CIO Africa: What is your sense of the current trade landscape in Africa in light of supply chain issues that arose from the pandemic and war in Ukraine?
Typically in supply chains, there are three parameters that are important: cost, reliability, and length of the supply chain, or the time it takes to connect from one market to another. During COVID-19, all three of these were affected quite significantly by air, sea, and land. Trucks were impacted because of increased restrictions; air passenger capacity basically stopped, which included a lot of cargo, causing a lot of disruption; and on the sea front, a lot of capacity was lost in China with the zero COVID-19 policy, in addition to unions in the US going on strike at Long Beach, which is the largest port servicing that market. So it’s been a difficult time. In Africa, the first major impact came from COVID-19 itself via the restrictions that were brought in by countries in terms of movement. The second came from the three modes of transport being impacted by artificial removal of supply, resulting in massive price increases. Third, now with the war in Ukraine, the basic cost of fuel, which was very low during the COVID-19 period, increased significantly. But things are improving. My view is that China is slowly normalising as global demand is falling sharply because of inflation. So even though the supply problem is not getting solved, we’re starting to see a significant normalisation of rates. What isn’t happening still is the reliability and the aspect of timeliness to reach key markets. These are both still challenges.
Many of those issues feel out of the control of African businesses. What can companies on the continent do to fortify themselves against shocks to the system?
What’s been happening is that many of the large companies who own the infrastructure, like KLM, Air France, ships, and large trucking firms, don’t really operate in Africa. They’re constantly looking for the highest value creation, so they tend to go places that either offer extremely good prices or have the capacity to do large volumes and have extremely good infrastructure that improves their efficiency. So the thing we need to do in Africa is to reduce the friction that operates within the chain. When ships come into a port in Mombasa, for instance, we need to streamline the processes so they don’t have to spend a lot of time sorting out basic processes, which is what happens today. And when a plane lands in Cape Town with cargo, how can we reduce the amount of bureaucracy that is needed? If you do that, you’ll start seeing a lot of traffic, and people will start pricing things correctly.
Supply Chain, Transportation and Logistics Industry