Strategic Sourcing and Industrialisation insights with Prof. Douglas Boateng
As countries around the world continue to deal with the impact of SAR-COV-2 infections, the overall global economic outlook remains irregular and uncertain with the International Monitory Fund calling the global pandemic a ‘Crisis like no other.’
This unpredictability has meant that, to date, every sector, including public/government departments, state-owned enterprises and countless private sector organisations have experienced the distressing effects of the COVID-19 pandemic.
The World Bank has called the pandemic the largest economic shock in decades and with a 5.2 percent contraction in global GDP predicted, the deepest global recession in decades appears to be on the horizon.
According to Africa Pulse report, economic growth in sub-Saharan Africa is also predicted to decline from 2.4% in 2019 to between -2.1% and -5.1% in 2020 and up to 20 to 30% of fiscal revenue is expected to be lost – placing the region into its first recession in 25 years.
This decline is largely due to Africa’s continued dependence on commodity exports. Between 2000 and 2017 Africa’s external exports accounted for 80% to 90% of its total trade. With recent crashes in commodity prices, this reliance on the export of commodities has not augured well for the continent.
With no imminent sign of a major and significant upswing in the fortunes of various regional economies, the downward trend is expected to continue for a while. As a result, there is an increasing demand from society at large for innovative economic relief measures, accelerated industrialisation and job creation efforts.
Africa is home to some of the fastest-growing economies and has had an average growth rate of 4.7% over the past decade. However, most of these regional economies were starting from a relatively low base consequently leading to challenges related to industrialisation, service delivery, job creation. Unfortunately, the Coronavirus pandemic has wiped out some of the economic gains.
While the relatively rapid growth rates achieved by many African countries in the last decade raised hopes that the continent was finally on a path to long-term socio-economic transformation, the pandemic and associated global financial challenge coupled with its socio-economic value shift has drawn increased attention to the need for public and private sectors to revisit their approaches to industrialisation and economic growth.
One of the proven enablers for sustainably transforming business, industries and societies is the calculated adaptation of supply chain management and in particular strategic sourcing. Strategic sourcing is a sub-process within procurement that assists in maximising the use of every cent utilised to source a tangible or intangible product for the benefit of an organisation, industry or society as a whole.
Strategic sourcing has been associated with business and industrial competitiveness, boosting economic growth and, more importantly, facilitating long term economic development. By creatively adopting innovative and strategic procurement and sourcing practices governments and business can maximise every dollar spent and facilitate the stimulation of local economic development.
Proper adoption of this tried and tested strategy can lead to significant value chain improvements and local value-add to resources, industrialisation and job creation.
Slow progress is better than no progress. While there has certainly been relatively good progress made in implementing policies and structural reforms to counteract some of the effects of the global pandemic, atypical buying and squandering within certain public and private sector organisations continue to wreak havoc on the lives and livelihoods of Ghanaians and Africans at large.
In developing countries, public procurement can account for as much as 70% of all government expenditure, especially in fragile states. Maverick spending and waste are not sustainable and concrete steps are needed to tackle the situation.
Inefficient spending in developing economies can be addressed through clear-cut supply chain management, procurement and sourcing guidelines. Although paradigm shifts in sourcing are happening, with many executives and government officials using strategic sourcing as a platform for competitive advantage and industrial development, these shifts are not happening quickly enough.
Governments and businesses across the continent continue to focus on short-term buying gains versus the long-term impact of strategically sourced goods and services. Such short-term thinking and buying behaviours have led to the spectacular demise of selected industries on the continent.
Urgent collective action is required in order to remedy how public sectors and corporate organisations in emerging economies should strategically source and acquire products and services as well as deal with selected suppliers. Taking this action is all the more urgent within the current African and global socio-economic environment.
As current COVID-19 shock waves continue to exacerbate unemployment rates, with the African Union reporting an estimated 20 million potential job losses on the continent – especially among the youth – the time has come for the widespread harnessing of the power of strategic sourcing to help realise various national and regional developmental goals, an Africa Beyond Aid and the broader UNSDG, Agenda 63 and Africa Continental Free Trade Area (AfCFTA) agendas.
The inextricable link between strategic sourcing and the sustainable development of Africa is evident in Agenda 2063, which provides a continental roadmap for development and highlights the need for inclusive growth and sustainable development. Strategic sourcing can emerge as a game-changer as African governments look to capitalise on the trade and integration opportunities that are emerging as a result of the newly assembled AfCFTA.
Innovative development agenda’s focused on enhancing intra-African trade and strategically sourcing products and services from across Africa are needed to promote the free movement of Africans around the continent and encourage long-term growth and prosperity in the region. This would allow Africa to become increasingly self-reliant by making the most of her own immense resources and creatively pursuing economic and social transformation that is beyond the realm of aid.
One of the key challenges facing the realisation of strategically developed sourcing and trade agendas is the relative lack of understanding of the conceptual background of the sourcing aspects of supply chain management and the latter’s inextricable link to long-term development, industrialisation and associated wider socio-economic growth. As the choices in sourcing practices continue to impact significantly on the lives of businesses, industry, communities and society as a whole, enhanced knowledge and understanding of the role of strategic sourcing is becoming ever more important.
Enhancing the understanding of how strategic industrial and consumer sourcing by citizens and companies can have a direct impact on sustainable national and regional development needs to become a focus are of both public and private institutions.
And now, more than ever, governments across the continent should be encouraging nationals to buy locally and from locally-owned companies to support regional economic growth and minimise the reliance on imports which have decimated local industries and helped to de-industrialise some sectors.
Sourcing of products and services purely in the name of short-term price gains are no longer acceptable as the dire consequences for people, societies are nowhere more so than in the developing nations of Africa.
Contributing to a panel discussion at the November 2019 high-level dialogue with African achievers, His Excellency President Nana Akufo-Addo, the architect and champion of the Beyond Aid Agenda emphasized the need for governments and private industry to work towards the realisation of the United Nations’ Sustainable Development Goals.
“We need to ask ourselves what our priority is. Are we protecting our interest? What are we doing for the mutual benefit of the continent? That is my understanding of building an Africa Beyond Aid and the future of our continent,” he said.
During the official handover of the AfCFTA secretariat on August 17, 2020, SG Wamkele Mene highlighted the huge potential for the continental free trade initiative to significantly boost intra-Africa trade, improve economies of scale and establish an integrated market. “It has the potential to be a catalyst for industrial development, placing Africa on a path to exporting value-added products, improving Africa’s competitiveness both in its own markets and globally,” he posited.
Trade is simply about buying and selling. As proven in other regions of the world, a sourcing mindset and behavioral change will make Africans part of the solution to unlocking the economic transformation potential for the African child and future generations.
Douglas Boateng, Africa’s first-ever appointed Professor Extraordinaire for supply and value chain management (SBL UNISA), is an International Professional certified Chartered Director and an adjunct academic. Independently recognised as one of the vertical specific global strategic thinkers on industrialization, supply and value chain governance and development, he continues to play leading academic and industrial roles in sectorial reforms both in Africa and around the world.
He has received independent recognitions and numerous lifetime achievement awards for his extraordinary contribution to the academic and industrial advancement of supply chain management from various international organisations including the Chartered Institute of Procurement and Supply, the Commonwealth Business Council and American multi-national Hewlett Packard (HP). For more information visit www.douglasboateng.com and www.panavest.com