Local Supply Chain Disruptions and Global Supply Chain Disruptions

Recently, flights between the major centres in SA and between SA and the rest of the world have been significantly disrupted due to the shortages of aviation fuel. This has meant that flights have been cancelled and that cargo has been stranded in airports due to a lack of air cargo space, particularly for long-distance hauls. While this may be a local SA problem (SA closed down a number of refineries for aviation fuel during COVID, and now has to import all its aviation fuel), it indicates a far greater structural problem for Africa. The number of competitors in the air cargo space contracted significantly due to COVID. A number of national carriers, which had been struggling prior to COVID, collapsed. Perhaps the most significant was the collapse of British Airways in Southern Africa (an event that did not make it to the British press). This has left few competitors for passenger or air cargo in SA – a point that has not escaped the attention of the Minister for Trade, who also includes competition in his portfolio. These local supply chain disruptions affect ecommerce fulfillment, particularly in the traditional cross-border markets of the USA, EU, UK, and Australasia.

On the other hand, at the global level, the supply of goods (and the export of goods bought online) are subject to global supply chain disruptions. UNCTAD has pointed out that industry structure and alliance practices within the maritime shipping, shipbuilding, and container manufacturing sectors may be contributing to the extreme reaction of shipping prices. In the short term, policymakers in developing countries can help mitigate the effects of rising shipping costs and decreasing service levels by extending the timeframes of trade finance and removing barriers to overland trade. Although there is little that governments outside of China, Europe, and the USA can do to solve directly the bottlenecks, market characteristics suggest that the global logistics industry may be susceptible to collusive outcomes, which exacerbate price spikes. Thus, governments could pay closer attention to potential anti-competitive behavior, especially in maritime shipping and hinterland logistics. In the medium to long term, UNCTAD recommends that policymakers, regulators, and researchers should carefully consider efficiency–resilience tradeoffs in the global logistics industry.

Oh, and in case you feel things can’t get worse – according to a statement released by the Suez Canal Authority, transit fees for tankers passing through the canal will rise by 15% next year. The increase for dry bulk carriers and tourist ships is 10%. The fee hikes will take effect as of 1 Jan 2023.