Sustainability is driving billions into Africa’s transport and logistics sector

Africa’s passenger transport and logistics sector is attracting investors looking to boost eco-friendly alternatives for commercial fleets – and is riding a growing wave of investment, as a result.

Seth Onyango, bird story agency

Africa’s transport and logistics sector is becoming a magnet for investors, pulling in US$1.4 billion in funding in the last four years, making it the third largest by deal value behind fintech and energy.

According to the startup funding database ‘Africa: The Big Deal,’ passenger transport ventures, such as ride-hailing and mobility and financing platforms, have received 48% of the sector funding, with Moove, Swvl, and Yassir raising a combined US$700 million.

“With the push for sustainable transport, we expect to see the acceleration of electric vehicles on the continent, backed by financing especially from climate funds, and incentives from governments,” the Deal projects.

This surge of interest coincides with a growing demand for sustainable transport options across the continent.

With robust backing from climate funds and bolstered by government incentives, the acceleration of electric vehicle adoption in Africa seems increasingly within reach.

Tellingly, logistics ventures, such as digital platforms for freight and delivery, have received 23% of the sector funding, with the majority supporting B2B platforms in the cargo and trucking services.

Kobo360, Trella, and Lori Systems are some of the leading startups in this segment, raising US$135 million.

These platforms are leveraging technology to connect shippers with carriers, optimise routes, reduce costs and improve efficiency.

But the platforms face challenges such as the lack of infrastructure and regulation in many African markets. However, plans are afoot to boost connectivity within countries and between states.

Meanwhile, companies with multi-tiered business models are blurring the lines between passenger transport and logistics.

They are accelerating the formalisation of services such as the taxi and paratransit industry, propelling e-commerce growth, and promoting delivery services.

Even though the big players have a commanding presence and are pivoting quickly, it’s the startups that are emerging as the true disruptors.

With their tailored offerings addressing pressing needs — such as accessible financing, sector coordination, and the speedy adoption of electric mobility — they are beginning to transform Africa’s transport and logistics industry, with the shift from Pay-as-You-Go (PAYG) to Pay-as-You-Drive (PAYD) schemes in the transport sector already setting the stage for sustainable and efficient mobility.

This transformation is vital on a continent where access to reliable and affordable transportation often proves challenging. It’s a shift propelled by digital solutions that include big data, geographic information systems (GIS), and the Internet of Things (IoT).

The PAYD model, which charges users based on actual vehicle usage, is increasingly popular for its flexibility and cost-efficiency. It tailors transportation costs to the user’s needs, promoting judicious use of vehicles and aligning with the global trend towards environmental sustainability.

Additionally, the digitalisation of transport services has been instrumental in optimising traffic flow, real-time vehicle tracking, and deploying charging infrastructures for electric mobility.

Such digital enhancements are now tipped to significantly reduce emissions and improve the sustainability of the sector.

Bus Rapid Transit (BRT) systems, for example, are becoming hotbeds for digital innovations such as PAYD.

BRT systems, commencing in Lagos, Nigeria, in 2008, have expanded to cities like Marrakech, Accra, Dar es Salaam, Johannesburg and Cape Town.

In Dar es Salaam, introducing a BRT system has led to a halving of travel times, contributing significantly to urban mobility and productivity.

The integration of PAYD schemes in such systems further boosts efficiency and affordability, encouraging public transportation usage.

However, The Big Deal also notes that while things have been rosy for the past four years, “the recent global slowdown in tech investment seems to also be impacting the transport and logistics.”

“For instance, in Q1 2022 there were over $220m in deals tracked in the transport and logistics (thanks, in part to a $115m raise by Moove in that quarter) while in Q1 2023 only $25 million in deals were tracked. It is clear the sector has not escaped the investment winter; less clear are the longer-term implications.”

Nevertheless, the opportunities have been recognised and the demand for logistics solutions, both physical and digital is only set to increase as Africa’s urban population surges.

bird story agency

Editor

devage.co.zw