Although they’re geographically close, the countries are separated by two other ECOWAS members - Togo and Benin, both of which are French-speaking. As a result, any trade done by truck would incur transit fees to both Togo and Benin and then an additional 7% duty in either Lagos or Accra.
To avoid that, some companies ship by sea. Both Lagos and Accra have large ports, and a direct vessel between the two will usually berth within 24 hours. But shipping companies often take up to a week to process and send bills of lading, delaying their goods’ progress through customs - and incurring daily rent on the vessels that carry them.
These barriers make it very difficult for smaller businesses — especially those working on new product development — to operate across borders in Africa. Multinationals, on the other hand, use two main strategies to reduce their costs. First, some large companies have been able to negotiate special treatment from the countries they operate in. Others with subsidiaries in each country of operation can ship goods from subsidiary to subsidiary, taking advantage of transfer pricing (the rules and methods that govern intracompany trades) to transfer goods and services to countries with better tax regimes than others, thereby increasing their profit and optimizing their inventory.
In different parts of the continent, entrepreneurs are managing their manufacturing process uniquely to reduce the impact of supply chain challenges on their business. While their products and business models are different, as are their scale and needs, each startup faces some of the same issues. To understand how they solve them and how these issues directly impact their business, I took a closer look at four companies across the continent.
Door-to-door Shipping in Nigeria
Contract manufacturing may be associated with China, but Jude Abalaka is working hard to change that notion in Lagos, Nigeria. Tranos Contracting, a company he founded in 2010, manufactures a wide range of industrial products: steel enclosures for power generators, plastic enclosures for electrical devices, electrical panels, and diesel generators. They will begin manufacturing switches and sockets for consumer markets in the coming months.
Tranos products at a recent exhibition. LivinSpaces
Like any thriving business, Tranos is constantly looking to expand - in their case, into consumer goods. This expansion comes with its own supply chain headaches, which are indicative of the issues that plague African manufacturers. In an interview earlier this year, he lamented about having to order materials 3–6 months ahead of production to avoid clearing delays at the seaport.
"About 30% of our inventory is ordered from overseas and mostly shipped by sea, except [if] the item is light and urgent", he wrote in an email. To manage this delay, Tranos keeps excess inventory on hand (tying up capital and making his business less nimble), though at times there are inevitable shortages that hold up production
Apart from production roadblocks, even just procuring manufacturing equipment has its own logistical challenges.
Last year, as part of their expansion efforts, Tranos imported an injection molding machine. This took months to accomplish. After rounds of due diligence, they engaged a logistics company to do door-to-door shipping. FOB Logistics would pick up the machine in Bengaluru, India, manage the freight forwarding, clear customs, and pay duties as well as any inland logistics costs, before finally delivering it to Tranos in Lagos.
Arrival of Tranos’ injection molding machine Twitter
"By engaging with these [door-to-door] companies, we can trust that the goods will arrive in due time", says Remi Akeusola, a supply chain manager at Tranos. Logistics firms deal with the port’s authorities regularly, importing multiple goods for different clients, and thus have a much smoother process clearing machines than startups. He goes on to describe the factors that necessitate using the services of a logistics company.