In 2024, much of the economies across Africa is grappling with the high cost of goods and inflation and one of the primary causes is the limited local supplier options businesses have to deal with on the continent.
Suppliers are the heartbeat of any supply chain management, and despite globalization, local suppliers are still quite relevant for these supply chains. They are majorly responsible for the success of most modern supply chain operations; without them, these operations will struggle to survive.
Limited supplier options have become a massive problem for many African supply chains. These include the high cost of goods, delays, inflation due to mounting forex exchange, and many others.
Overcoming this lack of local suppliers is necessary for businesses and the rejuvenation of the African economy. However, the question plaguing most businesses is the “How?”. We would address that in these blog posts, but before that, let us explore the “why?”
Why are there limited local supplier options in Africa
It is true that much has been made of globalization and the importance of engaging global suppliers. However, you will note that this is because it provides access to cheaper labour, better materials, and allows supply chains to reduce costs drastically. But, if the recent pandemic taught us anything, it is that overreliance on global suppliers is a weakness that any supply chain cannot afford.
That weakness is plaguing a lot of African supply chains, but why has it become a problem for them?
1. Poor infrastructure
Poor infrastructure is one of the biggest challenges African businesses and governments face on the continent. Unsurprisingly, it also impacts investments from local and foreign entities.
Examples of the poor infrastructures that plague the continent include poor roads, poor energy supply, and security.
With these challenges, people and businesses are often limited in productivity, forcing supply chains to seek foreign suppliers to ensure the continuity of their operations.
2. Political Instability and poor policies
In the last five years, Africa has continuously experienced a coup epidemic. 2023 alone saw Niger and Garbon as the latest victims. Since 2020, a total of seven countries have experienced military coups. This instability does not bode well for businesses investing in the continent. There will always be that hesitation as long as these persist. This makes it improbable to get better suppliers across the board.
3. Limited access to finance & capital
As supply chains grow, they often need suppliers with more capacity to ensure the success of their supply chain operations. However, many local suppliers in Africa lack the capacity to help them achieve this. A key reason is because of the poor access to finances and capital. This slows down the growth of these suppliers and hinders their effectiveness.
4. Skill gap
Although Africa has made significant leaps in the skill gap, there is still a lack of expertise in many fields that could help improve supply chain operations across the continent. This forces the supply chains to source more services outside the continent. Investing in education and skill acquisition can help turn the tide around. However, much of the responsibility for ensuring the right steps are taken is on the government.
How to tackle the issue of limited local suppliers in Africa
Without a doubt, the limited local suppliers across the continent impact supply chains negatively. Therefore, finding solutions to the problem will go a long way for many businesses and their supply chains.
What are some of the solutions?
1. Invest in supplier development
Supply chains across Africa should not be quick to dismiss suppliers who immediately do not meet their expectations. This is particularly important if the supply chain is finding it difficult to source other local suppliers. Investing in supplier development entails active investment by companies into building relationships with suppliers or potential suppliers to ensure the supplier can grow to the level where they can meet the demands of the business.
There are precedents for this. Unilever, Nestle, and Toyota have done this across Kenya, Ghana, and South Africa.
Many businesses shy away from this because they think it might be too expensive. In reality, it will be cheaper for them in the long run. Consider the current issue with forex, and you will realise this is not far-fetched. Investing in local suppliers simply entails providing training, capital, technical assistance, and other tools necessary to help improve the capacity of the supply chain operation.
There is a caveat, though. Before investing in a local supplier option, the supply chain must conduct its due diligence. You don’t want to invest in a bad person or business. It will be close to impossible to reap good rewards from that partnership.
2. Meet the suppliers where they are
When businesses and supply chains turn to local suppliers, it is not uncommon for them to think the options available have no hope of meeting their demands. Now, this is often true, but it doesn’t always have to be.
Businesses that began partnering with small-scale suppliers only a couple of years ago are now eating up all the benefits. They do not have to spend so much considering the current forex. And they can also provide goods and services to the customers at affordable rates.
It is important to partner with suppliers, even at their small level, while investing and giving them the opportunity to meet more needs of the supply chain gradually. If done well, these suppliers can become very good partners in the long run. This sort of partnership gives the business or supply chain a lot of leverage in the long run.
3. Consider regional sourcing
The absence of a supplier in one African country doesn’t necessarily mean the absence of suppliers on the entire continent. In many cases, these suppliers could be in neighbouring countries. If they can be engaged, it will result in cheaper and faster deliveries for these supply chains. Regional sourcing opens up a supply chain to suppliers of the same background, even if they do not necessarily share the same nationality.
This improves the ease of doing business and helps with communication, resulting in seamless operations for the supply chains involved.
4. Actively explore or search out potential suppliers
As much as there is a lack of suppliers, businesses and supply chains also have a huge propensity to skip searching for local suppliers. These supply chains will often immediately start working on sourcing globally, believing that there are no local suppliers. In my experience, there are many times they have been proven wrong.
You would be hard-pressed to blame them, though. This is because of the lack of visibility of the local suppliers. In today’s digital age, it is still common to come across businesses with no website or online presence in Africa. Despite the lack of visibility to the public, steps can be taken to actively seek out these suppliers, especially considering the benefits involved.
Researching the market, analysing competitors, and seeking out local businesses that use similar raw materials can go a long way.
Benefits of sourcing or partnering with local supplier options in Africa
Overcoming the limited nature of the local supplier options in Africa has immense benefits attached to them. Some of these benefits are:
1. Less reliance on forex: It is not news that the forex market adversely impacts many businesses across Africa. Less reliance on it will do wonders for many businesses and help them reduce costs while potentially improving product quality.
2. Speed: Engaging with local suppliers will often result in speedy deliveries of values and products for the supply chain. It’s basic maths. Importing goods from China or a different state or city within the same country. Which do you think would be faster for any supply chain?
3. Cost savings: Local suppliers generally help reduce cost and risk for any supply chain because most of the critical or expensive elements of global sourcing are eliminated.
4. Efficiency: Local suppliers help the supply chain stay more productive. It will lead to less waste and help the supply chain serve its customers better.
FAQ’s on tackling limited local supplier options in Africa
These are common questions asked across the internet, and they could help you understand the topic better.
Q1. How can businesses overcome the challenge of limited suppliers in Africa?
Supply chains can explore collaboration opportunities with local suppliers to strengthen operations. Additionally, efforts to improve infrastructure, invest in technology, and engage in capacity-building initiatives can contribute to expanding the supplier base.
Q2. What strategies can be employed to find reliable suppliers in Africa?
Supply chains can employ the following strategies to find suitable suppliers.
- Conduct thorough market research.
- Attend industry events and trade shows to connect with local suppliers.
- Establish partnerships with local businesses.
- Leverage online marketplaces to discover new suppliers.
Q3. How can supply chains manage risks associated with limited supplier options?
In managing the risks associated with limited suppliers, supply chains and businesses can do the following:
- Diversify suppliers.
- Implement robust risk management and due diligence processes.
- Stay informed about political and economic developments in the region.
Conclusion
The West favours the global supply chain because it gives them access to cheaper labour and goods. Africa is supposed to enjoy this for themselves, but for some reason, we find ourselves going to Asia and other places for goods.
The reason is limited supplier options here in Africa, but we can change that. The article details how to do this and will help supply chains reduce their forex cost.
Obinabo Tochukwu Tabansi is a supply chain mastro and writer with a decade of experience working in different facets of the supply chain. Today he is living his passion for writing on all things supply chain. His blog, Supply Chain Nuggets, is Africa’s fastest-rising supply chain blog, helping professionals, business owners, and curious minds navigate the supply chain complexities on the continent.
