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Mar 02, 2012

South Africa needs to relieve supply-chain constraints

Barloworld Logistics marketing executive Kate Stubbs discusses Barloworld Logistics' latest 'Supply Chain Foresight 2012' research report
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Research undertaken by logistics group Barloworld Logistics on Friday revealed the possibility that South Africa may soon lose its role as the world’s ‘gateway to Africa’ if it does not respond to rising competition from other African countries.

In its ninth publication of ‘supplychainforesight’ 2012, Barloworld said that Nigeria was seen as the most likely to overtake South Africa as leading economy and gateway to Africa.

“The research showed clearly a shift in global economic power towards emerging market economies. This shift should present South African businesses with a significant opportunity to capture market share. Companies should be embracing emerging market economies as trading partners and as new markets – and this is especially so of the African continent, where South Africa has for so long been seen as the trading and logistics gateway into Africa.

“That position is now under threat from other African countries like Nigeria, Egypt and other Southern African trade corridors such as the Maputo corridor,” Barloworld Logistics marketing executive Kate Stubbs said.

She noted that there was renewed and intense interest from the developed world to invest and grow businesses in Africa.

“The research highlighted that South African companies need to understand the threats and opportunities present for industry and the national supply chain in other African markets,” Stubbs said.

Respondents comprising top management and business owners across all sectors of the South African economy cited increasing flexibility, agility and responsiveness as the top strategic objective for their businesses, while making better use of the supply chain to gain competitive advantage and expansion into emerging markets were also ranked as critically important strategic objectives.

However, the cost of doing business is the most significant strategic constraint businesses have to deal with in South Africa. Currency volatility and the strength of the rand were also cited as critical constraints to doing business in South Africa, followed in severity by local competition and the macroeconomic uncertainty that currently dominates world markets.

More specifically, respondents indicated that when it came to supply chain management, the cost of transport is the most significant constraint to doing business in the country. South Africa’s economic hub, Gauteng, is located about 600 km from the closest port, making it a transport-intensive economy.

The country is characterised by an imbalance between road and rail costs, while the situation would be exacerbated with the imposition of tolling and carbon tax fees. The research pointed to a critical communication disconnect between the public and private sectors, making it difficult for companies to effectively plan their strategies.

Other factors cited as restraining the supply chain included finding skills and expertise to enhance the supply chain segment, the inefficiency of ports and harbours, labour unrest affecting supply chains and reducing the environmental impact of supply chains.

“These days cost management and partnership are essential to the use of the supply chain as a competitive advantage,” Stubbs said.

“The only one thing businesses could be certain about during the year is that almost all aspects of the business environment are changing,” strategist Clem Sunter said during the research results presentation.

“Africa is a gold mine if one offers the right product,” he said.

The research pointed to a set of action points that South Africa should heed to develop its market competitiveness. This included the need to support and develop industries that will provide the country with an international competitive advantage, align skills development and programmes to the needs of such industries, organise industries more collaboratively, so that more effective lobbying and skills development can be realised and the need for private and public sector collaboration at policy formulation level.

Edited by: David Shepherd
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