• Sunday, May 19, 2024
businessday logo

BusinessDay

Africa’s environment of uncertainty and its effects on supply chain risk

UN Global Compact Network partners Dangote Group

As geopolitical events across the world unfold, they continue to have an overbearing effect on the African continent. Some of these events include the tensions resulting from the Russia-Ukraine War, trade disputes between the US and China, BREXIT as well as France’s recent decision to bring an end to its military operation in Mali.

As more countries such as China begins to look towards Africa as an alternative to enhancing their production capacities, Africa could potentially become a major hub across the global supply chain.

Although there are also growing concerns about the viability and sustainability of these especially given the continent’s struggle with issues of terrorism and other forms of insecurity such as piracy. For instance, as of 2019, a total of 23 percent of all supply chain terror incidents across the world took place according to the BSI Supply Chain Risk Insight Report. To become and attractive destination for these countries Africa needs to confront some of its persistent challenges which have had severe consequences on the global supply chain in one way or the other.

Beyond these, there are also concerns over issues of human rights abuses and violations committed by state security forces in some Africa states. The consequences of these on ten global supply chain are that large companies and business might be inclined to move their products and manufacturing hubs outside Africa over such concerns. The situation is further worsened by the recent military coups that have occurred in some parts of the continent thereby ushering some levels of democratic backsliding.

As the rest of the world begins to increasingly consider Africa as a potential logistical hub, Africa must be prepared to put its own house in order, to avert missing out on the opportunities that lie ahead of it in the global supply chain

Having the right enabling environment remains crucial and central to ensuring that investors’ business interests are secured and guaranteed. In the absence of these other cost-effective alternatives are bound to be more attractive. In addition to this, a prevalent challenge with doing business across Africa which has had a significant effect on the supply chain has been the issue of endemic corruption which most African states continue to struggle with.

While corruption remains pervasive across various parts of both public and private sectors across Africa, the existence of endemic corruption amongst immigration officials is further compounded by the nature of the mostly porous borders in several African countries, all of which have adverse effects thereby constituting a risk to the supply chain.

These issues are also further compounded by the frequent power outages across the continent which makes it increasingly difficult for businesses to survive. The attendant effects on this given the difficulties associated with maintaining storage facilities where they exist, on the supply chain is that it adversely affects the cost of production which in turn is reflected in higher prices of products. In countries such as South Africa, the increased incidents of cargo thefts pose significant risks supply chain.

In addition to these, the under regulation of some mining sites and activities across the continent has exacerbated illicit mining which has also fuelled conflict resulting disruptions in the supply chain. One of such examples is in the Democratic Republic of Congo.

Associated with this is usually the issue of the exploitation of workers which could trigger labour strikes and other forms of civil unrest thereby affecting manufacturing and production operations within such affected settings.

Other forms of conflict which have adverse effects on the supply chain are interstate conflicts whereby borders between the warring states are kept closed. Recent escalations between Ethiopia and Eritrea buttresses this point.

Other cases have included the close of the Rwanda and Uganda borders, and between South Africa and Mozambique following xenophobic attacks in the past. There is therefore a need to address these issues in a way and manner that guarantees that the risks to the supply chain are significantly curtailed.

Read also: Technology, cybersecurity, and its effects on global supply chains

Another area that is of high important yet does not appear to be given so much attention are the uncertainties around elections in Africa and what they portend for the global supply chain. Sometimes, African states such as the Democratic Republic of Congo have closed their borders during elections.

This was also the case during Nigeria’s 2019 general elections when the government closed its borders. The implications of this are that it results in disruptions to the supply chain which could have consequences on regional trade and subsequently international trade outside of Africa.

During military takeovers of power, there is also the likelihood of the immediate closure of borders and airspace which affects the supply chain negatively as well. The transportation sector is usually not also left out.

For instance, the long fuel queues resulting for scarcity of premium motor spirit (PMS) which has become quite a frequent occurrence in places such as Nigeria has also adversely affected the supply chain particularly with regards to the timely distribution and delivery of goods.

As the rest of the world begins to increasingly consider Africa as a potential logistical hub, Africa must be prepared to put its own house in order, to avert missing out on the opportunities that lie ahead of it in the global supply chain.