Recent disruptions in the global supply chain has renewed call for Africa to build better policies for making the continent more competitive in the supply chain.
Currently, African countries integrate in the supply chain as tier three suppliers, providing minerals and metals into different supply chains. Unctad’s Economic Development in Africa Report 2023, however notes that with abundant mineral resources and growing consumer market, the continent offers many advantages.
The report recommends policy action in high technology sectors like automobiles, mobile telephones, renewable energy and health care which are billed as potential areas in making Africa a major player in the global supply chain.
“Global crisis such as the Covid-19 Pandemic, war in Ukraine and climate related effects impacted businesses and supply chain around the world. Many multinationals decided to look for ways to build resilience around future shocks,” noted Habiba Ben Barka, Senior Economic Affairs Officer Unctad.
“Our report explores different strategies, policies and mechanisms that African Countries can put in place to integrate some of the supply chain, we offer recommendations for governments, financing regulators, and the private sector to ensure supply chain financing are well developed within the continent to easily integrate in the global supply chain,” she said.
The report shows that the value of the African supply chain finance market rose by 40 per cent between 2021 and 2022, reaching $41 billion. But this is not enough.
The continent can mobilize more funds by removing barriers to supply chain finance, including regulatory challenges, high-risk perception, and insufficient credit information.
To optimize supply chain opportunities, Africa needs to go digital and improve access to supply chain finance. Countries such as Kenya have made notable progress in this realm, with rising rates of digital skills.
For high-tech and complex products like medical devices and electrical equipment, technologies such as automation, machine learning, artificial intelligence and blockchain are necessary for production, distribution, logistics and procurement.
The use of new technologies and digital solutions also enhances supply chain visibility, responsiveness and compliance with regulations.
According to the report, many small and medium-sized enterprises (SMEs) in Africa are not part of the global supply chain network due to their limited use of digital technologies. They face challenges such as a lack of skills and funding gaps.
African firms can play a larger role in supply chain diversification by integrating vertically or horizontally. Collaboration between large firms and SMEs through mergers and acquisitions can allow companies to streamline operations by acquiring their own suppliers, manufacturers and distributors.
Digital technologies could also help address financing needs. Technology-enabled solutions such as blockchain can improve supply chain financing, especially for SMEs, by enabling real-time and verifiable transactions, reducing the need for physical audits.
Action Points in the key industries
Automobile industry
1 Provide new vehicle-financing mechanisms with lower interest rates to capitalize on Africa’s growing demand for automobiles
2 Coordinate regional automotive strategies and development plans to avoid duplicating efforts and to better integrate low-income countries through, for instance, preferential treatment under rules of origin requirements.
3 Set up multi-brand mega-factories in countries with small assembly plants like Ghana, Kenya and Nigeria to attract the production of parts and components.
4 Improve collaboration between African countries and the private sector to fund technical institutes and adapt curriculums to reflect new industry developments, such as electric vehicles.
Health care industry
1 Harmonize pharmaceutical product regulation and registration to improve market access, achieve regional certification and scale-up production. Bolster efforts like the African Medicines Regulatory Harmonization programme.
2 Increase demand and access to medicine by promoting pooled procurement and financing programs like the Africa Medical Equipment Facility and the Africa Medical Supplies Platform.
3 Support cluster formation, such as Medicine City in Egypt, to ensure access to essential infrastructure for pharmaceutical operations and attract investment.
4 Encourage collaboration between companies like partnerships and joint ventures to increase access to knowledge and industrial design and facilitate technology transfer and intellectual property exchange.
Renewable energy technologies
1 Stimulate demand for solar panels in Africa through structured renewable energy procurement programs.
2 Prioritize advisory, installation and repair services in countries unable to manufacture solar panels. Local entrepreneurs can better cater to local needs, and such a strategy would create jobs.
3 Ensure local companies are included and local content requirements are considered by development finance institutions in tender procedures, to avoid excluding them from large-scale projects.
Mobile telephones
1 Promote local assembly and manufacturing in resource-rich countries by creating special economic zones and fostering favorable investment environments.
2 Address environmental, social and governance issues, such as raw materials transparency, to ensure the sustainable development of the sector.
3 Adopt circular supply chains that focus on recycling and remanufacturing products and components to enhance supply chain sustainability and attract sustainable investments.
Mining industry
1 Improve access to electricity and finance for local mining firms and provide targeted support to promote domestic participation in extracting critical minerals.
2 Provide support to African countries during contract negotiations to ensure they receive fair value for their minerals from the extractive industries.
3 Establish a regionally coordinated mining policy to enable disadvantaged countries to supply inputs through a common fund for transporting them from countries with weak infrastructure.
4 Bolster the implementation of the Africa Mining Vision.
Blockchain Supply Chain: Revolutionizing Transparency and Traceability (kenyanwallstreet.com)
