SA needs to diversify its supply chain networks
The recent unrest has prompted the question: could the supply chain networks and links operate differently to prevent similar disruption in future?
SA relies on the use of road transport, among other modes, for the delivery of goods across the country, and because of increased traffic congestion the logistics sector already struggles to deliver on time. It is estimated that more than 80% of freight in SA is transported by road.
The recent unrest in KwaZulu-Natal and Gauteng (and some small parts in other areas), which caused significant damage to key infrastructure and facilities, means this has now officially become worse.
The reality is that the protests, followed by prolonged unrest and looting sprees, have destroyed and disrupted vital transport, logistical, warehousing and distribution facilities in the two provinces. The SA economy was already reeling from the impact of the Covid-19 related lockdown, with the general supply of goods and services already suffering. This crisis can only exacerbate these challenges. With high levels of unemployment, a contracting economy coupled with stagnating recovery and dwindling industrial activities, we are officially in grave trouble.
Today, fears of food insecurity and shortages continue to rise, and because of the seriousness of the situation, there are new fears of more looting taking place by people who cannot access essential supplies. With major logistics companies already reporting disruption to their operations, there is no telling when normalcy is a possibility.
Already a couple of companies announced their inability to honour their contractual obligations due to damage incurred. State-owned transport operator Transnet declared force majeure on the vital Natcor (Natal Corridor) rail route that connects KwaZulu-Natal and Gauteng. The SA Petroleum Refinery, which is responsible for 35% of the country's fuel supply through Shell and BP outlets, also declared force majeure, due to the disruptive unrest. Some logistics companies grounded their operations in risk areas.
While some calm has been restored in the two provinces, the damage is already done, and the long-term consequences will be felt for years. From more job losses, to the closure of businesses, a reduction in fiscal income due to lower tax contributions, large scale disinvestment and slowing foreign direct investment flows. This has a ripple effect on the state’s ability to foster economic recovery, pay social grants and build key economic infrastructure (or even maintain existing ones). Essentially, the riots make our economic prospects even grimmer.
Could this have been avoided? I believe we could have handled the situation better and reacted quicker. However, there are lessons to be learnt in a crisis. This situation offers a unique opportunity to strengthen our ability to detect and prevent similar uprisings in future and to understand the root cause of this crisis. I think we can all agree that at the root of the unrest are socio-economic challenges, including high youth unemployment and poverty, inequality and widespread fatigue caused by the pandemic — all being exploited through the politics of today.
These disruptions not only affected essential supplies but also medicine and vaccine distribution, delaying the country’s Covid-19 vaccination programme. This raises the question: could the supply chain networks and links operate differently to prevent similar disruption in future? I believe technology can help us better pre-empt, mitigate and respond to disasters. For example, artificial intelligence could help us collect and interpret important data, and therefore make better decisions through information.
Additionally, technological integration of our supply chain networks and distribution could help the industry continue to serve the market even when disruptions occur. Alternative logistics technologies such as drones could be used right now to distribute supplies even to risky areas. A deliberate reinvestment into our manufacturing sector will also be key to ensuring that we not only get out of this difficult situation but prevent shortages when disruptions occur in future.
I believe that by now the government should have realised the importance of SMMEs to our economy, especially township economies, and therefore should invest more in fostering the successes of these businesses.
Lastly, still on the subject of diversification of our supply chain networks, the country needs to invest in the resuscitation of our rail infrastructure, expand on it and introduce modernised locomotives for efficient transportation of goods.
This means improved, dynamic and integrated logistics strategies that not only protect the sector from disruption but also enable an advanced and efficient service offering.
• Letsoalo is founder and MD of supply chain consultancy Sincpoint.
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