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Where does southern African sit in the global trade scenario?

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With about 90% of cargoes brought to Western Europe coming from the Far East (Asia), the need to reassure clients and end-users becomes ever more pressing as we navigate through a new era where global supply chains are challenged by unpredictability.

With about 90% of cargoes brought to Western Europe coming from the Far East (Asia), the need to reassure clients and end-users becomes ever more pressing as we navigate through a new era where global supply chains are challenged by unpredictability. 

In a conversation with Dr Darren Fraser, Transport Economist at HPC Hamburg Port Consulting, he mentioned that today’s world is significantly influencing the shape of present – and most likely future – supply chains and highlighted the impact of this scenario upon the African continent, particularly southern Africa.

Whether caused by Covid-related lockdowns and congestion, or the ongoing conflict in Ukraine, supply chains are in need to diversification if they are to stay resilient against another potential shock in the future. The search for resilience has, therefore, led to several manufacturers to consider reshoring as a possibility – and in some cases, the term evolves to “friendly-shoring”. While transpacific trade has dominated the scene in recent decades, shipping lanes and supply chains connecting Europe and Asia are faced with more options, not just in terms of trade corridors but also for manufacturing, which places the African continent on the spotlight.

The traditionally low production costs in East Asia seem now less profitable compared to those in Africa, which is closer to Europe and presents a younger semi-skilled population, with a growth rate of 2.3% (2.7% for the southern African region), which is significantly higher compared to the -0.04% rate of Eastern Asia. In the views of Dr Fraser, this presents a great opportunity for African countries to capitalize on their strategic position and enlarge the share of manufacturing activities in the region. However, if the continent – and especially the southern African region – is to become an attractive production alternative for global supply chains, it needs to improve its port, inland and manufacturing infrastructure. Significant milestones have taken place in this regard, such as recent commission of 750,000 TEUs that Namports (Namibian Ports Authority) have commissioned for Walvis Way, to which TiL Group has been appointed, the Port of Maputo in Mozambique, where DP World operates, leading to the Maputo corridor, and the recent investment in port and railway networks across the region.

In addition to infrastructure development, we are witnessing the constitution of Special Economic Zones (SEZs) adjacent to ports. While Africa has traditionally been known for its extractive economy, where minerals and raw materials would be extracted and shipped to manufacturing countries like India or China, national governments are now looking to stimulate local production to add value. This is another significant milestone for the region as it aims to incentivize local economies, enabling African countries to own a larger portion of their supply chains.

While these milestones point the industry in the right direction, the issues of political stability, safety, security, and reliability need to be addressed. Unfortunately, there does not seem to be a median average, but the region rather presents a mixed scenario, with some countries performing better than others. This is a major barrier for the development of manufacturing centres and infrastructure in Africa. Energy is another major issue to consider; without energy there can be no industrial production, and this is another issue that requires an articulated effort to guarantee the optimal performance of the energy grid.

Despite the clear areas where there is room for improvement, the longstanding trade relations between Europe and Africa, combined with the continent’s strategic geographic location and unique characteristics, places the spotlight on this region’s untapped potential to play a much larger role in global supply chains.

Darren Fraser will be speaking in the session “Forecasting the Evolution of the Supply Chain” at TOC Europe, which takes place from 13-15 June at the Ahoy Rotterdam.  Join him and discover even more – Register now for free entrance via the event website here