The war in Ukraine and its impact on the world economy has once again exposed the risks inherent in globalisation. The conflict has further disrupted global supply chains already strained by the COVID-19 pandemic and, according to Simon Geale, Executive Vice-President at supply chain consulting firm Proxima, the deceleration of globalisation is now a certainty.

Given all that’s transpired internationally in the past two years, businesses are now nearshoring their operations in an attempt to negate issues of cargo congestion and suspension of goods and services provision globally. Shoring up local supply networks is vital if South Africa is to keep its head above water amid speculation that another recession is imminent.

Businesses would do well to follow the example of South Africa’s automotive sector, says Bidvest International Logistics’ Supply Chain Solutions Manager, Willem Bekker. “South African automotive manufacturers have been implementing local sourcing strategies for years. This has been driven by incentive programmes put in place by the Department of Trade, Industry and Competition (DTIC), specifically the Automotive Production and Development Programme (APDP), called APDP 2 in its current form. In order to qualify for the significant incentives offered by this programme, the locally based automotive original equipment manufacturers (OEMs) have had to implement increasingly high targets for sourcing locally produced content for manufacturing. This means that when it comes to local sourcing, our motor industry is in a far better position than other countries.”

The major impact of the APDP is that it starts to create an entire value stream of locally manufactured goods and services linked to the automotive industry. Newer versions of the policy stress activities outside of the direct manufacturing operations, such as second and third-tier component suppliers, service provision, distribution and logistics systems and infrastructure.

Bekker also points out that because South Africa is geographically isolated from major economic hubs, the cost of moving goods to the country from Europe or the US is far higher than moving goods within the US or Europe. “This means that localisation has a significant logistics cost benefit, while also allowing far more flexibility in the supply chain through not being dependent on long global shipping lead times.”

Port and border congestion, which remains a threat to supply chains, further strengthens the case for localisation. A May 2022 white paper by the World Economic Forum indicates there is a growing demand for cross-border regional integration in southern Africa, with South Africa’s ports and borders playing a significant role. South Africa has been proactive in this regard, introducing electronic supporting documents, a mobile application tool that allows inspection results to be captured and a web-based platform for end-to-end processing of customs clearances.

The effect has been a reduction in the time needed for physical inspections from eight hours to two on average, a simplification of real-time customs declarations to as little as seven seconds and halving the number of days to import goods. Cargo scanners and electronic cargo tracking systems have also now made it possible to monitor goods in transit in real-time. 

The shifts occurring are all about building resilience, Bekker says. The traditional just-in-time model has become one that emphasises just-incase as supply chains are redefined. “You have to consider first-tier suppliers’ exposure to the risks you are trying to avoid. This works best by strong collaboration throughout the supply chain, building long-term relationships and partnerships with key suppliers and jointly understanding the macro-level benefits of realising a successful localisation strategy.”