The coronavirus lockdown measures imposed by governments around the world have caused severe disruption to supply chains, as companies were forced to shut in March.
One sector that has been deeply impacted by the pandemic is the flower industry in East and Southern Africa, which is one of the biggest exporters of cut flowers in the world.
Prior to the pandemic, the global cut flower market was worth $13bn (£10.4bn) per annum, according to international flower trade association Union Fleurs.
The European Union and the US are the biggest buyers of cut flowers in the world, Union Fleurs says. Kenya is Africa’s largest flower exporter, with South Africa not far behind.
Multiflora in Johannesburg is one of South Africa’s busiest cut flower auction houses. Prior to the pandemic, the auction house had an annual turnover of $16m. But right now, the auction house is getting 40% of the revenue it previously had.
Delayed and cancelled flights, increased freight costs and a huge fall in demand have brought the flower trade to a virtual standstill, and some flower farms in Kenya have already gone out of business since lockdown began.
All in all, the flower industry in Africa estimates that it has so far had to throw away 241,000 stems as a result of the pandemic.
“If there’s no socialising, there’s no need for flowers. We’re effectively looking at two months of non-trading,” Ian Ross, managing director of Flora Export SA tells the BBC.
However, many more businesses across the African continent have a focus on importing rather than exporting, flying in goods from China and India and reselling them at a higher price.
Latest data from British property consultancy and estate agency Knight Frank shows that transport costs represent between 50-75% of the retail price of goods sold in Africa.
“People want to get rich quickly, so the fastest way is to import goods and charge a high markup – many successful people have done this,” explains Alex Demissie, managing director of Africa Rising, a business consultancy based in Cologne that advises international companies on entering African markets.
“They do have pride for their countries [and homegrown products], but if there’s a lot of hassle, people will always use the easiest way to make money.”
The pandemic has unfortunately disrupted this business model, and it has opened the eyes of African entrepreneurs to the reality that local manufacturing needs to become a priority.
“Supply chains have become longer and more complicated, and hence more vulnerable,” says Andrew Alli, chief executive of Southbridge, a pan-African consulting advisory and financial services firm.
For example, rubber might be produced in Africa, but it is then exported to China to make personal protective equipment (PPE) like masks, which are then shipped to Europe, he explains, rather than African firms just making the masks themselves for sale.
But this is changing now – Africa Rising has seen a new trend of businesses trying to import more machines into African nations to set up local production centres, instead of importing finished products.
“This is a very positive development for small and mid-sized companies – international firms who are investing in African countries are actively looking for local components that they can use in their factories on site,” says Mr Demissie.
“We see a trend of diasporas returning to their countries to produce goods for these big international companies, such as making zippers for clothing firms.
“Supply chains are moving closer to these factories. At the end of the day, this is what will be creating jobs and making things more successful in the future.”
Improving regional supply chains
The other reason African entrepreneurs have historically depended on imports from China and India is that even if you can find someone to make the goods you want to sell in the region, current cross-border supply chains still leave much to be desired.
It is too expensive to import goods from neighbouring nations, says Mr Demissie, so smaller firms simply don’t bother.
South Africa, Morocco and Egypt have sophisticated supply chains similar to those of developed countries, but the rest of the continent is still trailing far behind, due to weak infrastructure.
“It takes too long at customs to bring in the goods. Some of these nations are facing similar obstacles to Southeast Asian countries and China at the beginning of the 1980s,” says Mr Demissie.
But efforts are being made gradually to improve transport networks in some nations.
Investments made by Chinese firms in Ethiopia and Kenya over the last three years have greatly improved rail connectivity, making it much easier to import and export goods, and the establishment of special economic zones in Ethiopia, Ghana and Nigeria are helping these countries to start local production centres.
Mr Demissie says that coronavirus lockdown has “accelerated” a change in mindset amongst African entrepreneurs, and firms are already coming up with unique “indigenous” ways to solve Africa’s supply chain problems, like Ethiopian Airlines or Kenya Airways.
New supply chain solutions
Ethiopian Airlines is currently Africa’s largest air passenger carrier. Started in 1945, the state-owned airline flies to 100 international destinations, as well as 21 domestic routes across the continent, and it also has an air freight service.
Ethiopian Airlines boss Tewolde GebreMariam told the BBC recently that he does not expect the government to bail the airline out, and to that end the airline has decided to focus on providing even more freight cargo deliveries, both internationally and across the continent, delivering everything from fresh produce to medications and PPE.
“It is a very tough challenge but we think we can survive with our cargo business,” he says.
Kenya Airways is also now considering wide-bodied passenger carriers to bolster its cargo shipments, converting four of its wide-bodied aircrafts into cargo freight aeroplanes.
On the day the BBC visited, Kenya Airways ground staff were loading 40 tonnes of fresh-cut flowers and fruits and vegetables into a Boeing 787 Dreamliner destined for London, with the cargo placed on top of seats.
Nigerian motorcycle transit app-based platform startup Max, which already operates in 10 West African cities, is a solution unique to the continent that has also ended up benefiting from the coronavirus lockdown.
“One of the outcomes of the pandemic is that with people stuck at home and not able to move around, they’ve had to find ways to get their essentials delivered to their doorsteps, which has been beneficial to us and has driven the growth of our logistics and last-mile delivery services,” says Max Nigeria’s chief financial officer Betrand Njoya.
“We expect that we’ll be in a position to grow the size of our network to more than 5,000 drivers within the next 12-18 months.”
Supply chains in many African nations are still not very good, and the African Development Bank (ADB) estimates that the continent would need $90-$130bn of investment in infrastructure per annum in order to get the region to where it needs to be.
That is a tough figure to get to, but Mr Demissie says that Chinese, Indian, South Korean, Singaporean, Iranian and Russian companies are now pouring some money into improving infrastructure across the continent.
“Africa still has the youngest population of any continent – who is going to make and sell consumer goods for the African consumers coming up?,” he tells the BBC.
“China was very backwards at the end of the 1970s, but people were willing to go and invest because they could see the opportunity, and we’re seeing that in African nations now.”