The post-pandemic economic climate brings with it a new set of risks that affect global trade. These risks emanate from throughout the system, the supply side, the demand side, from the perspective of regulatory uncertainty and from other broader contextual factors. The recent acute shortage of containers for exports from Asia and particularly China, represents one manifestation of pandemic induced risk, leading to exorbitant shipping costs and extended lead times. Africa, which relies heavily on imports from China and is deriving significant economic benefit from growing and diversifying export to China, must manage risks like these carefully. This must take the shape of a new way of thinking about risks and challenges, and adopting an attitude geared towards preemptive action.
With the decline in production during COVID-19, container liners globally drastically reduced activity, leaving equipment idle in ports around the world. As lockdowns eased and demand surged, bottlenecks across the value chain were experienced as container capacity was still on the ‘wrong side of the ocean’. The result has been a protracted shortage of capacity as outbound shipments continue to exceed return shipments with the spike in demand for goods from China. This has led the cost per container for a trans-Pacific shipment, for example, to increase from around USD2000 a year ago, to USD13,000 during the peak of this current shortage. This has also affected those exporting to China, although not as severely.
While the shortage of capacity has eased, this represents the kind of volatility and risk that accompanies the post-pandemic economic environment. It demonstrates that there is no luxury for reaction with the benefit of hindsight, but that there is a need for preemptive planning and strong risk mitigation interventions among players across the value chain and in governments. China is Africa’s top trading partner, and as such, a particular focus must be placed on ensuring that supply chains linking Africa to China are robust. This must include planning for efficient disruption response and the development of a more context-sensitive supply chain diversification approach. And among exporters there must be a sensitivity to how shocks affect downstream players in China.
In a situation where resurgences and new strains of the Coronavirus are a reality, making continued lockdowns an ongoing feature of the global landscape, the continued presence of risk, often unprecedented and unfamiliar risk, is inevitable. The recent acute container shortages is a case in point. This heightens the value of strong disruption response planning among supply chain actors. This is particularly important in Africa, where access to global markets is key to broader objectives of economic development. China and Africa must give priority to the building of supply chain resilience between the two, something which takes on a new meaning in the current context.
“This article is produced by Axis Group and is published in The Econometer section of ChinAfrica magazine (March 2021), an English and French language monthly publication that provides news, views and analysis on all things China, Africa and China-Africa relations.”