AfCFTA driving growth of Africa’s logistics business

The African Continental Free Trade Area (AfCFTA) is driving substantial growth in Africa's logistics business as West and East African countries intensify investments in shipping infrastructure to enhance regional trade. CNBC Africa's Aby Agina recently spoke with Tejaswi Avasaral, Deputy CEO of Lagos Free Zone, exploring the opportunities in the logistics sector and emphasizing the significance of investing in value-chains to attract more global firms to the continent. The conversation delved into the transformation of Africa from merely a consumer market with a population of 1.4 billion to a competitive hub for production and export to global markets. Avasaral highlighted Nigeria's proactive approach in drawing in investors, especially through special economic zones, as a pivotal strategy to boost competitiveness and foster trade growth. Over the past five years, despite facing macroeconomic challenges, Avasaral noted a significant shift in the business landscape. Tolaram, the parent company of the Lagos Free Zone project, emphasized the importance of long-term commitment in markets like Nigeria. With a 50-year presence in Nigeria, Tolaram has evolved into the country's largest consumer goods company and expanded into infrastructure development, successfully establishing Nigeria's first deep-sea port and port-based industrial system. The operational success of these projects is evident, with the port now handling a substantial portion of Nigeria's container market within just a year of commencing operations. The deep-sea port's advanced capabilities, offering the deepest draft in Nigerian waters and one of the deepest in West Africa, coupled with the neighboring modern industrial zone under the Lagos Free Zone brand, present lucrative opportunities for both local and international companies. This strategic location enables businesses to tap into Nigeria's vast market for local distribution and export. The Lagos Free Zone project has already attracted $2.5 billion in foreign direct investments (FDI), resulting in the creation of approximately 18,000 to 19,000 jobs over the last decade. Despite challenges such as fluctuating currency rates and external perceptions of Nigeria, recent stability in the Nigerian currency signals a promising shift towards a more attractive investment environment. The currency's stability is crucial for instilling confidence in potential investors and facilitating localized value addition, particularly for companies seeking proximity to major consumer markets. Looking ahead, Tolaram's extensive investments in Nigeria have positioned the company for further growth across Africa. With a footprint in eight African markets, including West, South, and East Africa, Tolaram foresees significant expansion opportunities driven by growing consumer product portfolios. The Lagos Free Zone project has garnered substantial interest from international companies, in addition to hosting renowned global brands such as Kellogg's, Colgate, and BASF. The influx of inquiries from diverse companies worldwide underscores the Free Zone's appeal as a strategic business hub. Avasaral anticipates converting these inquiries into tangible transactions within the next 12 months, solidifying the project's role as a pivotal player in Africa's logistics and trade ecosystem. In light of global trade disruptions stemming from geopolitical tensions and security concerns, Avasaral emphasized the imperative for companies to localize their value chains and enhance resilience by proximity to demand centers. This shift necessitates a conducive business environment characterized by policy stability, security, streamlined capital and human movement, and modern infrastructure. Addressing the risks ahead, Avasaral underscored the importance of fostering an environment that facilitates intra-African trade expansion. By eliminating non-tariff barriers, enhancing border controls and transportation infrastructure, and ensuring energy sufficiency, African countries can fortify their trade ecosystems and bolster regional trade growth. The outlook for Africa's logistics business appears promising, supported by the continent's evolving role as a global manufacturing and export hub. As investments surge in shipping infrastructure and value-chain development, Africa stands poised to attract more international businesses, driving economic growth and trade expansion across the region.