Coronavirus: How Africa’s provide chains are evolving

Ground staff loading fresh produce into a Kenya Airways Boeing 787
Image caption Ground workers loading contemporary produce right into a Kenya Airways Boeing 787

The coronavirus lockdown measures imposed by governments all over the world have triggered extreme disruption to produce chains, as firms had been compelled to close in March.

One sector that has been deeply impacted by the pandemic is the flower trade in East and Southern Africa, which is among the greatest exporters of minimize flowers on the earth.

Prior to the pandemic, the worldwide minimize flower market was value $13bn (£10.4bn) each year, in response to worldwide flower commerce association Union Fleurs.

The European Union and the US are the most important patrons of minimize flowers on the earth, Union Fleurs says. Kenya is Africa’s largest flower exporter, with South Africa not far behind.

Multiflora in Johannesburg is one in every of South Africa’s busiest minimize flower public sale homes. Prior to the pandemic, the public sale home had an annual turnover of $16m. But proper now, the public sale home is getting 40% of the income it beforehand had.

Delayed and cancelled flights, elevated freight prices and an enormous fall in demand have introduced the flower commerce to a digital standstill, and a few flower farms in Kenya have already gone out of enterprise since lockdown started.

All in all, the flower trade in Africa estimates that it has to date needed to throw away 241,000 stems because of the pandemic.

“If there’s no socialising, there’s no need for flowers. We’re effectively looking at two months of non-trading,” Ian Ross, managing director of Flora Export SA tells the BBC.

Image copyright AFP
Image caption The flower trade in Africa estimates it has needed to throw away 241,000 stems because the lockdown started

However, many extra companies throughout the African continent have a give attention to importing somewhat than exporting, flying in items from China and India and reselling them at a better worth.

Latest information from British property consultancy and property company Knight Frank reveals that transport prices signify between 50-75% of the retail worth of products bought in Africa.

“People want to get rich quickly, so the fastest way is to import goods and charge a high markup – many successful people have done this,” explains Alex Demissie, managing director of Africa Rising, a enterprise consultancy primarily based in Cologne that advises worldwide firms on getting into African markets.

“They do have pride for their countries [and homegrown products], but if there’s a lot of hassle, people will always use the easiest way to make money.”

The pandemic has sadly disrupted this enterprise mannequin, and it has opened the eyes of African entrepreneurs to the truth that native manufacturing must change into a precedence.

“Supply chains have become longer and more complicated, and hence more vulnerable,” says Andrew Alli, chief govt of Southbridge, a pan-African consulting advisory and monetary companies agency.

Image copyright Barcroft Media
Image caption Chinese staff assembling new locomotive trains to be exported to Nigeria

For instance, rubber may be produced in Africa, however it’s then exported to China to make private protecting gear (PPE) like masks, that are then shipped to Europe, he explains, somewhat than African companies simply making the masks themselves on the market.

But that is altering now – Africa Rising has seen a brand new pattern of companies making an attempt to import extra machines into African nations to arrange native manufacturing centres, as a substitute of importing completed merchandise.

“This is a very positive development for small and mid-sized companies – international firms who are investing in African countries are actively looking for local components that they can use in their factories on site,” says Mr Demissie.

“We see a pattern of diasporas returning to their international locations to supply items for these huge worldwide firms, similar to making zippers for clothes companies.

“Supply chains are moving closer to these factories. At the end of the day, this is what will be creating jobs and making things more successful in the future.”

Improving regional provide chains

The different motive African entrepreneurs have traditionally relied on imports from China and India is that even when you’ll find somebody to make the products you need to promote within the area, present cross-border provide chains nonetheless depart a lot to be desired.

Image copyright AFP
Image caption Chinese officers pose for a photograph on the launch of the Standard Gauge Railway (SGR) passenger practice from Nairobi to Suswa in October 2019

It is simply too costly to import items from neighbouring nations, says Mr Demissie, so smaller companies merely do not trouble.

South Africa, Morocco and Egypt have subtle provide chains just like these of developed international locations, however the remainder of the continent remains to be trailing far behind, because of weak infrastructure.

“It takes too long at customs to bring in the goods. Some of these nations are facing similar obstacles to Southeast Asian countries and China at the beginning of the 1980s,” says Mr Demissie.

But efforts are being made progressively to enhance transport networks in some nations.

Investments made by Chinese companies in Ethiopia and Kenya over the past three years have tremendously improved rail connectivity, making it a lot simpler to import and export items, and the institution of particular financial zones in Ethiopia, Ghana and Nigeria are serving to these international locations to start out native manufacturing centres.

Mr Demissie says that coronavirus lockdown has “accelerated” a change in mindset amongst African entrepreneurs, and companies are already arising with distinctive “indigenous” methods to resolve Africa’s provide chain issues, like Ethiopian Airlines or Kenya Airways.

New provide chain options

Ethiopian Airlines is at present Africa’s largest air passenger provider. Started in 1945, the state-owned airline flies to 100 worldwide locations, in addition to 21 home routes throughout the continent, and it additionally has an air freight service.

Image caption Ethiopian Airlines and Kenya Airways are hoping they will trip out the coronavirus disaster by banking on their cargo companies

Ethiopian Airlines boss Tewolde GebreMariam instructed the BBC lately that he doesn’t count on the federal government to bail the airline out, and to that finish the airline has determined to give attention to offering much more freight cargo deliveries, each internationally and throughout the continent, delivering every little thing from contemporary produce to drugs and PPE.

“It is a very tough challenge but we think we can survive with our cargo business,” he says.

Kenya Airways can also be now contemplating wide-bodied passenger carriers to bolster its cargo shipments, changing 4 of its wide-bodied aircrafts into cargo freight aeroplanes.

On the day the BBC visited, Kenya Airways floor workers had been loading 40 tonnes of fresh-cut flowers and fruit and veggies right into a Boeing 787 Dreamliner destined for London, with the cargo positioned on prime of seats.

Nigerian bike transit app-based platform startup Max, which already operates in 10 West African cities, is an answer distinctive to the continent that has additionally ended up benefiting from the coronavirus lockdown.

Image caption Max Nigeria, which raised $7m in funding in 2019, is now working in 10 cities in West Africa

“One of the outcomes of the pandemic is that with people stuck at home and not able to move around, they’ve had to find ways to get their essentials delivered to their doorsteps, which has been beneficial to us and has driven the growth of our logistics and last-mile delivery services,” says Max Nigeria’s chief monetary officer Betrand Njoya.

“We expect that we’ll be in a position to grow the size of our network to more than 5,000 drivers within the next 12-18 months.”

Supply chains in lots of African nations are nonetheless not excellent, and the African Development Bank (ADB) estimates that the continent would want $90-$130bn of funding in infrastructure each year with the intention to get the area to the place it must be.

That is a troublesome determine to get to, however Mr Demissie says that Chinese, Indian, South Korean, Singaporean, Iranian and Russian firms are actually pouring some cash into enhancing infrastructure throughout the continent.

“Africa still has the youngest population of any continent – who is going to make and sell consumer goods for the African consumers coming up?,” he tells the BBC.

“China was very backwards at the end of the 1970s, but people were willing to go and invest because they could see the opportunity, and we’re seeing that in African nations now.”