Page 6 - Logistics News July/Aug 2018

Thought Leadership

Supply chain strategies

for African markets

Courtesy CSCMP’s Supply Chain Quarterly

Africa’s economies are growing, but poor infrastructure and difficult business
conditions persist. Creative, flexible approaches to supply chain design and
execution can help companies overcome these and other challenges.

PERCEPTIONS OF Africa’s business potential have their investments, too. Rates of return on foreign
shifted dramatically in recent years. Driven by strong direct investments in Africa have generally been
fundamentals, the continent has become a priority higher than those for other regions over the same
for multinationals. In 2013, growth in Africa – which period.
registered at 6 percent – outstripped that of Asia for The quality of logistics infrastructure also
the fi rst time. Forecasts for the next decade suggest varies signifi cantly across the continent. Today, for
that Africa’s growth will continue to rival that of example, the airfreight hubs of Nairobi (Kenya),
emerging Asia, outpacing other emerging regions Addis Ababa (Ethiopia) and Johannesburg
like Latin America, the Middle East and Eastern (South Africa) have relatively good air links with
Europe. Moreover, African economies are expected the East and South, providing suffi cient capacity
to expand more than twice as fast as those of the to meet current demand in those regions. Air
developed world. cargo capacity in western Africa is still limited
For companies with goods and services to however, although there are current projects in
sell, the size of a region’s consuming middle class Luanda (Angola) and Abuja (Nigeria) that will
is of critical importance. With its combination of deliver additional capacity within the next few
growing population and rising wealth, Africa has a years, allowing those cities to serve as air hubs for
compelling story to tell here. western African countries.
Africa’s economic development and its extensive Similarly, there are signifi cant variations in the
natural resources wealth have together encouraged logistics costs and lead times required to access
signifi cant foreign investment in recent years. diff erent African markets; this is due to diff erences
Between 2006 and 2009, annual private capital in the ease of cross-border trade. For example,
infl ows rocketed from around US$30 billion to importing auto parts through Port Apapa, Nigeria,
more than $80 billion, outstripping both offi cial will take over three months. Importing the same
development aid and remittances from African parts through Durban, SA takes only one month,
émigrés around the world. Businesses that put with port-capacity limitations and longer handling
money into Africa have enjoyed strong returns on times accounting for most of the diff erence.
Navigating supply chain challenges
Africa presents unique and evolving challenges
for supply chains. Even companies with long track
records in the region are being forced to fi nd new
and creative ways to maintain growth and extend
their reach into new countries and markets. While
some of the lessons learned in other emerging
regions are also applicable to Africa, it is likely that
they will be only part of the solution. The rest will
come from unique approaches tailored to specifi c
countries, markets and consumer groups.
In particular, companies will need to adapt their
supply chain solutions in four specifi c ways:
1. Think of service and reliability fi rst, then
cost. Establishing a market in Africa requires,
fi rst and foremost, that customers have access

10 July/August 2018 | Logistics News