Out Of Africa – Procurement News
On the cusp of a groundbreaking Procurement event, in the wake of catastrophic pre-COVID events, and despite grim economic outlooks and stifled Supply Chains, Africa is proving itself to be an innovative, resilient force in World Procurement
It’s an exciting time for Procurement in Africa! Two leading influencers in the African Supply Chain and Procurement profession have created AFRICA SUPPLY CHAIN IN ACTION: the largest ever online learning, knowledge sharing and networking event for the profession focusing on Africa. SAPICS, The Professional Body for Supply Chain Management, has joined forces with Smart Procurement, Africa’s leading supply chain and procurement information service, to present this ground-breaking event on August 19 and 20 2020.
More than 1000 delegates are expected to attend: a significant proportion will no doubt be the thousands of Africa-based Procurious members! Join SAPICS and Smart Procurement along with Procurious’ greatest minds and register here.
AFRICA SUPPLY CHAIN IN ACTION will help African Supply Chain professionals position themselves and their businesses to adapt and thrive, now and beyond COVID-19. Their exciting packed programme will examine what Africa has learned from the COVID-19 pandemic and how individuals and organisations must work together to change the dialogue, strategies, and operating models in response to the new tomorrow.
This happens just as Africa is currently pioneering very positive developments in Procurement Technology. Africa’s pains during the COVID-19 pandemic have been well-documented: the lockdown of key countries’ exports, closure of borders and factories, and poor healthcare facilities. However, despite the doom and gloom, there is a general level of optimism and enthusiasm for innovation by people across the continent. Entrepreneurs in Nigeria, South Africa and East African countries are developing digital applications to solve our 2020 supply chain problems.
While fruit, vegetable, meat and seafood exports into Europe have taken a temporary hit, agritech solutions, such as remote sensing of crops and data- mining and analysis using e-platforms, are successfully being adopted by commercial farmers as part of their digital future. Nigeria is leading the way in applying technology to improving regional logistics: the transportation start-up Kobo360 is now in most countries in West Africa. Kenya and Uganda lead the way in affordable mobile services to support small business. The South African government is using WhatsApp to run an interactive chatbot which answers all types of queries about COVID-19, including business-related issues.
While Africa as a whole has recorded relatively few deaths from the disease, the numbers are rising and African countries are struggling to contain the spread. McKinsey has proposed different scenarios for Africa’s economic growth in the wake of the pandemic, the most likely being an annual growth rate as low as -3.9 per cent. This is based on the most realistic scenario: a lack of containment both globally and in Africa. The health of Africa’s Supply Chain and economy rests significantly on whether or not the spread of COVID-19 can be contained so trade can resume.
Africa’s trade with China
China’s exports to Africa over the last two decades have remained steady with South Africa, Nigeria and Egypt its three largest trading partners. Africa’s exports to China have been increasing, but are heavily dependent on commodity prices; the main products exported are raw materials including copper, iron ore and oil coming from Angola, South Africa and the Republic of Congo. While the data is not 100% reliable due to China’s reporting process, it is accurate enough for us to see the trend before this current crisis.
Foreign direct investment and agricultural investment in Africa by China has also been increasing over the same period but the trend was already slowing before the current crisis. There are still some high-value engineering and construction projects happening, especially in North and East Africa.
That was then …. this is now
Most of Africa is closed for business right now. Seaports are mostly closed, air cargo and other transport routes are limited and business lockdowns are in effect, halting exports. In China, Mass production shutdowns and supply chain disruptions due to the current crisis are causing problems. For example, 85% of South Africa’s mobile phone imports are from China, their largest import category by value. Not only does this impact the end consumer, it also affects the wider telecommunications industry and many service sectors.
The Chinese economy is not likely to bounce back from this pandemic as quickly as in previous similar episodes (Bird flu 1997, SARS 2002-2003, Swine flu 2009). Despite this, China will probably continue to be one of Africa’s biggest trading partners after the worst of this crisis has passed.
Africa’s global trade
Global law firm Baker Mackenzie notes that “over three-quarters of African exports to the rest of the world are heavily focused on natural resources and any reduction in demand impacts the economies of most of the continent”. They identified such countries as the DRC, Zambia, Nigeria and Ghana as being significantly exposed to risk in terms of industrial commodity exports, such as oil, iron ore and copper. They expect that once COVID-19 is brought under control it could lead to an increase in the demand for raw materials from Africa, especially from China.
Figure 2 – Africa’s commodity exports to the world
Source: Chatham House 2020
Africa’s Exports to Europe
Africa’s exports to the European Union stood at around US$133 billion in 2016. Most African countries have duty-free access to the EU market. Raw materials normally account for 49% of the value of Africa’s exports to Europe. It is expected that this will return to near normal when mining activities resume at full capacity. It is not that clear whether manufactured goods such as textiles and machinery will get back to current levels of 35% of exports. Food products and beverages make up the other 16%.
In sub-Saharan Africa, South Africa is the strongest and the most engaged when it comes to trade with the EU, supplying fuels and precious metals and other mining products, as well as machinery and transport equipment. The main destinations are Germany, Netherlands, Italy and the UK. West Africa is also a leading exporter to Europe. Animal products, vegetables, tobacco, and textiles are mainly imported from Benin, Senegal, Ghana and Guinea. Other countries, like Niger and Sierra Leone export commodities such as diamonds, uranium, and precious metals primarily to France, Italy, and the Netherlands.
What is next for Africa?
Normal business operations, as we know them, will be irrevocably changed as a result of this current pandemic. Many companies were not prepared for the level of disruption this unforeseen crisis would bring. We may not ever return to “normal” practices or to the marketplace as it was. What is clear is that companies that gave scant regard to managing their supply chain risks have received a wake-up call! Companies are advised to consider a range of different possible scenarios and develop plans to deal with each eventuality.
How did your Procurement Team handle the crisis so far?
As activities start to normalise, we need to reflect on how well we have been able to navigate the previous 3–6 months. A study of the success, or otherwise, of procurement events will highlight areas of improvement.
- How well did we execute emergency sourcing events?
- Did we make the best use of our available technologies?
- Did we act at the right time and in the right way with our suppliers?
- How could we have managed our sourcing processes better?
The path forward for Africa will no doubt be challenging, but it’s up to us to pave it – and together, we can.