21 Sep

African countries need to rethink how they trade with each other

If Africa wants to change how to trade with the rest of the world, it needs to start by rethinking how it trades with itself. Without urgent improvement, Africa risks remaining a supplier of solely primary materials to which others add value. But to succeed in moving higher up the global value chain, Africa will first need to develop efficient local and regional supply chains to facilitate higher levels of trade within the continent itself.

Multinational companies that recognised the opportunity to serve Africa’s growing market for consumer goods realised that the only way to do this successfully is to invest in their own “bespoke” supply chains on the continent. They know that getting their supply chains right is crucial to their businesses, while a more stable, locally owned and operated industry also has wider economic and social benefits. But there is now a need for scale and collaboration to drive this beyond the individual efforts of corporates.

The stars should be aligned for the development of fully integrated and locally funded supply chains, with the increase in consumer demand for companies to source products locally combined with growing pressure on consumer-facing industries to buy local. However, it is no secret that supply chains in Africa need to be strengthened and are plagued by a number of issues.

The continent has limited amounts of locally produced “secondary” processed materials, which is key to adding manufacturing value. This means that suppliers and distributors must often rely on imports of ingredients from countries outside of the continent, which can be so costly that it encourages suppliers to choose the cheaper option of importing the whole product, as opposed to merely parts of it.
All parts of the chain are challenged by factors like poor infrastructure, logistics, capacity, and long lead times. In several countries like Ethiopia and Ghana for example, significant parts of the population do not have access to decent roads or transport links, especially during rainy seasons. Countries that are landlocked can be particularly affected by long lead times. For example, in Burundi it can take up to 71 days to import goods from other East African countries and clearing customs at airports in the Democratic Republic of Congo can take significantly longer than in South Africa.

Read more: African countries need to rethink how they trade with each other

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