African economies hold the potential to play significant roles in global supply chains, leveraging their abundant resources, which are indispensable to high-tech sectors, coupled with their expanding consumer markets, according to the United Nations Conference on Trade and Development (UNCTAD) in their Economic Development in Africa Report 2023.
Supply chains embody the systems and means necessary for the development, production, and conveyance of goods and services from suppliers to consumers.
UNCTAD Secretary-General Rebeca Grynspan said, “This is Africa’s moment to bolster its position in global supply chains as diversification efforts continue. It’s also an opportunity for the continent to strengthen its emerging industries, foster economic growth and create jobs for millions of its people.”
Given Africa’s rich reserves of essential minerals and metals, including aluminium, cobalt, copper, lithium, and manganese, integral for tech-centric industries, the continent emerges as a compelling manufacturing hub.
This allure is enhanced by recent disruptions from trade disturbances, geopolitical affairs, and economic uncertainties pushing manufacturers to reconsider their production bases.
Furthermore, Africa provides other advantages such as streamlined access to primary materials, a youthful, tech-savvy, and flexible workforce, alongside a burgeoning middle class known for its escalating appetite for refined goods and services.
The study underscores that crafting a milieu conducive to tech-focused industries could help elevate wages across the continent, presently pegged at a bare minimum of $220 monthly, in contrast to the Americas’ $668 average.
A deeper assimilation into global supply chains could also diversify African economies, augmenting their resilience against future upheavals.
Tapping into Africa’s energy supply chains could also fast-track climate initiatives. The continent’s immense renewable energy capacity, especially in solar energy, can curtail production expenditures and diminish dependency on fossil fuel-derived energy.
However, Africa requires an influx in renewable energy investments to bridge the notable investment shortfall and surmount hurdles in manufacturing solar panels locally.
Presently, a mere 2% of global renewable energy investments are directed towards Africa. Increased investments in this domain, as pointed out by UNCTAD, could stimulate solar panel production on the continent.
For instance, in 2022, the Democratic Republic of the Congo stood as Africa’s top copper producer, generating 1.8 million metric tonnes. Beyond exploration and extraction, the nation holds potential as a refining hub for the electric vehicle sector.
Significant infrastructure investments are essential for Africa to assert itself as a prime supply chain nexus.
Seventeen African nations, encompassing Angola, Botswana, Ghana, and South Africa, have already instituted local content policies to spur local supply chain growth, promote technological exchange, generate jobs, and enhance in-country value.
Moreover, African states ought to negotiate superior mining contracts and exploration licences for metals utilised in high-tech products and supply chains, bolstering domestic industries and empowering local entities to design, procure, produce, and supply requisite components.
Embracing cutting-edge digital technologies is pivotal for refining supply chain operations. Countries like Kenya have showcased commendable strides in this sector, witnessing a surge in digital skills adoption across Africa.
UNCTAD encourages governments to devise robust policies, engender a facilitative regulatory framework, and magnify initiatives to champion the broad acceptance of these technologies.
The UN trading and development entity also reemphasises its appeal for enhanced financing solutions, granting African nations and enterprises cost-effective capital and liquidity to fortify their supply chains.
The report underscores the dire need for African SMEs to access enhanced supply chain finance, which bridges payment lags between purchasers and vendors, facilitates access to operational capital, and alleviates financial burdens.
As per the report, the worth of the African supply chain finance sector swelled by 40% between 2021 and 2022, touching $41 billion.
The continent could muster additional capital by eradicating impediments to supply chain finance, such as regulatory constraints, heightened risk perceptions, and scarce credit data.
UNCTAD further accentuates the necessity for debt relief, affording African countries the fiscal leeway to invest in reinforcing their supply chains, as they currently incur borrowing costs quadruple those of the US and octuple of European nations.