Jun 28, 2021

Warehousing and industrial parks in Africa: A continent of possibility

Africa has struggled for years with industrial development. A lack of infrastructure and funding in African countries has limited the continent’s ability to compete with titans of production such as those in Asian countries. The lack of trade, in return, has limited funding for infrastructure.

However, companies from China, Europe, the United States and the Middle East are now looking to Africa as a burgeoning market and as a new frontier for logistics infrastructure to support growth there. With foreign investment, Africa is building warehousing and industrial parks.

While each country’s ability to sustain these parks is different, research shows that the whole continent benefits. With the economic growth and new employment that international investments have brought, Africa is on its way to becoming a competitor in the global market.

Highest concentrations of industrial parks and warehousing complexes in Africa

There are active industrial parks in forty-seven African countries, with the largest percentages in Morocco, Ethiopia, and Uganda. Agility currently has logistics parks in four African countries: Cote D’Ivoire, Mozambique, Ghana, and Nigeria.

With plans to build more, Agility has seen the potential for providing secure, efficient warehousing for supply chain and manufacturing companies. Now, Africa is reaping the rewards of this investment, as some industrial parks have grown to house over one thousand companies.

Industrial real estate booms in eastern Africa

Ethiopia’s Growth and Transformation Plan aims to make the African country a major manufacturing hub. It began to realize this goal through Chinese investments: China funded several parks and a railway connecting Addis Ababa to the Djibouti port. This plan is increasing the country’s revenue, and Ethiopia will build its newest agro-industrial park without foreign aid.

In Kenya, Nairobi Gate is a centrally located warehouse and logistics park built with efficiency in mind. It is expected to attract business with its “built to suit” approach  offering tenants flexible and customizable spaces. Agility’s logistics parks feature both built-to-suit warehousing and facilities, along with ready-built structures that are move-in ready. Industrial parks are also gaining popularity in Uganda because they offer more space at cheaper prices than traditional warehouses located in the cities.

Opportunities along the coast

With Africa heavily dependent on maritime trade, landlocked Ethiopia and Uganda rely on other countries for access to shipping ports. These two countries will need infrastructure improvements to fully participate in the global marketplace, but those on the coastline have already benefited.

Morocco’s Tanger Med in particular boasts a location along multiple major maritime trade routes and connections to 186 ports. South Africa and Egypt are also hubs where many international shipping routes connect, and Djibouti is a notable subregional port. All four of Agility’s warehouse parks are on coastlines as well: three in western Africa and one in the south.

Benefits of warehousing and industrial parks in Africa

African leaders know that industrialization is key to improving economic conditions in all countries. It not only creates jobs but will also eventually enable African countries to compete in the global manufacturing market. The key is for international companies to bring their business to Africa. With foreign companies eager to invest, it is truly a winning situation for all parties involved.

Incentives for international companies to develop industrial parks

Africa provides many incentives for manufacturers looking to save production costs and establish new supply chains. Lower wages and a growing population of workers make African countries an attractive alternative to historically Asian production centers, and new legislation could lead to a major shift.

The impending African Continental Free Trade Area promises a continental market with unified standards between member countries and lower tariffs, eliminating several current barriers to foreign direct investment. The young population and high unemployment rate also create the opportunity for long-term employment and economic growth, especially if companies train their workers.

The Agility Logistics Park in Tema, Ghana, for example, runs a program to provide local students with vocational and technical training, directly contributing to the growth of a qualified, skilled local workforce. In fact, Agility hires 100 percent of its Ghana employees locally.

Incentives for African countries to develop industrial parks

The presence of industrial parks has already increased foreign direct investment in many African countries. A significant percentage of national exports comes from industrial parks, increasing overall trade and economic performance for those industries and related sectors.

Local communities enjoy more employment opportunities, and the presence of warehousing and industrial parks provides potential for skills improvement for local workers. These parks have been notably effective at increasing the population of women in the workforce and supporting job creation in highly skilled sectors. They also create jobs indirectly through the infrastructure required to build and sustain them, such as road development and power supply.

Warehousing and industrial park regulations in African countries

A major drive for the construction of these parks is that current African warehouses do not meet international standards. Even beyond official regulations, countries need updated facilities to attract business. Manufacturing practices need improvement, especially with the increasing focus on sustainable production.

Widespread standards for warehousing and industrial parks in Africa

With the push for more environmentally friendly production standards, the African Development Bank has created policies based on the concept of sustainable development. Some key points for industrial parks include diversifying energy sources and improving public health through proper waste management practices.

The United Nations has also set guidelines for the development of industrial parks to ensure the well-being of both humans and the environment. These include global standards for industrial, environmental, and social infrastructure.

Countries’ responses to warehousing and industrial park regulations

Many African countries currently benefit from creating sustainable manufacturing solutions. Morocco, for example, has attracted foreign investors with its ambitious goal to generate 52 percent of its energy renewably by 2030. Thanks to these investors, the country is already running its special economic zone carbon neutrally. South Africa is also pursuing industrial energy efficiency as a solution to its currently strained power grid.

However, strict sustainability standards are not realistic across the continent, as not every country has the same capability to meet them. Ethiopia has been a topic of discussion for the past several years, as it lacks comprehensive zoning and land-use regulations. Without these factors, the government cannot enforce sustainable building practices for industrial parks.

Technological advancements in warehousing and industrial parks in Africa

African countries’ varying ability to implement rising standards also blocks new technologies that simplify and cheapen supply chain logistics. Artificial intelligence (AI) is increasingly popular in the logistics industry, reducing time and costs, and the COVID-19 pandemic accelerated this transition.

AI technology in the supply chain industry

Though AI technology is not perfect, it is still an improvement over human error. Self-driving cars may still need a human supervisor, but AI can complete many routine tasks such as modifying orders without intervention, leaving employees free to focus on more important and complicated tasks. The whole operation runs more efficiently and, in many cases, safely.

Obstacles to implementing warehouse automation in Africa

Because African countries are just starting to build warehousing and industrial parks, many workers require basic training before employers can consider introducing AI and machine-learning technology. Even worldwide, educational programs are only now beginning to teach the fundamental skill set that AI technology requires, and these are especially scarce in Africa. While company training programs can help fill this gap, traditional education systems also need improvement.

Lack of necessary education is not the only obstacle that stands in Africa’s way. Others include the following:

  • Reliance on electricity and internet for AI—two things that are not always consistently available or affordable
  • Concerns about ethical use and data collection
  • Possibility of bias in algorithms, especially those written in countries with a predominantly white population
  • Limited access to large sets of data

However, with increased revenue and economic growth from warehousing and industrial parks, many countries may soon invest in programs, policies, and infrastructure. In turn, these will help remove obstacles and reduce the gap between Africa and more industrialized nations.

The future for warehousing and industrial parks in Africa

Many challenges remain for Africa to become truly industrialized, and each country will likely progress at its own rate. However, the continent as a whole is benefiting from foreign investment into warehousing and industrial parks in Africa. Many countries have seen significant economic growth in the past several years, and foreign direct investments created jobs and educational opportunities.

As more international companies take advantage of low wages and sustainability measures that ensure efficient production costs, Agility plans to expand its existing operations. It currently operates in twenty-two countries across Africa, providing freight forwarding, airport services, liquid fuel logistics, camp construction, catering, remote life support, and more. In the future, Agility plans to build more logistics parks to client specifications.

Establishing business in Africa may seem overwhelming. There are potential risks—from unmet infrastructure and sustainability standards to the cost of building large facilities and developing employee training programs. Contact Agility today to help mitigate these risks and design the right solution for your company and its products.

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