CIPS News


Chinese slowdown highlights Sub-Saharan Africa’s supply chain vulnerabilities

CIPS 16 February 2016
  • Sub-Saharan Africa’s supply chain risk score fell slightly in Q4 2015 from a record high in Q3, with macroeconomic improvements in Cote d'Ivoire, Namibia and Senegal the main contributory factors
  • Underlying risk trend continued to deteriorate however, as concerns over a Chinese slowdown, further falls in global commodity prices, and the US interest rate increase weighed on the region
  • The global supply chain risk score increased to a record of 79.3 in Q4, as global economic slowdown exposed emerging markets’ vulnerabilities

 


  • Sub-Saharan Africa’s supply chain risk score fell slightly in Q4 2015 from a record high in Q3, with macroeconomic improvements in Cote d'Ivoire, Namibia and Senegal the main contributory factors
  • Underlying risk trend continued to deteriorate however, as concerns over a Chinese slowdown, further falls in global commodity prices, and the US interest rate increase weighed on the region
  • The global supply chain risk score increased to a record of 79.3 in Q4, as global economic slowdown exposed emerging markets’ vulnerabilities

 

16 February 2016, South Africa – Global supply chains suffered from growing risk in Q4 2015, led by the slowdown in China’s economy, according to the latest CIPS Risk Index, powered by Dun & Bradstreet. The CIPS Risk Index, powered by Dun & Bradstreet, produced for the Chartered Institute of Procurement & Supply (CIPS), tracks the impact of economic and political developments on the stability of global supply chains.

Bucking the trend, Sub-Saharan Africa saw a slight drop in its risk score from 5.54 in Q3 2015 to 5.53 in Q4, contributing 3.1% to global supply chain risk. The most notable contributory factors to this downward shift were macroeconomic improvements in Cote d'Ivoire, Namibia and Senegal. All three countries took measures to diversify their economies away from commodity exports to China and boost investment in transport and energy infrastructure. These countries also benefitted from budget deficits remaining under control and debt distress risks remaining low.

On the other hand, Malawi and Zambia saw their supply chain risks increase over concerns about economic instability as a result of low commodity prices and energy shortages, as well as rising domestic debt and rampant inflation.

DNB map

At the regional level, risk continue to increase as the slowdown in the Chinese economy weighed on Sub-Saharan Africa’s growth in the fourth quarter of 2015. Many of the key economies in the region remain over-dependent on commodity exports to China. At the same time, large external and fiscal deficits among key regional economies are another area of concern. With a global commodities downturn, slowing growth in China and rising US interest rates, foreign investors have become more cautious about lending across the African continent. Faced with increasing interest payments, falling revenues and depreciating currencies, some countries are likely to struggle to service their debts.

Andre Coetzee, Managing Director of the Chartered Institute of Procurement & Supply (CIPS) Africa said:

“The Chinese slowdown, further falls in global commodity prices, and the prospect of a rapid capital outflow as a result of the US interest rate increase are having an uneven impact on supply chain risks across Sub-Saharan Africa’s key economies. Countries which fail to take action to diversify their economies or control national debts are likely to face economic and political instability, translating into increased supply chain risks. 

“For businesses in the region with international supply chains, it’s crucial to have processes and plans in place to cope with uncertainties and disruptions, from both a regional and global level.”

Oana Aristide, Interim Leader, Country Risk Services, Dun & Bradstreet

‘’Diversification and better macroeconomic management has improved the risk outlook for a number of Sub-Saharan economies, but the region as a whole remains overly reliant on China and commodities.”

-ENDS-

Notes to Editors:

About the CIPS Risk Index, powered by Dun & Bradstreet:

First launched in April 2014, the CIPS Risk Index, powered by Dun & Bradstreet, is a composite indicator of pressures acting upon supply chains globally. The Index analyses the socio-economic, physical trade and business continuity factors contributing to supply chain risk across the world, weighting each score according to that country’s contribution to global exports.

The Index helps sourcing professionals understand the risks to which to their supply chains are exposed, articulate questions and scenarios for key suppliers, inform assurance activities, check the readiness of contingency plans, support the negotiation of risk transfer in contracts, and establish factors which may impact the financial stability of tier one and sub-tier suppliers upstream.  Regular production of this Index will help procurement and supply professionals communicate and justify risk-informed sourcing decisions and support effective Supplier Relationship Management.

About the Chartered Institute of Procurement & Supply:

The Chartered Institute of Procurement & Supply (CIPS) is the leading international body representing purchasing and supply management professionals.  It is the worldwide centre of excellence on purchasing and supply management issues.  CIPS has a global community of 115,000 in 150 different countries, including senior business people, high-ranking civil servants and leading academics. The activities of purchasing and supply chain professionals have a major impact on the profitability and efficiency of all types of organisation and CIPS offers corporate solutions packages to improve business profitability. @CIPSnews.

About Dun & Bradstreet:

Dun & Bradstreet (NYSE: DNB) grows the most valuable relationships in business. By uncovering truth and meaning from data, we connect customers with the prospects, suppliers, clients and partners that matter most, and have since 1841. Nearly ninety percent of the Fortune 500, and companies of every size around the world, rely on our data, insights and analytics. For more about Dun & Bradstreet, visit DNB.com

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