Supply chain posers as consumer demand grows
• Bottlenecks, lead
Lynette Dicey
SSA which has resulted in freight rates rocketing. A global shortage of containers and truck drivers to transport containers once they have landed has not helped the situation. Port constraints are not a uniquely South African challenge. According to Cline, a number of ports around the world have reported being congested in recent months as they battle a shortage of resources including staff to load and unload vessels. Port constraints means ship turnaround times are now much longer. In some cases shipping lines are choosing to avoid those ports suffering excessive congestion. In SA the operations of local ports were badly affected in July by a cyberattack and civil unrest which impacted the Port of Durban. The challenges posed by disrupted supply chains and logistics constraints is creating an even bigger headache for importers in the form of
ensuring adequate working capital for a longer period, according to Cline. Along with all-time high freight rates, importers often pay for goods before the vessel sails,
However, as a result of the disruptions to global supply chains it is often taking longer to land products which means they are incurring additional, unplanned interest costs on this money for even longer, making the import process inherently more expensive. The volatility of the rand leaves the importer at even greater risk unless they have hedged the currency, he says, adding that when margins are already tight this is an additional expense most importers can ill-afford. Global supply chains are complex which is why we work with partners who understand it end to end, explains Cline. We
have expanded our global network which has allowed us to gain access to additional capacity. Working with multiple shipping lines ensures an inherent flexibility and choice for when capacity and urgency are issues. There are always challenges around import codes and tariffs which is why it sa good idea for importers to work with the right partners and clearing agents to alleviate some of the pressures. In response to the need for importers to factor in longer freight lead times, Cline says many of Investec s import clients are carrying more inventory. In addition clients have evolved their inventory tracking and forward planning intelligence to adapt to the situation. Ultimately, it s coming down to incorporating data-led models. Some importers have elected to switch to sourcing products locally to mitigate the risks of importing, he says. Those importers with higher stock levels could well be looking to offload excess stock on Black Friday and over the festive season to ensure a more normal stock supply in the new year, he predicts.
To date 38 countries in Africa have ratified the African Continental Free Trade Area (AfCFTA) agreement with 54 out of 55 countries signing the agreement. Eritrea is not a signatory.
The first shipment of goods under AFCFTA took place in early January this year and most signatories have now submitted their proposed rules of origin.
A Baker McKenzie report, compiled in collaboration with Oxford Economics titled AfCFTAs US$3-trillion Opportunity found that Africa s external imports account for more than half the total volume of imports while imports from other parts of Africa account for only 16% of total merchandise imports. Manufacturing GDP represents on average only 10% of GDP in Africa.
What this reveals, says Virusha Subban, partner and head of Indirect Tax at Baker McKenzie Johannesburg, is that limited production capabilities within Africa are currently being compensated for through foreign imports.
This manufacturing deficit could ultimately be satisfied within the continent and enabled by AfCFTA. At a high level, AfCTFA is focused on stimulating growth, creating employment and diversifying economies across the African continent through the creation of a single African market for goods and services.
Baker McKenzie s report found that AfCFTAs implementation offers unprecedented opportunities for Africa to reap economic and social benefits on the back of possible future improvements in transport infrastructure, reduction of red tape for crossborder dealings, renewed funding and improved liquidity.
AfCFTA is providing an opportunity for African countries to diversify their economies, scale production capacity and widen the range of products made in Africa, in particular boosting the production of manufactured goods, says Subban.
Closer integration of neighbouring economies is one potential avenue for creating scale and competitiveness through domestic market enlargement, thereby promoting development through greater efficiency for both intra-regional trade and trade with nonAfrican nations. In the longer term, she says regional trade co-operation could potentially become a successful bridge for connecting the region s wealthier and poorer nations, promoting the growth of value chains and laying the foundations for increased international exports, especially given existing strong trade ties with the EU and Asia. The report underscores the importance of not only lowering tariff barriers, but also addressing nontariff barriers to intra-regional trade. Some of the most significant obstacles to AfCFTA are inadequate infrastructure, poor trade logistics, onerous regulatory requirements, volatile financial markets, regional conflict and complex and corrupt customs procedures. These, says Subban, can be even more detrimental to trade expansion that tariff measures. There is consensus that the vast infrastructure gap in Africa, including transport and utilities infrastructure, must be urgently addressed so as not to restrict increased trade integration. Developing infrastructure is also key to addressing the
devastating economic impact of Covid-19,” says Subban. The report points out that reliable transport infrastructure will be vital for businesses to be able to scale up production for regional export or to develop manufacturing bases. The continent will need to redouble efforts to ensure an adequate supply of water and electricity is available so that free trade across borders is possible. Investments in utility infrastructure will also
Port inefficiencies increase costs, erode competitiveness
AfCFTA offers opportunities to reap economic benefits
Virusha Subban single market.
Dr Greg Cline global network.
Export sector may help jumpstart recovery
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SChallenges around export duty on scrap metal
based on certain terms and conditions being met. What the letter of credit provides for the exporter is payment certainty.
As an African and truly South African bank, Standard Bank has a vested interest in supporting the growth of local industries, SMEs in particular,” says Hlanti. We offer a variety of bespoke working capital and supply chain finance solutions to assist clients with accessing affordable funding based on local and cross-border transactions.
An example of these solutions, he reveals, is the bank s supplier financing solution, which allows suppliers to be able to receive early payment at preferential rates against invoices raised on a buyer. The solution, which is delivered on a fully automated basis, ensures a streamlined and timely processing of settlements and invoices. The bank is also able to help exporters mitigate key risks in the export process including payment and exchange rate risk and providing working capital to meet their liquidity needs. Standard Bank s deep knowledge of the continent, extensive correspondent banking network and innovative solutions entrenches it as the go-to bank for trade finance, says Milo. KEY DRIVERS OF THE TRADE SURPLUS INCLUDE MINING OUTPUTS, MANUFACTURED GOODS AND MOTOR VEHICLES
