The latest data from the Chartered Institute of Procurement and Supply (CIPS), released on Thursday, reveals escalating operational risk, both globally and in sub-Saharan Africa, owing to the prolonged slump in global commodity prices and the slowdown in emerging markets.
The CIPS risk index shows supply chain risk in sub-Saharan Africa worsening from 5.526 points in the first quarter to 5.544 points during the second quarter of 2016, with the region’s contribution to the overall index increasing slightly from 2.47 in the first quarter to 2.50 in the second quarter.
“The weak global growth environment and especially the slowdown in the Chinese economy will continue to weigh on growth in sub-Saharan Africa in the near term. As China continues its transition from an investment-led to a consumption-driven economy, its demand for African commodities will weaken even further,” said CIPS Africa MD André Coetzee.
Despite an increase in uncertainty, Brexit’s immediate impact on sub-Saharan Africa has been found to somewhat limited; however, its impact on the already-deteriorating global supply chain is more severe.
Global supply chain risk climbed from 79.8 in the first quarter to 80.8 in the second quarter – the highest level since 2013 and one of the highest levels since records began in 1995.
“The UK’s departure from the European Union could lead to some of the most dramatic shifts and severe implications for global supply chains in the coming years.
“While the full impact of the leave vote is still unfolding, the confusion and uncertainty surrounding the current situation has already driven supply chain risk to a worryingly high level,” explained CIPS economist and Cranfield School of Management Centre for Customised Executive Development director John Glen.
This meant that businesses needed to develop contingency plans for all possible scenarios, starting with “gaining clear visibility” of the supply chain environment to accurately assess emerging risks and ensuring supply chains' agility and flexibility, he said.
“Businesses should also consider more local sourcing, to avoid a potential rise in costs of key supplies imported from overseas. In the end, businesses may need to rebuild their distribution channels to match the new trade map,” Glen concluded.