In January 2021, Africa officially became a single free trade zone. Headquartered in the Ghanaian capital of Accra, the African Continental Free Trade Area (AfCFTA) created the largest free trade area in the world, measured by number of countries. Africa’s 1.3 billion people and combined gross domestic product of more than US$3 trillion now connect in a single market for goods and services.
In addition to AfCFTA, the explosion of e-commerce as well as infrastructure development are driving demand for high-quality warehousing throughout the continent. Agility, for example, is developing more than one million square meters of warehousing in burgeoning industrial areas. This includes new facilities in the sub-Saharan capitals of Accra, Maputo, and Abidjan. So how do you know if you are getting value for your money in Ghana, Mozambique, and Cote d’Ivoire warehousing?
Rapidly, African countries are making strides in logistics management. Warehousing used to rely on makeshift “godowns” for the storage of goods. Godowns typically lack certain basic features, such as reliable power, internet connectivity, security and sophisticated fire prevention and safety. Now, the need for modern warehouses is on the rise. With increased attention on attracting foreign investment in many African countries, here’s how to know if you are getting value for your money in Ghana, Mozambique, and Cote d’Ivoire warehousing.
What to look for in warehousing in Ghana, Mozambique, and Cote d’Ivoire
Common types of warehousing options in Ghana, Mozambique, and Cote d’Ivoire include:
- Public warehouses: Owned and regulated by government bodies that charge rent.
- Bonded warehouses: Owned by government or private companies with a government license.
- Private warehouses: Owned and managed by manufacturers or by specialized developers and logistics parks operators .
A logistics park is an area specifically designed to consolidate and centralize storage, distribution, processing, assembly, light manufacturing and other activities, that require warehousing. Modern logistics parks integrate easily with transportation networks so that goods move easily to and from intended markets.
Logistics parks feature pre-existing warehouse space, known as “ready-built warehousing,” which offers more predictable expenses. The landlord has already absorbed the cost of land, permits, and other regulatory requirements.
For example, CDCI, the largest retailer in Cote d’Ivoire, relocated to a ready-built warehouse in the Agility Logistics Park near Abidjan. The move upgraded CDCI’s operations to international standards and helped streamline and modernize its storage facilities. Since the move, CDCI has reduced overall logistics costs and lowered the rate of theft.
Another advantage to ready-built warehousing is support for flexible leases and space allowing businesses to scale. A flexible lease allows you to use or let warehouse space according to need. Agility Africa, for example, offers flexible leases from six months to five years with sizes from 500 square meters to more than 10,000 square meters.
International standards include 24-7 security, plus consistent electrical power, all included in the lease. Security includes controlled access as well as constant monitoring of the facility. Plus, the warehouse features sprinkler systems and other fire-prevention measures.
Increasingly, world-class warehousing involves internet connectivity and dependable backup service. Reliable internet service provides access to inventory, data analytics and insights that your company can use to build a resilient supply chain.
The UN Centre for Trade and Development estimates that there are currently more than 180 special economic zones (SEZs) in Africa, with 51 more under development. SEZs are areas that provide tax incentives in exchange for a company’s investment. Many African governments are facilitating development of logistics parks within SEZs to attract foreign investors.
Ghana, for example, established the Ghana Free Zones Authority (GFZA) in 1995. The GFZA lets companies operate in certain zones without paying customs duties. The Agility Logistics Park in the Tema Free Trade Zone offers not only bonded warehousing in Ghana but also laydown yard. A laydown yard is an outdoor space within a warehouse area to store material and equipment, often convenient for mining companies as well as oil and gas businesses.
For instance, many international energy companies have set up shop in the Agility Logistics Park near Accra. Its warehousing meets international standards, important for oil and gas, mining, automotive, fast-moving consumer goods, and electronics companies.
Why invest in warehousing in Ghana, Mozambique, and Cote d’Ivoire
The World Bank’s Logistics Performance Index is a survey of operators who provide feedback on a country’s logistics “friendliness.” Its most recent scores revealed that countries in sub-Saharan Africa averaged a score of 2.20 out of 5 for logistics infrastructure. However, African countries are emphasizing infrastructure upgrades. In fact, the British property consultancy Knight Frank estimates US$400 billion worth of rail and road development is taking place across Africa.
Africa’s industrial corridors
African governments with the support of the World Bank are creating seven industrial corridors that connect African regions by rail, by road, and by sea. For example, the West Africa Growth Ring links Ghana, Togo, Burkina Faso, and Cote d’Ivoire. The West Africa Growth Ring has seven main ports, including Takoradi and Tema in Ghana as well as San Pedro and Abidjan in Cote d’Ivoire.
Elsewhere, the Nacala Corridor connects Mozambique, Malawi, Zambia, and Zimbabwe. It features the Nacala Railway, valued at US$4.4 billion. Also, its main port of Nacala, in Mozambique, is the deepest port in southern Africa.
The objective of Africa’s industrial corridors is to promote investment and development, laying the groundwork for more than a million square meters of purpose-built warehousing, Knight Frank predicts. Companies such as Agility have built logistics parks along these prime industrial corridors, offering ready access to major ports and roadways.
Growth of e-commerce
Even before the COVID-19 pandemic, the Economist Intelligence Unit had predicted e-commerce in Africa to drive a 3.2 percent increase in retail sales. The pandemic drove even greater economic growth in online goods, which in turn created a promising outlook for warehousing, according to a study by the Mace Group.
Specifically, online sales revenues across Africa increased by more than 28 percent from 2019 to 2020, according to Knight Frank. Furthermore, e-commerce revenue could nearly double to $46 million by 2025 from the 2020 value of $27 billion, creating further private sector demand for warehousing.
Return on investment
Africa’s increasing attraction to foreign investors is driving demand for logistics facilities such as warehouses. As a result, industrial assets such as warehouses offer an average 12 percent yield. That’s double the yield of residential and more than the 9 percent yield of retail or office space, according to Knight Frank.
How to identify potential hidden costs in warehousing
Despite the emphasis on attracting foreign investment, each African country differs in its regulations. That’s why relying on local know-how helps your company figure out how to know if you are getting value for your money in Ghana, Mozambique, and Cote d’Ivoire warehousing.
Careful land management
For instance, leasing warehouse space in an Agility Logistics Park avoids the potential pitfalls of identifying and purchasing the land yourself. The navigation of each individual local market throughout sub-Saharan Africa requires informed decision-making and in-depth knowledge of local regulations. Otherwise, taxes or other fees particular to the chosen location can cause unpredicted cost overruns.
Stability in pricing
Furthermore, land prices are rising due to declining availability of suitable, properly zoned and approved land combined with increasing demand for industrial space. A further advantage of leasing space in a logistics park involves stability in operating expenses, such as electricity or waste management.
Emphasis on operational efficiency
Warehouses that meet international standards also decrease capital costs and boost quality control. Proximity to roads, railways, and ports also helps speed distribution.
How to incorporate best practices for investing in warehousing in Ghana, Mozambique, and Cote d’Ivoire
Best practices in warehousing go beyond physical infrastructure as well as considerations regarding power supply, internet access, and security.
Training local workers
Logistics in Africa have increased employment opportunities in Ghana, Mozambique, and Cote d’Ivoire. In Tema, for example, Agility hires 100 percent of its employees locally. The company offers vocational and technical training to local students to create its own skilled labor force.
Paying attention to the environment
In keeping with the global movement toward sustainability, Agility warehouses meet international environmental standards. For example, Agility uses energy-efficient roof materials. Skylights provide natural lighting and accompany LED and energy-saving bulbs. Solar-powered streetlights and wind-driven roof fans also contribute to energy savings.
Using data-driven solutions
Reliable internet means companies can use technology to improve best practices in warehousing. Artificial intelligence (AI) can save companies time and reduce operating costs. For example, AI can free employees from routine tasks, such as modifying fulfillment orders that come through the warehouse.
How to find the future in warehousing
The prime warehousing and logistics market has seen increased activity in certain pockets of sub-Saharan Africa, notably Abidjan and Maputo, Knight Frank reports. There’s rapidly improving infrastructure and favorable government regulations. It’s important to determine if you are getting value for your money in Ghana, Mozambique, and Cote d’Ivoire warehousing. Contact Agility today for expert guidance on how to capitalize on these emerging markets.