Economic growth for African nations is highly dependent on their participation in supply chains for goods and services. The more the companies and individuals domiciled in them participate in local and global supply chains, the more revenue they will generate. Supply chain generally can be a competitive advantage, with capabilities for reducing uncertainty and enhancing buyer and end-user satisfaction, and in recent times, with more public awareness and scrutiny, sustainability is a competitive advantage for participation in global supply chains. Consumers have boycotted brands, resulting in decline in sales, because of their lack of sustainable practices like child labor and deforestation. Investors also give attention to sustainability issues. Research indicates that there is a positive correlation between sustainable supply chains and long-term economic growth.
Sustainability is beyond climate change and carbon emissions. The Brundtland Commission of 1987, which was part of the UN World Commission on Environment and Development, defined sustainability as “a development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” The UN defines supply chain sustainability as “the management of environmental, social and economic impacts and the encouragement of good governance practices, throughout the lifecycles of goods and services.” A sustainable supply chain would be enabled to respond to the short-term demands without compromising on long term financial, social, and environmental performance, or while maintaining the well-being of the economy, environment, and society, as Elkafi Hassini, a professor of supply chain management in Canada, puts it.
The UN identifies ten principles of supply chain sustainability:
- Businesses should support and respect the protection of internationally proclaimed human rights
- Businesses should make sure that they are not complicit in human rights abuses
- Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining
- Businesses should uphold the elimination of all forms of forced and compulsory labour
- Businesses should uphold the effective abolition of child labour
- Businesses should uphold the elimination of discrimination in respect of employment and occupation
- Businesses should support a precautionary approach to environmental challenges
- Businesses should undertake initiatives to promote greater environmental responsibility
- Businesses should encourage the development and diffusion of environmentally friendly technologies
- Businesses should work against corruption in all its forms, including extortion and bribery
Apart from the reduced environmental impact, which, contrary to popular perception, leads to big savings, sustainable supply chain has immense benefits:
- Some studies indicate that organizations with the highest investments in the three pillars of sustainability also experience the largest and most stable economic growth.
- Reducing waste and increasing efficiency of machineries and real estate leads to savings in labor and material costs.
- Sustainability reduces operational and marginal costs from improved environmental and business efficiencies.
- Diversity of supply chain improves continuity of supply and avoids over-reliance on a single link in the chain, preventing costly downtimes and reputation damage.
- Sustainability also improves reputation, which enhances business growth and reduces the risk of detrimental effects on profit from boycotts.
- Sustainability creates new business opportunities. The potential for new partnerships with other related businesses in the value chain that are aligned on sustainability values is highest.
Focus on Africa
According to research by the Africa Academy of Management and the International Forum on Sustainable Value Chains, the escalation of social, political, and ecological problems in Africa since the end of the 20th century has impacted the continent’s potential to contribute demographically, politically, socially, and economically to global prosperity. Even though the continent has the youngest average age and is a focus of global development and investments, it does not measure well on sustainable supply chains: African countries are below the levels of other world regions in environmental, social, and economic performance.
Overall, Africa’s infrastructure needs a state of emergency, and poor infrastructure leads to logistics and supply chain inefficiencies, inhibiting not only the flow of goods from manufacturing to consumption, but the talent supply chain as well. According to the African Development Bank Group (AfDB), Africa has the lowest electricity access rate in the world. Over 640 million Africans have no access to electricity. Despite significant financial investments, road transportation across Africa is still challenged by a combination of poor road infrastructure, insecurity, and border control issues. While the world average of paved roads is 944 kilometers per 1000 square kilometers, in Africa, according to the World Bank, there is an average of 204 kilometers of paved roads per 1000 square kilometers. The continent’s road traffic injury fatality rate is 32.2 per 100,000 people, compared to between four and eight deaths per 100,000 people in countries like Sweden, the United Kingdom, and France. African roads are the most dangerous in the world.
Air travel within the region is one of the most expensive in the world: it could be cheaper to travel from Lagos to London, than to travel from Lagos to Lome or Kinshasha.
The continent needs to improve shipping networks as well as integrate road and sea freight to accelerate movement of goods within the region. African ports are still plagued with long cargo clearance times, under-developed port infrastructure, and container and cargo theft. For example, despite being the busiest terminal in West Africa, the Apapa port in Lagos can handle only 22,000 TEU of containerized cargo and the average waiting time for shipping liners is over 25 days at the container terminal due to long clearing times. Upon landing, African countries lack the extensive road networks that facilitate delivery, for instance, it can take up to 30 days to move heavy generator equipment from the port in Lomé to the neighboring country of Burkina Faso, a trip that should ideally take three days.
Insecurity is another major impediment on the continent. Evidence points to a systemic pattern of political instability that often disrupts supply chains in countries where inhabitants are widely dispersed. Large geographical spreads with small and dispersed populations have inhibited the establishment of strong governments that can control their borders while facilitating sustainable supply chains.
Intra-African trade records frequently understate the amount of trade on the continent, partly because of the lack of adequate statistics, and significantly because of the high rate of smuggling and human trafficking, which allows a substantial amount of traditional border trade to continue unrecorded. Smuggling and human trafficking across the continent are enabled by issues of bribery and corruption at the different borders and worsened by trade restrictions between neighboring African countries.
African businesses lag behind in measuring, reporting, and addressing sustainability concerns, issues, and problems. In Kenya, for example, only 0.05 percent of all registered businesses in the country are accounted for in the national Global Compact Network, even though the country is a strong exporter to Western Countries.
All these limits the continents participation in strategic partnerships and collaborations for economic growth. Are African countries the weakest market participants? Africa’s share of global trade has remained low in value and volume share performance, despite the global trend of export and trade participation from developed to emerging economies. Within the region, the share of intra-African exports as a percentage of total African exports, which increased from about 10 percent in 1995 to around 17 percent in 2017, is low compared to global trade standards. This gap is indicative of an opportunity for new growth facilitated by improved regional and global trade participation. What are the opportunities for repairing and strengthening supply chains in Africa?
Digital technology is very useful for sustainability in supply chain. There is an ongoing digital explosion in Africa. Internet penetration in sub-Saharan Africa has grown tenfold since the early 2000s, compared with a threefold increase in the rest of the world. Technology hubs are springing up at an incredible rate, with more than 50 percent year on year growth recorded in recent years, and more than 600 of these hubs across the continent. Almost half of the world’s mobile money transactions in 2018 were from Africa, and the continent is expected to lead the fastest growing mobile money technology through 2025, according to the Brookings Institution. Kenya, Nigeria, and South Africa, among the nations with the highest network coverage in sub-Saharan Africa, are expected to be the top three markets for smart phone connections in 2025.
Digital technology underscores and enables sustainability. Businesses can use technology to not only reduce the ecological stress generated for each supply chain related activity, but also to aid visibility, transparency, and accountability. From procurement to goods or service deliveries, digital technology can be used with immense benefits. Examples include remote working reducing commute time and carbon emissions from the commutes, robotics reducing human involvement in activities with high operational risks, insight from artificial intelligence reducing sourcing costs and customer satisfaction, technology facilitating better inventory control and reducing waste, and digitization enabling transparency and reducing opportunities for corruption. The increasing digital technology innovation also lowers the barriers of entry to being sustainable. Technology also opens up the talent and services market in Africa to the rest of the world, as it eliminates visa and travel requirements for participation.
As sustainability becomes integrated into supply chain activities, companies and regulators can measure performance using digitization, from data collection to analysis and interpretation for continuous improvement. One example is the use of digital technology and satellite imagery to create individual farm development plans on mobile devices, to guide Ghanaian cocoa farmers over a seven-year period, targeted at improving their productivity and sustainability, which was developed by a coalition of Rainforest Alliance, Grameen Foundation, University of Ghana’s Department of Agricultural Economics and Agribusiness, Touton, and WaterWatch Projects. Digital technology allows for transparency, which strengthens customer trust and leads to increased sales among some customers, with some paying 2 to 10 percent more for products that provide supply chain transparency, according to research by MIT Sloan professor Y. Karen Zheng and assistant professor Tim Kraft.
Yet digital technology does not address the critical policy changes needed to transform Africa’s supply chain to become sustainable.
There is no sustainable supply chain without a sustainable supply chain policy. Government policies have the highest impact on supply chain activities, with direct impact on travel, product duty brackets, market size, logistics cost, security, and regulatory compliance. In addition to country specific regulations, regional blocs on the continent operate free trade zones or have special trade relationships that will benefit from clear development policies and leadership around sustainable supply chain.
A sustainable supply chain is dependent on integrated economic, social, and environmental systems. This is where the Africa Continental Free Trade Area Agreement (AfCFTA) comes in. Trade analysts anticipate that AfCFTA, aimed at simplifying and reducing duties, human interference, and clearing procedures at ports, would greatly improve supply chain efficiencies. AfCFTA is also expected to unlock Africa’s potential to contribute to global and local prosperity demographically, socially, and economically, by not only harnessing the large market size of Africa but establishing mechanisms that will allow African economies to create enabling environments to support vibrant businesses without harming people and the natural environment.
AfCFTA is not limited to the movement of goods alone, but impacts services as well, since its priority sectors include financial services, transport, telecommunications/information technology, professional services, and tourism.
Different economic analysts point to Africa as a choice destination for foreign investments, with opportunities for accelerated economic growth. While still a long way from a sustainable supply chain based on the UN’s ten principles of sustainability, technology, conscious policies, and the implementation of AfCFTA could realize the continent’s immense economic potentials. Once the continent can surmount the challenges inhibiting the sustainable flow of goods and services on the continent more African nations will have the impetus for global supply chain participation, which will offer the much-needed competitive advantage for accelerated economic growth.