<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JEREMY MAGGS: The war in the Gulf is no longer just a distant geopolitical crisis. It\u2019s now directly hitting South Africa\u2019s trade arteries.<\/p>\n
According to the Chartered Institute of Procurement & Supply (Cips), shipping disruptions linked to the Iran conflict are already forcing vessels to reroute around the Cape. That could add up to two weeks to global trade journeys.<\/p>\n
At the same time, war risk insurance premiums, fuel surcharges and container rate hikes are beginning to filter through the global logistics system.<\/p>\n
That is obviously raising the prospect of higher costs for South African importers, exports and ultimately consumers.<\/p>\n
I want to bring in the regional managing director of the institute, Paul Vos, into the conversation. Paul, welcome to you. I want to start with the scale of the disruption, if we can.<\/p>\n
In your opinion, how immediate is the impact of this conflict on South African supply chains? Not good, I imagine.<\/p>\n
PAUL VOS: Hi, Jeremy. Yes, the impact is here already. Our supply chains have already been disrupted, and we hear various reports of a number of ships that are actually currently stuck or have been delayed.<\/p>\n
Never mind the longer transit times, we actually have quite a high number of transit ships that are stuck in the Red Sea area. So there are already going to be delays for us.<\/p>\n
Those war risk insurance premiums that you spoke about have already been applied. There will be fuel surcharges on those vehicles, and the container price hikes have already been applied.<\/p>\n
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So that\u2019s happened immediately and that\u2019s going to have an impact on working capital cycles, and it will tighten as the delays and the cost escalations hit simultaneously. So the impact has already happened. It\u2019s not something that\u2019s imminent.<\/p>\n
I know that we\u2019ve already had a fuel price increase this month. But from what we can gather, we are in for a significant fuel price increase from next month (April) as well. We see that the oil prices have already increased by 60% since this conflict started.<\/p>\n
Read\/listen: Oil shock: Brace for R5\/l to over R8\/l SA fuel spike<\/p>\n
Obviously, we know that the cost of the fuel products will be felt immediately by consumers, but the trickle-down effect into the rest of the economy will be evident for quite some time to come. But it\u2019s immediate.<\/p>\n
JEREMY MAGGS: Which South African industries then are most exposed to this disruption? It would obviously be manufacturing, retail, agriculture and others, I guess.<\/p>\n
PAUL VOS: If we look at the various sectors of the economy, retail, especially those that are seasonal and that have time-sensitive imports, that will be impacted in terms of stock.<\/p>\n
From the automotive side, there are those manufacturers that rely on very specific and precise components logistics, their production is going to be hit.<\/p>\n
Read: Shipping has collapsed through vital Strait of Hormuz<\/p>\n
Global electronics, there are already constraints on supply chains in terms of electronics, and that\u2019s going to be further constrained.<\/p>\n
For petrochemicals and pharmaceuticals, these are going to cause delays in manufacturing cycles. FMCG (fast-moving consumer goods) is heavily dependent on predictable lead time planning. So it\u2019s multifaceted across multiple sectors of the economy.<\/p>\n
JEREMY MAGGS: Do you think that small and medium businesses are more exposed to the shock than maybe larger corporates that I imagine would have deeper and perhaps more sophisticated supply chains?<\/p>\n
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PAUL VOS: I think the impact won\u2019t be as immediate for SMEs (small and medium-sized enterprises), but the SMEs will be the most vulnerable in the longer term.<\/p>\n
As these shocks trickle down through the economy, the SMEs are going to be the ones that will have to bear a significant brunt of the impact, and particularly those SMEs that are working in the informal economies where there\u2019s a lot of price sensitivity.<\/p>\n
From the immediate side there won\u2019t necessarily be a significant impact. But over the longer term, the SME sector is going to feel some strain.<\/p>\n
JEREMY MAGGS: And difficult to plan, particularly for businesses that rely on the so-called just-in-time inventory model.<\/p>\n
PAUL VOS: I think what we\u2019ve seen, we\u2019ve had a few practice runs with this. There\u2019s this notion of being future ready, which we don\u2019t really believe in. I think we believe more in being future fit.<\/p>\n
We\u2019ve had the same conversations around this when the situation in Ukraine emerged, and similarly at the beginning of the Trump administration, when there were discussions around tariffs.<\/p>\n
We had a lot of discussions around the need for agility. Our supply chain planners and leaders are now quite adept at finding alternatives.<\/p>\n
But in terms of the just-in-time side, no matter how much planning we have, there is still going to be a risk of stockouts with some supply lines. If you don\u2019t have an inherent buffer to absorb those delays or congestions, you\u2019re going to be faced with those.<\/p>\n
Then that will have another impact in terms of cost escalations as organisations are then forced to look at expedited logistics or finding alternative supply chains. Then that\u2019s going to place additional pressure on working capital, so that strain increases as well.<\/p>\n
We\u2019re actually looking at this whole supply chain as a concept and thinking more about how the practitioners in procurement and supply are now looking at more of a supplier web, because the whole notion of a chain has implications (because) if one link in the chain breaks, then the whole thing breaks down.<\/p>\n
As I said, as a result of our recent history, we are looking at more of a matrix and web-based approach to supply chains that\u2019s emerging.<\/p>\n
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JEREMY MAGGS: That supply web though, it reduces risk, I imagine, but it becomes a lot more complex, surely, and difficult to manage.<\/p>\n
PAUL VOS: Absolutely, it introduces a whole new level of complexity. What we are seeing is that the demands that are being made from a strategic perspective on organisations in terms of their procurement and supply chain function has increased exponentially because of some of the factors that we\u2019ve spoken about.<\/p>\n
This current situation is another example of that. So yeah, it\u2019s becoming increasingly complex. But that complexity is just driven by the needs of the market.<\/p>\n
JEREMY MAGGS: Just quickly, how worried are you right now?<\/p>\n
PAUL VOS: As I said, we have had the history of some of the events in the past. But I think that what we are worried about are issues like stock outages and alternatives options.<\/p>\n
Read:\u00a0Infrastructure upgrades boost trade in African markets<\/p>\n
We\u2019ve spoken at length before around the African Continental Free Trade Area (AfCFTA), and the fact that as a country we haven\u2019t necessarily explored the options around that and the alternatives in terms of our supply chain.<\/p>\n
I think that some of the conversations are getting a bit repetitive and tired, and we are concerned about the fact that some of the opportunities that have presented themselves haven\u2019t necessarily been adopted.<\/p>\n
I think our concern really is more around the protracted nature of this particular conflict and the longer-term effect of that. Our concerns are around the medium to long-term impact that this could have on us as a region.<\/p>\n
JEREMY MAGGS: Thank you very much indeed. Paul Vos from the Chartered Institute of Procurement & Supply, he\u2019s the regional managing director. Appreciate your time today.<\/p>\n
#Warlinked #shipping #delays #threaten #stock #availability #costs<\/p>\n","protected":false},"excerpt":{"rendered":"
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