Supply chain shocks in food sector need to be addressed
• Long-term effects of supply chain austerity on economy depend on how it is implemented
The food sector in East and Southern Africa has been adversely affected by supply chain shocks, which have resulted in challenges in the availability and affordability of food.
Recent news articles highlight the gravity of the situation, with Pick n Pay chair Gareth Ackerman warning of unrest and food shortages. These shocks have also affected the livelihoods of farmers and other stakeholders, so the urgency of addressing these challenges cannot be overstated.
However, when implemented effectively supply chain austerity can bring about long-term economic prosperity for the food and beverage sector in the region. The industry is critical to the SA economy too, providing employment opportunities for millions and contributing to GDP.
Consumer inflation stood at 7.1% in March, with food and nonalcoholic beverages increasing 14% year on year and another interest hike expected this week. By improving the efficiency of the industry’s supply chain, businesses can increase their competitiveness and ensure long-term viability. This in turn will benefit farmers and businesses, who rely on the industry for their livelihoods.
Supply chain austerity involves optimising the supply chain by reducing waste, increasing efficiency and streamlining processes. This can be achieved through a range of measures, including improving logistics, reducing inventory and optimising production processes. By implementing these measures businesses can reduce costs and increase efficiency, leading to improved profitability and competitiveness.
High inflation rates have resulted in increased costs for businesses, which have been passed on to consumers through higher prices for food and other goods, particularly in Africa, due to factors unique to their economic and political situations.
Supply chain austerity refers to the implementation of costcutting measures in supply chains to increase efficiency and reduce waste. While supply chain austerity can result in short-term cost savings, its long-term effect on economic prosperity and the livelihoods of farmers and businesses in SA depends on how it is implemented.
Collaboration is vital when it comes to implementing supply chain austerity in the food and beverage industry. This is because the food sector is highly interconnected, with each link in the supply chain affecting the next. Therefore, to achieve cost savings and efficiency gains businesses must work together to identify areas where improvements can be made.
Stats SA reported that the agricultural industry recorded the largest contraction (-3.3%) in the fourth quarter of 2022, pulled lower mainly by weaker production figures for field crops and horticulture products. If implemented effectively, supply chain austerity can bring economic prosperity by reducing costs and increasing efficiency, which can result in lower prices for consumers, increased profits for businesses and improved competitiveness in local and global markets, while supporting the farming industry. This can benefit the food industry, which is critical to the economy and provides livelihoods for farmers and businesses.
Furthermore, collaboration between businesses and stakeholders can help build stronger communities and foster social responsibility. For example, businesses can work with local farmers to source ingredients locally, providing them with a reliable source of income while also reducing transportation costs. This can help to build stronger relationships between businesses and farmers and contribute to the long-term economic prosperity of the food and beverage sector.
To ensure that supply chain hardship brings prosperity and supports the livelihood of farmers and businesses in SA, it is necessary to adopt a holistic approach that considers the entire value chain, from production to consumption. The approach should involve collaboration between farmers, suppliers’ processors, distributors, retailers and consumers, with strong engagement with the state to identify and implement costcutting measures that do not compromise quality, safety and sustainability.
Also, it is crucial to ensure the benefits of a value chain are shared equitably, including smallholder farmers and marginalised groups. Nestlé is demonstrating this effort with its partnership with the Skimmelkrans dairy farm. The continued traction of the partnership promotes an inclusive business model, providing training and cooperation and capacity building for suppliers and farmers, while strengthening social safety nets to support vulnerable workers.
Also, the government can act as an enabler and must invest in infrastructure and create a stable business environment that encourages investment and growth. This could involve improving transportation infrastructure, investing in technology and innovation, and addressing the social and political factors that contribute to supply chain shocks.
One such area is waste reduction. The food and beverage industry generates a sizeable amount of waste each year, much of which ends up in landfills. By implementing measures to reduce waste and increase sustainability, businesses can improve their environmental footprint while reducing costs. Governments can motivate businesses to implement sustainability measures by offering tax breaks or other forms of support.
In conclusion, the food sector faces significant challenges due to supply chain shocks, which affect the availability and affordability of food. However, implementing supply chain austerity measures can bring long-term prosperity by reducing costs and increasing efficiency. Collaboration between businesses and stakeholders is crucial to achieving these goals and can also foster social responsibility and build stronger communities.
Governments must also play their part by investing in infrastructure and creating a stable business environment. By working together the food and beverage industry can overcome these challenges and continue to contribute to the region’s economic growth and development.
IT IS NECESSARY TO ADOPT A HOLISTIC APPROACH THAT CONSIDERS THE ENTIRE VALUE CHAIN