Firms suffering due to unfair pricing

27 August 2020

More than half (56%) of African companies are facing supply shortages due to Covid-19, according to a survey.

A report, by the UN Economic Commission for Africa (UNECA) and International Economics Consulting, said border closures, high freight costs and shipment delays were behind the shortages.

“Whether on the supply-side or the market-side, businesses have suffered due to higher/unfair pricing,” said the report.

Almost two-thirds (64%) of survey respondents had experienced market distortions, with price fixing between competitors the most recurrent issue.

The survey, involving 206 businesses across Africa split across goods and services, said as a result of shortages firms were switching suppliers, “favouring national suppliers first, before African ones and even before non-African ones”.

In 56% of cases equivalent products had been found but 87% would prefer to return to the original suppliers, mostly due to higher prices charged by new suppliers.

Three-fifths (58%) of goods firms and 30% of services firms said they had faced challenges in logistics and shipping of products.

Overall, respondents said they were operating at 40-50% of their capacity.

Though many companies are limiting lay-offs, 20% of employees might lose their jobs in the next three months, the report warned.

It said the situation might have been worse if 27% of employees had not been able to work remotely.

SMEs had found it more challenging than larger firms to enable home working for employees.

“One of the main takeaways from this survey is the very positive fact that two-thirds of the surveyed companies indicated that they have identified new opportunities in response to the crisis,” said the report.

Simon Mevel, economics affairs officer at UNECA’s Regional Integration and Trade Division, said it was “interesting to note that firms involved in goods and SMEs are displaying the highest shares in terms of new opportunities identified following the crisis”.

Respondents’ current share of e-commerce revenues remained relatively small (16%), mainly due to challenges around internet connectivity, but 47% of the companies said they were moving or planning to move towards innovative or digital solutions through collaborations and partnerships.

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