With the slump in global commodity prices and the slowdown in emerging markets continue to weigh on export revenues and fiscal positions of key companies in the region, operational risk for companies doing business in Sub-Saharan Africa is on the increase.
Supply chain risk in Sub-Saharan Africa worsened from 5.526 points to 5.544 during the second quarter of 2016, as measured by the CIPS Risk Index, powered by Dun & Bradstreet. Global supply chain risk climbed to 80.8 in the second quarter of 2016, which is amongst the highest levels since records began in 1995. This continued the worsening trend in global risk which has been following this trajectory since the fourth quarter of last year. The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains.
Sub-Saharan Africa’s contribution to the overall CIPS risk index increased slightly from 2.47 in the first quarter to 2.50 in the second. Lower commodity prices have placed pressure on the tax revenues of governments in Sub-Saharan Africa – including South Africa.
André Coetzee, managing director, CIPS Africa said: “The weak global growth environment and especially the slowdown in the Chinese economy will continue to weigh on growth in Sub-Saharan Africa in the near term. As China continues its transition from an investment-led to a consumption-driven economy, its demand for African commodities will weaken even further.
“This can hamper crucial public sector spending on categories like infrastructure, education, and healthcare. A comprehensive policy response could help South Africa and the region weather the latest period of sub-par growth, positioning us to accelerate over the medium term.”