Global supply chain issues to dull SA’s Christmas and continue through 2022

Global supply chain issues will start affecting South Africa by this Christmas and continue until the end of 2022, with shortages mainly associated with products made in the East.

Black Friday shoppers will still find full shelves, but goods from the factory of the world, China, will likely not be delivered in time for the festive season.

According to Jacob van Rensburg, business analyst at the South African Association of Freight Forwarders (SAAFF), there has not yet been any shortages so far due to the global supply chain issues, but a certain degree of “supply chain narrowing” has already taken place.

“The ranges of product lines are affected, more than products themselves, which means, for example, you will only find five types of pasta at the supermarket, whereas previously, you would have had ten.”

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Unlikely that stock from the East will arrive in time for Christmas

Van Rensburg says stock for Black Friday will perhaps not be impacted, but the festive season will certainly be affected. It is highly unlikely that consumer goods out of the East, that have not yet shipped, will be available before Christmas, as the global issues caused bottlenecks throughout the global supply chains, which will have knock-on effects for South Africa.

A spokesperson for the Consumer Goods Council of South Africa confirms that there is concern globally about a mismatch between supply and demand due to issues such as container shortages and panic stocking by retailers.

“Locally we have not seen this becoming an issue, as the retail supply chain is currently meeting demand. If there are shortages these would be isolated rather than a trend.”

He does not want to speculate on what the future holds, but says the council is confident that there will not be challenges in the supply chain.

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Supply shock to global supply chain

Van Rensburg explains that initially, the impact on global supply chains in countries such as the US and the European Union (EU) and logistics infrastructure from Covid-19 came in the form of a ‘supply shock’.

“China’s shutdown and the slow return to full production capacity caused the US and EU importers to panic and ‘front-load’ their purchases from Chinese vendors with a ‘buy early, buy often’ mentality. When surges answer a supply shock in goods movement, a ripple effect of bottlenecks occurs across international and domestic supply chains.”

In the maritime eco-system, some of these bottlenecks show up at crucial points, such as port terminals, freight corridors, warehousing and distribution facilities.

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Getting empty containers to China a problem

Van Rensburg says imbalances in world trade caused by the pandemic have led to a substantial increase in empty containers needing to be repositioned, specifically to get empty containers to China as fast as possible.

“This imbalance distorts the growth picture significantly. It also provides an opportunity for shipping lines to take advantage in their pricing of what appears to be growing demand but is simply the need to move empty containers. The impact on freight rates has been clear.”

Container freight rates have increased nearly five-fold in the last 12 months due to global shortages, he says.

“South Africa has also lost out on some 15,000 containers’ worth of space compared to pre-lockdown and several shipping lines have opted to omit South African ports in favour of increasing capacity on the lucrative East-West trade lanes.”

According to Van Rensburg, the increase in movement of empty containers has been a global phenomenon, thanks to container imbalances created by the early stages of lockdowns worldwide and exaggerated by many factors recently, including port congestion, pent-up demand, Covid-19 outbreaks and poor schedule reliability.

He believes that South Africa should have sufficient supplies of medicine, due in part to a robust domestic market.

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Lockdown restrictions put pressure on global supply chain

The CGCSA spokesperson says supply chains were disrupted by lockdown restrictions imposed globally and as economies are gradually opening up and demand for goods increases, there is obvious pressure on already disrupted supply chains.

“The pandemic revealed the need for agile supply chains that can respond to unexpected shocks in the system, such as the impact of the pandemic. We believe efforts are being made globally to normalise the situation ahead of the expected increased demand during the normally busy festive shopping season.”

However, Van Rensburg says there is no quick fix for the broken global supply chain.

“Our best guess is that it will not be fixed before the Chinese New Year next year and likely only by the end of 2022.”