What About Africa’s Supply Chain Issues?

         

In the United States today, there is much discussion about supply chain problems threatening a delay in receiving goods from China into California ports that could impact Christmas sales.  Even more seriously, good on the dozens of vessels at sea waiting to unload at Los Angeles and other ports are also items of more immediate needs, such as medical equipment.  Because we have allowed the shift of goods to production in China – from toys to aspirin – the West Coast supply chain blockage is broadly important to customers across America.

            However, I must ask: what about Africa’s supply chain issues?  Both the federal government and the U.S. private sector have long expressed interest in boosting U.S.-Africa trade.  So, what is being done to address the challenges that make Africa imports more difficult to receive and more costly than they need to be?

            NeatCommerce.Com describes itself as a company that makes the world of trade more accessible for entrepreneurs, SMEs and ambitious young companies.  They have presented 10 challenges for international supply chains:

1. Lead times: Buyers increasingly expect faster deliveries.  However, global supply chains often measure shipping times in weeks and months. These long lead times make it challenging to balance supply and demand effectively.

2. Delays: Unfortunately, long lead times can expose your shipments to even longer delays. With so many steps in the global supply chain and such large distances for goods to travel, there’s many opportunities for things to go wrong.

3. Cash flow: Businesses must keep track and plan for a complex web of expenses. But with so many entities operating simultaneously, it’s hard to know where and when to allocate your resources.

4. Data management: To manage the global supply chain effectively, businesses must use and customize a suitable data management solution.  A survey by Logility and APICS, the association for supply chain management, found that:

  • 36% of respondents see the opportunity to balance supply and demand as a top driver for their analytics initiative.
  • 19% of companies want to leverage machine learning to improve their business’s forecast accuracy.

5. Exposure to risk: Many countries providing relatively inexpensive labor and manufacturing costs also typically have fewer stable governments and currencies. Local changes in leadership and policy can often affect the global supply chain.

6. Accountability and compliance: Companies have to consider social compliance when doing business internationally. Unfortunately, modern slavery, child labor practices, unacceptable working conditions and unfair compensation are just some of the unethical practices present in global supply chains.

7. Quality control and defects: Quality issues can also be challenging to manage. For example, businesses must consider the differences in acceptable defect levels in different countries.  It’s essential to clarify the quality level expected and the percentage of acceptable defects ahead of time. 

8. Language barriers: Another drawback to consider is that many countries will conduct day-to-day operations in a different language.  You can manage these types of issues by employing professional interpreters with specialist industry knowledge. 

9. Time zones: Times zones can also make communication difficult. When there’s no overlap in working hours, you can’t just pick up the phone. Instead, communication often happens via email and messaging platforms. 

10. Exchange rate and foreign transaction costs: Exchange rate fluctuations matter little when taking a holiday abroad. However, even the smallest changes in foreign exchange rates can increase costs significantly when managing a global supply chain.  Developing countries may offer the cheapest labor rates globally, but they often have relatively unstable currencies that are susceptible to regional influences.

            Those are the relevant issues, but in looking at how that plays out in Africa, let me put forward some specifics.  First, the lack of established transportation linkages from production facilities to ports/airports in Africa poses challenges in getting goods to markets abroad.  There is a dearth of air or sea transportation options that adds as much as 10% to the cost of African exports.  Goods from China, even before the current supply chain crisis, have taken a longer time to be delivered than American consumers generally want even though Chinese transportation options are more available.

            Second, I have found that the paperwork necessary to be filed prior to African exports reaching this country often are not done in a timely fashion.  Too often, U.S. customs brokers fail to meet such deadlines, which causes U.S. importers to pay unnecessary demurrage charges, as goods from Africa sit in warehouses until U.S. Customs can clear up any discrepancies.  Sometimes, such discrepancies can’t be cleared up, and in one recent case I encountered, the good intended for New York, ended up in Florida, and when the case couldn’t be satisfactorily resolved, the goods had to be returned to Africa.

            Third, even the perceived risk of upheaval in African governments makes doing business in Africa appear riskier that it may actually be.  After all, the former European colonial powers, China, Turkey and others countries have been in Africa and are expanding, not pulling out.  Of course, they mostly have long histories in Africa, unlike the United States.  I keep remembering the saying people at the corporate council on Africa used while I was there: “Capital is a coward; it only goes where it feels comfortable.”  Well others in the world find ways to enhance their comfort.

            Fourth, there is much talk about enabling environments, which encompasses rule of law, human rights and good governance.  No one is born knowing how to meet all the points involved, but we expect people on the continent, many of who were groomed during the colonial period in which corruption, mismanagement and denial of rights were condoned and then enshrined in practice.  Untangling that is not as easy as it might seem, although it will be necessary to do so.

            Fifth, quality control has not been consistently observed in Africa production facilities.  Two decades ago, when I was engaged in trade training in West Africa countries, I learned more about the International Standards Organization training to ensure adherence to international standards, but more than one country decided to establish their own standards agencies that were not in concert with international standards.  That rendered goods produced in their countries out of step with what foreign consumers expected of them.  That is not sustainable.

            Sixth, e-commerce and the use of computerized data management is increasingly an issue of concern in African countries.  Documents from trade paperwork to court decisions can now be computerized, making business and legal transactions more efficient and effective.  To not use this resource is increasingly less acceptable, as it has now become a competitive advantage for countries and their governments and private sectors to feature that in competition with their neighbors.

            Seventh, the management of currencies has long been a contentious issue in African countries.  One apocryphal (but apparently true) story was that a Nigerian company inked a deal that carried significant profit in naira and deposited the funds in a bank on a Friday.  Unfortunately, they chose the wrong time for a local currency deal because the Nigerian government decided to significantly devalue its currency over the weekend, and by Monday, the company found itself owing money to the bank.  Such decisions by governments have hit private sectors, especially smaller companies, to lose out because they don’t have crony protection from government officials or foreign currency accounts.

            Finally, as for time zones and language difficulties, they are largely being resolved as people on both sides of the Atlantic Ocean have found ways to overcome time, distance and language.

            I completely understand and accept that much attention has to be devoted to the supply chain issue on the West Coast involving mostly Chinese imports, but there should be significant attention and effort devoted to ensuring that the supply chains for African goods are not ignored.

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