Ghana’s logistics sector declines due to economic crisis – Report

Growth in the logistics sector slowed in the second quarter of 2022 due to economic pressures such as high inflation, the depreciation of the cedi against the dollar and the global supply chain disruptions impacting logistics in Ghana.

This was contained in a report by the Centre for Applied Research and Innovation in Supply Chain – Africa (CARISCA).

The Logistics Managers Index (LMI) measures the growth or decline of Ghana’s logistics industry, giving managers, policymakers and analysts a reliable data tool for evidence-based decision-making.

The LMI is based on eight key components: inventory levels, inventory costs, warehousing capacity, warehousing utilization, warehousing prices, transportation capacity, transportation utilization and transportation prices.

The LMI for the second quarter of 2022 showed moderate growth at 65.9 from the first quarter’s 64.7. There was also evidence that Ghanaian firms are winding down their inventories and not restocking as a result of the current economic situation, which is characterized by high inflation and rapid depreciation of the cedi against the dollar.

However, the cost of holding inventory remains high because inventory cost, warehouse prices and transportation prices have all increased. On the other hand, warehousing capacity, warehousing utilization, transportation capacity and transportation utilization have all decreased.

According to the report, “even though demand for warehousing outstrips supply, organizations that are facing dwindling inventory levels are finding it difficult to effectively utilize warehousing space and transport capacity. Several haulage companies have grounded parts of their fleet due to increasing fuel prices and low full-truck-load (FTL) orders.”

“Altogether, the economic situation is worrying because it seems to be having ripple effects on multiple sectors of Ghana’s economy. Continuation of this dire economic condition may have severe repercussions, including disruptions in transportation services, potential food shortages and the resultant hiking of food prices, redundant warehouses, close-down of supermarkets and poor utilization of logistics capacity.

The evidence from this second quarter is quite a reversal of expectations in the first quarter which revealed strong demand for goods and services and increasing growth in logistics activities over the year. Unfortunately, persistent global supply disruptions due to the Russia-Ukraine war and the cedi’s free fall against the dollar have slowed down the anticipated growth.

“The LMI will become one of the effective indicators of not just logistics activities but also the health of the larger economy of the country due to its predictive ability,” said Nathaniel Boso, CARISCA director and co-author of the index. “More importantly, the LMI fills the information gap in the logistics sector.”

Jeffrey Ntiamoah, the head of logistics at the online retailer Jumia, expressed excitement at the insights the LMI provides on logistics activities and its accuracy in presenting prevailing events in the industry.

“The quarterly insights that the LMI provides will be valuable to stakeholders in the logistics industry as well as global logistics companies looking to make in-roads into Ghana,” Ntiamoah said.

The LMI is the first of its kind in Africa. It provides supply chain managers in Ghana with evidence-backed data and information to enable effective supply chain planning. It is based on a quarterly survey of logistics, supply chain and procurement managers across multiple industries in Ghana.