Africa needs to play more impactful role in global supply chain – UN

The United Nations (UN) has said Africa needs to play a more impactful role in the global supply chain and build resilience for its large consumer market.

The UN agency noted that an important precondition for Africa to play the role will be to address its supply chain vulnerabilities.

It identified the key barriers to logistics and supply chains in Africa as poor infrastructure, informality, weak institutions and regulations, fragmented markets, limited sources of capital, low levels of technology and political risks.

This was disclosed by the United Nations Conference on Trade and Development (UNCTAD) in its recently released report titled: ‘The Economic Development in Africa Report 2023: The Potential of Africa to Capture Technology-intensive Global Supply Chains.’

The international body said Africa could position itself as a geographic alternative, and optimize its strategic value for future leading-edge supply chains, as many companies across the world rethink their supply chain strategies to address gaps and mitigate risks.

UN also affirmed that Nigeria is highly dependent on the imports of goods, such as refined petrol, cars, smartphones, cereals, and pharmaceuticals.

The report said: “These barriers can increase the cost of doing business and trade in many African countries, especially those that rely heavily on foreign imports of goods and services. For example, a country such as Nigeria, which has a population exceeding 200 million, is one of the biggest economies in the region (United Nations, 2022).

“Yet it remains highly dependent on the import of goods, such as refined petroleum oils, cars, smartphones, cereals, and pharmaceuticals, to satisfy its consumers (Observatory of Economic Complexity, 2022; Statista, 2023).”

According to the Secretary-General of UNCTAD, Rebeca Grynspan, the continent’s growing population and large consumer market presents it with an advantage as firms look for new destinations.

Grynspan said: “Africa’s growing population, increasingly large consumer markets, and expanding business opportunities are major sources of growth and prosperity for the world and key factors that position Africa as a strategic region in the drive for geographically diversified supply chains.

“Moreover, Africa’s large reserves of critical minerals that are vital for global supply chains of high technology-intensive industries can turn African economies into key suppliers of parts and components in the automotive, electronics, renewable energy, and medical devices sectors.”

The agency further revealed that many factors can influence a company’s decision to relocate parts of its supply chain to another country or region, and this includes a conducive environment for increased productivity, high-growth markets, high-profit entrepreneurship, an active and technology-oriented workforce, and a dynamic consumer base.

It noted that Nigeria experienced subdued growth in 2022, with inflation, power supply challenges, and lower-than-expected oil production affecting economic performance in the country.