The South African supply chain and national economic growth

The supplychainforesight research report into attitudes, issues and trends in South Africa’s supply chains has been conducted under the auspices of Barloworld Logistics since 2002, and is now well-established as the benchmark qualitative study of the national supply chain. This year’s ninth edition of the report, just released to the market, goes by the title South Africa Inc.: Growth, Competitiveness and the Africa Question. Once more it samples the responses of a wide range of senior executives and decision makers from across most of South Africa’s industry sectors, and not only those involved directly with supply chains. A wide range of different sized businesses are also canvassed each year, with a concentration on large multinational companies.

Clearly the most burning question facing South Africa’s businesses, across all industry sectors, is how to use their supply chains to remain profitable and competitive in a world stricken by economic slowdown, rising unemployment and high levels of debt. In South Africa these efforts to deploy the supply chain as an enabler of growth have been hampered by labour costs, bureaucracy, infrastructure shortcomings, and other competitive challenges. One of the aims of this year’s research, therefore, was to gauge how individual companies and industries are engaging the changing economic landscape with which the country is faced.

In particular that landscape reflects a shift in global economic power, away from the developed world and towards the still growing economies of the major emerging markets, which has been evident for the last few years. This shift should present South African business with a major opportunity to capture market share and growth. Companies and industries 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 – a position which is now under threat.

This year’s supplychainforesight study therefore sets out to analyse where South African companies are in terms of their strategies for growth, and engaging with how they are building and being part of a supply chain that is extending across their industry sectors and ultimately across the national economy. This included looking at how South African companies are organised and represented in their industries, and what industry-wide initiatives exist for key areas such as industry lobbying and skills training. The survey probes the objectives, challenges and constraints that face businesses, industries and the country in the quest for growth in difficult circumstances. Part of this focus on future insight – or foresight – is the implications of the shift to emerging economy markets and in particular looking to other African markets as a new field of possibility.

One of the strongest business objectives to emerge from the research is the need for increased flexibility and responsiveness in many supply chains, especially given the recessionary economic climate. The last few years have seen huge variations in demand patterns, and declines in volumes. This means that a responsive and flexible supply chain is essential if companies are to take advantage of increasing demand as economies recover. Those companies burdened by expensive and underutilised assets will struggle to compete, as will those unable to quickly add capacity.

On the downside for most South African business, and given as a major constraint to growth in the research, remains the uncertainty of the macroeconomic outlook. This concern for South Africa’s private sector reflects the direct impact that any recessionary dips in the developed world will have on South Africa – especially in the Eurozone. The knock-on effect of lower trade volumes between South Africa and its major European trading partners has already been keenly felt in the recession. Any tendency in the Eurozone to become more insular and protectionist in response to their debt burdens and the possible breakup of the zone will have an immediate impact on supply chains built up in the decades of flourishing global trade.

Another major constraint on growth that emerges from the findings lies closer to home – the cost of doing business. The bureaucracy and cost of labour in South African business has long been a cause of our underachievement in terms of international trade competitiveness, despite our relatively sophisticated trade infrastructure. This sadly continues to be the case. Allied to this are the further constraints for supply chains of the cost of transport and labour unrest, highlighted in the last year by crippling and expensive trucking strikes.

When asked specifically about factors enhancing and constraining South Africa’s competitiveness, many respondents pointed to our capacity to innovate and apply best practices as standing us in good stead to drive growth, while, perhaps predictably, a lack of skills is a serious constraint on growth for the private sector and for the national economy.

In terms of the respondents’ plans for growth into emerging economies, almost all sectors see an expansion in trade with emerging economies in the short to medium term. Interestingly, most of these companies will be selling into these markets, a sure indication that attention will not solely be focused on the developed economy markets in the near future. While most companies see South Africa’s position as the ‘gateway to Africa’ remaining dominant, many also perceive that our major continental trading bloc will continue to be the Southern African region, rather than the larger African economies further North.

The supplychainforesight study is launched nationally by Barloworld Logistics in March this year. The detailed results, which also include more information on how industries are organising themselves for competitiveness and growth, will be published in full on the Barloworld Logistics website (www.barloworld-logisitics.com), or on the dedicated research website, www.supplychainforesight.co.za. To find out more and to download previous reports and other resources, consult either of these sites.