POST-COVID-19 Shift in the Seafood Industry Means Opportunity for Africa

With China’s population now exceeding 1.4 billion, exporters globally are vying to tap into this market. Industries such as seafood see billions of dollars change hands, with China’s seafood imports worth $15.6 billion in 2019.

This positions China as an important export destination for many African seafood producers. However, the combination of the supply chain disruption, changing consumer behavior and increasingly stringent regulations adds considerable complexity for exporters. Effective supply chain management and route-to-market support is now more important than ever.

COVID-19 has created disruptions on multiple fronts. Where once an exporter could leverage highly integrated and efficient global logistics networks to send products to all corners of the world, virus prevention measures taken in many countries are delaying the arrival of containers at their destinations. While ports are operational again compared to the early days of the virus, congestion and delays continue to occur due to measures taken by port authorities to curb its spread.

A number of companies have instead turned to airfreight to avoid the delays caused by the ports. However, this service too has felt the impact of COVID-19. While commercial flights were able to reduce the costs of air freight cargo in the past, by the end of March, it was reported that global cargo capacity had fallen by 35 percent, which saw inverse increases in costs by up to 158 percent. The cost and time implications under the current climate is an added burden for players across the value chain, particularly sectors that deal in perishable goods.

Seafood is one of these. It is an attractive export to China, as various types of seafood such as abalone are considered a delicacy among Chinese consumers. This lucrative industry sees high-quality seafood products shipped to China in large volumes. Seafood, especially when sold frozen or live, requires special temperature-controlled freight containers and rapid transit times. Although this adds to the cost of these products, the market demand still exists and is set to continue its recovery in the second half of 2020. But the nature of demand is changing.

COVID-19 has disrupted the flow of all kinds of products across the global supply chain, and while many exporters have been unable to survive the shift in a more regulated and health-conscious environment, many still look to China and its wealth and demand for international products.

Consumers in China may have felt the impact on their wallets at the beginning of the virus outbreak, however, positive recovery in the second half of the year may see these consumers return to their pre-virus level purchases in various segments, including seafood. Africa still has scope to tap into this vast market, however, careful navigation is required in the POST-COVID-19 world.

China made the decision to not set a GDP target for 2020 after full consideration of the uncertainties about the COVID-19’S impact. This uncertainty for the future shows the implications the virus will have on both China’s domestic economy and the stability of the global economy as we move into the second half of the year. The set of economy boosting measures taken by the Chinese Government, however, should see stable growth, but not at the levels seen before the epidemic struck. Its strategy is to focus on prevention and control of further outbreaks rather than have a complete return to normal.

Key Economic Indicators

The consumer price index (CPI) rose by 2.5 percent year on year in June, 0.1 percent higher than May’s 2.4 percent. The producer price index (PPI) fell by 3 percent year on year. Food prices comprise almost a third of China’s CPI, with a rise in pork and vegetable prices contributing to June’s figure. Pork prices rose by 81.6 percent year on year, with decreased imports and COVID19 restrictions contributing to the increase. Vegetable prices surged due to floods in in many regions across China.

Expanding PMI

The purchasing manager’s index (PMI) expanded, with the index coming in at 50.9 in June. This followed the 50.6 reading in May, marking the fourth month of expansion since February’s low of 35.7. While China’s initial manufacturing challenges were the closure of factories at the beginning of the year, decreasing demand from international markets as rising COVID-19 cases in key markets for Chinese products has dampened hopes for a strong recovery in the second half of the year.

China-africa Digital Trade Week

This year’s China-africa Trade and Economic Expo could not take place physically this year due to the COVID-19 epidemic. The event was held on a digital platform, allowing visitors to search for manufacturers and products online and initiate dialogue with suppliers through video links. Whilst showcasing products, the platform also had a section for investment opportunities across varying economic sectors in Africa. CA

Expanding Courier Sector

The China express delivery development index came in at 364.2 in June, surging 75.1 percent from the same period last year, the State Post Bureau said in a report.

The sub-index for growth rose 37.1 percent year on year to 297.2, as the sector expects its business revenue to reach about $11.4 billion, up over 24 percent from a year ago. Meanwhile, the business volume of the courier sector is expected to top 7.6 billion parcels, up 40 percent year on year, the report shows.

Compiled on the basis of data from China’s major logistics companies operating delivery services, the index reflects the overall business activities and trends in the country’s courier sector.

Recovery of Auto Market

The auto market maintained recovery momentum in China in June, with both production and sales registering double-digit growth, industry data showed.

Total output reached 2.33 million units in June, up 22.5 percent year on year, while sales hit 2.3 million units, up 11.6 percent, according to the China Association of Automobile Manufacturers.

During the first half of the year, auto production and sales stood at 10.11 million units and 10.26 million units, down 16.8 percent and 16.9 percent year on year, respectively.

The association said the figures came in better than expected as measures to boost car consumption continued to prop up the market.

Hainan Free Trade Port

China will allocate a total of $495 million from the central budget to promote the building of the Hainan free trade port, the country’s top economic planner said on June 24.

The fund will be used for infrastructure construction and public services improvements, according to the National Development and Reform Commission (NDRC).

Targeted support will be offered to long-term projects, including monitoring facilities in comprehensive bonded zones, tourism-related infrastructure, as well as projects concerning epidemic prevention and control, said the NDRC.

Earlier in June, Chinese authorities released a master plan, which aims to build the southern island province into a globally influential, high-level free trade port by the middle of the century.

Increasing Services Production

China’s service production index went up 2.3 percent year on year in June as economic activities continued to recover, data from the National Bureau of Statistics (NBS) showed on July 16.

In the first half of 2020, the index dropped 6.1 percent from the same period last year, narrowing 5.6 percentage points from the decline in the first quarter, the NBS said.

In the first half, the value-added output of information transmission, software and information technology services rose 14.5 percent year on year, while that of financial services grew 6.6 percent.

Sectors once severely hit by the COVID-19 epidemic, such as wholesale and retail, as well as hospitality and catering, saw a narrower contraction in the first half than in the first quarter.

Supporting Small Businesses

As service centers for first-time borrowers were established in different regions, and banks optimized their financing services, China has strengthened financing support for small businesses.

Commercial banks’ services for first-time borrowers will be scored in a performance evaluation system, a new measure to encourage banks to support small and micro enterprises, according to a document released by the China Banking and Insurance Regulatory Commission recently.

First-time borrowers refer to enterprise clients who do not have loan records in the credit record system of the People’s Bank of China. Many places including Beijing, Zhejiang and Gansu provinces have made preliminary progress in raising the ratio of first-time borrowers to total small business clients. CA