Profit-making idea: Bolstering South Africa’s local supply chains

This week it was reported that Foschini Group and Woolworths would be increasing their investment in the South African clothing manufacturing sector to reduce their dependence on Chinese imports and better manage supply chain disruptions due to the Covid-19 pandemic.

According to Saliegh Salaam, portfolio manager at Old Mutual Investment Group’s Customised Solutions, this trend would be “one of the most striking opportunities to emerge [from Covid-19]”. He says that this phenomenon, in part, would roll back the increasing reliance on global supply chains that had prioritised cost over the security of supply.

“Many businesses are re-evaluating their reliance on imported goods and materials, and are looking to local suppliers for certain of their inputs,” Salaam says.

“This is a big opportunity for businesses and entrepreneurs to identify gaps in the local market for them to supply goods or materials that have previously been imported. The most important outcome from such a shift, however, is that it will build greater resilience into the local economy.”

As the global pandemic highlighted, many companies had become overly reliant on sourcing their goods and materials from lower-cost destinations. However, as soon as lockdowns were announced, many common goods were suddenly unavailable on shelves.

Salaam says this effect is evident across sectors, which can have serious consequences in certain cases. The pharmaceutical industry, for example, has been heavily reliant on imports for active ingredients used in drugs and other critical supplies.

“No-one can deny that the pandemic brought to the fore certain supply chain weaknesses that we weren’t aware of before. We can’t afford to repeat this, which is why government and businesses are seriously relooking at their supply chains. We need to build greater resilience to unexpected shocks,” he says.