Contrary to an expected dramatic decrease in international trade, flows have increased, with 38% of Middle Eastern companies and 32% of African companies managing to expand international sales, a global study of private sector perspectives shows.
Commissioned by end-to-end supply chain and logistics company DP World and conducted by the intelligence unit of media company The Economist, the study reveals that supply chain reconfiguration has been a priority for many businesses as they work to overcome the adverse impacts of the Covid-19 pandemic.
Globally, 83% of companies are reconfiguring their supply chains, with the Middle East from a regional perspective having the highest share of respondents (96%) whose companies were in the process of reconfiguring their supply chains.
In addition, 84% of African businesses responded that they were already in the process of doing so, slightly more than the global average of 83%.
The study also examined the impact of the Covid-19 pandemic, with the Middle East having the highest share of respondents (48%) indicating that a demand shock (defined as the difficulty in selling products to customers in international markets) had the greatest negative impact on their firms’ international sales.
Meanwhile, in Africa, the highest share of respondents (48%) indicated that a logistics shock (defined as the difficulty in arranging for transport or logistics services) had the greatest negative impact.
Capturing the perspectives of business leaders across six regions (North America, South America, Europe, Middle East, Africa and Asia Pacific), the research shows that, on average, companies allocated 32% of revenue from the first half of 2020 to help them switch suppliers or logistics providers and change production or purchasing locations.
Companies in the Middle East expect to restructure their supply chains within 7.4 months compared with 8.6 months in Africa and 8.5 months globally.
Additionally, Middle Eastern companies are reallocating about 30% of their 2020 first half revenues to reconfigure their supply chains, which is in line with the global average of 32%. However, respondents in Africa are reallocating less; on average, about 24% of their 2020 first half revenues.
SUPPORTING TRADE DURING COVID-19
The study also reveals the particular sectors that helped to support international trade during the Covid-19 pandemic.
Supported by data from the International Trade Centre, South African exports of pulp (the raw material for toilet paper) increased by 163%.
In Europe, during the first half of 2020, exports of cereals (particularly to the Middle East) and pharmaceutical products from the continent increased by 23% and 12%, respectively.
Meanwhile, for respondents in Africa, diversifying their supplier base was among the top two factors expected to determine international trade transactions up to 2025, according to the study. African companies may find opportunities for supplier diversification within the region since the new trade agreement – the African Continental Free Trade Agreement – which came into force earlier this year.
To enhance trade operations during the Covid-19 pandemic and beyond, African companies relied on a mix of advanced technologies, including the Internet of Things (IoT) (48% of respondents), cloud computing (26%) and data analytics (20%).
Further, in the Middle East, 56% believe big data and analytics will have a significant positive impact on their ability to trade across borders in the next three to five years. An additional 43% believe IoT will have a similar impact and 32% report that both blockchain and cloud will have an impact.
DP World CEO and chairperson Sultan Ahmed Bin Sulayem says international trade has shown remarkable resilience during the Covid-19 pandemic and will play a critical role in facilitating the global recovery.
“The business community is more optimistic for the future than many expected, and the supply chain challenges exposed by the pandemic have acted as a positive agent for change. We expect the result will be global flows of trade that are more efficient and more robust.”