In 2020, those relying on goods from China learnt the hard way about the dangers of not having flexible sourcing. “In the first quarter of 2020, the COVID-19 crisis caused mass production shutdowns and supply chain disruptions due to port closures in China,” explains Kagure Wamunyu, Chief Strategy Officer at Nigeria-based technology start-up Kobo360, which aggregates end-to-end haulage operations. “This caused a ripple effect across all global economic sectors, including Africa.”
Africa experienced the impact of a production slowdown in China from two different angles. In Q1 2020, China’s demand for African raw materials and commodities declined drastically, while the continent’s access to industrial components and manufactured goods from the region were also restricted.
The coronavirus fallout has proven a double-edged sword for Africa, however. “The current crisis creates an opportunity for African countries to build value chains as well as take advantage of the breakdown in supply chains from China and Europe,” says Ms Wamunyu.
Given the January 2021 implementation of the African Continental Free Trade Area (AfCFTA) agreement, which will form a US$3.4 trillion economic bloc, the disruption to operations in key manufacturing spots may have happened at an ideal time.
Many businesses have had no choice but to seek out alternative suppliers. In doing so, they have been exposed to some of the wider benefits of developing inclusive supply chains, including the ability to access new and innovative ideas, develop more competitive businesses, and tackle inequality.
Minority Supplier Development UK (MSDUK), which brings together global corporations and ethnic-minority businesses to develop more inclusive and diverse supply chains, saw the number of corporate members almost double in the seven months after the virus first emerged.
The pandemic prompted corporate businesses at MSDUK to buy from ethnic minority suppliers offering personal protective equipment and essential goods. “Those entrepreneurs were far better when it came to quality and service – they were working 24/7 to make sure they were providing those services to our corporate partners,” says Mayank Shah, Founder and Chief Executive Officer of MSDUK. “There is a very simple business case [for developing inclusive supply chains], even if we ignore the social impact.”
“It is vital to have a clear risk ranking, an understanding of your critical suppliers, and enough process around those suppliers to monitor for potential disruptions and then be able to respond proactively. We have been helping customers with managing their supplier base. We have been asking: how much more engaged are you with your suppliers in order to understand what’s going on? The COVID-19 crisis has woken up a number of industry players and I believe we are starting to see more formalization in how they manage sourcing arrangements. Another critical element here is not only managing first-tier arrangements, but also having an awareness of your suppliers’ suppliers and how that might impact the delivery of your products.”
“The COVID-19 crisis provided the final ingredient that has led to a perfect storm. It’s come on top of the risk of economic downturn, Brexit, US-China trade-wars, increased regulation, tensions continuing in the Middle East, and signs of ‘slowbalization’ (and how global trade will be impacted by this now and into the future). There are, however, positives for business to take from these events. Increased globalization and economic growth will return, but those who will prosper most from the supply chain revolution will do so by emerging stronger from the crisis with an adaptable and resilient mindset. Now is the time for making bold decisions that will have lasting value, driven not only by lessons learnt from the crisis management of COVID-19, but also by other events that have created the perfect storm. Businesses that adopt a wider and more diverse supply chain will find themselves adapting more effectively to regulatory change. There should be clearer visibility of their entire supply chain to seize opportunities, address challenges, and be effective in proactively managing all aspects of third-party risk. Businesses should be better equipped to act decisively and quickly to solve supply chain problems and be pioneers of technological advancement and innovative thinking in their industry. There should be a mindset to evolve working practices continually. Furthermore, I believe delivering an effective environmental, social and governance (ESG) agenda as part of the business model will be an increasingly key feature of future success.”