logistics: Algeria, Kenya and Angola Offer Best Opportunities in Africa

February 26th, 2017

The largest revenue sources for logistics providers are retailers and wholesalers. Naturally, with traditional retailing witnessing a slowdown globally, trade and logistics companies are looking for new frontiers for their business growth. As Africa is anticipated to be among the leaders in retail growth rates many companies are aiming to enter and expand in this region.

We believe that accelerating growth in retail sales and the increasing footprint of international retailers like Carefree, along with signs of movement towards capacity expansion by national and international logistics players, have made some African countries more attractive to companies looking to expand there. Slower retail growth in South Africa, one of the most advanced economies in the region, has spurred logistics providers to start exploring Algeria, Kenya and Angola as part of their market expansion strategies. We expect these three African countries to be among the fastest growing retail markets 2015-2021, with lucrative prospects for the long-term growth of logistics demand in all of them.

This opinion is a part of a global briefing Key Future Trends in the Global Logistics Industry for 2025.

Algeria’s untapped growth potential

Algeria poses one of the largest GDP growth opportunities in Africa and has a significant share of growing middle-class income inhabitants. Apart from consumer spending potential, growth is also encouraged by opening of new retail spots by international retail chains, as well as plans to improve the logistics infrastructure. According to World Bank Algeria already is among top three African countries when it comes to FDI inflows.

With the anticipated growth of the Algerian retail industry logistics, market is also expected to increase at a double digit rates. Already some international logistics players are demonstrating robust growth dynamics. For example, Algerian subsidiary of GEFCO Group, an international logistics company, has reported strong results during the first two years of operations since its establishment in 2014. The opportunities for the logistics industry in Algeria are expected to grow further after the Algerian government announced plans for a USD $3.3 billion investment into construction of a new deep water port at El Hamdania, which would be another important enhancement to management of container goods, improving the supply structure of the growing Algerian economy

The retail industry is forecast to also increase by 34% value terms over the 2015-2021 period. The country already operates three large mega shopping centres, and such major European brands as Mango, Aldo, Zara and United Colors of Benetton have all set up operations in the country. Moreover, Carrefour, Europe’s largest retailer, has also opened its first hypermarket in Algeria contributing to the retail industry growth and growing potential for logistics service demand growth in the future.

Forecasted Retail Market Growth in Sub-Saharan Africa

Kenya the easiest market to enter

Kenya, similarly to other East and South African countries, has structural issues in regards to logistics infrastructure and logistics competence, yet the situation is changing for the better. Moreover, Kenya is also attractive for its relatively stable political environment and ease of doing business compared to other African countries. Turnover of the logistics industry in Kenya reached USD9.4 billion in 2015, and increased at a CAGR of 13% over the 2010-2015 period. One of the driving reasons for such growth is growing retail industry, which is forecast to jump almost 34% in real value terms over the 2015-2021 period.

To support the growing supply needs for retail as well as other economic sectors, the Kenyan government launched a long-term development plan, Vision 2030, with an emphasis on large-scale transport projects in rail, road and shipping segments which is also set to boost demand for logistics services. As a result transportation companies are making sure they are prepared for the increasing pace of demand growth. In 2016 Bolloré Group, a global logistics and transportation giant, already present in Africa for over a decade, announced a USD 21 million investment into expansion of its operations, and creation a new logistics hub in Nairobi.

The wide supply of retail property in the capital, and rising levels of disposable income among Kenya’s middle class, are making Kenya an appealing first stop among overseas retailers. The expansion of the formal retail sector and shopping centres is observed not only in the capital of Nairobi, but also in other major urban areas. Similarly to Algeria, in mid-2016, Carrefour opened its first supermarket in Kenya in a franchise partnership with the Majid Al Futtaim Group. Carrefour’s second outlet is due to open in 2017. Positive developments are lifting the share of formal retailing in Kenya to a higher level, also contributing to the attractiveness of the industry and paving the path for positive prospects and continuous demand for logistics services in the future.

Angola has ambitious goals to become regional logistics hub

Angola has re-emerged to appear among Africa’s largest oil exporters. Besides a growing population, the expansion of modern retailing is also one of the main drivers of demand for consumer goods and in turn, logistics services. With growing incomes, middle class Angolans are increasingly able to buy not only essential goods, but also more expensive durables and specialised goods, making the market even more attractive for retail and logistics expansion. The turnover of the logistics industry in Angola reaching USD $11.2 billion in 2015 and has been increasing by an average of 18% over the 2010-2015 period.

Together with positive potential development in the retail trade, Angola’s commodities exports are booming. Transportation and logistics therefore continue to be the key in fulfilment of the ever-growing demand for goods. Moreover, Angola’s government is aiming to become the continent’s logistics hub, placing great emphasis on infrastructure expansion. In 2017, Angola’s state-owned investment fund, The Fundo Soberano de Angola, announced a USD108 million investment into a deep sea water port. Meanwhile, international logistics companies are already turning their heads towards this lucrative market. For example, Kuwait-listed logistics firm Agility is planning to invest USD100 million in Africa, with Angola among the target markets for expansion.A leading home-grown Angolan transport and logistics company, Antonio J. Silva Transport and Logistics (AJS), has reported its revenues growing almost 50% over the past two years, illustrating a successful story of harnessing the growth potential in Angola’s growing logistics market.

Unofficial trade in open markets remains significant in Angola, yet a number of grocery retail chains are already operating in the country and are successfully expanding. One of the most recent developments to affect Angola’s retail market and contribute to growing demand for logistics services is Africa’s biggest grocery retailer, Shoprite’s talks with Steinhoff about buying its African assets. The arrangement would create a group with USD15 billion in annual sales. The purchase would give Steinhoff a significant equity interest in Shoprite, with operations in more than a dozen countries that include Ghana, South Africa, Nigeria and Angola. As a result the logistics industry in Angola will have even more opportunities to follow retail expansion growth.

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