News focus: Ebola threatens global growth

Will Green is news editor of Supply Management
11 November 2014

Alongside the human tragedy of the Ebola crisis lies an increasing threat to global supply chains and economic growth, writes Will Green.

The biggest outbreak of Ebola the world has ever seen has so far claimed the lives of almost 5,000 people in West Africa and led to concern about the potential impact on global economic growth.

Supply chains in the countries directly affected – mainly Liberia, Sierra Leone and Guinea – have been “severely disrupted”, but the implications  of the outbreak reach far further.

BBC economics editor Robert Peston, speaking at the LME Metals Seminar in London in October, said: “The impact on Africa is likely to be significant and, depending on whether we are able to contain its spread, it could have an impact on global growth.”

Charles Laurie, head of Africa research at Maplecroft, says workforces’ fear of contracting the disease means that the “sourcing, manufacturing and delivery of goods are facing major slowdowns in the worst-affected countries”.

“West Africa is experiencing profound trade and transport disruption in some areas as regional authorities block borders and implement roadblocks in a bid to halt the spread of Ebola,” he says. “The operation of markets will remain severely disrupted in the most affected countries, due to ongoing implementation of quarantine zones, restrictions of movement, surging fuel prices and the declaration of force majeure in some sectors.”

The World Health Organization (WHO) has declared Senegal and Nigeria Ebola-free and Laurie says this means their economies are “far less affected, although the prospect of resurgent cases will keep investors on edge”.

Babs Omotowa, managing director and CEO of Nigeria LNG (NLNG) and CIPS president, says “very quickly” after the first case of Ebola was discovered in Nigeria in July, “critical foreign vendors began to show reluctance to mobilise to our production facilities and even to continue ongoing contract discussions”.

Omotowa says suppliers working in offices walked out or failed to return, while “unprecedented” demand for both routine and specialist medical supplies created a “procurement challenge”.

“Though the response to contain the spread of Ebola was relatively swift and ultimately effective, even faster were the effects of the negative perception it cast over the business environment in Nigeria, with significant impact on the ability of the oil and gas industry to procure critical goods and services,” he says.

According to Laurie, economic growth in Nigeria, the region’s powerhouse, will dip 0.1 per cent this year, while growth in Liberia is expected to be impeded much more, dropping from 6.9 per cent to 2.4 per cent. “Economic recession in affected countries in 2015 is becoming increasingly likely as authorities struggle to contain the outbreak,” he says. “Declining revenues and increasing spending pressures by governments to contain the outbreak may result in increased tax rates for the companies still operational in the region.”

Shockwaves from the crisis may also hit commodity markets, with the price of cocoa having risen 10 per cent since August, in part due to fears of Ebola spreading to the cocoa-producing countries of Ghana and Ivory Coast.

Loraine Hudson, market analyst at Mintec, says the impact on global markets has so far been restricted to cocoa. “There may have been some impact on local prices, but not the global market,” she says. “The same applies for gold and metals. Timber and rubber prices may have also been affected locally, and these industries are important to the affected countries’ economies, but again they have not as yet translated to the global market.”

Transport and logistics have been hit hard, according to Laurie. “The harvesting of agro-commodities, such as rubber, palm oil and a variety of food crops, in the most affected countries will be severely impacted by reduced mobility and disruptions to transport links. While mining operations have faced slowdowns due to the evacuation of expatriate staff, major disruptions to key road and port infrastructure will contribute to unpredictable deliveries for the foreseeable future.”

Nick Wildgoose, global supply chain product leader at Zurich, says globalised operations leave firms vulnerable. “Even if companies are not directly affected, they may suffer through their supply chains – for example bauxite or coffee,” he says.

Omotowa says Nigerian government procurement policies to support local suppliers have helped to build capacity in the country and assisted NLNG in weathering the Ebola crisis. The firm’s continuity plan was invoked and they worked with industry partners to develop a response, which included stocking up on critical supplies. “We were also able to leverage our relationships with key suppliers to obtain expedited delivery times,” he says.

“The company also put in place a vendor communication protocol to dispel rumours and comfort letters were issued to explain measures to protect staff and stakeholders from the spread of the disease,” he says.

“Despite the challenging market conditions and business pressure, all critical items were procured and delivered through prioritisation of activities within the supply chain.”

The crisis has highlighted the importance of planning. Wildgoose says firms should “assess the adequacy of their business continuity plans in respect of the threat Ebola presents”. Omotowa says plans should include worst-case scenarios and “especially the risk of strategic vendor withdrawal or unavailability of a critical supply”.

“Another lesson learnt is the benefit of establishing industry partnerships to manage a common threat,” he says.

A report by SCM World says Africa remains a good place to invest, with growth across the continent predicted to be 5.8 per cent in 2014, second only to Asia. West African countries grew by 7 per cent in 2013, while GDP growth in Sierra Leone was almost 14 per cent. SCM World says the number of households gaining discretionary spending power is growing by almost 12,000 a day.

“While the Ebola outbreak garners the majority of media attention on Africa, the long-term narrative of this continent is one of youth, urbanisation, rising income levels and optimism,” says the report.

A brief yet deadly history

The first cases of Ebola virus disease emerged in 1976 in Sudan and Democratic Republic of Congo, the latter outbreak near the Ebola River, from where the disease took its name.

According to the World Health Organization (WHO), it is thought fruit bats are the natural hosts of the disease and it passes to humans through contact with the blood and other bodily fluids of infected animals such as monkeys and antelope.

Ebola spreads through direct contact, via broken skin or mucous membranes, with bodily fluids and items contaminated with these fluids, such as bedding.

The time between catching the virus and the onset of symptoms, when patients become infectious, can be between two and 21 days. The first symptoms are fever, fatigue and headache, followed by vomiting, diarrhoea, impaired liver and kidney function, and internal and external bleeding.

The similarity between early symptoms and other illnesses make diagnosis difficult, and there is currently no licensed treatment or vaccine. Supportive care, such as rehydration and treating specific symptoms, improves survival. The average survival rate is around 50 per cent, though fatality rates have varied between 25 per cent and 90 per cent in past outbreaks.

The current outbreak is the “largest and most complex” since Ebola was discovered, according to WHO, with more than 13,000 cases and almost 5,000 deaths at the time of writing.

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